Permanent Secretary in the Ministry of Industry, Investment and Commerce, Reginald Budhan, says the development of an effective procurement policy for micro, small and medium enterprises (MSMEs) is timely and will go a far way in creating a supportive environment for Jamaica’s small business community.
Speaking at a MSME stakeholders’ meeting today (September 14) at the Jamaica Trade and Invest headquarters in New Kingston, Mr. Budhan contended that the current criteria for government procurement is discriminatory and outdated.
“For years I have had a fundamental difficulty with these criteria. These are what I would call myopic and anti-development criteria, intended to benefit mainly the privileged, large companies and overseas companies,” he stated.
Permanent Secretary in the Ministry of Industry, Investment and Commerce, Reginald Budhan listens to Consultant, Inter-American Development Bank, Sonia Witter-Rickards, at today’s (Sept.14) meeting of Micro, Small and Medium Enterprises (MSMEs) stakeholders to discuss government’s procurement policy. The meeting was held at the Jamaica Trade and Invest headquarters in New Kingston.
The Government of Jamaica has received technical assistance support through the Inter-American Development Bank (IDB) for the development of a modernised MSME procurement policy, which Mr. Budhan said, promises to be “pro-development and supportive of our small business sector.”
Stakeholders at today’s meeting were presented with a draft copy of the new policy and were encouraged to provide their feedback.
According to the Permanent Secretary, with the new policy, the government, particularly the Ministries of Industry, Investment and Commerce and Finance and the Public Service, will seek to change some of the weaknesses in the system.
He contended that since the government is a major purchaser in the economy, mainly of goods, works and services, government policy can be a powerful instrument of development if engineered appropriately.
He argued that the existing criteria for procurement do not take into consideration important national objectives, such as saving foreign exchange, creation of local employment, development of local expertise and new technology in the country.
He said that the practice of packaging contracts large simply to make the bid attractive to international bidders undermines important national objectives. “By packaging contracts large to get low cost and to attract overseas bidders we create employment abroad. By packaging contracts large we export foreign exchange, by packing contracts large, we discriminate against local companies that have to pay taxes to fund those very contracts,” he stated.
Mr. Budhan therefore suggested that it would be better to award the contract to a local company even if the contract costs 15 to 20 per cent more. “Because the government has 33 1/3 per cent shares in all local companies and is entitled to a third of the pre-tax dividends that goes to pay for the increased costs,” he pointed out.
He argued further that when the government awards the contract to a local company foreign exchange stays in the country. “Also, we create local employment, and when we create local employment, we get taxes to pay for the increased costs and we put food on the tables of persons, who would otherwise be unemployed,” he said.
Citing other shortcomings in the existing policy, Mr. Budhan said that the requirements for registration with the National Contracts Commission (NCC) are another bureaucratic hurdle that must be dismantled in order to create fairness and development in the sector.
He said that while local companies are required to be registered with the NCC, foreign companies are required to so only after they have been successful with a tender.
“The only usefulness of that to me is that in the future it would increase the chance of that company getting another government contract,” he reasoned. “This NCC registry is unfair and unjust to local companies. In addition, it acts as a barrier to small companies that are tax compliant but aren’t able to qualify to be on the NCC’s list.”
The Permanent Secretary said the system also encourages corruption in government, as companies are often inclined to bribe public officials to get on the registry. In addition, he said, the maintenance of a current and credible database is “incredibly expensive”, particularly when one takes into consideration the number of MSMEs throughout the country.
“When you consider that we have over 90, 000 micro and small businesses, if all MSMEs will have to be registered in order to bid for contracts of over $275, 000, the NCC would have to be able to put in place, the resources to keep that database current and credible,” he said.
He said that better approach is the creation of a national register, which is voluntary. “When a company bids, it provides current information about itself. If the bid evaluators want to verify the information provided, then it can be validated as a part of the tender evaluation exercise,” he pointed out.