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Cross-border e-Procurement in the Digital Transformation: Discussions and Implications Multilateral negotiations, Trade policy

Author Ji Hyun Park Language Korean Date 2021.03.30

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   This report analyzes statistics on cross-border e-procurement, examines the use of e-procurement and e-procurement systems in the USA, the EU, and Korea, and comparatively analyzes e-procurement norms in international trade agreements to identify implications. 
   The analysis of statistics on cross-border e-procurement included data on millions of procurement contracts per year downloaded from government websites to estimate the amounts of procurement, or that gained by processing publicly available data. The results showed that, while the public procurement is a gigantic market that accounts for 10‒15% of the GDP, cross-border e-procurement only represented an insignificant share. In the US procurement market, which is the largest single market in the world, cross-border e-procurement as defined by vendor nationality only accounted for 2‒3% (excluding the USA, in terms of value). This figure was 3% in the EU (direct cross-border procurement, in terms of value), and less than 1% in Korea (central government, foreign funds). However, it is notable that, as in the cases of the EU, Korea, and the USA, there is an upward trend in the size of cross-border e-procurement in countries that use electronic means in the procurement process.
   Country-specific e-procurement data from World Bank reports were analyzed to take stock of the use of e-procurement. The number of countries using electronic means decreased as the e-procurement process progressed. Also, while the US, the EU, and Korea have well-organized e-procurement systems and are showing an increase in their use of e-procurement, the share of cross-border e-procurement in these countries was shown to be very low, indicating a high entry barrier in the procurement market.
   Comparative analysis of e-procurement norms in different international trade agreements revealed incremental increases in bilateral and regional trade agreements that embrace e-procurement norms. Recent FTAs such as the Regional Comprehensive Economic Partnership (RCEP) have added or newly established provisions on e-procurement cooperation. In particular, the Digital Economy Partnership Agreement (DEPA), a digital trade agreement, includes provisions on cooperation (cooperation activities related to e-procurement) in government procurement. For the DEPA, it is notable that government procurement, which would otherwise have been addressed in individual chapters in other trade agreements, was included in the digital trade agreement. This represents a new trend in digital trade where government procurement proceeds from the perspective of cooperation. E-procurement cooperation provisions that have recently emerged one after another in trade agreements including FTAs are likely to be added or newly drafted into more concrete cooperation provisions within trade agreements to come.
   This report presents ways to vitalize cross-border e-procurement and develop norms for e-procurement. The overarching prerequisite to the vitalization of cross-border e-procurement is to build procurement statistics as the basis for developing procurement policies. Also important, particularly for countries actively utilizing electronic means in public procurement, is to modernize procurement systems and increase the use of e-procurement, as seen in the case of the EU, which experienced increases in cross-border transactions. However, even if a country has a well-developed e-procurement system, the country’s institutional regulations may serve as an entry barrier that prevents foreign companies from entering the procurement market. In this sense, efforts must be made to ease or improve institutional regulations that may hinder cross-border e-procurement. There is a need to strengthen international cooperation, especially in response to communicable diseases, and have an international council or organization overseeing e-procurement to coordinate and regulate the execution of procurement activities in emergency situations. Most of all, openness in government procurement will be limited as long as the policy stance to take advantage of government procurement as a policy tool remains, and this calls for countries’ willingness to open their procurement markets.
   This report suggests directions for the development of norms for cross-border e-procurement in preparation for an expansion in agreements related to e-procurement. In the short run, inter-governmental discussions over cooperation for e-procurement and international discussions should be expanded. In the medium term, we can expect discussions over including e-procurement in electronic commerce or digital trade chapters of international trade agreements, rather than government procurement chapters, as part of digital trade. The long- term orientation should be to establish norms to promote cross-border e-procurement, which will require discussions and considerations to regulate entry barriers in e-procurement markets and institutional regulations that hinder cross-border e-procurement. This highlights, in particular, the roles of the WTO in promoting cross-border e-procurement and developing norms for e-procurement. The e-procurement system is one of Korea’s strong points, and the country should be aggressive in exporting it. To expand exports of the Korean e-procurement system, considerations should be made for many other aspects including interconnected systems, operations, and training, rather than just aiming to export the procurement system itself. Particularly important is continued post-export follow-up, as well as constant monitoring and networking aimed at extending the scope of export from building e-procurement systems to include the advancement of these systems as well.

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