KRAC, in collaboration with the Center to Combat Corruption and Cronyism (C4 Center), Malaysia, organized the SEA-ACN Regional Forum on Understanding Public Procurement, held on February 17 – 18, 2025.
This objective of this regional forum is to launch and present a study on a comparative analysis of different government procurement methods in ASEAN and to discuss on corruption case of public procurement in Indonesia, Philippines, Malaysia, Cambodia and Singapore.
At this regional forum, the main sessions were training workshops for participants, hosted by the C4 Center. C4 presented the risks of corruption in various public procurement modalities, emphasizing that these risks vary depending on the form and complexity of the procurement. As procurement methods become more diverse and sophisticated, so too do the potential avenues for corruption.
Public procurement is the process by which the government sector purchases goods or services, aimed at benefiting society. This process not only maximizes public benefit but also contributes to the creation of domestic industries and generates employment opportunities.
Public procurement is a process that uses state funding through the legislative branch, such as the Parliament in Malaysia. The budget is debated, reviewed, and approved to cover expenditure across various industries, in a similar manner to the process in Thailand. However, the public procurement process has shifted from being solely funded by the state to being funded by private sectors in various projects.
The public procurement procedure is designed to ensure transparency and promote fair competition among bidders based on the value-for-money principle. Additionally, the procurement process has evolved in various forms to help reduce corruption, such as the introduction of e-procurement systems in countries like Malaysia and Thailand. However, the issue of corruption persists at every stage and modality of the public procurement process.
In the training session, C4 presentation covered the corruption risk in various types of public procurement including,
Corruption risks associated with public procurement in Public-Private Partnerships (PPPs)
This corruption risk arise when politician or officers appoint crony companies to form a consortium. This cronyism allows them to exert control over the supply chain of goods or services, often resulting in unqualified public projects and services being provided to the public.
Corruption risks associated with public procurement in Private finance initiative (PFI)
This risk will occur similarly with PPS in the way cronyism. Even though PFI projects can provide short-term economic benefit because of their efficiency, they can still suffer from the same corruption issues. Additionally, PFI projects are considered services. The government uses PFIs to address the infrastructure shortfalls. Hence, this cronyism results in the appointment of unqualified companies to execute the projects, leading to poor management and ultimately affecting the public.
Corruption risks associated with public procurement in government-to-government agreements (G2G)
This agreement is made between the governments of multiple countries, where they directly select the company for the contract, bypassing the open contracting tender process. This creates potential for corruption in various instances. For example, corruption occurs when the selected company has connections with politicians or officials involved in the project, resulting in the company receiving inflated budgets for project implementation. Besides, G2G projects lack transparency in their operations, as their procurement is not subjected by the same regulations that apply to conventional private sector entities.
Corruption risks associated with public procurement in Strategic Partnership
These are similar to G2G agreement, but this agreement does not only focus on economic sector but involve agreements based on foreign policy and national security justifications. These strategic partnerships have been signed on the Memorandum of Understanding (MOU), including various procurement contracts. However, the details of procurement under the MOUs are not publicly available for citizens to monitor.
Besides, C4 presented three alternative models of public procurement that bypass the standard regulatory processes.
Corruption risk in emergency procurement
Due to a national emergency, the procurement process bypasses the standard regulatory procedures, leading to opportunities for corruption. Without the competitive standard process, there is a risk that contracts could be awarded to unqualified suppliers.
Corruption risk in concessions
The government typically finances and builds the infrastructure—such as roads, airports, or utilities—but then hands over the operation and management of these assets to a private company, which allows for rent-seeking activities. The rent – seeking is the behaviour of extracting excessive profits by charging high fees. And this type of behavior doesn’t add value to the public or the economy.
Corruption risk in Off-budget procurement
As public procurement is not included in the state funding; this procurement is far less likely to be scrutinized. Besides, this type of procurement includes contingent liabilities of the government. The government authorizes state-owned enterprises (SOEs) to issue bonds in order to raise funds for the projects, with the guarantee by the government, so the procurement in the projects lack transparency. When the projects fail, the government will be responsible for the contingent liabilities, posing a significant fiscal risk to the nation.
Lastly, regarding this training session by C4 Center, it is evident that the risk of corruption can arise in all forms of procurement. Therefore, understanding the various types of procurement is crucial for effectively preventing and addressing corruption in a sustainable manner.
For more discussion from the SEA-ACN Regional Forum on Understanding Public Procurement, please visit KRAC Corruption Facebook page.
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