Transparency International

This Anti-Corruption Helpdesk brief was produced in response to a query from one of Transparency International’s national chapters. The Anti-Corruption Helpdesk is operated by Transparency International and funded by the European Union

Query

Please provide an overview of corruption risks related to the involvement of foreign bidders in public procurement processes, listing examples from Latin America where possible

Summary

On the heels of a global push to open public procurement markets to foreign bidders and after several high-profile corruption cases involving multinational corporations and public procurement contracts, there is growing interest in the influence of foreign bidders in domestic public procurement processes. But so far, little research is available on the specific corruption risks that opening up public procurement markets may entail, or whether open or closed public procurement markets hold qualitatively or quantitatively different levels of risk.

This Helpdesk Answer provides an overview of the different approaches taken to allow foreign bidders to compete for domestic public procurement contracts, including explicit and implicit market access restrictions as well as efforts to open procurement to foreign firms via free trade agreements. It then considers various corruption risks that come with each approach, including conflicts of interest, nepotism, bribery and issues surrounding beneficial ownership transparency.

No specific mitigation measures have been put forward to explicitly tackle corruption risks related to the involvement of foreign bidders in public procurement processes. But some measures intended to reduce corruption in public procurement more broadly may also help contain corruption related to the involvement of foreign companies. This includes e-procurement, beneficial ownership registers, as well as broader transparency measures.

Contents

  1. Introduction
  2. Background
  3. Towards liberalisation or protectionism in procurement markets?
  4. Procurement corruption and foreign bidders
  5. Mitigation measures
  6. References

Main points

  • Recent decades have seen both a general push to liberalise public procurement markets as well as a rise in protectionism in some countries.
  • Measures to restrict foreign bidders from public procurement (such as joint venture requirements) can give rise to significant corruption risks, including conflicts of interest and nepotism.
  • Opaque corporate structures and inadequate beneficial ownership transparency increase corruption risks surrounding foreign bidders.
  • Transparency (especially beneficial ownership transparency) and e-solutions are promising tools to reduce corruption risks in public procurement, both domestically and internationally

Authors

Jennifer Schoeberlein, tihelpdesk@transparency.org

Reviewer

Matthew Jenkins, Transparency International

Date

20/01/2022

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