Tom Moerenhout International Institute for Sustainable Development Public procurance is an of import driver of economic activity in many quickly turning economic systems. In Vietnam, authorities disbursement has systematically accounted for more than 25 per cent of economic activity in the last decennary. The portion of GDP owed to province disbursement more than tripled, from VND170,000 billion in 2000 to VND583,000 billion in 2009 ( General Statistics Office of Vietnam, 2011 ) . Like other quickly industrialising states, Vietnam may shortly witness a diminution in Official Development Aid when it reaches the GDP position of a lower middle-income state. This has of import deductions for the aims of public procurance. From one side, procurance policies play a primary function in guaranting an efficient economic system. For illustration, in Vietnam and other South East Asiatic states, substructure restraints prevent optimum growing. The Vietnamese authorities increased its disbursement on substructure from VND6.795 billion in 2005 to VND14.679 billion in 2009. With FDI
adding another VND1.816 billion in 2010, the portion of substructure procurance in Vietnam has been systematically between 8 per cent and 10 per cent of GDP. In malice of these attempts, investors still list hapless substructure as one of the chief hinderances for operations in Vietnam ( Nguyen Xuan Thanh, 2009 ) .
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Procurement to Promote Green Industrial Growth
In add-on to guaranting an efficient economic system, procurance can besides steer economic systems to put in efficient sectors.There is a consensus that Vietnam ‘s growing is in big portion attributable to its successes in the fabrication sector. However, in its Vietnam Industrial Investment study, UNIDO righteously warns that, to keep sustainable growing, industrial policy demands to refocus on transmutation in strategic sectors that can give future consequences from technological alteration, invention and acquisition ( UNIDO, 2012 ) . Such a form is non Vietnam-specific, but reflects
the growing pains transitional economic systems frequently encounter after a period of manufacturing-driven growing. To get away what is frequently referred to as the “ in-between income trap, ” Vietnam needs to make new competitory advantages. This efficaciously means it needs to aim sectors in which it can add value by invention and technological promotion. Green industrial growing is normally known as a way that creates important added value. Both sustainable sectors-for illustration renewable energy and healthcare-as sustainability public presentation in conventional corporate sectors move companies to put in longer-term value creative activity as opposed to shorter-term net income coevals. When done decently, this finally delivers stable competitory advantages ( Eccles, Ioannou & A ; Serafeim, 2011 ) . Research on the 2006-2010 period indicates that companies that invest to a great extent into the impact of
environmental, societal and administration issues ( ESG ) , perform better than those who do non ( RCM, 2011 ) .
Vietnam ‘s Turning Interest in Green Industrial Growth
However, private investors seldom take first stairss to increase short-run costs. Rather, public finance is needed to herd in private capital, therefore the importance of public procurance. The Vietnamese authorities is good cognizant of this and has made several efforts to explicate statute law to accomplish sustainable, value-driven growing. In its 2004 Strategic Orientation for Sustainable Development, for illustration, it elaborated a growing program around cleaner production, environmental friendliness and clear industrialisation. It focuses particularly on the fabrication sector, and calls for a prioritization of engineerings that facilitate modern and clean production. More practically, the scheme focuses on raising the quality of merchandises to cut down costs, and, therefore, increase the function of proficient
criterions in industrial procedures ( Government of Vietnam, 2004 ) . Vietnam has besides set specific standardisation marks in its National Environmental Protection Strategy ( Moerenhout & A ; Lam, 2011 ) .
The demand for cleaner industrialisation to keep economic growing has become more prevailing in recent old ages. In 2009, a specific Cleaner Production in Industry Strategy was adopted to guarantee that at least 50 per cent of all industrial production installations are informed of the benefits of cleaner production methods by 2015, with at least 25 per cent Procurement, Innovation and Green Growth 41 already implementing such methods ( Government of Vietnam, 2009 ) . The authorities angle of this displacement towards green industrial procedures was chiefly laid out in the 2005 Environment Protection Law. This scheme includes both counsel for authoritiess to promote cleaner industrial procedures ( “ soft jurisprudence ” ) , and specific inducements that the authorities can offer to promote sustainable production and ingestion. These include, among others, land-related penchants, freedom from and decrease of revenue enhancements, loans from environmental protection financess and the prioritization of official development aid ( ODA ) capital ( Moerenhout & A ; Lam, 2011, p. 44 ) . This jurisprudence was
continued by a 2009 edict further intensifying inducements for environmental protection activities ( Government of Vietnam, 2009, Decree No. 04/2009/ND-CP ) .
The Missing Procurement Angle While good cognizant of the necessity of adding value through invention and green industrialisation to avoid the middle-income trap, Vietnam ‘s legal model is still losing the important procurance angle. The disagreement between Vietnam ‘s precedences in policy and development, and governmental precedences in disbursement may good harm the chances of clean industrialisation. As mentioned, procurance is a strong economic driver that is able to herd
in private capital. However, as portion of its scrutiny of green growing, the authorities is presently carry oning research on how green procurance could be successfully introduced in the hereafter. As an of import first measure, the Korean International Cooperation Agency has provided aid to upgrade Vietnam ‘s public procurance system with the debut of the electronic command system of the Republic of Korea ( KONEPS ) ( Moerenhout & A ; Lam, 2011, p. 44 ) .
In malice of the absence of direct procurance policies to catalyse green industrial growing, Vietnam has made considerable advancement in explicating statute law that is aimed at “ greening ” procurance. However, there are still defects in the content and execution of bing, indirect green procurance policies. For substructure undertakings, the most of import tool is the environmental impact appraisal ( EIA ) , which is non procurances specific. However, the effectual execution and followup of EIAs are still limited. There are besides mulcts for non following with environmental and societal protection ordinances. However, these mulcts are by and large excessively low to implement conformity. With respects to standardisation, Vietnam ‘s command jurisprudence does non incorporate any. If criterions are integrated, it is in the proficient demands of stamps. However, in those instances, the environmental mark is still comparatively low, and clip frame, quality and costs remain more of import than environmental or societal criterions.
In this respect, for illustration, command paperss and ratings frequently assess immediate undertakings costs, instead than longer-term nest eggs and life rhythm costs ( Moerenhout & A ; Lam, 2011, p. 44 ) .
The Need for Efficient Procurement as a First Measure In add-on to jobs related to direct and indirect green procurance schemes, Vietnam ‘s overall procurance policy contains defects that need to be addressed if the authorities wants procurance to be expeditiously used for invention and green industrial growing. Primarily transparence and unity are still developing. It is hard or frequently impossible to notice on procurement-related ordinance before it is adopted. When companies challenge a procurance determination, they are frequently excluded from future stamps. In add-on, ordinances are frequently applied in an inconsistent mode at different governmental degrees. Often, there are no specialised procurance units within securing entities and there is no procurement codification of behavior. These inefficiencies make the execution of a standardized procurance system really hard ( Transparency International USA, 2011, p. 40 ) . The Vietnamese e-procurement system that South Korea is presently helping with represents an of import spring in this respect ( Ketels, Nguyen, Nguyen & A ; Hanh, 2010, p. 124 ) .
Insufficient competition besides harms the potency of procurance for green industrial growing. Generally, small- and moderate-sized endeavors ( SMEs ) have troubles following with sustainability ordinances because they did non implement anterior demands. However, because international market entree is more and more learned upon such standards, the companies are seeking preparation to catch up and cut down otherwise higher conformity costs. It would profit Vietnamese growing if these market inducements were complemented by governmental enforcement and aid. This can be chiefly achieved by efficient procurance policies ( Moerenhout & A ; Lam, 2011, p. 44 ) . 42 Procurement, Innovation and Green Growth From their side, state-owned endeavors ( SOEs ) frequently operate with a deficiency of transparence. There are struggles of involvement as SOEs are frequently both bidders and pimps, with governmental entities frequently protecting and favoring “ their ” SOEs ( Transparency International USA, 2011, p. 40 ) . If SMEs and SOEs, two of import forces in the Vietnamese economic system, do non structurally adjust, and the authorities does non undertake corruptness and the deficiency of legislative enforcement, the possible to avoid the middle-income trap by bring forthing green industrial growing seems comparatively unfavorable. To day of the month, procurement policies have non yet served as an efficient accelerator to investing in green growing. However, it is clear that they can play a critical function in the close hereafter. The barriers experienced within Vietnam are declarative of barriers that South East Asiatic states may see when they are transitioning into lower middle-income economic systems. As in their instance, efficient procurance can function as of import driver to avoid the middle-income trap and create added value through green industrial growing.
Deductions for Procurement Policy and Models
The sheer volumes and values involved when authoritiess buy present in themselves an of import inducement for greener growing, for companies will be more inclined to put and introduce when it becomes clear that the demand for green merchandises and services exists, is of a long-run nature and of monolithic graduated table. As we have begun to show in this policy brief, green industrial growing has so been triggered by procurance, and authoritiess have so walked the talk on sustainable development through related policies. However, as states seek to shift themselves in planetary markets and better their comparative trading advantages, public procurance policies need to be calibrated to turn to several deformations.
Acknowledging that there are different degrees of green
Different legal powers and procurement entities are utilizing different standards to place green merchandises and develop green merchandise specifications. For illustration, specification for sustainable lumber can run from conformity with international enfranchisement strategies, to sourcing from community-owned and -managed woods, to self-declarations from providers, to sourcing from domestic plantations. This creates market deformations that impede the commercialisation of green merchandises. For providers, it presents jobs for accomplishing economic systems of graduated table and go throughing the related cost decreases down to the consumer. The feasibleness argument in turn toing this deformation flexible joints
on the demand to keep flexibleness within procurance policy. Should non procurers be given the flexibleness to specify different degrees and features of “ green public presentation ” based on their state ‘s industrial, economic and societal precedences? Challenges in securing green infrastructure-making the instance for whole life costing in times of economic asceticism the instance for entire cost of ownership demands to be far better articulated in procurance policy, since public buyers are besides confronting challenges in “ securing green ” in times of economic asceticism. As demonstrated in the 2012 EU study on the consumption of green public procurance, pimps are confronting troubles in both happening the clip and resources to develop green specifications given budgets cuts for staffing and confer withing services. In add-on, authorities asceticism plans have cut into developing plans for pimps on the development of green stamps and, furthermore, in the updating of science-based tools that are indispensable in the development of green stamps. In emerging economic systems such resource restraints are platitude. In add-on, green merchandises cost more to buy and pimps are hard pressed to incur higher disbursement on greener merchandises and services ( despite being able to calculate nest eggs during user life ) given the many other pressing environmental and societal issues on which authorities disbursement would be justified. The instance for entire cost of ownership demands to be far better embedded in procurance policy.
Procurement, Innovation and Green Growth Fragmentation of markets Equally much as there are different degrees of environmental public presentation, there is besides a big proliferation of eco-labels, enfranchisement strategies and voluntary criterions on sustainable public presentation. Public bureaus and providers around the universe frequently cite the “ eco-label quandary. ” IISD research indicates that globally, there are over 400 eco-labels in operation, and for sectors that are frequent countries of public spending-there are around 40 labels-all bespeaking varying degrees of public presentation. For illustration, Hewlett Packard says that the company “ faces 50 labels – and hold decided to seek to act upon 13 and prioritise conformity with 12 ” ( Personal communicating with IISD, May 2012 ) .
This is taking in portion to the atomization of demand-as different entities are utilizing different eco-label intelligence and different public presentation standards in jointing green stamps. As stated by the Confederation of Danish Industry in an interview with IISD in May 2012, “ municipalities-even within the same metropolitan area-are utilizing different green standard when purchasing the same merchandise. This poses jobs for providers as they are non able to scale up supply and cut down unit costs. ”
Gun trigger for green invention
Green growing would be good served by direct synergisms between procurance and invention policies, such as aiming investing for R & A ; D to priority procurement disbursement. For illustration, the U.S. Small Business Innovation Research ( SBIR ) plan militias 2.5 per cent of the entire extramural ( non-academic ) research budgets of all federal bureaus with extramural research budgets in surplus of US $ 100 million, for contracts or grants to little concerns.
In 2010, that represented over US $ 1Billion in research financess. Over half the awards are made to companies with fewer than 25 people and a 3rd to companies of fewer than 10. A fifth are minority or women-owned concerns. A one-fourth of the companies selected for grants in 2010 were first-time victors. The EU is besides traveling in this way. The “ Innovation Union ” Communication ( European Commission, 2010 ) identifies public procurance as a important chance to further invention:
”Unsatisfactory model conditions, runing from hapless entree to finance, high costs of IPR, to decelerate standardization and uneffective usage of public procurance. This is a serious disability when companies can take to put and carry on research in many other parts of the universe. In add-on, staying barriers for enterprisers to convey “ thoughts to market ” must be removed: better entree to finance, peculiarly for SMEs, low-cost Intellectual Property Rights, smarter and more ambitious ordinance and marks, faster scene of interoperable criterions and strategic usage of our monolithic procurance budgets. ”