With Taiwan set to become a signatory to the WTO Government Procurement Agreement (GPA, 政府採購法), which will give local businesses access to global government procurement, experts said the move would also pose great challenges to the country politically and economically.
After President Ma Ying-jeou (馬英九) signed the instrument of accession to the GPA on June 8 following the legislature’s endorsement on May 15, the agreement will enter into force 30 days after it was sent to the WTO Secretariat to complete the procedure.
The government sent the documents to the WTO on June 15.
When Taiwan entered the WTO in 2002, it said it would join the GPA within a year, but it took more than six years for the world trade body’s Committee on Government Procurement to accept the accession of Taiwan to the plurilateral accord, which it did on Dec. 9.
The objective of the GPA is to encourage government procurement among its members based on the principles of reciprocity and national treatment.
Aside from a series of bilateral negotiations with the other GPA signatories, “the main reason for [the] delay [in Taiwan’s accession] was resolution 87 made by the WTO Committee on Government Procurement on June 2, 2006,” Democratic Progressive Party (DPP) Legislator William Lai (賴清德) said.
Lai said the DPP government refused to compromise on the country’s sovereignty because of a clause in the resolution that he said amounted to a demand for Taiwan’s “de-sovereignty.”
In the resolution, the GPA parties said the nomenclature and other terminology used in a decision on accession to the agreement — including in appendices and annexes — by any delegation representing a separate customs territory are provided for the purpose of clarity in defining commitments in the framework of the accession of the agreement and that none has implications for sovereignty.
The resolution was widely believed to be aimed at Taiwan, adopted as a member of the WTO under the name “Separate Customs Territory of Taiwan, Kinmen, Penghu and Matsu.”
Beijing has expressed strong opposition to Taiwan’s accession to the GPA, largely because terminology found in documents hinted at Taiwan’s sovereign status. Another point of contention was the accession of Hong Kong and Aruba — two entities that like Taiwan joined the WTO as separate customs territories — as they are considered autonomous regions rather than countries.
The Chinese Nationalist Party (KMT) considered it a victory when the WTO agreed to allow Taiwan to list the names of the central government’s Cabinet-level bodies and the Office of the President as “The Entities which Procure in Accordance with the Provisions of this [GPA] Agreement.”
The KMT has made no mention of existence of the still valid resolution on the country, not to mention of its possible impact on the country’s sovereignty, while it boasted that the accession to the GPA was attributed to improved cross-strait relations after it came to power.
Deputy Minister of Economic Affairs John Deng (鄧振中) is the top GPA negotiator. He said the resolution was not targeted at Taiwan as “not even a word in the resolution was about the Separate Customs Territory of Taiwan, Kinmen, Penghu and Matsu.”
”The KMT buried its head in the sand when it looked at the problem in this manner,” said Lo Chih-cheng (羅致政), director of the of political science department at Soochow University.
Lo said China had exerted its influence at the WTO’s Committee on Government Procurement to push for the resolution, as Taiwan’s entry into the organization could be interpreted as a symbol of Taiwan’s sovereignty.
“The DPP government tried to discourage GPA members from formulating the resolution over the years, but to no avail,” said Lo, who previously served as chairman of the Ministry of Foreign Affairs’ Research and Planning Board in the DPP administration.
“It would be a very bad model if Taiwan’s entry into the GPA was not an isolated case but rather served as a precedent, as it would mean that Taiwan would not be allowed to accede to any international accord or join international bodies unless it agreed to deny the existence of its sovereignty,” he said.
On the economic aspect, specialists on public projects called on the government to come up with measures to help businesses explore foreign markets and increase their competitiveness as they vie with global manufacturers for local government procurement programs.
The Ministry of Economic Affairs said the government procurement market among the 40 GPA signatories amounts to US$960.3 billion annually, 150 times Taiwan’s potential market.
Under Taiwan’s accession to the GPA, government procurement contracts for goods and services above NT$5.45 million (US$166,000) and for construction projects above NT$250 million will all be open to international bidding.
Su Ming-tong (蘇明通), director of the Department of Planning at the Public Construction Commission (PCC), said Taiwanese firms stood to benefit the most from GPA accession by gaining access to other signatories’ government procurement markets.
Taiwan has already opened up its bidding process for government projects to foreign firms. Over the past years, about 27 percent of contracts were awarded to foreign bidders.
“That number could rise after Taiwan’s accession to the GPA, but local businesses should still be more competitive than their foreign counterparts in securing local contracts because of language issues and the fact that foreign technician certificates are not recognized here,” Su said.
Hsieh Yu-shan (謝玉山), director of the Business and Engineering Department of the RSEA Engineering Corp (榮民工程公司), said the country’s accession to the GPA could have both a beneficial and detrimental impact on local businesses.
“We expect to see an increase in the number of foreign firms in the country after the accession, while there will be giant hurdles to overcome for local businesses eyeing overseas government procurement markets,” Hsieh said.
The GPA members would more or less set up measures to protest local firms against foreign bidders, Hsieh said.
“For most local businesses, the thorny issue would be the amount of security deposits required. The US, for example, stipulates that the performance guarantee of a single construction project shall be 100 percent of the cost, which many Taiwanese businesses simply cannot afford,” Hsieh said.
He said the association of building and construction businesses hoped the government would establish a fund to help local businesses raise security deposits for their foreign construction bids.
Chief secretary of the PCC Wu Kuo-an (吳國安) said the government should provide significant logistical support for local business as they seek entry into foreign markets.
“We need a collective effort to help local firms enter government procurement markets. Local firms need the MOEA to gather business information, the Ministry of Finance to consult with tax issues, the Ministry of Education to train professionals with expertise in languages and other skills,” Wu said.
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