Ukraine: Time to Join the GPA?

Joining the GPA would strengthen Ukraine’s procurement system and buttress its efforts to fight corruption.

In a recent article (June 14, 2014), the Economist reported on efforts in Ukraine to reverse the “runaway corruption” that characterized the rule of its deposed president, Viktor Yanukovych. One such measure is the Ukrainian Parliament’s adoption of legislation to establish a new government procurement system. The current procurement system has numerous deficiencies, according to a recent statement by the World Bank. This statement, made in April, also noted that proposed amendments would “bring greater alignment” with good international procurement practices and achieve the “ transparency, openness and integrity needed in a sound public procurement system.” In addition to revising its procurement system, Ukraine is taking steps to draft rules to prevent conflicts-of-interest by its officials when they undertake government procurement. Another means for Ukraine to strengthen its procurement system would be to bring it into compliance with the WTO Government Procurement Agreement (GPA) by completing its GPA accession.

Three years ago, in 2011, Ukraine applied for membership in the GPA. It followed its application with submission of its Replies to the Checklist of Issues, which provide a description of its procurement regime. At the end of 2012, Ukraine tabled its initial offer setting out the procurement that it proposed to cover under the GPA.

According to the 2013 annual report of the WTO Committee on Government Procurement, the GPA parties indicated that Ukraine’s initial offer provided a “good basis for further negotiations.” They also identified several elements of its offer that would require further discussion such as thresholds, coverage of sub-central entities and other entities, the services and construction services to be covered under the GPA, as well as Ukraine’s list of exclusions. A number of parties, including the United States and the European Union (EU), followed up those comments with written requests for improvements in Ukraine’s offer. Subsequently, as a consequence of its domestic circumstances, Ukraine did not fulfill its intention to submit a revised offer before the end of 2013.

Ukraine should now take steps to advance its accession to the GPA by tabling its promised revised offer and information on the reform of its procurement system. Moving forward with its GPA accession would complement Ukraine’s plans to move toward closer economic integration with the EU. On June 27, 2014, the EU and Ukraine intend to sign the EU-Ukraine Association Agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA). The DCFTA will give Ukraine full access to the EU’s procurement markets (except for defense procurement). Similarly, EU firms will gain access to Ukrainian procurement.

GPA accession would give Ukraine access to the significant U.S. federal procurement system, which is currently not available to it. Unlike the EU, the U.S. cannot open its federal procurement to Ukraine until it becomes a GPA party. In addition, as a GPA party, Ukraine would gain rights to participate in the vast procurement added under the recently approved revision of the GPA, which is estimated at approximately $80 billion to $100 billion annually, according to the WTO Secretariat.

Joining the GPA would also strengthen Ukraine’s ability to address corruption in its procurement system. The revised GPA recognizes the importance of avoiding conflicts of interest and corrupt practices.  The GPA also includes a general admonition to procuring entities to conduct their procurement in a transparent and impartial manner so as to avoid these problems.

As discussed in an earlier posting (relating to China’s accession to the GPA), the WTO procurement committee examines the procurement regime of acceding countries to determine whether it conforms to the GPA. If the GPA parties find shortcomings in Ukraine’s procurement, it would be expected to rectify them before its accession became effective. By meeting the GPA standards for accession, Ukraine would be implementing a procurement system that is transparent, open and based on international procurement practices. Such a system should further its efforts to reverse its past patterns of corruption.

Jean Heilman Grier

June 23, 2014

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