[MUSIC] Hi everyone, welcome back. Last time we talked about the global public procurement, overall concept when we talk about the global market, and domestic market, international market and global market and also concept of global marketing. And then we also talk about the important issue, what you have to be, to be a global operator. Today we're going to talk about the more specific issue while the government procurement, and public procurement. I want to refresh your memory that we talked about the government procurement. The public procurement is a procurement of the goods and services and work or construction, on behalf of public entity and such as a government agencies. So we call it actually The Contracting Authority in Europe, and in the United States, we call it Government Agency. So different way in different market. But anyway, about 10 to 20% of GDP gross domestic product of the government procurement is actually account for substantial part of the global economy. So the OECD country, anywhere between 15 to 18% of the actual spend on the public procurement of each country. Corruption, fraud or protectionism is a key element of the problem in global public procurement under World Trade Organization. We have a very important agreement the treaty called Agreement on Government Procurement. So we're going to talk about more about the GPA agreement on government procurement, where the legal framework for the basis for the all of the government procurement, especially under Free Trade Agreement. So I'm going to talk about the very important but the basic concept, what distinguish the public procurement versus the commercial procurement. So if you look at it, global market as one single house. Under the roof of the global market, you have two big room, one room is the commercial market, the other room is public procurement market. As I said earlier, for the OECD country, and the public procurement market is accounted for anywhere between 15 to 18% of country GDP, rest of other basically its own commercial market. So when you look at the global market as a whole, it consists of commercial market procurement. And then public market procurement, whereby commercial market procurement account for more than 80%, and public procurement market accounting for the balance of it. Then we have very important question. So now we know that each country has a public procurement account for anywhere between, it really depends on different country I'm going to share information with you later on. But anywhere between, as I said 15 to 18 some, OECD but other country goes up to more than 20% of the GDP account for public procurement. So when it comes to draw the line in between commercial procurement and public procurement, what can be a key criteria or key element of determining public procurement? We can come up with three key elements. Number one, source of funding. Basically where the money come from. Okay, so all these public procurement, we must have some source of funding, where the money come from. So source of funding for the public procurement or public fund in other word, taxes, that is number one criteria. So the money come from private sources is not public procurement. So we have a little bit of gray area like public private partnership PPP contract, which is mixed with public funds and a combination of private investment bank. But still, when we have element of the public fund in the PPP, that's why you see most of the PPP contract considered as international competitive bidding as a part of public procurement. So number two element of determining public procurement is rule and regulation. So why do we have loads of regulation? Is basically a said, where the money come from money happened to be taxes from all walks of life. People who pay taxes, whether rich, poor, or the common people they equally or proportionally contributed their tax. Therefore when you have money source of funding as a public fund, this money must be used properly according to the objective of the funding fund, therefore, rules and regulation applies. Any country whether large or small, okay, and reasonable legal framework exist in any country they have rules and regulation for public procurement. Because when there are no rules and regulation apply for public procurement, you can imagine what will happen because source of funding as a public fund will not be utilized the way it should be. The third element of public procurement is beneficiary. So let's go back to two element we talked about before. So the source of funding number one, and therefore we got to have rule and regulation for public procurement and who is going to be a beneficiary of those activities. Public interest. If and we have so many a dictator basically a drain the funds from the public and then, use for personal benefit using money for renovating their home and houses, and decorating with the quarter an item all other expensive item. Okay so basically, the three key elements all comes together. This interwoven concept you cannot take any concept out of this triangle concept. Source of funding is first step to define public procurement, and rules and regulation to support pass utilize public fund. And also, after you have public fund, apply the rules and regulations for the benefit of the entire society. So beneficiary must be public interest. So if public procurement benefit goes to private group or private, any specific interest group and political party, political power, is no longer a fair and reasonable and transparent public procurement. So these principles where we talked about today, where the money come from rules and regulation and penetration of public interest, it is the most important element of understanding public procurement. It applies to all other public procurement and international agency, in any country I'm mean decent country okay with rules and regulation respected. So, if you do not have the balanced approach to have the three element account, you will have a problem with the corruption and also all sorts of irregularity. And then people are the leadership political leadership to take advantage of tendering a specific infrastructure of the country, roads, bridges and factories, social infrastructure, construction project on their own benefit or their private interest group. So that's why you will see more and more and then the substantial amount of the money and energy spent on, For the issue with the equal opportunity and also transparency and fairness procedure. So, when we said there is three key element to public procurement and also we need to have another additional backup, which enable any country or authority to execute those principle. A one way is a fairness, in the procedure I think is very important. Doesn't matter how many procedures you have, if you do not have fairness procedure which apply to all competitor, which apply all the vendor, any of the system you have is no good. And also transparency. Whatever you have it, in whatever source of funding or regulation you may have it, if there is no transparency, if deal be strike in the separate room without knowing anybody know, without any other third party or any other the monetary agency look at it. If a couple of the politicians inside the room come up with a closing deal, basically, they're not transparency. So you must have transparency to protect three key elements of the public procurement. So now we would like to look at public procurement and the market. So there is some you know, a case study and we can go back in history. So procurement organization roars what they mean is, what procurement will do a specific as the organization role. It was not until recognized until 1800. So one of the earliest acknowledgement of the procurement function we can find from Charles Babbage's 1832 books on his Economy of Machinery and Manufactures. He points out the need for interior man he called it instead of the procurement specialist or procurement. He pointed out the need for a different welding of material man in the mining sector actually who select, purchases and check the goods and services required, essentially Babbage call for centralized public officer. It was this was 1832, amazing, isn't it? So back in 1832, instead of calling a procurement officer procurement and charge call it material man basically in charge of all the procurement function that we know today. That's how far goes back to history 1832. And Industrial Revolution procurement actually start to shape a different way. Marshall Kirkman in his book in 1887 books, The Handling of Railway Supplies Their Purchase and disposition, he detail our procurement the strategic contribution, in other words, what procurement would contribute. And how to improve railroad industry, specifically acquiring goods from, different part of the country and the bring them south or west Back in 1886 depends on Pennsylvania railroad gave department status to procuring the function referring to the supply department. So the two example that I'd refer the one from charles Baggade the 1832 books on The Economy of the Machinery And The Manufacturer, A Northshore Marshall Kirkman 1886 seven books, The Handling of Railway Supply. These go back 100 years but they start to see the importance of the procurement, even tighter in Charles Baggage book it's different the material man, basically procurement manager, the function was described in the mining sector. This is the person select purchases and track the goods and services require basically same function what we see today. So public procurement market, I'm not going to go through in too much detail about the world's biggest economy in 2019, 2020 basically how the GDP in the in different country and what they're public procurement account for. So you can share the slide and basically same as what I said earlier in OECD country or the developing country using anywhere between 15 to 18% of the GDP for public procurement. I want to share some information about this one and we have a little more specific. This is not a country breakdown but more towards the continent. So we can say actually this is a procurement as of the percentage of the GDP, as a public procurement. So with Southeast Asia, almost 20%. Sub-Saharan African is about 15%. Latin American Caribbean 14 to 53%. European Central Asia goes down a little bit about little over 10%. North America, 11%. Middle East and North Africa, 11% and East Asia Pacific and 9.26%. But these are a not a specific country but more toward demographic and the content, so they give you some indication of what role public procurement play for global domestic product. So we talked about today and the role of public procurement, called back to history, what old man said, almost 1800. As demand procured the different things that we call it material man, that we have a look at. So from the next section we are going to talk about the procurement, as a part of the value chain or supply chain management component. We will have a look at it. Thank you.
