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Public procurement as an industrial policy tool an option for developing countries?

Listed author(s):
  • Rainer Kattel
  • Veiko Lember

So far, only 40 countries have joined WTOÿs Government Procurement Agreement (GPA), from the developing world only some East Asian (Hong Kong [China], South Korea, Singapore) economies and ten Eastern European countries are parties to the agreement. This article sets out to answer two interrelated questions: is it advisable for developing countries to use public procurement efforts for development, and should more developing countries join the GPA? We survey key arguments for and against joining the GPA, and by adopting the framework of public procurement for innovation, we argue that government procurement should not be seen only as an indirect support measure for development, but also as a direct vehicle for promoting innovation and industries and, thus, growth and development. We also show that using public procurement for development assumes high levels of policy capacity, which most developing countries lack. In addition, we show how the GPA as well as other WTO agreements make it complicated for the developing countries to benefit from public procurement for innovation. As a result, the article suggests that the developing countries could apply a mix of direct and indirect (so-called soft) publicprocurement- for-innovation measures. In order to do this, developing countries need to develop the policy capacity to take advantage of the complex and multi-layered industrial policy space still available under WTO rules.

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Paper provided by TUT Ragnar Nurkse School of Innovation and Governance in its series The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics with number 31.

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Length: 34 pages
Date of creation: May 2010
Handle: RePEc:tth:wpaper:31
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