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Keynote Speech by PPS Administrator

- Asia-Pacific Conference on Electronic Government Procurement (e-GP) (Greetings) Good morning. Dignitaries from MDBs including ADB, WB, AfDB, IDB, and EBRD, and distinguished participants from many countries world-wide! I understand this e-GP Conference is co-hosted by ADB and the Indonesian government with aims to explore ways to help innovate public procurement of the Asia-Pacific region countries. In this regard, it is my great honor to introduce Korea's public procurement experiences. Before my speech, I would like to express my heartfelt thanks to Mr. Pastika, Governor of Bali, Mr. Tuwo, Vice-Minister of the National Development Planning of Indonesia, Mr. Stephen Groff, Vice-President of ADB, and many other staff members who have provided unsparing efforts to organize this conference.

(Introduction) The recent economic crisis stemming from the European financial turmoil is pushing countries all over the world to optimize the public expenditure. At this juncture, it is very opportune and meaningful that public procurement experts from MDBs and the Asia-Pacific region are gathered here to discuss how to reform public procurement and promote the sharing of their rich experiences.

(Concept of Public Procurement and Its Magnitude) Before I talk about the importance of electronic procurement, I would like to touch on the significance of efficient and transparent public procurement in terms of enhancing national competitiveness. Public procurement is to purchase goods and contract for construction works required from government entities such as education, health, and social infrastructure. In the case of OECD countries, the average value of public procurement accounts for 12% of GDP, and around 20% in developing countries. (Functions and Importance of Public Procurement)

Considering the scale of public procurement in the national economy, the government competitiveness significantly relies on the integrity of public procurement. Efficient and transparent public procurement is the driving force to optimize the national budget execution and stimulate fair and sound competition among businesses. This will result in the national development by helping increase job creation and technological innovation in the private sector.

(Need for e-Procurement) According to Transparency International, 400 billion dollars are being wasted every year due to corruption and inefficiency in the public procurement sector. In order to achieve more efficient and transparent public procurement systems, all the countries including even the advanced are rendering efforts to strengthen education and audit for their procurement officials. However, conventional procurement practice which depends on manual and face-to-face process has a limited effect in improving the quality of public procurement service. In this respect, many countries including Korea are actively implementing e-Procurement systems.

(Pre-KONEPS Era) Since the inauguration of the Korean government in 1948, Korea has been operating a centralized procurement system. My organization, Public Procurement Service, or PPS, is responsible for this centralized procurement. PPS performs the purchase of goods and services, and contracts for governmental construction projects on behalf of the government agencies. As far as the corruption and inefficiency was concerned in the public procurement sector, Korea was no exception. PPS used to be criticized as the first target to be abolished whenever new government took office. Low and inefficient productivity of procurement officials was the major obstacle for Korea to move forward beyond 10,000 dollars in per capita income by wasting government budget and cutting national competitiveness. Widespread corruption in public procurement administration created bad practices whereby bribery and lobbying, instead of quality and price, were considered most successful tools to win the contracts.

(Post-KONEPS Era : Achievements of KONEPS) The prevailing criticism regarding the organizational existence left no choice for PPS but to reform the Korea`s procurement landscape by taking advantage of Korea`s advanced IT technology. In our way to adopting e-Procurement, we had to overcome numerous objections and resistance from many stakeholders. However, with the firm resolution to alter the Korea`s conventional procurement practice, PPS succeeded in launching e-Procurement system in 2002, which is commonly known as KONEPS. Since the launch of KONEPS, Korea's public procurement has experienced dramatic changes. Firstly, transparent procurement has been realized. Due to the minimized interpersonal contacts between suppliers and contract officials, the possibility of wrong-doings has declined sharply. Besides, because all bidders are allowed to review the progress of bidding and contracting on a real-time basis, transparency has been enhanced to a great extent.

Secondly, efficiency has been increased remarkably. Digitalization of entire procurement process has minimized a need for suppliers to visit procuring entities. According to our recent survey, the electronic processing of whole procurement work has brought about 8 billion dollars` worth of savings per annum.

Thirdly, productivity has been improved significantly. After the introduction of KONEPS, the productivity of procurement officials has increased more than 5 times. KONEPS has proven that digitalization of the whole procurement process leads to the incredible increase of productivity of procurement officials not to mention private businesses.

(Excellent Features of KONEPS) These achievements were made possible based on the three major characteristics of KONEPS. Firstly, KONEPS is the single window where all procurement information is readily available;

Secondly, KONEPS is a highly integrated system with data linkage with external systems; Lastly, KONEPS provides one stop service whereby registration, bidding, contracting and payment are performed at one place. Thanks to the convenient and efficient functions of KONEPS, around 200,000 suppliers and more than 40,000 public entities in Korea are registered at KONEPS, and made 75 billion dollar worth of procurement contracts as of 2010. This scale accounts for about 60% of total public procurement value. As such, KONEPS has become the hub of public procurement market in Korea. In addition, through high degree of international recognition such as winning of UN Public Service Award, and quoted as the Best Practice Model in e-Procurement, PPS and KONEPS have become the icons of successful innovation globally.

(International Cooperation in e-Procurement) I strongly believe that this conference will provide invaluable opportunity to share experiences and know-hows, and further promote global collaboration. PPS has been actively supporting developing countries with various programs such as helping conduct feasibility study, and establish e-Procurement systems in countries including Vietnam, Mongolia, Costa Rica, and Tunisia. Furthermore, in conjunction with International organizations such as World Bank and UN, we are promoting e-Procurement expansion through holding joint-conferences and educational projects. The Korean government is committed to continued promotion of cooperative projects in the area of procurement administration including e-Procurement in tandem with other countries and international institutions. In this respect, I would like to ask for the support and interest from all of you here.

(Global Cooperation for e-Procurement and Procurement Administration - Suggestions) In closing my speech today, I would like to make two suggestions in relation to the advancement of public procurement administration from the global viewpoint. My first suggestion is to create 'Asia-Pacific e-Procurement Cooperative Body' which is exclusively dedicated to e-Procurement.

I believe that once the Asia-Pacific e-Procurement Cooperative Body is established, it will facilitate the sharing and dissemination of e-Procurement among member countries. The second suggestion I would like to make is that we need to enhance international cooperation/ in the government procurement sector. Recently, more and more countries are joining the WTO GPA and establishing FTAs in order to expand exchange of information and procurement cooperation. In a similar context, we, at the Asia-Pacific region, need to work out collaboration mechanism for the public procurement sector by taking advantage of existing international cooperation channels in the government procurement fields. The European Union is trying to spur member countries' cross-border participation in public procurement markets. As part of its specific efforts, EU has set up Pan-European Public Procurement on-line system which is currently being built through integration of e-Procurement systems of member nations.

(Closing) Lastly, I hope that this e-GP conference will serve as a vehicle to further strengthen cooperation in this region for the public procurement sector including e-Procurement. I would also like to ensure that the Korean government will join in such endeavors and provide active support. I really appreciate your attention. Once again, I do hope that this conference will be a great success. Thank you.