Government procurement refers to purchases of goods or services, including consultancies and professional services, construction, maintenance and material supply contracts, facilities contracts, capital equipment and property and leasing arrangements, undertaken by governments for their own consumption.
Government procurement accounts for a significant part of the economy of many countries. Although a government procurement agreement did not form part of the core WTO agreement, a number of WTO member governments signed a plurilateral agreement on government procurement. However, this was optional and did not go far enough for private sector and governments vying for new opportunities for profit and control through the liberalization of this important area. Government procurement provisions in free trade agreements stipulate that governments (national and sub-national) must treat overseas tenders no less favourably than local ones. Many bilateral agreements include provisions which already commit governments to open up this lucrative market to transnational corporations. This issue has been a contentious sticking point for Malaysia in its negotiations with Washington on an FTA and India in its negotiations with the EU. Malaysia’s procurement policy has kept foreign companies from bidding for state contracts, which US negotiators object to.