Global GDP: How large is public procurement?

| 0 Comments

BosioDjankov.pngBy Erica Bosio (Program Manager of the Growth Analytics, Development Economics Vice Presidency at the World Bank) and Simeon Djankov (Director, World Development Report 2019)

Public procurement -- the process by which governments purchase goods, services and works from the private sector -- amounted to $11 trillion out of global GDP of nearly $90 trillion in 2018. In other words, 12 percent of global GDP is spent following procurement regulation.

The regulation of public procurement is relatively new. With the exception of Japan in 1947 and the United States two years later, most countries adopted procurement laws in the 1990s or 2000s. This legislative activity was informed by the model procurement regulation that the United Nations Commission on International Trade Law made available in 1994. The regulation on the books in many countries is consequently similar, though in practice may differ. An ongoing research project with professors Edward Glaeser and Andrei Shleifer at Harvard University aims to document these differences.

The size of public procurement as a share of GDP is nearly identical across low-income, middle income and high-income countries. Among the 190 countries that we have studied, low-income economies procure on average 13 percent of GDP in goods, services and works. Middle-income countries procure 13.2 percent of GDP and high-income countries procure 14 percent of GDP. These differences are statistically insignificant.

There are large differences within income groups, however. Botswana, a middle-income country, procures 28 percent of GDP (figure 1). In Sri Lanka, another middle-income country, that figure is only 6 percent. Kenya, a low-income country, procures 26 percent of GDP; Madagascar -- only 5 percent. Our research is focused on finding patterns across countries in terms of their proclivity to use procurement regulation.

Figure 1: Twelve percent of GDP globally is spent on public procurement

Article6_image.png

Source: Own calculations based on government data and World Bank Group staff estimates.

Note: These procurement data may not cover military expenditures and sectors like healthcare, as these are sometimes incurred through special procurement regulation or direct awards. The actual size of public procurement is likely larger.

For example, we match data on the size of public procurement as a share of GDP with the Freedom House 2018 index to see whether accountable governments rely more on public procurement. The answer is yes, they do, although this relationship is statistically insignificant. The average share of public procurement to GDP is over 14 percent in high accountability countries, 13 percent in medium accountability countries and less than 12 percent in low accountability countries. European countries tend to have a large share of public procurement in GDP: 25 percent in Switzerland, 20 percent in the Netherlands, 19 percent in Finland, and 16.5 percent in Sweden, for example. So do a number of large emerging economies: Brazil, Egypt, India, Pakistan, South Africa, Turkey and Vietnam all procure over 20 percent of GDP. The size of procurement expenditure in these groups of countries reflects a larger engagement by the government in providing goods, services and works.

Fragile states often have a small share of public procurement to GDP, reflecting the limited ability of governments to deliver services. In 2018, for example, Yemen, Niger, Cameroon, the Democratic Republic of Congo, Sudan and South Sudan each spent less than 5 percent of GDP through general procurement procedures.

These data -- collected by contacting the relevant procurement agencies or statistical offices -- complement existing World Bank data on the overall size of public expenditure. The method of these expenditures varies across countries and even across sectors within a country. Procurement regulation offers a level of transparency and competition that is typically higher than alternative methods of direct awards to private contractors, works and services implemented by state-owned enterprises, or sector-specific rules that limit competition. The data is made publicly available as part of the Contracting with the Government indicator of the Doing Business project.

World Bank Blogs

Leave a comment


 

 

Career opportunites

Category Implementation Manager

  • >500 000 Gauteng Permanent Projects / Category Management Supply Chain
As an Executive Search and Career Consultant specializing

Head of Procurement

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Regional Sourcing Manager

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Procurement Director

  • >500 000 KwaZulu Natal Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Procurement Specialist

  • >500 000 Buyer Gauteng Permanent Procurement Officer / Specialist
As an Executive Search and Career Consultant specializing

Senior Sourcing Manager

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing Supply Chain
As an Executive Search and Career Consultant specializing

Indirect Sourcing Programme Manager

  • >500 000 Contract Projects / Category Management Strategic Sourcing Western Cape
As an Executive Search and Career Consultant specializing

Deputy Chief Commercial Officer

  • >500 000 Contract Gauteng Procurement Management Supplier / Business Development
As an Executive Search and Career Consultant specializing

GROUP PROCUREMENT MANAGER

  • Gauteng Permanent Procurement Management Supplier / Business Development
Operating out of Johannesburg, this is a key

Tutor and Coordinator

  • Gauteng Operations, Planning & Inventory Permanent Procurement Management Supplier / Business Development
Purpose of the job: To plan, coach, advise

Commodity Manager

  • <500 000 Commodities Gauteng Procurement Management
Are you a Commodity Manager looking for the

Supply Chain Professional

  • <500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Supply Planning

  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer Procurement Consultant
Are you an Industrial Engineer looking to make

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Supply Chain
Seeking vibrant industry specific individuals seeking new opportunities

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Procurement Management
Looking for an Operations Manager to take into

Supply Chain Systems Administrator

  • >500 000 Gauteng Procurement Management Strategic Sourcing Supply Chain
One of South Africa's leading, mining companies is

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Procurement Management
Are you an experienced Logistics Manager looking for

Continuous Improvement Manager

  • >500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Warehouse Assistant

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory
I am currently looking for ambitious Demand Planner,