Do Margin of Preference cause inefficiency?

RSM
I think no one can deny the fact that granting margin of preference to the local firms it is expensive undertaking on the part of the Governments. Margin of preferences are actually be looked at as a discount that the Government are willing to pay as a premium.

If we look at the figures you have presented in your submission it is scaring – it is justifying the fact I have mentioned above that - it is expensive undertaking. However, we need look at the principal objective of the preference scheme – to assist the local business community to become competitive and efficient suppliers/service providers to the public sector. This includes capacity building of the local firms and encourages using of locally manufactured goods. No doubt that if the local firms could absorb this preferential treatment there will be massive multiplier effect in all sectors of economic – absorption capacity still setback. To me preferential treatment in procurement should be considered as a tool to empower citizens economically as well as part of an overall economic stimulus strategy.

On the other hand, foreign firms normal construed preference scheme as discrimination and detriment competition in the procurement process. To some extent I tend to agree with their arguments simply because margin of preference gives chance for local bidders to price high with knowledge of discount from the Government. I think here is where the concern of RSM is centred, that awarding the bid to the bidder whose tender sum is 8 billion more than the lowest! To me this is the discount Government should bear by the Government – for developing local industry and manufacturing.

RSM, if you go by logic, the answer for your questions will be NO.