A story in The Guardian shows how open tendering can undermine economic development by running smaller suppliers out of the market. The article provides the following example from Ghana which saw:
Ghana’s once-proud textile industry lose out to a Chinese company on a government contract to produce cloth for the country’s 50 year independence celebrations, due to open international competition. These contracts have reduced a domestic industry that in 1977 employed 25,000 people to less than 3,000 by 2005.
Explaining why nondiscriminatory procurement policies can often be counter-intuitive, Clare Coffey, acting head of policy at ActionAidUK warns: “The big companies, the big consultancies have the equipment and can respond at speed to large tenders, can loss lead, can flood a market … so I would be extremely wary of opening up a market prematurely without setting up safeguards because I don’t think it would be a fair market”.
