Government Procurement: Public Spending or a Driver of Growth?
In a previous article on maximizing value added in the Jordanian economy, I noted that government procurement can play an important role in expanding the base of local suppliers, particularly small and medium-sized enterprises. When public demand is directed thoughtfully, it does not only improve spending efficiency; it also strengthens local production and opens new markets for enterprises capable of growth and job creation.
The importance of this issue becomes clearer when considering the size of government procurement in Jordan, which is estimated at around 8% to 10% of gross domestic product. This makes it an influential market tool, capable of supporting economic activity across sectors and governorates. Therefore, managing this demand more openly can transform it from traditional public spending into a means of broadening the productive base of the economy.
In this context, the importance of small and medium-sized enterprises becomes evident. They represent nearly 90% of all companies in Jordan, contribute around 60% of GDP, and provide more than 50% of employment opportunities. This means that any serious policy aimed at increasing growth and employment must give proper attention to this sector, as it represents the broadest base of economic activity.
Nevertheless, these enterprises receive only around 12% of bank financing, reflecting a clear gap between their contribution to the economy and the financing available to them. This gap widens when they face difficulty accessing government procurement opportunities, particularly when contracts are large, qualification requirements are high, and guarantee requirements exceed their capacity. The World Bank has indicated that large companies, although they represent only about 1% of all companies, received 60% of the value of public procurement contracts in Jordan during the period 2018–2022.
Building on this, reform does not start from scratch. Jordan has taken important steps to modernize its procurement system through Government Procurement Bylaw No. 8 of 2022 and the electronic procurement platform JONEPS, which enhanced the electronic publication of tenders and award results. However, the most important phase today is to maximize the economic impact of these tools, so that modernization is not limited to the digitization of procedures, but extends to expanding the supplier base and increasing the participation of small and medium-sized enterprises.
From here, the need arises to further develop the way government tenders are designed, by dividing them into smaller, geographic, or technical packages whenever possible. This allows wider participation by small and medium-sized enterprises without compromising transparency or competition. This approach is also consistent with several international experiences that have used public procurement as a tool to open markets to these enterprises, through contract division, simplified entry requirements, faster payments, and continued commitment to integrity and fair competition.
The impact of this approach is not limited to companies alone; it also extends to the governorates. Some services and supplies depend on proximity to the place of implementation, which creates opportunities for local suppliers to participate in projects and services. For this participation to become broader, the financing side must also be addressed through faster payments, milestone-based payments, reduced guarantees in low-risk contracts, and linking contracts to suitable financing and guarantee programs.
Finally, to ensure that development does not remain limited to written procedures, its results should be measured by monitoring the share of small and medium-sized enterprises in government contracts, the number of new suppliers, the geographic distribution of tenders, and the average payment period. Most importantly, these ideas should not be implemented at the expense of transparency or competition, but through them. Ultimately, developing the government procurement system can turn public spending into a development tool that supports growth, expands the supplier base, and increases the efficiency of the Jordanian economy.
In a previous article on maximizing value added in the Jordanian economy, I noted that government procurement can play an important role in expanding the base of local suppliers, particularly small and medium-sized enterprises. When public demand is directed thoughtfully, it does not only improve spending efficiency; it also strengthens local production and opens new markets for enterprises capable of growth and job creation.
The importance of this issue becomes clearer when considering the size of government procurement in Jordan, which is estimated at around 8% to 10% of gross domestic product. This makes it an influential market tool, capable of supporting economic activity across sectors and governorates. Therefore, managing this demand more openly can transform it from traditional public spending into a means of broadening the productive base of the economy.
In this context, the importance of small and medium-sized enterprises becomes evident. They represent nearly 90% of all companies in Jordan, contribute around 60% of GDP, and provide more than 50% of employment opportunities. This means that any serious policy aimed at increasing growth and employment must give proper attention to this sector, as it represents the broadest base of economic activity.
Nevertheless, these enterprises receive only around 12% of bank financing, reflecting a clear gap between their contribution to the economy and the financing available to them. This gap widens when they face difficulty accessing government procurement opportunities, particularly when contracts are large, qualification requirements are high, and guarantee requirements exceed their capacity. The World Bank has indicated that large companies, although they represent only about 1% of all companies, received 60% of the value of public procurement contracts in Jordan during the period 2018–2022.
Building on this, reform does not start from scratch. Jordan has taken important steps to modernize its procurement system through Government Procurement Bylaw No. 8 of 2022 and the electronic procurement platform JONEPS, which enhanced the electronic publication of tenders and award results. However, the most important phase today is to maximize the economic impact of these tools, so that modernization is not limited to the digitization of procedures, but extends to expanding the supplier base and increasing the participation of small and medium-sized enterprises.
From here, the need arises to further develop the way government tenders are designed, by dividing them into smaller, geographic, or technical packages whenever possible. This allows wider participation by small and medium-sized enterprises without compromising transparency or competition. This approach is also consistent with several international experiences that have used public procurement as a tool to open markets to these enterprises, through contract division, simplified entry requirements, faster payments, and continued commitment to integrity and fair competition.
The impact of this approach is not limited to companies alone; it also extends to the governorates. Some services and supplies depend on proximity to the place of implementation, which creates opportunities for local suppliers to participate in projects and services. For this participation to become broader, the financing side must also be addressed through faster payments, milestone-based payments, reduced guarantees in low-risk contracts, and linking contracts to suitable financing and guarantee programs.
Finally, to ensure that development does not remain limited to written procedures, its results should be measured by monitoring the share of small and medium-sized enterprises in government contracts, the number of new suppliers, the geographic distribution of tenders, and the average payment period. Most importantly, these ideas should not be implemented at the expense of transparency or competition, but through them. Ultimately, developing the government procurement system can turn public spending into a development tool that supports growth, expands the supplier base, and increases the efficiency of the Jordanian economy.
In a previous article on maximizing value added in the Jordanian economy, I noted that government procurement can play an important role in expanding the base of local suppliers, particularly small and medium-sized enterprises. When public demand is directed thoughtfully, it does not only improve spending efficiency; it also strengthens local production and opens new markets for enterprises capable of growth and job creation.
The importance of this issue becomes clearer when considering the size of government procurement in Jordan, which is estimated at around 8% to 10% of gross domestic product. This makes it an influential market tool, capable of supporting economic activity across sectors and governorates. Therefore, managing this demand more openly can transform it from traditional public spending into a means of broadening the productive base of the economy.
In this context, the importance of small and medium-sized enterprises becomes evident. They represent nearly 90% of all companies in Jordan, contribute around 60% of GDP, and provide more than 50% of employment opportunities. This means that any serious policy aimed at increasing growth and employment must give proper attention to this sector, as it represents the broadest base of economic activity.
Nevertheless, these enterprises receive only around 12% of bank financing, reflecting a clear gap between their contribution to the economy and the financing available to them. This gap widens when they face difficulty accessing government procurement opportunities, particularly when contracts are large, qualification requirements are high, and guarantee requirements exceed their capacity. The World Bank has indicated that large companies, although they represent only about 1% of all companies, received 60% of the value of public procurement contracts in Jordan during the period 2018–2022.
Building on this, reform does not start from scratch. Jordan has taken important steps to modernize its procurement system through Government Procurement Bylaw No. 8 of 2022 and the electronic procurement platform JONEPS, which enhanced the electronic publication of tenders and award results. However, the most important phase today is to maximize the economic impact of these tools, so that modernization is not limited to the digitization of procedures, but extends to expanding the supplier base and increasing the participation of small and medium-sized enterprises.
From here, the need arises to further develop the way government tenders are designed, by dividing them into smaller, geographic, or technical packages whenever possible. This allows wider participation by small and medium-sized enterprises without compromising transparency or competition. This approach is also consistent with several international experiences that have used public procurement as a tool to open markets to these enterprises, through contract division, simplified entry requirements, faster payments, and continued commitment to integrity and fair competition.
The impact of this approach is not limited to companies alone; it also extends to the governorates. Some services and supplies depend on proximity to the place of implementation, which creates opportunities for local suppliers to participate in projects and services. For this participation to become broader, the financing side must also be addressed through faster payments, milestone-based payments, reduced guarantees in low-risk contracts, and linking contracts to suitable financing and guarantee programs.
Finally, to ensure that development does not remain limited to written procedures, its results should be measured by monitoring the share of small and medium-sized enterprises in government contracts, the number of new suppliers, the geographic distribution of tenders, and the average payment period. Most importantly, these ideas should not be implemented at the expense of transparency or competition, but through them. Ultimately, developing the government procurement system can turn public spending into a development tool that supports growth, expands the supplier base, and increases the efficiency of the Jordanian economy.
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Government Procurement: Public Spending or a Driver of Growth?
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