Discuss the importance of E-Procurement in improving transparency and

reducing corruption

Introduction

Corruption has been a huge problem to the leakage of the purchase of goods and

services such as public funds and markets exchange in a lot of countries in the world.

It features the involvement of the several civil servants in the government who cheated

or lobbied their way in order to benefit themselves in national markets. This group of

civil servants who committed such an act is known as lobbyist. Therefore, the

Malaysian government has established the E-Procurement system to improve its

administrations and to advance straightforwardness in the procurement process

(Aman, Kasimin., 2011). This paper plans to survey the adequacy of the E-

Procurement framework in decreasing the lobbyist association, bureaucracy and

corruption in one of the biggest statutory bodies in Malaysia.

The utilization of ICT, by and large, has likewise changed taxpayer driven

organization conveyance forms, plans of action and individuals' desires for the quality

and productivity of data sharing and administration conveyance. Governments

everywhere throughout the world have exhibited the need to improve administration

conveyance and have the capacity to deal with issues quickly and acceptably (Maniam

et al., 2006). The innovation and appearance of web innovation has made it workable

for governments to change themselves by offering different customary administrations

on the web. E-procurement refers to “the use of electronic methods in every stage of

the purchasing process from identification of requirements through payment, and

potentially to contract management” (www.ogc.gov.uk).

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Definition

E-Procurement can be defined as an inter-organisational information system that

generate automatically the procurement process in order to increase efficiency and

effectiveness of the government procurement (Neupane et al., 2012). According to

OECD (2008), Panayiotou, Gayialis & Tatsiopoulos (2004), E-Procurement can be

described as the use of Information Technology such as internet, computer and online

portal to conduct sales and purchase of the goods and services in business to

business (B2b) activities.

Based on Oxford Dictionary, corruption can be defined as dishonest or fraudulent

act by those in power or the authority that based on bribery. It can be widely an act of

criminal and unlawful by those who were entrusted by higher authority in order to gain

illicit or self-benefit. The act of corruption included bribery, fraud, influencing and

threatening.

Transparency can be known as the clear condition of certain context or object. In

the terms of governance or business, transparency means openness, honesty and be

fair in any activities that being done. It is mainly used by the government or the

business corporation to show the fair conduct by their parties in dealing business or

activities with their respective customers.

The Public Procurement and Corruption in Malaysia

Corruption and fraud has been the most undeniable subject that is continuously

happening all around the world which Malaysia also involved. This issue will cause

many problematic issues that would follow if it not to be resolved as soon as possible

(JPM, 2013). Based on National Auditor Report in 2012, there are about 121 cases

that linked to fraud in the public sector which involved huge amount of public funds.
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This public sector includes one of the many national project such as Petronas and

Sime Darby. Corruption has been identified in many forms which consist of

administrative corruption, the involvement of lobbyists’ towards legal methods of

affecting government policy and public procurement kickback (Hellman, 2000).

According to the report from Ministry of Finance in 2011, the government of

Malaysia has spent about RM150 billion every year in procuring goods and services

which gives a perfect example of riskiness of public procurement to be exposed

towards corruption.

The leakages which happened in public procurement stem especially public funds

comes from the corrupt lobbyists who placed higher prices for the purchase of

products. This lobbyists group also used their influence in public authorities in order to

ensure they will gain this benefit, thus associating themselves in corruption (Ratković,

2013). The best example to portray this when the lobbyist are offering bribes to certain

procurement officer in order to obtain information in ease from the procuring agencies

before selling it to the other companies for a certain amount of payment. Hence,

lobbyist involvement will cause widespread corruption among the government

employee and the suppliers themselves.

The Establishment of E-Procurement in Malaysia

Many countries has been researching the best ways to cope corruption within the

procurement process in their respective countries such as Canada, United Kingdom,

Australia and United States. These countries have their own Lobbyist Code of Conduct

that will supervise the lobbyist activities in the public service.

Malaysia is still in the wind of preparing and establishing guidelines for this

lobbyists and corporations who cheated their way in purchasing, selling and
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manipulating the sales, goods and services via procurement process. Malaysian Anti-

Corruption Commission (2013) has been trying the E-Procurement system in public

procurement as an anti-corruption programme in order to overcome this corruption

issue such as the establishment of My Procurement online portal in order to reduce

corruption in Malaysia’s public sector (Neupane et al., 2012). This project can be

traced back in 1999 before being put in full practice in 2002 which the government

transformed the procurement process from manual practice into an electronic and

transparent process. This government initiatives allow them to increase their

effectiveness and efficient via extensive usage of online system rather than to promote

accountability and transparency in the procurement activities.

E-Procurement system has been proved worthful as it improve the integrity and

increase transparency in the procurement processes (Schapper, 2007). The system

is an automated processes which will detect any error and fraud automatically in the

procurement process. Thus, the used of E-Procurement has been increased by

governments in the world as a reform for the procurement process (Luijken & Martini,

2014).

The establishment of E-Procurement allows most of the transactions and sales

being made by direct purchase. Hence, the government can supervise the fraud and

error by the logs that has been saved in online data archive. All ministries in Malaysia

use E-Procurement in conducting and managing the public organisations, statutory

bodies, public procurement and financial institutions. Hence, in order to increase

transparency in the public services, the E-Procurement system was developed and

created by the government. Even so, the E-Procurement still follow the procedure in

the cycle of procurement with the addition of online web-based system to the cycle in

order to cope the fraud and corruption in the public services.

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The Outcome of E-Procurement in Malaysia

Overall, the implementation of E-Procurement or known as E-Perolehan in

Malaysia proved essential on fighting corruption in Malaysia. This system has given

benefits to the public sectors, supplier communities and customers (M. Kaliannan et

al., 2009).

According to Ministry of Finance (2009) report, the government already have

benefit from the E-Procurement system that has been fully implemented in 2002. The

system improved the purchasing control and increase the economy’s scale and

accuracy in the purchasing goods and services in the country. This system have

decrease the uncontrolled purchases and corruption between suppliers and

procurement officers rapidly. E-Procurement system has already prevent corruption

and reduces abuse of discretion. As the technology advance, the government will not

have to worry about the fraud in the procurement process.

Since the E-Procurement system was established in 2002, there are already 6000

registered suppliers all over Malaysia that is fully embraced and participating actively

in this system. This allow the officials to detect and identify the lobbyist group between

supplier and procurement officer. The government will have the access to the

supplier’s information so that will ease the authority to catch any frauds or corruption

done between both parties.

The implementation of E-Procurement in Malaysia has speed up its effectiveness

in fighting corruption. The Ministry of Finance has used E-Procurement or E-Perolehan

as an official site for all suppliers in Malaysia to gain customers and buyers. The

system is very popular due to its ability to repel any frauds and enhance transparency.

The activities between suppliers and procurement officers will be strictly monitored to

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maintain safety and fair conduct of the sales and purchase of the goods and services.

The data can be easily traced by the system therefore, the integrity of the procurement

process can be guaranteed.

The Argument of E-Procurement system

However, there is still a loophole that can be found for the lobbyist to infiltrate the

E-Procurement system towards their benefits. This is because the system is still not a

fully automated and auto-generate process which means, the officer still needs to

select the suppliers for the process. The suppliers who responded to the invitation

done by the procurement officer in the online portal would find a way to communicate

and reach with the officer outside the system. It means that the suppliers may request

to meet the officers to influence them to use the system for the selection process. Thus,

it is likely that corruption might happen in the E-Procurement system.

Based on the Heggstad et al. (2010) studies, unethical behaviour like corruption

and lobbyist can be found at any stages in the procurement process will occur if there

were lack of integrity among officers and inadequate transparency in the system. The

suppliers tend to use bribery and offer money to this procurement officer who

administered the system in order to obtain vital and valuable information of that

procurement. The suppliers even went so far by reaching to the higher authority or

officials who controls the E-Procurement system in order to benefit themselves in the

market. Therefore, an extensive explanation and guideline regarding on suppliers

selection must be given to the procurement officer to ensure they understand about

the job given. The process in the E-Procurement must have extensive trust and

integrity in order to convince the suppliers that the process in the system is transparent

and all regulations provided by the government must be followed.

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Conclusion

The E-Procurement system has been widely used by the government all around

the world in order to cope corruption and fraud in the public procurement. This paper

allows the study of the importance of E-Procurement in improving transparency and

reducing corruption in Malaysia. The study showed acceptable results regarding on

the efficiency and effectiveness of E-Procurement system in reducing corruption such

as lobbyist group that involved in public procurement.

In the E-Procurement system, it is difficult for fraud and corruption group such as

lobbyist to involve in this online web-based system due to all processes were fully

automated and generated by the system and no direct human interference during the

procurement processes. Based on the several researchers that has been mentioned

above, the E-Procurement process was transparent and difficult to be breached in by

the suppliers. All the decision was made by the management in order to determine the

criteria of the suppliers. The involvement of the lobbyist group proved to be difficult in

the E-Procurement system unless they could reach towards the higher officials or

authority who controls and administered this online system. The integrity of the

procurement officer who have been given the mandate to conduct this E-Procurement

system is also a factor for the corruption to be made in this system.

Generally, the usage of E-Procurement system has been the initiatives backbone

of the Malaysian government in order to fight and reduce corruption and fraud in the

procurement process. This online web-based system also proved to be transparent

and difficult to be breached in without permission and access from the higher

government officials. Therefore, the procurement process would be done fairly for all

parties involved. (1912 words)

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