The government procurement budget of South China's Guangdong Province is expected to exceed 18 billion yuan (US$2.2 billion) next year, inclining towards small- and medium-sized businesses.

The procurement will still mainly involve engineering, service and commodities projects, including public facilities, greening, and office buildings, said sources with the Department of Finance of Guangdong Province (DFGP).

With the digitalization of government departments in recent years, the government will purchase more digital hardware, such as computers, said Liang Jiexian, an official from DFGP's Government Procurement Office.

"The information technology (IT) sector will continue to enjoy many opportunities next year," said Liang.

A number of IT giants, such as Founder, IBM, Dell, and HP have already been bidding for government procurement contracts this year.

In addition, Liang predicts that all government departments of Guangdong Province will likely use Linux software by 2006, as the Guangdong Linux Center established itself, beginning in July this year in Guangzhou, the province's capital city.

Over the past years, small- and medium-sized enterprises (SMEs) have had fewer opportunities to take a share of government procurement contracts. However, Liang predicts the government will stipulate corresponding policies to help attract more SMEs.

Liang did not specify how much of the 18-billion-yuan (US$2.2-billion) purchasing budget would be allocated to SMEs.

According to Liang, the government would consider lowering some requirements, including those for the bidder's minimum registered capital, to allow more SMEs into the bidding competition.

But he stressed that the government would continue to watch closely their financial capability.

Meanwhile, Liang said that the province's procurement office is planning to introduce a "watchdog" system, in a bid to better supervise the bidding and allocating process of government purchasing.

The province is set to allocate more than 5 million yuan (US$604,500) to assess the government-funded projects to help better allocate the total procurement budget in the years to come, Liang said.

The government procurement of Guangdong Province has been the highest among other provinces and regions in the nation for years since it first introduced the program in 2000.

The government procurement of Guangdong Province hit about 12.7 billion yuan (US$1.5 billion) in 2003.

And it was predicted that this year's amount will climb to 16 billion yuan (US$2.4 billion), according to Liang.

Among its total, a considerable proportion has been used in purchasing imported products in the first three quarters this year, said Liang.

"Although government procurement mainly targets domestic products, imported products made up a considerable proportion," said Liang.

A total of 12 billion yuan (US$1.5 billion) was used in purchasing domestic products last year, making up 94 percent of its total.

Meanwhile, 750 million yuan (US$90.7 million) were used in purchasing imported products, according to Liang.

"Imported products are needed because Chinese enterprises are still incapable of making such products of high quality at present, like sophisticated cameras for reporters," said Liang.

He stressed the positive effects of government procurement, saying it has helped spur economic growth in less developed areas and SMEs, as well as promoting environmental protection.

"It has also helped the government reduce budgets through bidding competition," Liang said.

For example, procurements of the province hit about 5.3 billion yuan (US$641 million) in the first half of this year, helping save 591 million yuan (US$71.5 million) in the government budget, Liang said.

Although Guangzhou-based media reports earlier this month stated that the province's government purchasing will climb to 20 billion yuan (US$2.4 billion) next year, Liang said, that "it is impossible to reach that amount".

"Although the government procurement has room for growth, we still need to balance the procurement budget and other financial budgets," said Liang.

To date, government procurements came to 9.9 billion yuan (US$1.2 billion) in the first three quarters this year, up 30 per cent compared with that of the corresponding period of last year.

(China Business Weekly December 20, 2004)