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Logo of Phnom Penh Post newspaper Phnom Penh Post - Exclusive medicines deal for Doung Chhiv

Exclusive medicines deal for Doung Chhiv

THE Prime Ministers have awarded a private company a monopoly on importing millions

of dollars of medical supplies for the government, scrapping a competitive bidding

system.

The deal, which appears to violate Ministry of Finance regulations, is to supply

all medical drugs and equipment needed by the Ministry of Health for hospitals, clinics

and the military around Cambodia.

The Doung Chivv Import-Export Tourism and Transport Co, whose imports include Otard

cognac, has won a three-year monopoly to provide the goods.

There is 12 billion riel ($4.8 million) in this year's national Budget for medical

purchases, according to the Ministry of Health. It is unknown how much will be allocated

for the next two years.

Previously, the supply of medical materials was - in line with regulations introduced

last year on government purchasing - open to international bidding by various importers

or manufacturers. The government evaluated bids before awarding individual contracts.

The Prime Ministers have agreed in principle to Doung Chivv's medical monopoly but

the details, including how the company will be paid, are unclear.

It is also unknown whether the way will be opened for similar exclusive arrangements

for other government ministries' supplies.

Some health professionals fear the Doung Chivv deal may see Cambodia paying more,

and getting less, for medical goods.

Financial experts say the government's action is not only anti-competitive but directly

cuts across efforts to make state purchasing, and the civil service generally, more

open and accountable.

Officials acknowledge that the international bidding process has been the subject

of chronic delays - taking as long as 40-60 weeks to get tenders approved and goods

delivered.

But they say the Prime Ministers' decision to abolish the system was not requested

by the Ministry of Health.

The monopoly was requested by Doung Chivv, and approved first by Hun Sen and then

his co-Prime Minister Prince Norodom Ranariddh.

The Ministers of Health and of Finance were informed in a July 19 letter from the

Prime Ministers' Council of Ministers cabinet chiefs that the "Royal Government

of Cambodia has accepted in principle" the proposal of Doung Chivv.

The company would be given the right to supply all pharmaceuticals, medical materials

and equipment, without bidding, for 1996 to 1998.

The decision was made "in order to maintain the stability of drug supply",

the letter said in apparent reference to delays in the bidding system.

The company must discuss the "quality, type of drug, the quantity and price"

with the Health and Finance ministries.

Doung Chivv is an importer-exporter - particularly of alcoholic beverages - also

involved in construction and other fields. The company would not comment, but critics

say it has no experience with health supplies.

Its monopoly conflicts with a July 1995 sub-decree signed by the Prime Ministers

and a November 1995 circular issued by the Finance Ministry.

They specified that all government purchases worth more than 20 million riel ($8,000)

must be open to competitive bidding, by foreign or domestic suppliers.

The rules were established to promote transparency and deter corruption, limiting

officials' ability to directly order goods from whomever they wanted.

"Where is our credibility? You make a decree and a few months later you scrap

your decree," said one critic who would not be named. "If government regulations

are nothing, then the government is nothing."

Nouv Kanun, a Secretary of State and chief of Ranariddh's cabinet at the Council

of Ministers, said it was the "Prime Ministers' prerogative" to "over-rule"

the Finance Ministry regulations.

He was not certain of the Prime Ministers' reasons, saying: "I think the Prime

Ministers would understand clearly why they would decide this... I think you don't

need to ask anything more."

But he noted "bad experiences" with the international bidding system, such

as companies offering very low bids and providing correspondingly poor quality goods.

Officials at the offices of both Prime Ministers either said they did not know about

the deal or referred inquiries to the Ministry of Health.

Dr Nuth Sokhom, Under-secretary of State for Health, said there had been long delays

in obtaining much-needed drugs and equipment through the slow bidding process.

The ministry had been working to speed up the system and it was the Prime Ministers'

decision - not the ministry's request - to abolish tendering.

However, if Doung Chivv was able to provide medical goods of high quality and fair

price in a more timely way, "we will be very happy".

Sokhom said the ministry would work with Doung Chivv to ensure only high-quality

and reasonably-priced goods were imported.

The ministry had lists of international prices for pharmaceuticals, he said, but

"we have less information [about the cost of] medical equipment. That is a problem."

"I think the company itself has to be responsible and we will have to assist

the company technically."

Other sources suggested that the ministry would have little bargaining power with

Doung Chivv - as the only authorized importer - if the company charged too much for

medical supplies.

One questioned why the company was chosen, saying: "You cannot buy drugs as

you buy cognac."

No officials contacted by the Post were able to explain how Doung Chivv would be

paid: whether it would get a set fee or charge the ministry a mark-up on suppliers'

prices.

Doung Chivv representative Sath Navy, responsible for managing the deal, declined

to comment because details had yet to be finalized with the government.

Minister of Finance Keat Chhon was overseas at the Post's press time and could not

be contacted for comment.

He is believed to have discussed the matter with the Asian Development Bank in Manila

during a visit there, but ADB representatives in Phnom Penh said they were not authorized

to comment.

The ADB, along with other multi-lateral agencies, has been a key advocate of greater

transparency in government purchasing. The bank funds a Ministry of Finance procurement

unit, through which all state purchases have to be approved.

Unit chief Chhay Vuth said he had sent a letter to his Minister on the issue and

was awaiting instructions on how to handle the purchase of health supplies.

Several sources acknowledged ponderous bureaucracy within the bidding system, particularly

at the Ministry of Finance, where files are said to sit for months without action.

Bribery, some people say, appears to be one way of getting bids approved more quickly.

Financial experts said there was nothing wrong with involving the private sector

in government procurement - providing that it was done in a competitive, transparent

way.

They questioned why other importers and medical firms were not given a chance to

vie for the monopoly awarded to Doung Chivv.

"The benefits of the private sector are that they bring specialist knowledge

and have a competitive edge," said one.

"The problem with this is that the company doesn't have specialized knowledge

and this contract was given without competition for it."

Dr Georg Petersen, representative of the World Health Organization (WHO), which had

been working with the government to try to streamline the bidding process, said he

did not know how the new system would work.

"Our main concern is that the country is able to get quality drugs at an internationally-accepted

good price. It's a political decision what mechanism they use.

"If this mechanism does that, no-one will have a concern with it."

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