Telecom Operators Urge Government to Scrap G2G Contracting Rule

Industry body says direct government-to-government deals are squeezing out private firms and weakening competition

 

ISLAMABAD: The Telecom Operators Association (TOA) has urged the government to repeal the government-to-government (G2G) direct contracting provision under the Public Procurement Rules (PPRA) 2004, arguing that the mechanism is limiting private-sector participation and distorting competition.

 

In a letter addressed to Finance Minister Muhammad Aurangzeb, Planning Minister Ahsan Iqbal and IT Minister Shaza Fatima Khawaja, the association highlighted Clause 42(f), introduced into the procurement rules through SRO 834(I)/2021 in June 2021.

 

The provision permits government procuring agencies to directly award contracts to state-owned entities, including professional, autonomous and semi-autonomous bodies at the federal and provincial levels, for time-sensitive works and services considered to be in the public interest.

 

Under the rules, eligible state-owned entities are required to execute such assignments using their own resources and cannot rely on private-sector partners, joint ventures or subcontractors.

 

Where multiple state-owned entities qualify, the procuring agency may conduct a limited tender among them without public advertisement and is required to establish a mechanism for determining whether the proposed prices are reasonable.

 

Private sector facing growing pressure

 

The TOA claimed that the 2021 amendment has contributed to a significant expansion of state-owned entities and the creation of new government-backed organisations, many of which have subsequently secured IT and telecom projects through direct G2G arrangements without open competitive bidding.

 

The association said this has placed private-sector companies at a disadvantage despite their substantial investment in Pakistan’s technology and telecommunications infrastructure over the past two decades.

 

According to the TOA, telecom operators are increasingly transforming from traditional connectivity providers into broader digital-services companies, investing heavily in data centres, cloud computing, artificial intelligence and other emerging technologies.

 

The industry body argued that a stronger domestic technology market is essential if Pakistani companies are to develop products and services capable of competing in international markets.

 

Concerns over uneven competition

 

The association said government procurement represents a major source of demand for IT, telecom and digital services, but the increasing role of government-owned companies is reducing opportunities for private businesses.

 

It claimed that while significant public-sector spending continues to go to foreign suppliers for hardware and software, some work that was previously undertaken by domestic private companies has shifted toward government-owned entities.

 

The TOA warned that reduced access to domestic contracts could prevent local technology companies from testing, developing and scaling their products before entering international markets.

 

It also raised concerns that state-linked entities may benefit from regulatory exemptions, preferential licensing arrangements or implicit government support that private-sector competitors do not receive.

 

According to the association, the government's simultaneous role as regulator and market participant could create an uneven playing field, increase barriers to entry and discourage private investment, innovation and research and development.

 

Efficiency and employment concerns

 

The TOA also argued that limited competition could reduce incentives for state-backed contractors to improve efficiency and service quality.

 

It warned that inefficient state-owned enterprises could ultimately create additional financial pressure on the economy, citing Pakistan International Airlines, Pakistan Steel Mills and power distribution companies as examples.

 

The association further said restricting private-sector participation could affect employment opportunities, particularly for educated young people, as small and medium-sized technology companies play an important role in generating jobs.

 

It also expressed concerns about access to financing, arguing that substantial government borrowing can encourage banks to favour sovereign securities over private-sector lending, potentially increasing borrowing costs and restricting affordable financing for SMEs.

 

Alleged subcontracting concerns

 

The TOA also alleged that some state-owned entities awarded projects through G2G arrangements subsequently subcontract portions of the work to selected private companies without conducting competitive procurement.

 

The association argued that such practices could undermine the transparency and accountability objectives of the public procurement framework.

 

Referring to Prime Minister Shehbaz Sharif's position that the government should not be involved in running businesses, the TOA said state-owned entities are largely funded through resources generated by taxpayers and should not receive preferential treatment when competing with private companies.

 

The association urged the government to repeal Clause 42(f) of the PPRA Rules and require state-owned enterprises to compete with private companies on an equal basis for government-funded projects through transparent and competitive procurement procedures.

 

It said removing preferential access would help strengthen private-sector investment, promote competition and create greater opportunities for Pakistan's domestic technology ecosystem.