OAG: Ending advance payments could help curb corruption

Typically, 5% to 15% of a projects total value is paid to contractors in advance of any work, said Mr Samran, who chairs a committee at the Office of the Auditor-General (OAG) investigating corruption in state procurement contracts.

"But from our investigation, it's impossible to say how much of these funds are actually applied toward investment and how much is kicked back under the table to state officials," he said.

The scope of the potential corruption is massive, according to the OAG. An advance payment of 5% on a one-billion-baht project, for instance, would amount to 50 million baht.

Without advance payments, however, private contractors would face a greater burden in managing their cashflow and liquidity to finance construction. Earlier this year, the government acknowledged that contractors were encountering greater difficulties in completing projects due to state payment and reimbursement delays.

Government procurement and investment projects amount to between 300 billion and 400 billion baht each year, accounting for about one-quarter of the annual fiscal budget.

Mr Samran said eliminating advance payments would not be a problem for contractors, as bank guarantees and loans could be tapped to finance construction.

"Yes, it might increase the costs for contractors, but at the same time, it would help improve transparency and reduce corruption within the system, as the banks themselves would also help play a monitoring role over the contractors," he said.

Mr Samran added that his committee expected to finalise its study on procurement corruption within the next three months. The full report will then be presented to the State Audit Commission and Parliament.BANGKOK POST.