Production localization will open access to government contracts?

March 24, 2015 20:31

Despite the apparent solidity and monumentality, the Federal Law "On the contract system" is constantly undergoing some changes. One more package of amendments to the Federal Law #44-FZ was prepared by the Ministry of Economic Development together with the Ministry of Finance and the Ministry of Industry. Agencies proposed to introduce a new practice of long-term government contracts, in which it will be possible to buy goods directly from manufacturers without competitive procedures. The corresponding document has already been sent to the Government.

According to the initiative, long-term contracts for a period of up to seven years of performance will be based on the agreements on the localization of production. If the entrepreneur develops production of Russian products, customers will be able to buy it without bidding, as in the case with the purchase from a single supplier. Financial terms of the enforcement of such contracts, or the provision of a bank guarantee will not be required, and contract termination will be possible only by the decision of the Federal Court. It is expected that this package of measures will motivate providers to create a Russian production.

The idea of developing a new mechanism of long-term government contracts was met ambiguously. Some experts call it opaque, arguing that this model creates an unjustified "privilege" for foreign entrepreneurs, reduces competition and ultimately can lead to monopolization of the market. Other experts note that granting of rights to purchase in such a way does not ensure demand. Manufacturers will invest money in the organization of production, and government customers will choose other contractors through a closed competition, they fear.

It is worth noting that, according to Deputy Prime Minister Arkady Dvorkovich, today localization of companies is an average about 30-40%, and by 2018 it is expected to increase 60-70%. At the same time, clear requirements for the localization of foreign production in Russia are not available in the amendments proposed by the Ministry of Economic Development.