The agenda of the Verkhovna Rada of the current session week includes a bill №3739, which provides for localization requirements for public procurement of engineering products. The bill itself is expected to be considered on December 16, 2021.

Народный депутат Дмитрий Кисилевский
Народный депутат Дмитрий Кисилевский

This was reported by the railway magazine Railway Supply with reference to the Deputy Chairman of the Verkhovna Rada Committee on Economic Development Dmitry Kisilevsky.

“Localization is on the agenda of the Verkhovna Rada for the current session week. Tentatively – for Thursday. The vote, which almost entire Ukrainian industry expects, will take place in the coming days, ” he wrote.

The Deputy noted that every year Ukraine spends about 600 billion hryvnia on public procurement – 40% for imported goods.

“This is an abnormally high number. For example, in the EU, the share of imports in public procurement is 8%, in the USA – 5%. The requirement for localization is a normal practice in the EU, the USA, and practically in all other developed economies of the world. Due to the dominance of imports in public procurement, Ukrainian mechanical engineering is particularly affected. Bill 3739 offers a solution to this problem: you want to sell a bus, tram or locomotive to the Ukrainian stat – please build a production facility in Ukraine, purchase components from Ukrainian enterprises, hire Ukrainian citizens, ” he said.

Dmitry Kisilevsky informed about the compromise that was reached during consultations with the European Union. The European Union opposed the bill.

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“Companies from the countries-signatories to the GPA (WTO Public Procurement Agreement), in particular the EU and the US, will not be subject to the localization requirement. But for 80% of public purchases of engineering products (incl. China, Belarus and Turkey, who have not signed the GPA) localization will work, ” he said.

Last week, the Verkhovna Rada Committee on Economic Development amended and supported for adoption in the second reading draft law No. 3739 on amendments to the law of Ukraine “On public procurement”, thereby creating prerequisites for sustainable development and modernization of domestic industry.

This bill provides for the requirement of a local content in public procurement of products of a number of categories of mechanical engineering: railway transport, urban transport, municipal equipment, power engineering and aerospace.

In the revised draft law, in the first year of its operation, a localization requirement is provided at the level of 10%, followed by an annual increase of 5%, while the increase in the localization requirement will stop at 40% and will remain until the end of the 10-year term of the law.

On July 21, 2020, the Rada adopted in the first reading Bill No. 3739 on the localization of industrial production in the procurement of foreign equipment for state-owned companies and state institutions of Ukraine.

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