Parliament to review procurement requirements, drawing E.U. criticism

Ukraine’s parliament included in its agenda for the July
21 special session a bill that would impose requirements on state procurements
for the products of domestic manufacturers of machinery and parts. By setting
such requirements, Bill No. 3739 aims to create the preconditions for stable
development and modernization of domestic industry, according to its text.
Minimum domestic procurements would be 25%-45% in 2021 and 40%-60% in 2024,
according to the legislation. It doesn’t apply to all procurements of
domestically produced machinery and parts, but only those in the spheres of
energy, utilities and maintenance and transport.

The bill’s sponsors, led by MPs from The People’s
Servant and Fatherland parties, claim the measure will add 3.9pp to GDP
annually and improve the nation’s balance of payments in the mid-term. “The
requirement is proposed temporarily, for ten years, and this step is supposed
to support the national producer, or at least require nonresidents to locate
their production in Ukraine,” the bill’s summary said.

Yet the measure violates the norms of the Ukraine-E.U.
Deep and Comprehensive Free Trade Area, according to critics, including Matti
Maasikas, the E.U. representative to Ukraine who submitted a July 4 letter
critical of the bill to Parliamentary Speaker Razumkov and PM Denys Shmyhal.
The agreement forbids state procurements based on the country of production,
and screening tender participants based on their country of origin.
Restrictions can be set only based on universal criteria, critics said, though
requirements can be set on building infrastructure at the place where contracts
are executed.

Zenon Zawada: A similar bill was approved in the first reading in 2017, and never
went further. That this type of cheap populism is being revived is reflective
of the entire political climate set by the Zelensky administration of one-off
solutions to problems that sound appealing, but whose results are questionable.
In this case, it would certainly roil the already irritated E.U. member-states,
who had warned about the 2017 legislation that its extreme proposals don’t have
a precedent among E.U. trading partners. We can’t predict whether it will be
approved, but we can certainly say it will add to the irritation by E.U.
business of having to support an ever-unattractive Ukrainian market at the
expense of trade with Russia.