Localization of production in Ukraine. Are there any pitfalls in the state project?

The issue of localization of industrial production in Ukraine has been relevant since last year. And, although the initiative was supported by the Verkhovna Rada in July 2020, there are still disputes about the need for its introduction.

The localization of production, as one of the criteria for determining the winner in procurement, has gained both many supporters and opponents.
Opinions of both were divided in principle. The main topics for the disputes were the expected economic effect of its introduction, the risks associated with the creation of preferences for Ukrainian producers, as well as Ukraine’s compliance with its obligations under the Association Agreement with the EU.

Opponents of localization claim that it will create preconditions for the monopoly position of Ukrainian producers in the market, as well as reduce competition and the pace of development of domestic industry.
But is it really so? Why is the initiative, which actually protects Ukraine from the intervention of foreign industrial producers, receiving such resistance?
The company PC “POZHMASHINA”, the largest manufacturer of fire-fighting, agricultural and special equipment in Ukraine, has long been in this market and has been operating in the field of mechanical engineering for over 90 years! Our serious experience gives grounds to claim that localization will not in any way create illegal preferences for Ukrainian producers.

On the contrary, the industry of our country needs healthy state protectionism. This is our opinion, as producers and employers, regarding the adoption of this state project.
Oleg Averyanov, General Director of the Company, commented on the situation and noted: “The experience of other successful countries in Europe and America proves to us that smart localization only contributes to the development of industry and the economy of states. If we are now exposed to the influence of certain stakeholders and refuse to localize, we will put the future of our engineering at real risk. In this situation, it is important for us to recall the Chinese saying, “You don’t have to listen to what Americans say, you have to do what they do.”

It is impossible to raise the economy of Ukraine if we do not create jobs and develop our own production. In order for Ukrainians not to leave the state, it is necessary to provide them with work at home.
We must become a country that creates added value and does not serve as a raw material base for foreign countries. ”
Thus, the law creates certain preferences for domestic producers in the field of mechanical engineering. But what exactly? If the Company, which has production facilities in Ukraine, creates jobs, it has advantages over those who do not make such investments in the state economy. And this is quite normal.

Those who are afraid of monopolization and negative economic effect, as an example, can look at the analysis of the budget program “Financial support for agricultural producers” in the field of “Partial compensation for the cost of agricultural machinery and equipment of domestic production”, which operates in Ukraine over the past 5 years.

During the duration of this Program, the agricultural engineering and agro-industrial sectors only won. The introduction of 25% compensation for the cost of purchased equipment made in Ukraine, did not reduce the competitiveness of manufacturers. Rather, on the contrary, it stimulated the production of quality products so that agricultural enterprises would be interested in purchasing them, guided not only by an affordable price. An advantage in price alone would not give the expected effect. Consumers want a quality product. This is an axiom. Thus, all participants of the Program received a positive result.

Localization will simply expand these opportunities for a wider range of industrial engineering.
On the example of POZHMASHYNA LLC, we claim that the purchase of firefighting equipment exclusively from Ukrainian manufacturers, which has been a mandatory item specified in the state budget for the last 5 years, has yielded results.

The company pays taxes, develops the state’s economy, employs more than 600 Ukrainians, and invests the profits in the development of production facilities

About $ 10,000,000 was spent on the purchase of modern CNC equipment, repairs of shops, administrative and production facilities, automation of enterprise management systems and sales, training and retraining of personnel.

These measures have given the desired result – the production equipment of the company “POZHMASHINA” today is not inferior to the European. We can compete with it.

According to General Director Oleg Averyanov: “These are the foundations on which the domestic industry and economy should be built. And those who do not understand this or pretend that they do not understand are not friends of Ukraine, but its enemies. Explicit or veiled.

In fact, no one wants to restrict the rights of foreign companies. They can compete on an equal footing with Ukrainian producers, having previously created their share in Ukraine to localization. This will be fair and will put all market participants on an equal footing. Simply importing foreign products into Ukraine will in no way help stimulate one’s own industry.

Therefore, the introduction of a mandatory share of localization is vital. It will give a new impetus and a round of development, both mechanical engineering and related industries in the country. And there are no pitfalls here. “These” stones “should be sought from opponents of the bill, who, speculating on various data, are trying to postpone or even cancel the adoption.”