BOFIT Viikkokatsaus / BOFIT Weekly 2018/17

The proposal is related to an amendment approved at the end of 2017 that will enter into force at the beginning of July. Under that law, state-owned enterprises and their subsidiaries must seek approval from the government commission on import substitution for certain imported procurements. The law also applies to investment projects receiving state support. The current proposal details which products and services will need permission.

The law was initially planned to concern mainly ship and aircraft procurements. The newest list from the ministry of industry and trade incorporates over 200 additional products and services that extend to e.g. textiles, cement, industrial machinery and construction services. For most of the listed goods and services, the bill proposes that approval of import substitution commission would be needed for imports worth over 50 million rubles (€700,000) annually. The proposal is considered strict, but some observers expect its impact to be blunted by shortening the final list or raising the minimum ruble value on imports requiring approval.

The legislative amendment is part of the government's import substitution policy that has been accentuated in recent years. The policy seeks to reduce the country's dependence on imported goods by replacing them with domestic products. The government has sought to promote import substitution especially by imposing procurement rules on the government sector and state-owned enterprises. However, these policies have so far yielded meagre results.