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SUPPORT OF ENTERPRISES-PRODUCERS IN THE SPHERE OF TRANSPORT ENGINEERING

Pretext

Unions of entrepreneurial organizations of the Lviv Region «OPOL» and the Lviv Regional Union of Employers’ Organizations addressed the Lviv CCI with the issue of measures of efficiency of activity and competitiveness of engineering enterprises of the Lviv Region and Ukraine - on the national and international markets. The Lviv CCI turned to the Ukrainian Chamber of Commerce and Industry with the request to officially address the Cabinet of Ministers of Ukraine with this issue.

Issue

Enterprises of the Lviv Region produce ecological and modern electric transport (trolley buses, trams, electric buses), buses and ambulances for communal needs of cities using advanced world technologies. However, only large Ukrainian cities or state or communal institutions can be potential buyers. Purchase is done exceptionally with budget funds. However, considering the economic situation in the state, our production enterprises feel an urgent need in working capital and are forced to attract bank loans using the budget for execution of contracts by procurement of goods, work and services. This situation leads to the necessity to include in the product price all expenses of the enterprise, including servicing of bank loans. This, in turn, considerably increases the final price of goods. Thereby, the products of national production enterprises become less competitive. This issue can be partially solved by providing advance payments, as this is stipulated by the Resolution of the Cabinet of Ministers of Ukraine dd. April 23, 2014 No. 117. However, the mentioned Resolution foresees the possibility of a preliminary payment only for a period which does not exceed three months for goods, work and services with a prolonged production cycle (over three months) and/or technical specification to which special requirements as to technical characteristics of the procurement subject are defined (production process), which differ from international or national standards, norms and rules. However, the production cycle of transport vehicles exceeds the 3-month term: for trolley buses, buses, electro-buses, ambulance and communal cars it amounts to 5 – 6 months, and for trams – 9 – 12 months. This, in turn, means that the enterprise-producer of such goods cannot produce and deliver the product by the term indicated in the procurement agreements, and, therefore, are forced either to refuse receipt of preliminary payment in general, or return the advancement payment. 

Proposals from the Ukrainian CCI

With the goal to support the national engineering sphere, the state economy, and the development of national production of communal transport vehicles, the Ukrainian CCI addressed the Cabinet of Ministers of Ukraine with the request to support proposals of representatives of the engineering sphere of the Lviv Region.

The Ukrainian CCI proposed to make amendments to Point 1 of the Resolution of the Cabinet of Ministers of Ukraine dd. April 23, 2014 No. 117 «On preliminary payment for goods, work and services purchased with budget funds», in particular to add a new paragraph to Subpoint 4 of Point 1 with: «buses, trolley buses, electro-buses and other wheel transport vehicles intended to communal needs»; 

– Subpoint of Point 1 of the Resolution with a new paragraph: «trolley buses».  

As a result, producers of buses, trolley buses, electro-buses and other wheel transport vehicles, intended for communal needs, could receive preliminary payment for the term up to 6 months, and the producers of trams – for the term up to 1 year. The client will have the opportunity during procurement of transport to independently determine the amount of the previous payment for such procurements. This will allow Ukrainian producers to substantially decrease the cost of production of such goods, and therefore decrease the proposal price, which, in turn, will allow to save budget funds and increase volumes of procurement of necessary goods.

Steps to Result

The Ukrainian CCI addressed the First Vice Prime Minister – Minister of Economic Development and Trade of Ukraine Stepan Kubiv in an official letter with the request to give relevant instructions, first of all, to the Ministry of Economic Development and Trade of Ukraine, Ministry of Finance of Ukraine, State Fiscal Service and other interested state government bodies, to process given proposals and forward the agreed conclusion for review to the Cabinet of Ministers of Ukraine.   

The Ministry of Economic Development and Trade of Ukraine supported the proposals and prepared a relevant draft regulation according to the demands of the Regulations of the Cabinet of Ministers of Ukraine.   

Result

The Cabinet of Ministers of Ukraine approved the abovementioned amendments to Point 1 of the Resolution of the Cabinet of Ministers of Ukraine dd. April 23, 2014 No. 117 «On preliminary payment for goods, work and services purchased with budget funds» with a Resolution dd. February 1, 2017 No. 49.