In order to bring regional protectionism into the open, its acceptable forms should be legalized

18 august 2015 | Rossiyskaya Gazeta

There is more and more discrimination of suppliers of goods and services that are 'strangers’. Analysts say the phenomenon is becoming more and more widespread. However, the Federal Antimonopoly Service does not hold inquiries into complaints about bias that is based on criteria other than prices.

Aleksey Shiryayev
Aleksey Shiryayev
Department for Legal Expertise

The Rossiyskaya Gazeta periodical writes that there is more and more regional protectionism going on in Russian provinces both at the level of relatively cheap (up to 1 million rubles) state orders and in areas that have nothing to do with construction, such as subscriptions to periodicals, manufacture of office and medical furniture. In 2013 ‘local’ companies filled 70% of the local state orders, which in money terms translates into 1.22 trillion out of a total of 1.74 trillion rubles. The lowest level of regional protectionism was recorded in Leningrad Oblast (11.8%), Tyumen Oblast (19.5%), Smolensk Oblast (25.2%), Moscow Oblast (28.1%) and Amur Oblast (28.7%).

Here is how Aleksey Shiryaev, the Adviser to the Department for Legal Expertise of the Analytical Center explained to Rossiyskaya Gazeta about why Amur Oblast, for instance, made it into this list. “It is a remote region with a relatively small population of just about 810 thousand, that is an energy donor and it does not have its own manufacturers and local suppliers are few and far between. This means that whatever goods, equipment, spare parts and expendables as well as medications that are needed there have to be purchased from other regions, including the neighboring Khabarovsk Krai,” the expert said.

In order to bring regional protectionism out into the open, its acceptable forms need to be legalized, through the federal contract system in the first place. Once that is done, these acceptable forms of regional protectionism can be used to develop economic integration between the regions, Mr. Shiryaev believes. The same principles should be used as the ones that the current preferences for small businesses are based on. In other words, a quota must be specified for what must be the percentage of state orders placed with non-domiciled companies, lists of goods and services should be drawn up. In his view, lists of goods and services (from domestic producers and vendors) that will be officially protected by law could be approved in the regions.

The expert noted that an additional measure that could help expand the geography of companies participating in regional state purchases could be price preferences for companies manufacturing durable goods, medical equipment, construction materials and tools, furniture and the like from remote federal districts. This would offset their transportation and other costs incurred because of their remoteness, Mr. Shiryaev believes.