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Minister Elvira Nabiullina Speaks at the Conference Entitled Applicability and Use of Federal Law on Purchase of Goods, Work and Services by Individual Types of Legal Entities

01.11.11

On November 1, 2011, Minister Elvira Nabiullina delivered a speech at the conference: Applicability and Use of Federal Law on Purchase of Goods, Work and Serviced by Individual Types of Legal Entities, which was arranged by the All-Russian Public Entity Business Russia together with the Ministry for Economic Development of the Russian Federation.

 

Speech by Minister Elvira Nabiullina

At the Conference: Applicability and Use of Federal Law on Purchases of Goods, Work and Services by Individual Types of Legal Entities

Moscow, November 1, 2011

 

Dear colleagues!

 

I would like to thank «Delovaya Rossia» for arranging for discussion of the law on purchases in the governmental sector, which takes effect on January 1 of the next year.

This law is important not only in terms of arranging for procurement processes in state companies – it is also significant for improvement of the business environment in the entire country.

The main challenge for our economic policy is change in the economic growth model. We should make the economy more diversified.

For these purposes, we need to actively use all sources of internal demand. And the demand on the part of the state and state companies plays a major part here.

In our assessments, purchases for governmental needs amount to RUB 6 billion annually, which are directly channeled to our economy from the budget. The scope of purchase by governmental companies and natural monopolies is even higher – some RUB 7 trillion.

As a result, we speak about 13 trillion of demand resource, which should push our economy to diversification.

We should secure such mechanisms of regulation, when this money will turn into true investment incentives.

Business should be able, in the mid-term, to assess the demand of the state for goods, work and services and, which is not insignificant, for innovations.

The provision that obliges companies to increase the share of purchases of innovative products was intentionally included into the 223rd Federal Law. Starting from 2015, prospective plans of purchases of innovative and high-tech products will be developed for 5 to 7 years.

For this purpose, it is necessary to ensure transparency of conditions and predictability of decisions taken in the state sector.

Therefore, our Ministry started a large-scale reform of the entire procurement law, which comprises the two key components.

The first one is the reform of purchases for governmental needs.

The sector of governmental purchases is currently regulated by Law № 94. It is, perhaps, one of a few laws that everybody knows by its number and, speaking about it, they don’t even mention the name. Our reform was largely the response to criticism from different parts concerning Law № 94. This law was aimed at reducing corruption and, in a certain period of time, worked to tackle this problem, but it could not become a factor in development of fair competition. Law № 94-FZ does not enable to model the entire sphere of purchases so that to provide landmarks to the economy, nor does it create conditions for investments.

We developed the Law on the Federal Contractual System, which is intended to replace Law № 94-FZ, and submitted the same to the Government today.

Hopefully, the shift to the Federal Contractual System will start on July 1, 2012, with certain transitional provisions, so that the economic entities should be able to adapt to new regulation conditions.

The second element of the reform is purchases for the governmental sector.

Purchases by state-owned companies, utilities enterprises, natural monopolies are not virtually regulated now. As a result, just a few state-owned companies have managed to establish their own efficient purchasing systems so far; practices of other companies (we must say, they are the majority) are often closed, sometimes even anti-market, by nature.

The inefficiency of spending in the state sector is, for instance, low quality of utilities services, constant unjustified tariff increases. It is but one example. Considering the scope of spending by the governmental sector, we can understand what the price of inefficient purchases is. And it is the population and business that pay this price in the end.

The situation should change significantly with entry into legal force of the law on purchases in the governmental sector – it is Federal Law of July 17, 2011, № 223-FZ, On Purchase of Goods, Work, Services by Individual Legal Entities. The federal contractual system and Law № 223, being the elements of one and the same system, nonetheless, resolve different objectives, and so envisage different regulation arrangements.

FCS regulates the entire cycle of procurement relations – from forecasting to planning of governmental needs to acceptance and qualitative assessment of the results. In the essence, Law № 223-FZ just introduced information standards of purchases for the state sector.

But they have one feature in common – a new level of transparency of purchases, drastic increase in quality of information for business and public.

It is noteworthy that creation of the law on purchases by state companies and natural monopolies was an extremely difficult objective. Work was performed with difficulties, in constant discussions.

On the one hand, we understood very well that it is necessary to set the transparent rules of the game, to determine the requirements to public statements, which conform to the expectations of the society.

But, on the other hand, information is a competition resource; we should not downgrade the competitive standing of subjects of regulation by law.

For innovation companies, project companies created by development institutes, the information on purchases is, in some cases, information on the technologies they are developing. And we must not disadvantage them, by forcing them to disclose such information.

We believe that we managed to find a well-balanced solution in the law.

Effective on January 1, 2012, the subjects regulated by law will be obliged to publish information on their purchases on their own websites. Effective on July 1, 2012, they will operate in the single information system integrated with governmental purchases.

State-owned companies will have to develop their regulations on purchases, to publish procurement plans and notices of tenders.

Law № 223 creates a new information reality, and its implementation will necessitate development of new practices.

There is a need in further work to prepare the framework of by-laws, as it would determine the efficiency of regulation of the law. A part of this regulatory framework is to be created as early as this December: to develop the procedure for placement of procurement plans, the list of goods for e-trading, the procedure for publication of information on tenders.

New rules for companies must be created in close teamwork with you – potential counterparties of the country’s biggest customers.

We have already gained extensive experience of fruitful cooperation with Business Russia. We have been jointly working on assessment of the regulatory impact, simplification of customs clearance, business environment in the regions and determination of the best regulatory practices.

We suggest joint monitoring of the efficiency of application by the companies of new procurement law – it is possible to create the transparency rating of procurement procedures in the state sector.

Our joint work should result in improvement of the business environment as the aggregate of factors of regulation and practice of doing business.

We suggest that this joint work be continued. It is important for us that you participate in adjustment of the 223rd law and improvement of the regulatory and legal base of governmental purchases.

I hope, today’s conference will help us shape the right approaches to the regulatory and legal base of purchase law.

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