Ukraine has increased the minimum level of localization in public procurement: why it matters

16 January 10:56

Starting January 1, 2025, the minimum level of localization in public procurement of engineering products has increased from 20% to 25%. The Ministry of Economy of Ukraine reminded about this, Komersant ukrainskyi reports.

From now on, state institutions, enterprises and local governments can only purchase engineering products with at least 25% of Ukrainian components.

As you know, the localization requirement was introduced by the Law “On Public Procurement” and is regulated by the Cabinet of Ministers Resolution No. 861 of August 2, 2022. The document provides for a gradual increase in the level of localization, which is being implemented in stages:

2022 – 10%

2023 – 15%; and

2024 – 20%; and

2025 – 25% of the total

2026 – 30%

2027 – 35% – 35

2028 – 40%

These norms apply to procurement in such areas as public transport, railway transport, municipal and specialized machinery, and energy equipment.

Localization legislation is one of the important tools to support domestic producers and is integrated into the state policy of industrial development “Made in Ukraine”.

According to Andriy Teliupa, Deputy Minister of Economy, “increasing the level of localization in public procurement is not just an economic decision, but a strategic necessity in times of war.”

What is the particular importance of increasing the level of localization?

“In times of war, the role of the state as an economic agent is extremely important. It creates demand for goods produced by Ukrainian companies that employ millions of Ukrainian citizens. For example, more than 200 enterprises from all regions of our country are involved in the production of each Ukrainian bus,” explains Dmytro Kysylevskyi, Deputy Chairman of the Committee on Economic Development.

According to him, localization also contributes to stable financing of the Armed Forces of Ukraine, as when imports are purchased, taxes go to the budgets of other countries, and jobs are created there, not in Ukraine.

The MP reminded that localization requirements now apply to public transport, special equipment, railway transport and energy equipment.

How the localization policy will develop in 2025

Dmytro Kysylevsky said that before Russia’s invasion, the penetration of imports in public procurement was estimated to be about 40%, while the goal is to reduce this figure to the EU level of 5%.

It is also important to measure the level of import penetration in public procurement based on objective data rather than mathematical modeling.

In his opinion, another problem that is overdue for a solution is fraudsters in the state localization register who enter fictitious data into the register and, on this basis, illegally participate in public tenders.

Dmytro Kysylevsky, Deputy Chairman of the Committee on Economic Development, said that amendments to the legislation have been prepared that will increase the responsibility of violators and strengthen the powers of controlling bodies to prevent such fraud.

Also, he said, we should expect the expansion of localization to other industries: consultations on the extension of localization to new categories of goods are now at the final stage.

Василевич Сергій
Editor