In the coming years, the need for localization will only grow. An increase in demand for Russian goods or foreign ones, but localized in Russia, is expected. It is also likely that direct supplies of products from abroad will decline, which ultimately may lead to the loss of the Russian market for foreign companies that do not dare to localize in the Russian Federation.
Since 2014, the importance of localization and import substitution has rightfully become one of the priority areas of the Russian economy.
With several Western countries imposing sanctions against Russia, the Russian Government has decided to introduce countermeasures and significantly reduce its dependence on foreign goods and services. Import substitution is adopted as the basis of the national industrial policy. This trend presupposes a new approach to international market players to substitute imports and increase domestic production. However, such measures may not be canceled when sanctions against Russia are eventually lifted.
Tightening regulations are driving the need to replace more imported products with locally made products. Although foreign products are not completely prohibited (?) for government procurement, but limited, it is important for foreign companies to continue looking for more efficient ways of working unleash the potential of the Russian market.
An increasingly high priority for international companies is the ability to adapt and cope with changing conditions and uncertainty.
At the same time, this situation offers great opportunities. Companies that decide to localize their business in Russia have the following advantages:
We understand that all the definitions that are used concerning localization and import substitution processes seem unclear at first and can even be confusing. Meanwhile, understanding the general context and all the subtleties of terminology cannot be overestimated.
We are ready to explain the main nuances.
Procurement of all goods and services, except for securities, precious metals, etc. of domestic origin have priority over foreign goods and services for budget organizations, state-owned companies, strategically important enterprises, monopolies etc. (Resolution No. 925 of September 16, 2019)
Each purchasing authority may have its own procurement rules
Public procurement is regulated separately from government procurement. According to Resolution No. 925 of September 16, 2019, which clarifies 223-FZ, Russian goods have priority over foreign ones.
Despite the fact that this law does not formally introduce any prohibitions and restrictions to minimize possible risks, some large organizations (for example, in the oil & gas and railway industries) set their own restrictions on the purchase of foreign goods, despite the formal absence of such a requirement.
TLC can help plan and implement each stage of entering the Russian market and developing your business in Russia.