Does a domestic manufacturer need a State Defense Order?
How effective is the placement of state defense orders with consortiums? After all, a few years ago it was abandoned.
According to Batyrbek Aubakirov, acting chairman of the manufacturing industry committee of NCE Atameken, such a measure of support for domestic producers of raw materials has already proven its effectiveness.
“In 2016-2019, there was a practice of concluding long-term contracts with associations of domestic enterprises within the framework of the state defense order. Then the local content in the production of raw materials was brought to 95%. Several investment projects were implemented to create or modernize enterprises producing fabrics and knitted fabrics,” said Batyrbek Aubakirov.
During the development of the first version of the draft law “On the defense industry and the state defense order” in 2019, the rule on the inclusion of consortiums in the executors of the state defense order received the support of the deputies of the Mazhilis and the Senate of the Parliament of the Republic of Kazakhstan, as well as a positive conclusion of the Government.
“However, the norm was never included due to the tight deadlines for drafting the bill. It was supposed to be included in the next bills,” explains the head of the manufacturing industry committee of NCE Atameken.
In Atameken, a position was formed on this issue back in 2018. In a letter dated May 10, 2018, to the head of the working group on the draft law “On the defense industry and the state defense order”, a number of arguments were cited in support of the consortium model for participation in the state defense order.
“The model of work of the association of legal entities is a more perfect and high level of interaction between business among themselves and business with the state,” the letter says.
The National Chamber notes this approach as an effective measure to ensure the growth of the country’s domestic production and ensure the economic independence of the country. The measure helps prevent the outflow of funds from the country, create conditions for reaching full production capacity and increasing local content, as well as provide an opportunity to combine manufacturing enterprises of different cycles from the production of raw materials in order to create a finished end product.
According to Batyrbek Aubakirov, now it is possible to return this norm of support for domestic production as part of the amendments to the law.
“Certainly, the consortium model that was implemented is not ideal. But it is much more advanced than the old procurement methods. At the same time, taking into account the previous experience of the work of consortiums, it is necessary to take further steps to improve this mechanism, provide for increased transparency of work, and not completely prohibit it,” Batyrbek Aubakirov notes.
In the period 2016-2019, the supply of clothing items for the needs of the Ministry of Defense of the Republic of Kazakhstan for uniforms and shoes was carried out under long-term contracts with of manufacturers’ associations. During these years, 60 Kazakh enterprises were involved in the execution of orders under contracts.