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- Import substitution syndrome: why we need to strengthen control over public procurement
Import substitution syndrome: why we need to strengthen control over public procurement
Recently, against the background of the ongoing tightening of sanctions, the topic of import substitution continues to remain in the spotlight of Russian society. It's not for nothing that President Vladimir Putin instructed the government to strengthen control over the implementation by state-owned companies of the norms of procurement legislation on import substitution and even suggested considering fines for non-compliance. Against the background of the authorities' preparation of tightening mechanisms, Izvestia examines how effectively the state will be able to monitor compliance with these standards, how new measures will affect prices and product quality, and what consequences await domestic producers and consumers.
Stricter rules for the benefit of the national economy
The issue of import substitution control in state-owned companies has been the subject of discussion at the highest level. The Head of State stressed the need to bring procurement practices in line with the regulatory framework: "We need to do this (introduce controls for state-owned companies. — Ed.). It is necessary for life to comply with the regulatory framework that has been created in this regard (regulation of procurement of state—owned companies - 223-FZ. — Ed.)".
The President also instructed the agencies not only to strengthen control, but also to provide for sanctions for violations: "If practice shows that some kind of tightening is needed, not only control is needed, but also some kind of sanctions for violations. Enter financial and economic data. Fines, of course, to demotivate the violation of these norms. I ask my colleagues to work on this issue."
At the same time, Vladimir Putin emphasized the difficulty of determining the origin of components: "All these regulatory tools that [we] are introducing are aimed at supporting the domestic manufacturer. It is clear that sometimes it is not so easy to determine what is domestic, because [imported] components are imported under the guise of domestic components, then they are disassembled, and it turns out that it is not domestic at all."
Strengthening control over the implementation of import substitution standards in state—owned companies is an absolutely necessary measure in the current geopolitical conditions," emphasizes Russian Senator Oleg Golov.
"As for the so—called loopholes in import substitution regulations, that's why the president instructed to finalize the regulatory framework in order to eliminate existing gaps in legislation," Golov points out.
According to him, the introduction of penalties will become an effective economic incentive for state-owned companies to strictly comply with import substitution requirements, rather than look for ways to circumvent them. It is important to understand that this is not just about formal compliance with the rules, but about the strategic task of ensuring Russia's technological sovereignty.
According to aggregated data from various agencies, in 2025, Russia has made significant progress in import substitution in a number of strategic industries. In the telecommunications sector, the production of key electronic modules for LTE and 5G base stations has begun, which should ensure full localization of equipment by 2030.
The share of domestic components in the automotive industry has reached 40%, while the government has more than doubled subsidies to support local production. Positive dynamics is also noted in agricultural machinery — the production of tractors, combines and other equipment for farmers is growing. A large polyethylene production plant in Ust-Kut is being prepared for launch in the chemical industry, and production of lactulose, which is important for baby food and functional products, has begun in the food and medical fields.
Nevertheless, not all directions are developing evenly. Difficulties remain in the machine tool industry due to a shortage of components and qualified personnel, so the industry temporarily relies on retrofitting (upgrading old systems through the introduction of new technologies) and equipment supplies from China.
In general, the pace of substitution of foreign technologies in the energy sector and industry is more restrained, mainly due to the long implementation time and the complexity of equipment adaptation. Nevertheless, large state-owned companies are increasingly adopting domestic technologies, especially in the field of digital security and technological autonomy.
Control mechanisms: the view of the Ministry of Finance
Amendments to Law No. 223-FZ came into force this year. The press service of the Ministry of Finance explained to Izvestia that the changes that came into force prohibited the replacement of Russian goods with foreign goods at the stage of contract execution if a contract for the supply of Russian goods was concluded based on the results of the purchase.
The law provides for protective mechanisms, such as a ban on the purchase of foreign goods or a restriction on its purchase if there is an application with a Russian equivalent.
Currently, according to the Ministry of Finance, a certain level of control over compliance with the new requirements is provided by comparing data in the unified procurement information system: "monitoring compliance with the ban is provided by comparing information contained in the register of contracts in the unified procurement information system, which contains all concluded contracts, as well as changes made to their terms.".
The Ministry of Finance notes that some useful norms have already been included in No. 44-FZ, "the positive result of their application served as the basis for their inclusion in the norms of Law No. 223-FZ."
Izvestia also sent a request to the Ministry of Economic Development and the Ministry of Industry and Trade on what the mechanics of controlling the increase in import substitution should look like and what penalties are needed for violations of the norms. However, no response had been received at the time of publication.
The problem of loopholes
The question of how effectively the state can effectively monitor compliance with the accepted import substitution standards remains open. Artem Kudrachev, Director of Large Business Relations at SKB Kontur, admits that it is still impossible to completely eliminate loopholes.
— It is probably impossible to completely eliminate loopholes and workarounds due to the complexity of the economy and the human factor. However, the government can significantly improve the effectiveness of control by applying an integrated approach: combining stricter regulatory measures, increased supervision, stimulating domestic production and increasing transparency of procurement procedures, the expert notes.
Experts emphasize the need to find a balance between increased control and business support. Artyom Kudrachev notes: "import substitution is necessary, but a balance between control and business support is important." At the same time, the expert notes that the main stage of this complex process has already been completed: a significant part of the companies have already been entered into the registers, which allow them to have the right to supply to government agencies.
Sergey Katyrin, head of the Chamber of Commerce and Industry of the Russian Federation, believes that "increased control can play a positive role, primarily for manufacturers who are really ready and able to replace foreign goods."
However, he warns of the risk of overloading entrepreneurs with bureaucratic procedures: one of the ways is to improve the mechanism for confirming production in Russia and simplify the procedure for including products in the register of Russian industrial products.
— The CCI of the Russian Federation has already raised these issues, including regarding the correction of Resolution No. 719 ("On confirmation of industrial production in the territory of the Russian Federation"), and will continue to participate in the development of solutions that will simultaneously stimulate domestic manufacturers and maintain business rationality in procurement, — he said.
Katyrin draws attention to the need for a balanced approach to fines.
"On the one hand, this can become an effective incentive for discipline and development of demand for Russian products, but on the other hand, there is a risk that with a formal approach to control, companies will be afraid to purchase even those items for which domestic manufacturers do not yet have a full functional or technological equivalent," the Izvestia interlocutor comments.
Risks and offers
The expert of "Business Russia", chairman of the regional Union of Employers, deputy of the Legislative Assembly of Stavropol Peter Korotchenko emphasizes: "Naturally, control over the implementation of the norms of any legislation is mandatory, while I would like to note that any tightening of control will require additional efforts and, consequently, labor costs in the state apparatus, and any fines will eventually be paid by consumers of finished products, during the production of which they will be imposed."
Deputy Korotchenko suggests returning to the practice of creating government commissions with the participation of business. According to him, this will help eliminate unnecessary administrative barriers and restrictions.
According to experts, the introduction of fines and stricter controls will depend on how quickly and successfully domestic manufacturers can offer competitive solutions in terms of price and quality, as well as on competent government support and investments in key industries. That is, from the point of view of strategic security and the development of the national economy, these costs can be considered as investments.
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