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“ELECTRON” CONCERN ABOUT THE SITUATION WITH THE PURCHASE OF 100 BUSES FOR LVIV ATP №1

18.01.2021

"Electron" Concern, whose company is a bidder in the project "Urban Public Transport in Ukraine" with a loan from the European Investment Bank, informs the public that comments on the circumstances of this procurement are limited due to the obligations of bidders to comply conditions of confidentiality.

However, taking into consideration  the loud public response and heated discussion on the possible purchase of 100 MAZ 203 buses made in Belarus for Lviv and mentions in the context of statements and discussions of  Concern's products, including the cost of "Electron” buses and the ability to produce them in a timely manner, "Electron” reports .

 

As to the actual proposal for the production of buses submitted to the tender.

These are A185 ‘Electron” buses of a new generation, which have been mass-produced since 2016 and they stand out among the most buses sold on the Ukrainian market. Yes, these buses are a bit more expensive, but their price is justified by economic efficiency in operation during the so-called "life cycle" with a guarantee of more than 15 years.


  

 

A number of the latest design solutions are used in the design of the A185 "Electron". Namely:

                - the body of the bus is made of structural and stainless steel and composite materials, which provide better corrosion protection and guaranteed service life of more than 15 years;

                - electrical equipment of the bus, made using CAN-modules and CAN-bus, provides continuous computer control and diagnostics of all systems and units of the bus, allows you quickly to find faults, reduces operating costs;

                - for the convenience of passengers, especially low-mobility groups, the cabin has 9 seats on the low floor, and, at the request of the customer, their number can be increased to 12 (in the bus MAZ 203 there are only 2 such seats);

                - engines of American company CUMMINS in the world ranking for the third year in a row are recognized as the best in their class, have the lowest fuel consumption per 1 kW of power;

                - a number of innovative and technical measures implemented by "Electron” made it possible significantly to save fuel and lubricants (up to 10%);

                - units and components used from leading European manufacturers also significantly improve the quality, reliability and durability of the bus.

 

                Therefore, A185 "Electron" buses in their technical level should be compared with modern buses manufactured by companies such as MAN, MERCEDES, Solaris Bus & Coach, and not with MAZ 203, which belongs to the previous generation.


                The difference in prices between Ukrainian and Belarusian producers is also significantly influenced by a number of other factors.


                MAZ is a state-owned enterprise that receives support from subsidies from the state budget of Belarus, as well as enjoys significant tax benefits in its own country. MAZ actively sells buses in Ukraine and does not pay customs duties on their import. Why? Because the Free Trade Agreement within the CIS (the virtual commonwealth of states formed during the collapse of the Soviet Union) is still in force. In addition, the Ministry of Finance of the Republic of Belarus reimburses banks and leasing companies for interest payments and lease payments in the amount of 2/3 of the refinancing rate, if these customers buy goods of Belarusian origin.


  

                In addition, the President of Belarus in order to expand into foreign markets, including Ukraine, provided MAZ in 2017-2018 with non-refundable state aid in the amount of over USD 500 million. However, despite significant government support, MAZ is chronically unprofitable: losses for the period 2015-2018 amounted to more than 100 million USD. The above financial information is provided from open sources in Belarus.


                All this together testifies to the use of dumping by the Belarusian producer - low pricing in the Ukrainian market. And another confirmation of MAZ's dumping at Lviv auctions is that the price of similar MAZ 203 buses purchased by Kyiv on lease terms (without a tender) is 30% higher than in Lviv.


                At the same time, the Belarusian transport market, despite the current free trade agreement within the CIS, is completely closed to foreign producers, including Ukrainian ones: since 2008 there has been a strict legislative ban on imports of products produced in Belarus.


                Ukrainian producers work in completely different conditions, without any tax benefits and preferences from the state. And the credit policy of financial institutions is aimed only at the complete destruction of Ukrainian producers: interest rates on loans exceed - up to 20% and above.


                Furthermore, Ukrainian commodity produces in no way are not defended from the unpredictable and often speculative number of foreign currency. So, only through non-transfer, foreign exchange enterprises of "Concern” spent on the supply of 50 trolleybuses to Lviv 40 million UAH.

               

            It is worth paying attention to another tool that has not been used to save budget funds. It is a question of practice of application by the European and world banks of an important preference: customers can provide a 15% difference in the preferential tariff for goods produced or created in the country and containing at least 30% of the local finished product. This is an opportunity at least partially to protect the interests of Ukrainian producers. And in the tender documentation of the mentioned tender, unfortunately, this option was absent. Although in other cities of Ukraine it is successfully used.

 

And now about the comments of some bloggers about the extremely long delivery times of our company, including these 100 buses and that they will be allegedly produced by "Electron” not earlier than by the end of 2022. Therefore, we draw their attention to the fact that the tender documentation contains completely different, specific delivery dates.


Namely: the first batch of 20 buses must be delivered not later than 30 weeks from the date of receipt of the advance payment by the supplier and starting from that time every four weeks 20 buses must be delivered. As a result, the entire contract will become 47 weeks, so that less than one year and, in addition, early delivery is allowed. And our "Concern” has all the production capabilities to withstand this schedule and fulfill the contract in time, but provided that the customers will fulfill their obligations in a timely manner too.


                And finally. When ordering from a Ukrainian manufacturer, taxes are paid to Ukraine, and from a foreign manufacturer, the funds are used for the development of other countries. In particular, under this contract, the Ukrainian company would be paid to the local and state budgets of Ukraine over UAH 100 million. taxes and more than two hundred workers would have employment and decent wages during the year.

                For reference - in recent years (including the crisis years 2019-2020),  "Electron" Concern has paid more than a billion hryvnias in taxes to local and state budgets of Ukraine.


                Ukraine is almost the only country in the world that does not use non-price criteria in public procurement.

 

Neither the life cycle of the proposed machinery and equipment, nor localization, nor employment, nor corporate social responsibility, nor ecology are taken into account - nothing, only the price. Nowhere else you will see it in the world. For example, in tenders in Poland, the price is only 15%, the remaining 85% - the animation criterion, which laid down all the above conditions. All successful states support their producers because imports are jobs and taxes in other countries.

                And now the reality is that the Ukrainian public procurement market is open unilaterally for about 80% of all countries.

                Ukrainian producers have to work in such conditions.

 

TAKING INTO ACCOUNT THE ABOVE, "ELECTRON" CONCERN IS IN FAVOR OF CREATING EQUAL, NON-DISCRIMINATORY CONDITIONS FOR ALL  PARTICIPANTS OF PUBLIC PROCUREMENT AND OFFERS:

 

Firstly, Verkhovna Rada of Ukraine should immediately consider and adopt in the second reading:

-              draft Law on Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine on Stimulating the Development of the Electric Transport Sector in Ukraine (№3476);

-              Draft Law on Amendments to the Customs Code of Ukraine to Stimulate the Development of the Electric Transport Sector in Ukraine (№3477);

-              Amendments to the Law of Ukraine "On Public Procurement” on creating preconditions for sustainable development and modernization of domestic industry ”(№3739).

 

Secondly, National Bank of Ukraine, the Ministry of Finance, the Ministry of Infrastructure should develop safeguards against the negative consequences of unpredictable and speculative currency fluctuations.

 

Thirdly, the positive experience of the Cabinet of Ministers of Ukraine on preferential lending to small and medium-sized producers should be extended to mechanical engineering as a strategic sector of the economy.

 

Finally, the government urgently needs to review the terms of the Free Trade Agreement directly with the Republic of Belarus and / or other CIS free trade countries and exclude trolleybuses, buses, trams and electric buses from the list of goods not subject to duty-free import into Ukraine. In addition, it is necessary to revise or, if possible, denounce the Rules of Determination of the country of origin of goods, which allow exporting country independently to determine the criterion of sufficient processing / alteration of goods and issue a certificate of origin for the provision of goods to the free trade regime.

 

The implementation of these steps will make it impossible to continue discriminating against Ukrainian producers in public procurement. These issues are the responsibility of the state, not local governments.

 

"Electron” Concern has submitted its proposals to the Government and  Verkhovna Rada of Ukraine and they have been waiting for their consideration for a long time.


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