Last December Russian President Boris Yeltsin signed the law on the Delivery of Products for Federal Governmental Needs, which received little publicity at the time but is now beginning to make computer vendors a little uneasy. The law seems to make it obligatory for state enterprises to buy from companies assembling in Russia. Seems because it has yet to be interpreted in practice. Over the last six months there has been a steady growth in the imported computer market in Russia. A vicious price war in Europe and the US has made brand-name computers considerably more competitive with Russian assembled personal computers and cheaper non-brand machines made in the Far East. Several very large contracts – including the Central Bank of Russia, the Savings Bank of Russia and the State Duma – were awarded last year and vendors say federal bodies are now very sensitive to the fact that they should make sensible and longer-term purchases. To date, few Western computer companies have decided that it is worthwhile to assemble boxes in Russia. Most reckon the logistical hassles and relatively low volumes would make it unworkable. This has been with the exception of IBM Corp, which in 1993 began assembling personal computers at the Kvant plant in Zelenograd and has now switched the majority of its production there. Around 70% of IBM personal computers sold in Russia in 1994 were assembled at Kvant and now RS/6000 workstations will also be assembled there. And now the the law on the Delivery of Products for Federal Governmental Needs may have provided IBM with a golden reward for its 1993 decision to commit to Russian assembly. The law, which was passed by the State Duma and ratified by Yeltsin, appears to ban all state bodies from purchasing imported goods. According to the decree, state bodies can only purchase imported goods if the goods needed are not, or cannot, be made in Russia. The law states that the needs of all state bodies across the country are to be centrally defined. All purchases by the state are to be made through State Contracts and one of the stipulations in these contracts is that …it is not permitted to buy foreign products. With the exception of those cases where the production of analogous products is impossible or economically not viable in the Russian Federation. At this stage it is impossible to say how this law will be enforced or whether it will be enforced at all. It may turn out to be yet another ruse designed to collect licences from companies selling to state structures. Moreover, how analogous will be defined is anybody’s guess. But if the apparent spirit of this law is enforced then it will change the entire complexion of the personal computer market. Major foreign players may have to decide whether to assemble their computers in Russia, or hand over large sections of the market to IBM and the Russian assembly companies. Alternatively, they may have to give Russian partners rights to do a degree of assembly work on their computers in order for them to satisfy this new requirement. It is also a little odd that the State Duma, which has just bought itself several hundred thousand dollars’ worth of Compaq Computer Corp boxes, was at the same time voting to prevent anyone else so doing. This kind of inconsistency suggests that the law could be a well-executed piece of industry lobbying.
Protested against the World Bank
In November the Association of Russian Computer Producers of Computer Systems and Software protested against a World Bank tender that restricted participation to those companies that could provide huge financial securities and credit, that is to say foreign ones. The association wanted to open the tender to more companies, including Russian ones, and sent a letter to Yeltsin. According to the World Bank, the association managed to exert considerable, although unsuccessful, pressure to get the loan either changed or abandoned. All of which suggests that the law could well be the result of continuing efforts by a very small number of well-connected Russian com
panies. Most Moscow vendors believe the law could well be the result of continuing efforts by Moscow-based assembly company IVK to tilt the balance in its favour in bids for large state contracts. IVK specialises in large state contracts and has been running an aggressive campaign against foreign vendors in recent months.
