The EAEU Intergovernmental Council agreed to support joint industrial projects

The Intergovernmental Council of the EAEU, held on Thursday in Bishkek, approved the first common mechanism for financing industrial projects for the countries of the union – the provision describing it, which Kommersant got acquainted with, involves compensation of the interest rate on the loan in the amount of the rate of the Central Bank in the borrower’s country. Projects with participants from at least three EAEU countries and meeting the criteria for the share of supplies will be able to apply for a subsidy – for this, a list of banks participating in the program will be approved. The union budget provides about 1.8 billion rubles for these purposes next year.

In Bishkek on Thursday, meetings of the heads of government of three associations were held – the Shanghai Cooperation Organization (SCO), as well as the EAEU and the CIS. Within the SCO, security and transport issues were mainly discussed. In particular, Prime Minister Mikhail Mishustin proposed that SCO participants conclude an international agreement on the use of transit potential. He also proposed introducing a regional payment and settlement mechanism and ensuring the conversion of national currencies in national markets. Let us recall that last week the head of the Russian government said that the White House and the Bank of Russia are preparing “systemic solutions” that will increase the availability of settlements with foreign counterparties. At the Council of CIS Heads of Government, the main issue was the use of water resources in Central Asia, as well as an agreement on services, which should expand the free trade zone regime and the prospects for common energy markets.

At the Intergovernmental Council of the EAEU, the participating countries approved the regulation “on the selection of joint cooperation projects in industries and the provision of financial assistance in their implementation by the EAEU member states” (“Kommersant has read the document”).

It will come into force after the ratification of amendments to the treaty on the EAEU, approved in May, the latter giving the EEC the authority to allocate financial support. The subsidy will cover the bank’s shortfall in income from providing a loan at a preferential rate – its level will be calculated as the interest rate minus the key rate of the Central Bank of the country in which the loan is issued. The maximum rate of banks participating in the mechanism on such loans should not exceed the level of the key rate increased by 6.5%.

“The next step will be the approval by the EEC Council of the lists of banks from each of the five countries that will participate in the program,” Artak Kamalyan, Minister of Industry and Agro-Industrial Complex of the EEC, told Kommersant. “Next year the volume of financing could be about 1.8 billion rubles—it will be covered by contributions from countries from revenues from collected duties.” This amount has already been included in the EAEU budget for next year – according to Kommersant, it will be approved by the end of the year. The maximum subsidy amount for one project should not exceed RUB 350 million. in year.

The regulation itself describes, first of all, the procedure for selecting projects and requirements for borrowers. Projects that involve companies from three or more EAEU countries can apply for a subsidy; each participant must supply at least 5% of materials and components, equipment and software, or provide engineering and construction services (costing at least 10% of the project cost ), another option for participation is a property contribution of at least 10%. Next, projects will be selected using a point system (the business must demonstrate the possibility of increasing turnover within the EAEU or exporting to third countries, as well as confirm the volume of investments and tax revenues). In some cases, it is envisaged to apply a supply threshold of 1.5% – with the condition that within five years this share will increase to 5% (other project participants’ shares in any case should be above the threshold).

The EEC will consider applications indirectly: banks will collect them from businesses in cases where the project potentially falls under the criteria of the regulation, and send them to the commission. The EEC will review them twice a year – as of April 1 and October 1, the document says. “Projects will be considered within the framework of a special expert group, an industry advisory committee, a board, and the projects will be approved by the EEC Council,” Artak Kamalyan explains the procedure.

The funds can be used to create new or expand and modernize existing industries (a total of 26 sectors in processing are listed – from aircraft manufacturing to light industry), including the acquisition and leasing of fixed assets, the purchase of equipment, the purchase or lease of land, construction, as well as to cover customs duties, R&D costs and license payments. The borrower will be required to report quarterly on how the project is being implemented. Products must also comply with the standards of origin of goods for government procurement in the EAEU countries.

Tatyana Edovina, Bishkek