EBA urges not to return to manual regulation of business

19/ 01/ 2022

The Cabinet of Ministers has recently decided that for the period of quarantine the maximum level of trade margin is set at no more than 10% of the wholesale price for rye-wheat bread, loaf, buckwheat, granulated sugar, high-quality wheat flour, domestic pasta products, pasteurized milk with a fat content of 2.5%, sunflower oil, chicken eggs category C1, poultry (chicken carcass), butter with a fat content of 72.5% – including the costs for advertising, marketing, logistics, training, processing, packaging, other services related to the sale to the final consumer (CMU Resolution №1 of January 12, 2022). Thus, the EBA member companies are concerned about this situation, as the implementation of this rule will require the need to adapt internal processes, amend contracts with suppliers, adjust other business processes, in order to further provide consumers with socially significant goods. At the same time, the Resolution does not provide for a transitional period for the implementation of its provisions and requirements so that businesses have some time to properly prepare for changes in regulation. Therefore, it is likely that this may lead to the suspension of the sale of these foods until all retail processes are established and business gains a clear understanding of the pricing process. Thus, it is necessary to further clarify the definition of the wholesale price of goods, the methodology for correct calculation of 10% surcharge, and specify the list of goods that fall under this regulation. It is worth noting that the business absolutely supports the need to have reasonable prices for socially important goods in Ukraine. However, currently, the rise in food prices is not due to rising trade margins. What has risen is the selling prices for such goods by producers, who, in turn, are forced to raise prices due to rising prices for energy, raw materials, utilities, etc. The EBA community has repeatedly appealed to the Cabinet of Ministers and the Ministry of Economy with proposals to revise the mechanism for declaring price changes and revise the list of goods for which prices are subject to the declaration – to simplify the declaration procedure itself. Thus, according to the business community, not all categories of goods from the list are of social significance (for example, the list includes goods of the highest price segment), so this list should be specified and, if possible, reduced. Moreover, in 2014, when signing a Memorandum with the IMF, Ukraine recognized that the national regulatory framework is excessively complex and imposes unnecessary costs on business and the need to take measures to improve the business climate. Therefore, in 2017, state regulation of prices was abolished. The European Business Association appeals to the Prime Minister of Ukraine, the Ministry of Economy, and the Ministry of Agrarian Policy not to resort to manual management of business processes and repeal the Resolution. If this is not possible in any way – then the business community calls for the postponement of the entry into force of the Resolution until March 1, 2022, but not before the meeting with representatives of the food retail market takes place as we expect the authorities to provide clear explanations on how to implement it. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

Thus, the EBA member companies are concerned about this situation, as the implementation of this rule will require the need to adapt internal processes, amend contracts with suppliers, adjust other business processes, in order to further provide consumers with socially significant goods.

At the same time, the Resolution does not provide for a transitional period for the implementation of its provisions and requirements so that businesses have some time to properly prepare for changes in regulation. Therefore, it is likely that this may lead to the suspension of the sale of these foods until all retail processes are established and business gains a clear understanding of the pricing process.

Thus, it is necessary to further clarify the definition of “the wholesale price of goods”, the methodology for correct calculation of 10% surcharge, and specify the list of goods that fall under this regulation.

It is worth noting that the business absolutely supports the need to have reasonable prices for socially important goods in Ukraine. However, currently, the rise in food prices is not due to rising trade margins. What has risen is the selling prices for such goods by producers, who, in turn, are forced to raise prices due to rising prices for energy, raw materials, utilities, etc.

The EBA community has repeatedly appealed to the Cabinet of Ministers and the Ministry of Economy with proposals to revise the mechanism for declaring price changes and revise the list of goods for which prices are subject to the declaration – to simplify the declaration procedure itself. Thus, according to the business community, not all categories of goods from the list are of social significance (for example, the list includes goods of the highest price segment), so this list should be specified and, if possible, reduced.

Moreover, in 2014, when signing a Memorandum with the IMF, Ukraine recognized that the national regulatory framework is excessively complex and imposes unnecessary costs on business and the need to take measures to improve the business climate. Therefore, in 2017, state regulation of prices was abolished.

The European Business Association appeals to the Prime Minister of Ukraine, the Ministry of Economy, and the Ministry of Agrarian Policy not to resort to manual management of business processes and repeal the Resolution. If this is not possible in any way – then the business community calls for the postponement of the entry into force of the Resolution until March 1, 2022, but not before the meeting with representatives of the food retail market takes place as we expect the authorities to provide clear explanations on how to implement it.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.