Ukrainian Institute for the Future -

The defense establishment will become a shareholder of Ukroboronprom. What is bigger – advantages or risks?

The Ministry of Defense is part of the Cabinet, while refers to the presidential vertical: the Minister of Defense reports to the president of Ukraine as the Supreme Commander in Chief.

Therefore, the initiative to subordinate the enterprises belonging to the Ukroboronprom (UOP) is one of the components in the chain of attempts to solve the issue of the highest level – where the center of formation and implementation of policy in the military-industrial complex should be located. In crude terms – who will be the primary responsible person in the defense industry, the prime minister or the president?

The reasoning for the introduction of such a model in Ukraine:

1) MOD is the main user of the weapons and military equipment, and coordinates the military-technical policy for all 16 governmental customers from government defence order;

2) The institutional memory regarding the production and transfer (purchase/sale) of weapons and military equipment is best preserved in the MOD;

3) MOD conducts the largest number of research, development, and engineering activities, and, accordingly, adopts new models of weapons and military equipment, which is a necessary condition for the national companies to enter foreign markets;

4) The function of pre-production (purchase of production equipment for UOP) should be performed by the MOD, not the Ministry of Economic Development and Trade of Ukraine – the cost of pre-production should be included in the total cost of weapons and military equipment (infographics).

Finally, it is necessary to remark the latest statements of the authorities. It is not possible to become a shareholder of something that is not a joint-stock company. That is, enterprises that are part of the UOP must undergo the process of corporatization (transformation of state unitary enterprises into joint-stock companies).

And in order to do this, we need a special law on the specifics of corporatization and further privatization in the defense industry complex (which has been developed and is awaiting consideration in the Rada).

Viktor Plakhuta, the expert on the reform and development of the defense industry and defense procurement system of the Ukrainian Institute for the Future

First published: Liga.Blogs