181011 ATDefense Industry Development Strategy 2028 is a policy document with a ten-year planning horizon, consolidating all the innovations and reforms of the recent years. It is based on the assessment of the resources and production capacities of all segments of the Ukrainian defense industry.

 

Approval of the Strategy confirms the transformation of the Ukrainian defense industry into a new model. It went from reforms to sustainable development.

 

The ongoing transformations are cross-sectoral and concern the interests of key stakeholders such as the society and the international community as controlling authorities, the Ukrainian army as a consumer and defense industry enterprises as producers. And, of course, the contribution of private enterprises is pivotal.

 

When developing the Strategy provisions, the aforementioned interests were fully taken into account. That is why the document is public: respective state bodies, security forces, scientists and representatives of the defense industry were involved in its development. The Strategy was well received by the prominent research institution of Ukraine the National Institute for Strategic Studies. Also, the Strategy was presented at the NATO Representation to Ukraine.

 

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The Strategy continues defense industry reform focused on production. The practice of enterprises uniting into industrial associations by manufacturing spheres was codified. The industry received necessary tools: SOEs acquired plans and designed steps for their implementation, private enterprises got wide opportunities. This model is already working. "Kozak" and "Furia" along with "Vilkha" and "Bohdana", displayed at the military parade on 2018 Independence Day are a conclusive proof of model viability.

 

When it comes to private enterprises, we have to focus on three main benchmarks: the intensification of participation in defense projects, in the system of public procurement for defense purposes, and in technical military cooperation.

 

I. The burden on the state budget will be reduced by introducing the principles of self-sustainability and expanding access to defense projects of a wide range of Ukrainian business entities in the medium term.

 

In addition, the lifting the ban on joint ventures and joint activities will contribute to the sustainable functioning of the private sector as a potential co-developer. This will allow us to attract foreign capital or use the potential of domestic private investment for such projects.

 

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II. In the view of Ukraine’s shift towards the three-year budget planning, we also introduced a system of mid-term public procurement planning for defense purposes. It allowed the authorities to effectively plan the needs and available resources., Arms manufacturers got the opportunity to plan their production outputs in advance. Hence, enterprises received guaranteed orders and predictable return on investments.

 

However, the reform of the public procurement system for defense purposes is not limited to the three-year planning. The next step in the implementation of the Strategy should be the introduction of partially competitive procedures in the selection of potential contractors.

 

The need to revise approaches to ensuring transparency of procurement is conditioned by both pro-European vector of the defense industry development and growing role of civil society in the process of strengthening the defense capability and increasing the transparency requirements of public institutions.

 

The introduction of partially competitive procedures is aimed at combating corruption, preventing market monopolization and creating the basis for the private sector development.

 

Although the production of weapons and military equipment is a lengthy and complicated process, reviewing the selection criteria and implementing the protection system of internal defense market against unfair competition, allows us to attract more private companies with advantageous proposals and high-quality products and services of Ukrainian origin.

 

III. Trade liberalization and the integration of the private sector into the international market. Simplifying the procedure for obtaining permissions for export-import operations by defense industry enterprises will allow them to make decisions on conducting such activities independently or with the mediation of enterprises that already have special authorization.

 

Moreover, the automation of obtaining export and import permits within the framework of the reform of the state export control system and reducing the time for obtaining such permits is aimed at accelerating customs procedures.

 

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What are the expected results? These instruments will facilitate investment growth on the domestic market that benefits the national economy. The needs of security forces will be fully met - this is one of the criteria of the country’s defense capability. New orders and guarantees for obtaining such orders in the future are the sign of sustainable development of defense production.

 

In fact, today the defense industry should be considered as one of the main drivers of economic growth and the basis for building a national security system in Ukraine. Adherence to the important component of the defense industry reform launched several years ago - the parity of development of the state and private sectors - is the key to the formation of Ukraine as a state capable of ensuring the production of internationally competitive weapons and military equipment.

 

Andrii Tyvonchuk,

Head of the Department of Strategic Development of Defense and Security Sector, Ministry of Economic Development and Trade of Ukraine

 

You can find this article in Ukrainian here: СТРАТЕГІЯ РОЗВИТКУ ОБОРОННО-ПРОМИСЛОВОГО КОМПЛЕКСУ: ІНСТРУМЕНТАРІЙ ДЛЯ ПРИВАТНОГО СЕКТОРУ

 

PS: This article was published in “UKRAINIAN TECHNOLOGY: UKRAINIAN PRIVATE-SECTOR DEFENSE INDUSTRIES” DIRECTORY 2018-2019, which was presented at XV INTERNATIONAL SPECIALIZED EXHIBITION ARMS AND SECURITY '2018

 

Related Publication:

 

DEFENSE INDUSTRY REFORM: FROM REANIMATION MEASURES TO LONG-TERM PLANNING

 

SUPPLY OF THE UKRAINIAN ARMY: POTENTIAL OF THE PRIVATE SECTOR

 

YURII BROVCHENKO: PRIVATE SECTOR’S CONTRIBUTION TO DEFENSE INDUSTRIES IN UKRAINE CANNOT BE EMPHASIZED ENOUGHYURII BROVCHENKO: PRIVATE SECTOR’S CONTRIBUTION TO DEFENSE INDUSTRIES IN UKRAINE CANNOT BE EMPHASIZED ENOUGH

 

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