15 April 2021

On April 14, the Cabinet of Ministers approved the Strategy for Defence Industry Development. 

The Strategy defines the priorities of the state’s defence industry policy, and the goals and expected results of defence industry reform. According to the legislation, development of such documents requires mandatory public consultations. But there were none. Just like there was no document available for the public.

The key progressive moment is that the Strategy stipulates transforming defence state-owned enterprises into business entities and forming science and production associations according to industry principles. The document also confirms that the state defence conglomerate Ukroboronprom will cease to exist, as it will be transformed together with the member companies in its vertically-integrated structure.

However, simultaneously with these plans to modernize Ukraine’s defence industry, the Strategy includes excessive functions for the Minstrategprom that were common to Soviet ministries, which were policymakers and, at the same time, controlled enterprises as owners.   

At yesterday’s government session, Vice Prime Minister for European and Euro-Atlantic integration Olha Stefanishyna, in an emergency effort, managed to bring the draft Strategy closer to Euro-Atlantic standards. 

Stefanishyna incorporated an amendment into the main body of the Strategy to minimize the Minstrategprom’s conflict of interest. She suggested dividing the functions of owner and policy-maker in the list of key directions for defence industry policy. Stefanishyna’s suggested amendments considerably improved the Strategy from the point of view of meeting the Organization for Economic Cooperation and Development (OECD) corporate governance principles, which are the best world practices for managing state-owned enterprises.

The most interesting part is hidden in the Strategy’s ‘secret’ Annex. The draft Strategy developed by the Minstrategprom was not publicized. NAKO received both versions of the document via inquiries for access to public information. Civil society is especially concerned about this ‘secret’ Annex to the Strategy developed by the Minstrategprom, which it tried to hide from the public. 

Luckily, the Government did not approve this Annex with the Strategy and sent it for follow-up revision. It is currently unclear if the Annex will be considered and, if so, when and according to which procedures. NAKO insists that if the Annex to the Strategy is adopted in the way it is now, Ukraine risks reversing its ambitious Euro-Atlantic reforms back to the old Soviet governance practices. 

Under such non-transparent conditions, public discussion of this document is acute. After Cabinet of Ministers approval, the Strategy will be submitted to the National Security and Defence Council. Before the Council considers and potentially approves this document, we call on the responsible state bodies to hold public hearings on the Strategy and the Annex to it.

In this call, NAKO is supported by StateWatch, Bihus.Info (NGO Tom 14), and the Defence Procurement Reform Project, with the support of the UK Ministry of Defence and the NaUKMA Anti-Corruption Research and Education Center.