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7 December, 2020
“Manual control” or crisis management of defense enterprises?
This summer, the Verkhovna Rada registered a draft law providing for the elimination of Ukroboronprom and reforming of defence industry enterprises (draft law on corporatization №3822). As a result, out of more than 60 enterprises of Ukroboronprom going to create 9 industrial holding companies incorporated under the two large state holdings. However, it has recently become known that the Ministry for Strategic Industries intends to corporatize a number of enterprises on an extraordinary basis, without waiting for consideration of the mentioned draft law.

To achieve that, the Ministry twice initiated the withdrawal of 6 aviation companies from the management of Ukroboronprom, including Antonov Company, Kharkiv State Aviation Production Enterprise, Factory 410 CA, SE "Ivchenko-Progress", Kharkiv Machine-Building Plant "FED" and Kharkiv Aggregate Design Bureau. However, this decision has not been agreed yet, and the ministry has been accused of trying to establish manual control over these enterprises.

The expediency of subordinating a number of aviation enterprises to the Ministry for Strategic Industries was discussed on December, 3 during a meeting of the Committee of the Verkhovna Rada with the participation of the Vice Prime Minister Oleh Urusky, representatives of Ukroboronprom and its newly appointed CEO Yuriy Husiev.

Chairman of the Committee Oleksandr Zavitnevych noted that this will actually remove enterprises not only from the scope of a number of laws, but also from the scope of the draft law on corporatization №3822, which parliamentarians are going to consider in the nearest future. As a result, the budget and assets of these enterprises may incur significant losses, and reform within these enterprises may not take place at all.

In his turn, Vice Prime Minister Urusky explained that despite a number of legal issues, this decision would exclusively affect Ukroboronprom, and aviation companies mentioned above will only benefit. According to him, the situation in the teams and management of these enterprises is extremely tense and requires rapid actions to prevent further escalation of the conflict, and therefore they should be subordinated to the ministry as soon as possible.

It is expected that this issue will be resolved during a separate meeting of the National Security and Defense Council on the transformation of Ukroboronprom and the future of the defence industry at all. The date of the meeting is unknown at this time, but NAKO will monitor the sector and keep you informed. You can watch the video of the committee meeting here: https://bit.ly/2JZqMJq