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5 November, 2021
NAKO: Ministry of Strategic Industries implemented a program to modernize the defence industry by only 9%

As of October, the budget program of the Ministry of Strategic Industries, “Implementation of state target programs of reforming and development of the defence industry” has spent 221 million UAH out of the planned  2.53 billion UAH. This is only 9% of the total planned amount for 2021.

NAKO received this information on program expenditures from the State Treasury Service in response to a request.

Within the framework of this program, more than 20 research and development projects on the manufacture of armored and aviation equipment, missile weapons and ammunition, special chemical products, as well as the creation of a single information system were to be carried out at the expense of the budget.

In the description of the program for one design project, it is estimated at 102 million UAH. Thus, for the  221 million UAH actually spent during the year, the ministry could carry out only two planned projects.

Details of the work are not disclosed, because the funds under the budget program to modernize the defence industry are spent under the label ”secret.”

NAKO asked the Ministry of Strategic Industries to explain the low percentage of implementation of the budget modernization program, but within a week the organization had not received any response.

In previous years, this program was implemented by the Ministry of Economy. As of October 2020, the program had spent 517 million UAH (20%) of the planned 2.53 billion UAH, and as of October 2019, 985 million UAH (41%) of the planned 2.42 billion UAH. 

At the same time, during the program in recent years, there were receivables from the state-owned enterprise Bezpeka (“Security”), which is now part of the Ministry of Strategic Industries and is the customer for work in this budget program. The state powder plant Zirka is14 million UAH in debt and the state holding company Artem, which produces ammunition, is 454 million UAH in debt. The latter company’s debts appeared during the execution of contracts in 2017. According to the National Anti-corruption Bureau of Ukraine (NABU), at that time the director of Bezpeka conspired with officials from the Ministry of Economy to involve a foreign company, Gray Fox Logistics, to supply a strategically important line for the production of 152- and 155-mm shells. The state holding company Artem made an advance payment of 217 million UAH but did not receive the equipment.

This year, the Ministry of Strategic Industries provided in its budget request for a program to modernize the defence industry more than 7.5 billion UAH by 2024.
 

NAKO recommends that the Ministry of Strategic Industries take measures to increase the effectiveness of the defence industry modernization program. 

Namely:

  • Reduce the level of procurement secrecy within the budget program to modernize the defence industry in order to ensure the principle of competitiveness and transparency in bidding.
  • Introduce quarterly reporting by the Ministry of Strategic Industries on the results of the budget program ”Implementation of state target programs for reform and development of the defence industry.”
Earlier, NAKO reported that the Defence Ministry plans to secretly spend more than 95 billion UAH on modernizing weapons and military equipment.