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23 November, 2020
Parliamentary Committee or NDSC Suggested as Platforms to Resume Dialogue on Defence Industry Reform
An open and transparent dialogue between the Ministry of Strategic Industries and other key stakeholders including Ukroboronprom is needed to unpause the defence industry reform. It was one of the key messages at the recent Online Defence Talks organized by the Independent Defence Anti-Corruption Committee (NAKO).   

The discussion ‘Ukraine’s Defence Industry Reform: Is it at Risk?’ which took place online on Tuesday, November 23, hosted a number of key stakeholders as panellists and more than 50 guests, including representatives of embassies, think tanks, and civil society. The discussants included: Mariiana Bezuhla, MP, Deputy Head of Committee for National Security, Defence and Intelligence; Svitlana Panaiotidi, Deputy Minister for Economy; Roman Bondar, Ukroboronprom’s First Deputy Director for Transformation, and Dmytro Yablonovsky, an expert on state property. The event was moderated by NAKO’s Executive Director Olena Tregub. 

All of the discussants acknowledged a 3-month delay in the defence industry reform.  In particular, the delay happened in the legislative process around the Draft Law on corporatization of the state defence conglomerate Ukroboronprom (UOP). The participants called to advance the process and to adopt the law which is crucially needed to bring the defence enterprise closer to OECD standards. It was stressed by several panellists that the financial situation of Ukroboronprom is critical, and corporatization in line with the OECD standards is the only way to make defence enterprises efficient, less prone to corruption and free from political meddling. 

The Parliamentary Defence Committee and the National Defence and Security Council were suggested as the possible platform for the dialogue. The Parliamentary Defence Committee has been already asked to arrange the multi-party meeting to help resolve differences between the stakeholders.   One of the worries mentioned by several panellists was about implementation of the Law on Defence Procurement. The law should be in force by 1 January 2020 which requires adoption of secondary legislation. However, the implementation package is not ready yet.

An adjacent problem is that implementation of State Defence Order (SDO) 2021 as such can be at risk and that transfer of the SDO coordination function from one ministry to another can be a challenging process. Currently, the newly established Ministry for Strategic Industries (MSI) is still lacking operational capacity as there is no office or required staff with access to state secrets. So far, for the period of transformation, responsibility for certain areas such as SDO is still laid on the Ministry for Economy.  While other functions, such as export controls, will remain with the Ministry of Economy. 

Another issue discussed was the pause with the Strategy for the Military Industrial Complex. The document had been previously developed by the Ministry of Economy with the support of a wide range of stakeholders. With the creation of MSI, the Strategy was transferred to it for further enhancement and is still being worked on. The panellists stressed that the adoption of the Strategy is one of the parts of the implementation of the Law on National Security and a prerequisite for the UOP reform. The adoption of the UOP Ownership Policy was also delayed in the same manner. The discussion also touched upon such sensitive issues as the reported attempts of direct pressure and interference with the operational activity of Ukroboronprom including instructions from the Ministry on who to appoint as CEOs of member companies.  

The newly created Ministry for Strategic Industries was also invited and Deputy Minister Valeriy Ivashchenko planned to participate but had to cancel before the event. NAKO will invite the representative of MSI for the next event and hopes that the Ministry will be represented next time.  We have also invited for a dialogue the representatives of the President’s Office and the NDSC and expect to host them for the second round of the discussion soon.