One step closer towards the development of Ukraine’s defence industry!
On August 28, President Zelenskyi signed the Strategy of Defence Industry Development. Earlier, the draft Strategy was approved by the National Security and Defence and Council (NSDC).
The strategy defines priorities for the state’s defence industry policies and goals and the expected results from defence industry reform.
Within the last year, there were several versions of the strategy. First, the Ministry of Economy introduced its version of the document in September 2020. Later the Ministry for Strategic Industries (MSI) developed its own strategies: the first one in January 2021 and the second in April. The latter one was approved by the Cabinet of Ministers of Ukraine (CMU) on April 14, and only in June, it found its place in the NSDC.
NAKO analysed a number of versions of this document. One of them contained corruption risks and laid the foundation for manual control over defence enterprises, which contradicts the best corporate governance practices in state-owned enterprises (SOEs).This exact version was not considered during the government session. Primarily due to amendments of Olha Stefanishyna, Vice-Prime Minister for European Integration, the approved document appeared to be more in line with OECD standards.
The strategy provides for transforming state defence enterprises into business entities. The document also enshrines the liquidation of State Conglomerate Ukroboronprom and establishing a new “vertically-integrated structure” instead. This is the key progressive element of the strategy.
The document also provides for implementing corporate governance standards within the defence SOEs, in accordance with best international practices. On a strategic level, it prevents mixing the policy-maker function, which is the responsibility of the MSI, with the CMU’s manager function. This prevents a conflict of interests between the government bodies.