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13 July, 2018
Between Classifying and Declassifying

Blog by MP Svitlana Zalishchuk for Ukrayinska Pravda

Today, the President has signed the “National Security” Law. Nonetheless, the defence budget for the following year remains written in nine little lines, with nine-digit numbers, that conveniently keeps the flow of money classified.

A rhetorical question: is it classified from external enemies or internal tax payers?

We are four years in a state of war. A military tax was introduced, the law "On National Security" was adopted. It seems that everything is right: correct things are written in the law, correct words are spoken by the top rank officials, yet up to this day these are words not actions. A car cannot ride without wheels, and transparency in the defence sector can’t simply appear without the amendment of the law “On State Secrets”.

Together with Arthur Pererverzev, an expert from the reform office of the Defence Ministry, and Olena Tregub from NAKO, we held a briefing in the Parliament about the much-needed next steps in this area.

In the Ukrainian legislation, there are no objective criteria for determining the level of secrecy. Yet, the Security Service of Ukraine has its own substantial list of information that may include state secrets which covers almost all possible information.

This situation is one of the main reasons why there is a closed club of military producers and suppliers.

One more Soviet hiccup – the nine circles of hell through bureaucracy. The process of forming a defense order implies substantial paper work and numerous approvals from regulatory officials. There is no other way, with procurement in Ukraine being carried out in a complex and incomprehensible way.

Defence procurement can be carried out by the Ministry of Defence in two ways: through the Law “On Public Procurement” or through the Law “On Special Aspects of Procurement of Goods and Services for Ensuring Defence Needs” and the Law of Ukraine "On State Defence Order”.

The Law of Ukraine “On Public Procurement” is in fact a Ukrainian version of the EU directive of the same name, while the Law “On Special Aspects…” is a combination of those principles that formed the basis of the Law "On Public Procurement". The functioning of this mechanism is serviced by the ProZorro system.

Taking into account that the mentioned laws came into force in 2016 and should be in line with the European principles, everything could have worked out if not one major “if” – the system of the state defence order is totally obsolete.

This system creates a process in which a state customer cannot independently formulate and make changes to his own order, yet he must every single time coordinate with the other bodies - the Ministry of Economic Development, and after the new Law on National Security has come into force - with the National Security and Defence Council to receive a final decision.

Also, nobody has ever heard about decentralization in the defence procurement sphere. Surely, it’s definitely clearer to those sitting in the ministerial cabinets, what is missing on the ground and in what quantity. Adding to the fact that the state customer cannot independently in the defined limits formulate and make changes to his own order, yet he must every single time coordinate with other bodies – with the Ministry of Economic Development, after the new Law on National Security has come into force – with the National Security and Defence Council, and receive the final decision from the Cabinet of Ministers.

Now let’s talk about the inability to make international procurements. It’s actually quite simple: The Law of Ukraine "On State Defenсe Order” implies that the Ministry of Defence must procure from Ukroboronprom’s member companies acting as intermediaries (I mean those companies whose names we can’t mention). This situation limits the Ministry’s ability to interact with the foreign market and rises the price of commodities, works and services due to the intermediary remuneration.

This conflicts with the international standards and prevents Ukraine, for example, from buying American military equipment.

How can we make our defence budget transparent and efficient?

It is necessary to review the approaches to classifying information with respect to the data including state secrets. I mean here those secrets which are considered as such in Ukraine now. In the US, there is an accurately formulated principle: “if there is sufficient doubt whether the information should be classified, then it shouldn’t be”. That is why, according to the NATO standards, the information concerning the value of a state contract, its subject and the identity of the manufacturer/supplier cannot be classified.

In terms of legislation, it is necessary to define procedures for public procurement of double and military goods. The existing law “On Public Procurement" is not enough, because it doesn’t take into account the specific character of the defence sector. That is why it is necessary to adapt the provisions of the European directive on defence procurement, which have been successfully operating in the EU for a while now.

Thus, after the Law "On National Security", the next step for the President together with the Ministry of Defence should be to draft a bill on introducing changes to the Law "On State Secrets" and to initiate the adaptation of the European Directive.