I grew up in Mykolaiv and I still reside there with my family.
I am honored to have been elected by the people of Mykolaiv to represent and protect their interest in our parliament.
Unfortunately, my hometown has become a graveyard of shattered hopes as it relates to the State industrial strategy in our region, best symbolized by a rusty skeleton of the cruiser “Ukraine” as a sore reminder.
In recent years, State-owned enterprises that have historically provided thousands of jobs and constituted the main source of livelihood in our city, have been gutted resulted in the production grinding to a standstill. Needless to say, this demise of State-owned enterprises in Mykolaiv has greatly affected our citizens’ livelihood and quality of life.
It is true that Ukraine inherited a vast industrial Soviet legacy, including the military-industrial complex. But it is equally true that for years our defense enterprises experienced stagnation instead of development. Antiquated employee training and development methods were proven inadequate for the modern times, and in the absence of any marketing or distribution network to speak of, the underlying technologies at these State enterprises experienced sluggishness rather than progress. Moreover, there was no serial production of the novel models of equipment and weapons. The majority of the enterprises and state exporters dealt exclusively with the assets that Ukraine inherited after declaring independence. The technological cycle of production was purpose-built in the Soviet times to fit the mold of the Russian industry: components were imported from Russia and the end products were exported back to Russia.
Russia’s imposed war on Ukraine posed innumerable challenges for our country. As you will know, these challenges should have been addressed without delay and more consistently.
It is imperative to urgently:
• Reform the military procurement system to serve the interests of the state;
• Establish control and drive the efficiency of “Ukroboronprom” as the governing body of state defense enterprises;
• Ensure the revival of the defense industry;
• Update the certification standards and discard those that are not on par with the international level;
• Reform the inefficient export system and implement a technology protection system
Currently, more than 80% of the budget is allocated to satisfy the immediate needs by purchasing existing obsolete models, versus a mere 15-17% earmarked for the development of new weapons.
My main goal as the Chair of the subcommittee of defense industry and technical modernization of the Committee on National Security, Defense and Intelligence of the Verkhovna Rada of Ukraine of the 9th convocation is to promote the production and export of Ukrainian defense industry products, to restore the internationally competitive status of the aviation industry, to ensure transparency and efficiency in defense industry procedures, to reform and ensure the effectiveness of the aforementioned industries, as well as to create open and supportive laws designed to encourage investment.
In order to fulfill these tasks, as a Chair of the subcommittee, I will soon address the following draft legislation:
1. Draft Law on Defense Procurement 2398-D
The main objective of this law is to create an efficient and transparent procurement system for the defense industry.
This draft law aims to overcome:
- Lack of transparency in public defense procurement. The existing decision-making system on public defense procurement is inadequate to combat corruption in the industry;
- Lack of transparency in pricing decisions;
- Lack of support for the national manufacturers;
- Lack of transparency in the methodology use to select manufacturers and suppliers of products;
- Absence of competitive procedures;
- Inability to approve any purchase plans with horizons that span more than one year.
The main provisions of the draft law are:
- Providing defense industry customers the ability and flexibility to make prompt decisions on procurement. Implementing an “open section” concept in the procurement plan while preserving any related national secrets;
- Introducing the concept of “a three-year defense procurement plan”, which will serve as a basis for middle-term defense acquisition planning and will allow the state defense procurement to become a vehicle for the development of Ukrainian economy and production;
- ● Prioritizing national manufacturers. Creating a list of products that should be purchased exclusively from Ukrainian manufacturers, complemented with a second list that identifies those that can be purchased abroad.;
- Simplifying procurement procedures by dividing them into several categories: Closed procedures without the use of the electronic procurement system, Simplified tendering with the use of the electronic procurement system (ProZorro), Tendering with limited participation (ProZorro), and Simplified tendering without the use of the electronic procurement system;
- Implementing external control mechanisms for defense procurement in order to prevent influence peddling;
- Ensuring continuity of all equipment used by the national security agencies, including but not limited to weapons and other military equipment, through all necessary means;
- Creating an automated registry system of planning, monitoring, reporting and expert supervision of the activities of the defense enterprises for customers and manufacturers;
- Pricing methodology via separate Resolution of the Cabinet of Ministers of Ukraine, which is currently drafted by the Ministry for Development of Economy, Trade, and Agriculture and is undergoing a procedure of approval of all interested state bodies;
- Settlement of individual issues;
- Pricing of products;
- Quality assurance and confirmation;
- Receiving information on planned purchases.
2. Draft Law on specificities of managing state-owned assets in the military-industrial complex (a revised law)
The main objective of this draft law is to create a corporate management system for defense enterprises.
This draft law is important for several reasons:
- Currently “Ukroboronprom” consists of a number of enterprises that operate without a single unifying purpose and are not interconnected;
- Most enterprises not only do not function well but also gradually accumulate deadweight assets that require the State’s support and oversight;
- These enterprises are inefficient in carrying out public procurement and often have “puppet” management systems;
- The enterprise has a slow and inefficient decision-making model;
- The above shortcomings result is a failure to attract foreign investments;
- These shortcomings also result in low exports.
The main provisions:
The law envisions the corporatization of the current UkrOboronProm by creating a new corporate entity of upper-tier management, State Joint Stock Holding Company “Ukroboronprom” (hereinafter – SJSHC MIC), provided that the following is implemented:
- SJSHC MIC is granted the managing authority currently held by “Ukroboronprom”, including managing authority over the standalone state enterprises and state joint-stock companies of the defense industry, and over entities of lower-tier management;
- Legislative obligatory and automatic consolidation and inclusion of shares of the joint-stock companies into the authorized capital of SJSHC MIC, with an eventual plan to corporatize the state standalone defense enterprises and other joint-stock companies of MIC;
- Creation of a mechanism for operational change of the authorized capital of SJSHC MIC and for decision-making on its formation (inclusion of new corporate packages). For this purpose, it is considered fitting to This authority should be included in the mandate of the supervisory board of SJSHC MIC as its supreme governing body.
3. Draft law on joint investment activities in the MIC
The main objective is to attract foreign investment for the development of the industry.
The adoption of the said draft law is imperative because:
- As of now, Ukraine does not allow foreign investments in joint activities with the use of assets belonging to law enforcement agencies. The respective legislation for the industry does not exist;
- Competitions for attracting investors are unregulated;
- Corruption poses a strategically unacceptable and dangerous risk in this area.
4. Draft Law on Military-Technical Cooperation (adoption of new legislation)
The main objective is to reform the State Service of Export Control of Ukraine.
This draft law is necessary for several reasons, including:
- The requirement to obtain permits for export-import operations is hindering the development of the industry instead of bolstering it;
- The export control system should be implemented via a service organization.
The main provisions:
- Simplify internal interagency approval procedures;
- Simplify export authorization procedures;
- Introduce the responsibility of related organizations for the late issuance of approvals;
- Shorten the time required to obtain permits;
- Introduce a declarative principle for obtaining permits.
5. Draft Law on Establishment of an Effective Mechanism for Prompt Provision of Housing for Military Personnel
The main objective of this draft law is to address the housing backlog for military personnel within 3-5 years.
This draft law is important for the following reasons:
- Absence of a transparent system of competitions for attracting investors-developers (other investment partners);
- Corruption component and stalling; lack of a clear methodology for determining investment-worthy plots of land and the order of attracting investors;
- Absence of an effective asset management system and misuse of assets for generating profit; substantial corruption component at the level of law enforcement agencies;
- Absence of a prompt and efficient process for managing existing agreements, complicated and time-consuming procedures for termination and introduction of amendments;
- A large number of related authorities and organizations that the implementation of the project is dependant on;
- Absence of a legally defined barter algorithm and valuation of real estate at different stages of readiness.
The main provisions:
- To initiate tenders for attracting real estate investors for the construction of residential and multifunctional complexes on lands currently used by the Ministry of Defense (hereinafter – the MOD);
- To audit the existing investment contracts;
- To provide the procedure of amending the terms of investment contracts (in case of obtaining real estate in other projects and/or at differing stages of readiness);
- To initiate tenders for the sale of property belonging to the MOD and its subdivisions;
- To initiate tenders for the cultivation of agricultural lands used by the MOD and its structural subdivisions;
- To initiate the creation of transparent conditions and algorithms for managing the property of the MOD for the implementation of the objectives of this draft law;
- To obtain privileges when receiving rights for connection to external networks;
- To initiate the facilitation of obtaining permits;
- To create an open system of rewards and bonuses for the management of the MOD and its structural subdivisions and subordinate enterprises, for the implementation of investment projects, in order to eliminate corruption risks.
For its security and defense, Ukraine requires basic policy planning documents that take advantage of global best practices. To ensure peace, it is necessary to develop new strategic approaches and principles that are enshrined in strategic documents on development and application for the Armed Forces and other military formations (warfare doctrine, strategies, and programs of development of the Armed Forces, National Guard and the State Border Guard Service of Ukraine, intelligence doctrine, information security doctrine, etc.). These strategic instruments should serve as a basis for the armament and military equipment development program, backed by a long-term budget – and this I consider to be the key mission for both our Committee and all deputies of the Verkhovna Rada of the 9th convocation.