Ukraine Defense Industry
Ukraine is aiming to become a weapons manufacturing hub for Western nations, according to the new Minister for Strategic Industries Oleksandr Kamyshin. Kamysyhin gained a reputation as head national railway company Ukrzaliznytsia for ensuring that trains continued to run on time despite the war. He was appointed to his new role eight months ago. "We're really focusing on making Ukraine the arsenal of the free world," he said in an interview with the Associated Press 04 November 2023.
Ukraine now counts around 500 private and state-owned companies that produce or develop equipment for the battlefield. "We are focused on producing all types of weapons and ammunition, and we show that we can test it on the battlefield and make it better during the war," Kamyshin said. "That's something we can contribute to the free world, because as you see, defense industry is becoming more and more important globally."
Ukrainian President Volodymyr Zelensky noted 12 October 2023 that the state's basic course now is domestic production of weapons and equipment, and therefore a comprehensive program is developed in all areas to provide the defense forces with appropriate weapons. “Today at the Staff meeting, we discussed, among other things, how to provide our warriors with more of our own Ukrainian weapons capabilities. We are grateful to every leader, every country that helps us with weapons, equipment, and ammunition. And we are doing everything to increase the supplies. By the way, yesterday's Ramstein meeting helped with this. But it is evident that the state's fundamental course is our own production, our own weapons, equipment, our own ammunition for all positions needed for the defense forces,” Zelensky said in his evening address. According to him, everything – from missiles and drones to armored vehicles and ammunition of the required calibers – is considered.
Zelenskiy announced the creation of a Defense Industries Alliance 30 September 2023 to manufacture weapons in his country and underscore its commitment to developing a modern defense industry. Zelenskiy made the announcement at an event in Kyiv, billed as the Defense Industries Forum, which he said included industry representatives from the United States, Britain, France, Germany, Turkey, Sweden, and the Czech Republic.
"We have developed an appropriate basic declaration as the basis of the alliance, which can be joined by manufacturers of weapons and military equipment around the world who share our intention to provide protection against aggression in the risky conditions of today," Zelenskiy told attendees on September 30. The Kyiv event followed unannounced visits by NATO Secretary-General Jens Stoltenberg and the British, French, and Slovak defense ministers.
"Our priority is the development of defense production using modern technologies, including the production of shells, missiles, and drones in Ukraine, in cooperation with global leaders in this field," Zelenskiy said on social media. He added that his country is "ready to offer special conditions to companies willing to develop defense production together with our country." Zelenskiy said the declaration had already been signed by 13 companies "which are ready to build a new arsenal for defense together with Ukraine." Ukraine's war-tested officials were reportedly planning to meet with representatives of more than 160 companies from 26 countries at the defense forum in Kyiv.
Moscow has repeatedly slammed plans to create arms production units in Ukraine, with Kremlin spokesman Dmitry Peskov saying earlier this month that if the West decides to deploy military plants on Ukrainian soil, they will become the object of “special attention” of the Russian Armed Forces. He added that the possible deployment of Western military factories in Ukraine cannot in any way affect “the predetermination of successful implementation and the completion of a [Russian] special military operation."
Russian Foreign Ministry spokeswoman Maria Zakharova, for her part, told a news briefing in early September that if plans to expand arms production in Ukraine are implemented, Russia will take “the necessary measures to stop threats to its security.” Zakharova said “We consider such intentions as another confirmation of the direct involvement of the military-industrial complex and the ruling circles of Western countries in the armed conflict and support for the criminal Kiev regime”.
German arms manufacturer Rheinmetall has received the go-ahead from the country’s Federal Antimonopoly Office to set up a joint venture with the Ukrainian Defense Industry, previously known as Ukroboronprom. According to Rheinmetall, "The JV [joint venture] is to be based in Kiev and engage in service and maintenance as well as the assembly, production and development of military vehicles."
Arsenal Otechestva editor Alexei Leonkov told Sputnik that Kiev and Berlin are currently writing up an agreement of intent, which is presented as if the decision on the JV has already been made. Actually, however, there are several factors that make these plans by Berlin and Kiev doubtful, the Russian analyst pointed out. First and foremost, Ukraine is involved in hostilities, which means that its industrial sector is often exposed to Russian missile attacks and those conducted by Russian long-range combat drones, according to Leonkov.
Rheinmetall – a high-tech company – will most likely have to spend its own money to train Ukrainian workers so that they can be on a first-name basis with German technology, as per Leonkov. “The only thing that can be done is, on the one hand, to do some PR, and on the other - to knock out money that will never be spent on creating the JV’s workshops and production sites. One can easily point the finger at Russian missiles that allegedly destroyed JV sites,” the analyst said, calling the Kiev-Berlin project “a money laundering scheme.”
President of Ukraine Volodymyr Zelenskyy is convinced that one of the most promising areas of Ukraine’s development now and after victory will be security-related industries and security technologies. He said this 28 August 2923 in an interview with journalist Natalia Moseychuk. "Ukraine has great opportunities: from technology to agriculture. Now a new direction where we are number one is the security sector,” the Head of State noted when asked about his vision of economic development of our country and attraction of investors.The President said that Ukraine had responded to the request of its partners to hold a forum in the field of military tech in October. According to him, the forum will be attended by many companies – leading industry representatives from around the world. Volodymyr Zelenskyy did not rule out the possibility of signing contracts during this event.
The Head of State emphasized: “Ukraine is now open to partners and investors, and each of them can find their own niche and receive state support.In addition, as the President noted, Ukraine has already revived its defense industry production and is manufacturing a number of NATO-standard equipment.”It is of great importance that we are a tester, a pioneer – in the good sense of the word – of the launch and use of many types of ammunition. Modern ones. This is a great example for many businessmen around the world. I think we will be number one in this area – military tech and digital. At least on the European continent,” the Head of State said.
In addition, several programs have been launched at Ukroboronprom enterprises, including missile programs.Volodymyr Zelenskyy noted that Ukraine currently produces Neptune, Stugna, and Corsar, and the volume of this production is growing significantly.”It’s just enormous numbers that are constantly at the front, constantly in need, that our servicemen approve, and they want even more, but you can’t even imagine how many we are producing. It’s a big, very big number,” the President said.
Also, according to the Head of State, Ukraine has launched the production of NATO-standard artillery.”It has never been in Ukraine and was not supposed to be, but we managed to come to an agreement. We have domestic artillery that is on the battlefield today. This is 155-caliber artillery, which has never been there before. We now have production, and not just of one system, but systemic production. This is still not enough, very little for the front, but it is already many times more than before,” he said and added that the production of many things requires discussion with partners to obtain technological permits.
Ukraine had an extensive military-industrial complex during the USSR, which suffered highly after the Cold War, as it lost its major customer and was then looted by oligarchs – but it still has very good long-term material for a military-industrial base. Making weapons could be highly profitable as well as a military boon for Ukraine, which from an economic angle looks well-suited to ramping up defence manufacturing: the Soviet Union’s over-industrialised economy left it with ample infrastructure, before the Ukrainian economy’s under-performance after the collapse of communism left it with lots of spare capacity.
British arms executives reportedly travelled to Kyiv for discussions to set up joint ventures to manufacture British arms and military vehicles in Ukraine. Analysts agree that such a deal is on the cards, with the UK as Ukraine’s leading partner due to their close ties – and that such an agreement would ease strains on weapons supplies to Kyiv. But analysts do not expect it to be a short-term game changer, especially as long as Russian air strikes would threaten any Ukrainian weapons factories.
Executives from UK defence companies wre in talks with Kyiv on allowing British-designed arms and military vehicles to be manufactured in Ukraine under licence, The Telegraph reported 15 February 2023. Such a deal would take an already close defence relationship up a gear. Britain has been notably generous in supplying arms to Ukraine, as the second-largest weapons donor to Kyiv. This munificence has been well appreciated in Ukraine, as demonstrated by the Ukrainian soldiers shouting “God Save The Queen!” while firing British-donated NLAW missiles at Russian tanks in the early stages of the war.
Russia calls the war in Ukraine a "special operation" aimed at "demilitarization and denazification." Since 24 February 2022, the entire territory of Ukraine has been under missile strikes by Russian troops. In particular, they are inflicted on the enterprises of the military-industrial complex, for example, the Kiev armored plant. It is necessary to repair the damaged equipment and to let out new in risky conditions.
Missile strikes throughout Ukraine jeopardize any production and repair work at Ukrainian defense plants and factories. The military-industrial complex in the conditions of a large-scale war will inevitably work in two directions - maintenance of the provided western equipment and production of own developments. The inevitable and partial migration of production to countries that are not shelled by the Russian army, experts say. Experts remind that it is not enough to fill the army with new weapons: it is important to teach them to use and take into account the available high-tech weapons in determining the combat mission.
Ukraine inherited a sprawling defense industry from the Soviet Union, producing a wide range of products, including tanks and armored vehicles, aircraft, radars and electronics, missiles, and ships. Defense conglomerate Ukroboronprom oversees the defense industry, which comprises over 130 state-run companies. Defense spending growth, high demand for defense equipment, and strong local manufacturing capabilities in some segments of the defense industry are boosting Ukraine’s defense sector. Strong demand for defense equipment domestically, improvements in the sector’s structure and procurement processes, as well as growing international defense industry collaboration and trade ties, will benefit Ukrainian defense manufacturers in the longer term.
In recent years, given budget constraints, many Ukrainian armed forces acquisitions have been organized through military assistance programs with allies. Within this international military aid, the Ukrainian Army received armored vehicles and island-class boats. In addition, Ukraine received communications equipment, navigation equipment for vessels, counter-battery radars, cybersecurity technology, night-vision devices, tents, portable lighting systems, personal protective equipment for personnel, mine-clearance equipment, medical equipment, and various replacement parts.
Ukraine is in the process of dismantling the obsolete, Soviet system of state defense acquisition in favor of unified defense acquisition plans. In December 2019, the Ministry of Defense of Ukraine started working with the NATO Support and Procurement Agency (NSPA). In July 2020, the Law “On Defense Procurement” was approved by the Ukrainian Parliament. This law declassifies a significant part of the state defense budget and creates a competitive and transparent environment in the military hardware market. The Ministry of Defense of Ukraine is setting up an independent task force to inspect and approve all acquisitions.
Ukraine is undertaking reform of its defense industry establishing clusters within the state-owned company UkrOboronProm (UOP) and improving UOP’s management efficiency and governance. In January 2019, legislation was approved to grant authority to import and export defense products to enterprises of various forms of ownership. This eliminated a long-standing monopoly of state-owned special exporters within the UOP umbrella and allowed foreign military sales.
The primary suppliers of defense and military equipment to Ukraine’s armed forces are the state-owned company UkrOboronProm (UOP), established in 2010, and a growing number of private enterprises. The share of private companies supplying the national defense sector reached 54 % in 2020.
Due to the full-scale invasion, the cooperation of enterprises in the industry has been disrupted, the regular work of certain enterprises has been destroyed or impossible, and there is a staff shortage.
Defense spending growth, high demand for defense equipment, and strong local manufacturing capabilities in some segments of the defense industry are boosting Ukraine’s defense sector. However, factors such as corruption, limited investment openness, and non-transparent governance in the defense sector weigh on the sector's overall performance. Strong demand for defense equipment domestically, improvements in the sector’s structure and procurement processes, as well as growing international defense industry collaboration and trade ties, will benefit Ukrainian defense manufacturers in the longer term.
Ukraine is undertaking a reform of the defense industry establishing clusters within the state-owned company UkrOboronProm (UOP) and improving UOP’s management efficiency and governance. In January 2019, legislation has been approved to grant the authority to import and export defense products to enterprises of various forms of ownership. This will eliminate a long-standing monopoly of state-owned special exporters within the UOP umbrella and allow foreign military sales.
The primary suppliers of defense and military equipment to Ukraine’s armed forces are the state-owned company UkrOboronProm (UOP), established in 2010, and a growing number of private enterprises. The share of private companies supplying the national defense sector will reach 60 percent in 2019.
Because of Ukraine’s acute need to reduce its dependence on Russian defense and military equipment, the GOU seeks to diversify its equipment supplies by purchasing equipment from the U.S. and other Western countries.
The Russian market has historically accounted for a large share of Ukrainian defense component exports, and currently Ukrainian defense companies have worked to strengthen industry cooperation and exports to other countries, with a particular focus on the Middle East and Asia. Ukraine is an attractive partner for countries looking to develop and expand their own defense industries, as Ukrainian defense manufacturers have substantial capabilities in segments such as ground and aerospace, and face fewer restrictions on technology transfer than many other players on the international market. Facilitating this process, in July 2016, the Ukrainian parliament passed regulation enabling Ukrainian aircraft manufacturers to enter international joint ventures (JVs) and produce equipment overseas.
The President of Ukraine signed a law that allows the Ministry of Defense, the Ministry of Internal Affairs, the Security Service of Ukraine to directly procure products, labor, and defense services abroad without intermediary companies. Before, such procurements were possible only through the mediation of Ukroboronprom State Concern.
Military operations that unfolded in Donbas since May 2014, swept the most industrialized areas of Donetsk and Luhansk regions. In the conflict zone, there was a coal mining industry in the region with mines and concentrating mills and a lot of industrial enterprises whose products are of strategic importance. To the mercy of fate were left some factories of the defense industry, the development of which is not only unique but also secret. By not exact and scattered data, enterprises in Luhansk, Donetsk, Krasnodon, and Snizhne became mining of illegal armed formations. In the list of plants where equipment was dismantled, there are eight enterprises. They are OJSC "Tochmash Plant" (Donetsk), OJSC Topaz (Donetsk), CJSC "Luhansk Cartridge Plant" (Luhansk), Luhansk Electronic Machine Building Plant "Mashzavod-100" (Luhansk), OJSC "Luhanskteplovoz" (Luhansk), Luhansk Machine Building Plant named after Parkhomenko (Luhansk), "Yunist" OJSC (Krasnodon, Luhansk Region), branch of "Motor Sich Plant" (Snizhne).
The military-industrial complex of the Ukrainian SSR was the second largest after the RSFSR. By some accounts, the Ukrainian military-industrial complex included 3594 enterprises, which employed more than 4 million people - by other accounts, 1,840 enterprises and research centers that employed 2.7 million people. Ukraine inherited almost a third of the space industry of the former USSR. The space industry included 140 enterprises and institutes that provided jobs for 200 thousand people. According to the head of the Ministry of Industry and Trade Denis Manturov, announced in April 2014, the total portfolio of Russian civil and military orders placed at Ukrainian enterprises amounted to about $ 15 billion, or 8.2% of Ukraine's GDP. The Russian-Ukrainian defense commodity flow numbered more than 7 thousand items of goods.
Some facilities had unique capabilities such as shipbuilding and missile production. However, it was not a coherent national defense sector per se, but a fragmented collection of what used to be the mammoth Soviet military-industrial complex, which had to be transformed into the national defense sector of Ukraine.
"MotorSich" supplied Russsia with 250-270 TVZ-117 and VK-2500 engines worth $ 1.5 billion. They were intended for combat and transport helicopters Mi-26, Ka-31, Ka-32, Ka-52, Mi- 8 different modifications, Mi-24, Mi-28N, Mi-35. Engines of Ukrainian origin are installed on the Russian Be-200 amphibious aircraft and the Yak-130 combat training aircraft, as well as on the An-124 Ruslan heavy transport aircraft. In addition, Motorsich supplied the R-95-300 turbojet engines for the Kh-55 and Kh-55SM strategic cruise missiles, the Kh-59M, Kh-35 aircraft tactical missiles and the 3M10 and 3M24 naval missiles.
The radar works in Ukraine since 1991 were characterized by a sharp weakening of the budget funding for science. A lot of powerful scientific centers, especially military ones were gradually disbanded or combined (including ARTA). Some radar experts from former ARTA started to work in universities, in particular in Kozhedub Kharkov University of Air Forces (KhUAF) and Kharkov National University of Radioelectronics (KhNURE). Contractual relations with Russia were almost terminated. Electronic and radioengineering industry also seriously suffered.
The military-industrial complex of Ukraine is the most advanced and developed branch of the state's sector of economy. Ukraine's formidable defense industry, which employed more than one million people and produced cutting-edge hardware like the Morozov Design Bureau's new BTR-4 and the AN-70.
It includes about 85 scientific organizations which are specialized in the development of armaments and military equipment for different usage. The air and space complex consists of 18 design bureaus and 64 enterprises. In order to design and build ships and armaments for the Ukrainian Navy, 15 research and development institutes, 40 design bureaus and 67 plants have been brought together. This complex is tasked to design heavy cruisers, build missile cruisers and big antisubmarine warfare (ASW) cruisers, develop small ASW ships. Rocketry and missilery equipment, rockets, missiles, projectiles, and other munitions are designed and made at 6 design bureaus and 28 plants.
Ukraine has certain scientific, technical and industrial basis for the indigenous research, development and production of small arms. A number of scientific-industrial corporations have started R&D and production of small arms. The armor equipment is designed and manufactured at 3 design bureaus and 27 plants. The scientific and industrial potential of Ukraine makes it possible to create and produce modern technical means of military communications and automated control systems at 2 scientific-research institutes and 13 plants. A total of 2 scientific-research institutes and 53 plants produce power supply batteries; 3 scientific-research institutes and 6 plants manufacture intelligence and radio-electronic warfare equipment; 4 design bureaus and 27 plants make engineer equipment and materiel.
In June 2012 Ukraine’s Parliament released defense enterprises from the need to comply with public procurement law and associated tender procedures. Supporters claimed the move will improve these enterprises’ ability to gain state defense orders and strengthen Ukraine’s competitive position as a top world’s arms exporter. The Director General of the state-owned defense industry conglomerate UkrOboronProm, Dmytro Peregudov, commented that this move will significantly increase the international competitiveness of Ukraine’s defense industry, as in the past Ukrainian enterprises often lost prospective contracts due to the time and resources spent on meeting mandatory tender procedures. The new law also prohibited publication of information on procurement of military products, weapons, components, and spare parts with the justification that the publication of such information could threaten Ukraine’s national security and undermine the promotion of Ukrainian goods on the world market.
| 1998 | 300m dollars |
| 1999 | 446m dollars |
| 2000 | 600m dollars |
| 2001 | 575m dollars |
| 2002 | 550m dollars |
| 2003 | 714m dollars |
| 2004 | 780m dollars |
| 2005 | 800m dollars |
| 2006 | 1bn dollars |
| 2007 | 1bn-1.2bn dollars |
| 2008 | 1bn-1.2bn dollars |
The existing structure of the military-industrial complex of Ukraine does not provide for the enclosed cycle of nomenclature of weapons and military equipment for the Armed Forces. Thus, the aim of military-technical cooperation is to create a cooperative system within Ukraine and at international level to meet the needs of industry in accessory parts and components, power supply batteries, cells, materials etc.
Ukraine was deeply integrated into the former Soviet economy, particularly in the agricultural and defense industries. Upon achieving independence, many analysts believed Ukraine had the best medium-term prospects for economic development of any of the former Soviet republics, including Russia. Ukraine's vast agricultural resources, port and shipbuilding facilities, machinery sector, transportation network, and skilled workforce created a favorable investment picture. Ukrainian authorities, however, did not undertake structural economic reforms. In the early 1990s, Ukraine experienced serious inflation, privatization was at a standstill, real wages plummeted, and economic output continued its steep decline.
Ukraine has well-developed scientific and industrial base. The national economy includes such spheres as heavy machine building, ferrous and non-ferrous metallurgy, shipbuilding, automotive industry (buses, cars and trucks), manufacturing of tractors and other agriculture machinery, diesel locomotive manufacturing, manufacturing of machine-tools, turbines and aircraft engines, production of power plants', oil extraction and chemical equipment and so on. Ukraine is also a powerful manufacturer of energy.
Several fields of Ukrainian economy demonstrate high technological level of development. The country is producing carrier rockets, satellites and space research equipment. Ukraine is a considerable producer of military equipment, including tanks, military transport aircrafts, SAM complexes and optical equipment. Antonov aircraft, lighter-aboard ships, walking excavators, precise machinery, and electric welding equipment are produced using state-of-art technologies and comply with the top world standards.
Despite being Tymoshenko's home oblast, Dnipropetrovsk has been decidedly "blue" in the past elections. Yanukovych took 61 percent of the final 2004 presidential vote, and PoR polled a near-majority in both the 2006 and 2007 Rada elections. A number of Ukraine's political and economic elite, including former President Kuchma and leading oligarchs like Ihor Kolomyyskyy and Viktor Pinchuk, had roots there. One of just a handful of "donor" oblasts to the national budget, Dnipropetrovsk is a major contributor to Ukraine's economy in metallurgy, the defense industry and banking, in addition to being a hub for rail and sea shipping and an agricultural center.
As Ukraine acquired independence in 1991, one of the main objectives for the new government became the prevention of further decline of Ukraine's Soviet-style economy. Ukrainian society and the Government of Ukraine became aware that the state had exhausted its resources in supporting giant industrial enterprises, as well as collective farms. The only workable solution appeared to be fast privatization. However, the progress of privatization was extremely slow. In 1999, the state still owned shares in 6,500 companies, or 58 percent of all incorporated companies.
The country's vast agricultural potential, its highly educated population, its transportation networks and the technological infrastructure it inherited from the Soviet Union provide Ukraine with excellent preconditions for strong economic growth. Upon gaining its independence in 1991 Ukraine focused attention on consolidating its nascent state and did not implement the types of deep structural reforms that laid the basis for rapid economic growth in some parts of Eastern Europe. Instead, it adopted a "go slow" approach to economic reform that led to nine years of successive economic declines. While the pace of reform has accelerated since early 2000, Ukraine is still far from joining the ranks of the world's developed market economies. Having taken serious strides toward fiscal and monetary stability which have stimulated significant economic growth, Ukraine must now create a strong legal basis for a market democracy in order to compete effectively for capital with its neighbors. After contracting in every year since independence in 1991, Ukraine's economy started growing in 2000, with real GNP growing by 5.8%, and industrial output, disposable income, and consumer spending all growing by double-digit figures.
Corruption acts a severe brake on investment. Ukraine consistently ranks among the most corrupt countries in Transparency International's annual review of transparency and corruption. On Transparency International's Year 2000 Corruption Perception Index, Ukraine ranked 87 (tied with Azerbaijan) out of 90 countries. Only Yugoslavia and Nigeria ranked worse. A World Bank study published in 2000 ranked Ukraine among the worst Eastern European nations in terms of both administrative and state capture corruption. The World Bank defines administrative corruption as the taking of bribes and other illegal payments.
In a 2000 business survey conducted by the International Financial Corporation (IFC), 100% of firms responding indicated that they had been compelled to pay unauthorized fees to obtain basic government services such as business permits, fire inspection reports, etc. An aggressive campaign instituted by the government of Ukraine to reduce over-regulation is leading to a decrease in administrative corruption but much remains to be done. Many observers believe administrative corruption must be addressed in tandem with the problem of unrealistically low government wages. As long as members of the Cabinet of Ministers make only about US$300 per month while police and other inspectors often make as little as $30, stamping out administrative corruption will remain difficult.
Many observers believe that state capture corruption represents a more severe threat to economic growth and foreign investment. The World Bank defines "state capture corruption" as occurring when politically influential individual or groups use their power to appropriate for themselves sections of the economy. In Ukraine, a group commonly referred to as "oligarchs" control a significant portion of the economy, particularly in the spheres of mass media, energy and heavy industries such as steel and chemicals. Many of these oligarchs enjoy immunity from prosecution thanks to their seats in the Rada (parliament).
The development of small and medium enterprises (SMEs) in Ukraine is hindered by an extremely stringent system of issuing permits and excessive government control of business activity. A pervasive problem undermining business development in Ukraine is the high number of businesses operating unoffi cially, without registration (at least 500,000, or 25% of the total number of active businesses). Business regulation based on permits and inspections in Ukraine is among the most rigorous in the countries of the former Soviet Union. Inspections continue on a massive scale, with nearly 95% of SMEs inspected by control authorities. The most active inspecting authorities include the State Tax Administration of Ukraine, the State Fire Safety Inspectorate (fire safety authorities), and the State Sanitary and Epidemiological Service (SES), each inspecting more than 50% of SMEs across the country in 2006.
The United States would work with the Government of Ukraine to ensure strategic assets and companies in Ukraine's aerospace and defense sector are not subject to foreign ownership, control, or undue influence by strategic competitors to the United States, such as the People's Republic of China (PRC).
By its order No. 246 of March 25, 2022, the Cabinet of Ministers approved the Action Plan for the relocation of production facilities from areas where hostilities are underway or there is a threat of hostilities to safe territories.
Oleksiy Reznikov, Minister of Defense of Ukraine, announced during the "Building Together" online conference 11 July 2022 that now Ukraine has received a large number of modern weapons that need to be serviced. Therefore, the state is considering the possibility of creating joint enterprises for the maintenance of equipment both in Eastern Europe and in the territory of Western Ukraine. "Today, this is a huge training ground where tests will be held. And this means that technological things, innovative solutions and offers will be in demand here. Therefore, the formation of joint ventures, let them be located first in the countries of Eastern Europe, but for Ukraine, let them be located on the territory of Western Ukraine in protected places, but this is already a real request today," said Reznikov.
On 29 September 2023, the first forum of defense industries was held in Kyiv, at which, as Ukrainian President Vladimir Zelensky stated, more than 30 countries and 252 military companies were represented. At the forum, the Ukrainian authorities made several statements to stimulate the interest of Western companies in expanding weapons production in Ukraine. In particular, Zelensky spoke about working on a special economic regime for the military-industrial complex, but did not disclose details. As the Ukrainian Foreign Ministry clarified, a plan for such a regime will be presented before the end of the year. At the forum, the president also announced the creation of an alliance of defense industries and announced the creation of a military fund, which is planned to be replenished from confiscated Russian assets.
Ukrainian Foreign Minister Dmitry Kuleba said 17 October 2023 that 59 companies from 23 countries have joined the defense industry alliance and are ready to produce weapons together with Kiev. “59 companies from 23 countries have already joined the alliance of defense industries. They will produce the necessary weapons together with Ukraine,” the Foreign Ministry press service quotes Kuleba.
On 07 February 2024, the Verkhovna Rada of Ukraine adopted in the first reading as a basis the project of the Law on Amendments to the Law of Ukraine "On Defense Procurement" regarding the improvement of the legal regulation of pricing in defense procurement during the legal regime of martial law" (No. 10454). This is stated in a message on the website of the parliament. The draft law submitted by the Government should solve the problem with the interpretation of norms regarding the profit of defense industry enterprises in favor of business.
To implement these provisions, the draft law proposes:
- a) supplement Article 30 of the Law of Ukraine "On Defense Procurement" with part six, which regulates the level of profit when purchasing goods, works and services for defense purposes, as well as other goods, works and services for the guaranteed provision of security and defense needs during the operation of the legal regime of military state, which is carried out according to a non-competitive procurement procedure or without carrying out the types (procedures) of procurement specified by legislation;
- b) in the final provisions of the draft law, note the following: "This Law enters into force on the day following its publication and applies to all state contracts (agreements) on defense procurement, which were concluded under a non-competitive procurement procedure or without carrying out the types (procedures) of procurement defined by legislation, and/or were executed (are executed) ) during the operation of the legal regime of martial law in Ukraine, introduced by the Decree of the President of Ukraine "On the introduction of martial law in Ukraine" dated February 24, 2022 No. 64/2022, approved by the Law of Ukraine "On the approval of the Decree of the President of Ukraine "On the introduction of martial law in Ukraine" dated February 24, 2022 No. 2102-IX".
According to the Ministry of Economy, the defense sector has already provided +3.6% to the country's GDP, but its opportunities are much greater. Speaking about the solution to the issue of the enterprises, in respect of which the DASU drew up audit reports with a conclusion on the illegality of including profit in the price of the product, the Ministry of Economy assured that the draft law No. 10454 will have retrospective application. Therefore, with its adoption, the problem will be solved for all enterprises that have been fulfilling state defense orders since the beginning of martial law.
In 2023, the Ukrainian military-industrial complex tripled its production capacity, while year it will increase six-fold, while half of the products set to be manufactured has already been contracted for 2024. That’s according to Oleksandr Kamyshin, Minister for Strategic Industries, who spoke at the Ukraine, Year 2024 Forum, Ukrinform reported 25 March 2024. "Last year, our defense industry delivered three times more products than in 2022. The capacity for 2024 is six times higher than last year. Today, we have about half of these capabilities already contracted for this year, and together with the Ministry of Defense and our Defense Forces, we are working on further contracting," the minister said.
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