The main task of Ukroboronprom is to meet the needs of the Ukrainian army and the National Guard, as well as other military units, for modern equipment, upgrades, repairs and recycling. As a new head of Ukronoronprom, appointed by presidential decree on March 21, I will make it top priority of my activity.
Currently, we’re getting ready to supply 100 armored personnel carriers for the National Guard to reinforce their fighting capabilities.
But I am happy to say that we are able to produce a lot more, and meet the army’s demand for arms and equipment to fight a defensive war. We’re able to produce many components for aircraft and a lot of military equipment, but what we cannot produce, we need to be able to quickly buy from abroad, including from NATO facilities.
We’re waiting for the political leadership of the country to produce the National Security and Military Doctrine, which will lay out Ukraine’s needs for enhancing military effectiveness. The next step will be to develop a new Concept of Army Development, which breaks the doctrine down to individual tasks.
Ukroboronprom will then be able to implement these tasks in cooperation with the Defense Ministry of Ukraine, though the domestic potential of its arms industry and through military and technical cooperation with others.
But the state-owned arms concern is in a state of crisis by itself, and needs to increase the efficiency of its own performance. Here’s an example. There are 120,000 workers employed by the arms industry companies that are part of Ukroboronprom.
In the past years, per worker output at these companies ranged from Hr 30,000 to 150,000 per year, depending on the type of production. On average, it was less than $10,000 per worker. At the same type, the Israeli armament industry, which employs up to 30,000 workers, the output is $200,000 per worker. In France, the number is 240,000 per head.
One of the reasons behind this gap is technological backwardness of Ukrainian production. The production facilities of Ukrainian arms factories have changed very little since the Soviet times. To produce a single component, a chain of dozens of links is used, each employing a worker to run it. If one of those workers fails to come to work, the whole production like is halted.
Another key problem of Ukroboronprom is corruption, and the web of corrupt schemes that has entangled it. For example, some pieces of legislation that were adopted for this industry were in fact specially designed legal loopholes to allow outsiders inside this very secretive industry.
In the past years, the commissions intermediaries have been allowed to make off the arms industry increased by 5-7 percent, eating not only the potential profit for the national arms concern, but making the production loss-making.
I have taken a number of measures to reverse these and other schemes. We are now able and must ensure we have zero tolerance for corruption. The new management of the state concern is finalizing a detailed plan of primary anti-corruption measures. At the same time, we’re analyzing a number of corruption-sensitive procedures, particularly the procurement.
Our next task will be enhancement of human resources. Staff problems are key and have to be addressed extremely carefully, with respect to each worker. But searching for new people is even more difficult. We plan to search for people – especially those who are engaged in financial and economic activities of the company – through competitive procedures and are currently developing the regulations required to compete this task. Ukroboronprom workers make decent wages, so we can expect high quality professionals to want to fill our vacancies.
Under current circumstances, the goal of increasing the world market share for Ukraine’s arms industry though supply of more competitive products, and making hard currency off it for the nation’s coffers, becomes secondary, but still stands. We will continue active trade, and hope to meet last year’s sales figures in 2014.
Ukraine’s export potential should benefit from Ukroboronprom’s new priority of meeting the needs of Ukraine’s army. As a rule, military equipment adopted by the domestic armed forces sell better abroad. Moreover, the arms industry can become an important locomotive for the nation’s economy in times of recession.
The emergency our country is facing should significanty speed up the rate of upgrades of the idustry, and trickle into the Ukrainian research industries as well. The path from designing the weapons and making them should become much shorter, which should also be beneficial for the economy.
The key directions here should be development of controls and automated systems, aviation and air-defense facilities, means of military intelligence and high pressure weaponry.
And last, but not least, Ukraine will have to address the issue of technical cooperation with the Russian Federation. At this point, no military equipment is supplied to Russia anymore. But even if the current standoff de-escalates, our bilateral relations will remain frozen. Yes, we will incur economic losses, but at least we will no longer arm the enemy.
Yuriy Tereshchenko is the newly appointed head of Ukroboronprom state concern, the arms production monopoly in Ukraine. He has 20 years of experience in the national defense and weapons industries, and has worked as Deputy Secretary of the National Security and Defense Council and Head of the Committee on Military Technical Cooperation under the President of Ukraine. The Ukrainian and Russian versions of this op-ed was printed in the March 29 edition of Zerkalo Nedeli Weekly.
