Ukraine’s parliament, the Verkhovna Rada, has passed a key bill required for the in-depth restructure of UkrOboronProm, the state-run defense production giant known for endemic corruption and low efficacy.
A total of 256 lawmakers endorsed the law in the final reading, paving the way to the company’s much-heralded dissolution into a number of corporatized arms businesses.
UkrOboronProm’s director-general Yuriy Husyev, in an emotional statement, called it “a victory of Ukraine’s defense production sector.”
“The reform envisages turning state-run defense enterprises, currently part of UkrOboronProm, into joint-stock companies that are more flexible in terms of their organization and legal base,” UkrOboronProm commented on July 13. “The state represented by the Cabinet of Ministers is going to be the enterprises’ only shareholder.”
All newly created defense contractors would be grouped into industry-based clusters: armored vehicles, radar systems, high-precision weapons and munitions, naval systems, aircraft repairs and special export companies.
UkrOboronProm, currently a controlling company with over 100 enterprises, is going to be transformed into a corporate core “taking the lead in reorganization and investment promotion.”
“The bill introduced a modern model of corporate management… which is meant to secure the companies from corruption risks, conflicts of interest, and direct political influence,” UkrOboronProm stated.
“The newly created entities are going to be entitled to use direct investments, including from abroad, to produce modern weapons and hardware primarily for Ukraine’s Armed Forces.”
“All funds gained from selling surplus assets will be allocated exclusively to the needs of transformed companies: production development and modernization, financing research, innovations, improving social security of employees.”
It will no longer be possible to siphon funds out of the industry, as has been done for years, according to the statement. Previously, UkrOboronProm exercised full financial control over its enterprises and prevented the companies from managing their profits.
