17:47 26.03.2018

Bukin: Corporatization of Ukroboronprom should be thoroughly prepared, privatization amid military actions in Ukraine poses many risks

34 min read
Bukin: Corporatization of Ukroboronprom should be thoroughly prepared, privatization amid military actions in Ukraine poses many risks

Exclusive interview with Ukroboronprom Director General Pavlo Bukin for the Interfax-Ukraine News Agency

In 2015, Ukroboronprom announced a massive staged reform program to document strategic defense plans with the stated goal of bringing Ukraine's Armed Forces by 2020 fully in line with NATO standards. In addition, plans were announced to attract NATO members to the system of weapons purchases. Are there any objective appraisals of the level of fulfillment of these announced reforms? According to some estimates, defense sector reform measures are only 30% complete.

The other day I came from Brussels, where a meeting of the working group was held within the framework of the Ukraine-NATO Commission on reforming Ukraine's defense sector. There were representatives of all delegations at NATO Headquarters. The Ukrainian delegation was led by the head of the Interdepartmental Commission for Ukraine's military industrial complex, Deputy Head of the Ministry of Economic Development and Trade Brovchenko. Also attending were representatives of private manufacturers from the League of Defense Enterprises of Ukraine, and the NGO Practice. The alliance presented a report on the state of Ukraine's defense industry - their vision. I would not call it a comprehensive report. Incidentally, the report contained errors. For example, it said Ukroboronprom is subordinated to the Defense Ministry, and I drew their attention to this. I'm not saying that this is critical mistake.

The report was voiced by NATO's US mission? Can you clarify this, keeping in mind the statement of the recently appointed foreign advisor of the state concern, former head of the US Advanced Defense Research Projects Agency (DARPA), Mr. Teter, about the plans of the American side to provide multifaceted support to the reform.

As for NATO's' US delegation, it expressed great support for what is being done in Ukraine ... One of the problems with the report was the lack of transparency in pricing of Defense Ministry equipment. I drew their attention to the fact that Ukraine is an export-oriented party in the production of arms and military equipment. This is well known – we export 85% of what we produce. And this puts us in a unique situation, one that is atypical for the EU countries. NATO's internal defense market is quite wealthy. The volume of domestic supplies is much greater than the export one. When they export arms it is an instrument of foreign policy. The decision to deliver to a particular country is made, first of all, for reasons of political support, and only then with an eye of whether it's economically profitable. This is all due to transparency in the domestic market. I explained that our Defense Ministry purchases are carried out 'at cost.' If we were to provide universal access, arms exports would be, to put it mildly, significantly more complicated. It is difficult to negotiate a price when the cost of the product is known. For many western colleagues, this was a surprise. And they took note. Again, this depends on the possibility of the Ukrainian defense budget. Ukraine's Armed Forces is 250,000 strong, compared to 170,000 in Germany, which has twice the population of Ukraine. I won't even talk about the German budget. I also tried to explain that we are in a unique situation. Ukraine inherited a large defense sector from the Soviet Union. It was designed to support the entire Soviet army. So, we need to go through this period of transformation, with the support of Western partners, including our NATO partners.

I tried to convey to NATO experts, what we challenges we are facing implementing defense industry reforms to date. I used an equipment repair plant working for the Defense Ministry as an example. To date, Ukraine's Defense Minister has been responsible for verifying and checking the cost of goods and services, including components, as well as setting profitability guidelines. The salaries of all employees of this repair plant enterprise are regulated by industry standards as per the Ministry of Economic Development and Trade. I asked my colleagues what the enterprise is in control over and what is our social responsibility? For salary arrears, if we say that we are building an economic model? The model of pricing, which exists in the framework of the state order, is difficult to call it economic or market based. Moreover, this system does not at all stimulate the management of the defense enterprise to reduce product costs, because it would receives less money for development. I'm not talking about the element of corruption. I tried to convey to my colleagues that the current system initially creates obstacles for the functioning of the defense industry - those norms, which are in pricing in the state order system, which are probably borrowed from the Soviet Union.

Did the Western partners make any assessments regarding the pace of the reform of the defense sector? What drawbacks of the reforms, other than those mentioned by you, did our Western partners note?

I think 30% is an adequate estimate. They noted the slow transition to NATO standards. Our partners understand that budget constraints slow this process down. We gave examples of each type of weapons, including aircraft platforms. You can understand how much money this requires. But it is necessary to move in this direction and, for starters, comply with NATO standards. There are critical problems in import substitution. This is the easiest way for the Armed Forces to adopt NATO standards. For example, long-range artillery - there is a specific problem with large-calibre ammunition. We can switch to the NATO standard, but securing a guaranteed supply components and ammunition is a complex issue ... Also during the meeting we were asked the question how we and the EU cooperate in general. I said we are working with each EU country, but there is a so-called "European Union" in the EU. The Code of Conduct of Arms Exports calls on countries to be careful about developing cooperation in the defense sphere with countries involved in armed conflicts. Therefore, we have a very slow dialogue there. I gave an example of a number of countries where this dialogue does not develop quickly enough for obvious reasons. Military experts in the West understand this issue.

Current internal contradictions in the EU and in the transatlantic structures probably make it difficult for dialogue to develop dynamically …

Yes, and I do not understand at what stage preparations for the NATO summit are at now. And this atmosphere is felt when you come to the headquarters of the alliance. The current situation with the alliance with Turkey, especially after the purchase of the S-400 SAM system from the Russian Federation, is complicated. Our NATO colleagues realize this. If we talk about our progress in our movement towards NATO standards, I will try to find those points where it can be done most quickly, where Ukraine's Defense Ministry will be most comfortable to make a decision. Because the old stockpiles, the old firearms, the old platforms - they weigh on the speed of decision-making ... And again, the primary question whether we will incur additional budget costs as we accept NATO standards.

How realistic are the terms of switching over to NATO standards in terms of re-equipping Ukraine's Armed Forces, and this against the backdrop of strategic defense plans and the international audit of Ukroboronprom?

Today there is progress in the issue of international audit, in the prequalification of tender participants. I do not yet thoroughly studied all aspects of the audit, but from what I understand if we are talking about a legal audit, then in the legal audit, we are strong enough. I do not want the result of this audit to be that we receive information we already knew. There already was an audit that told us we were limited in terms of state defense. In order for the international audit to be effective, auditors need to give a clear statement of our legal framework and our vision of where problems exist today. It should move on from what we already understand ... The most difficult problem is that I do not know whether the technological audit will be part of the audit. There may be critical technology that we need, but it might already be obsolete, for example. How will we get new technical solutions and recommendations? How can we organize the production of one or another piece of military equipment, or a component used today, which is already being used? This is the most difficult question. And I can not answer for myself how much I need the first and second stages [legal and financial-economic- IF-U]. They probably need to be reorganized, but when we get to the third stage, what will we do next? Here, probably, there is no other answer, except mobilizing internal resources and attracting available experts. This is what relates to the audit.

But here there is another question: we have the State Audit Service of Ukraine (SASU), and there is the Accounting Chamber, which we should render these services for free, as they say. If there is a need, just apply. I must answer the question for myself in a legal context: how will I announce a tender for the purchase of consulting and auditing services, when I have an alternative to get the same services for free? And are there any criteria that SASU is worse than Big Five auditors? Thus, we have a situation where the SASU is not legally worse than the Big Five, and at the same time the services of the SASU are free, and this leads to the fact that many public sector companies purchase external audit services under other formulations that, in fact, describe the audit. This can not be called a systemic solution to the problem.

As far as I understand, audit is one of the key components of the reform program, approved by our political allies. Therefore, you will probably rely here, first of all, on a political argument.

Yes, for a political argument ... For example, audit activities of the NJSC Naftogaz were also conducted. In fact, trades are held for services that are essentially an audit, and are called differently. Yes, I fully understand the political argument, but the simplest solution will be if we receive dedicated funding from our partners for these audits as assistance. Or there will be a decision about some other kind of financing.

A sensitive issue, which Mr. Teter spoke about, is the corporate environment and plans for the creation of a DARPA analogue in Ukroboronprom as a priority for the updated Supervisory Board. Do you share the opinion about the political and other risks of this project?

PB: Yes, I understand what is being considered: obtaining insider information, both in the context of competition, and in the context of the struggle for the non-proliferation of critical technologies. We discussed this issue with Zgurovsky (head of the National Concern, Rector of Kyiv Polytechnic Institute (KPI). He has a proposal and I fully support him, that the analog of the DARPA (GARDA) will be based at KPI, and that this will be done on the basis of the KPI. Simply put, this will be a unit that will collect information on new technologies and introduce them into the defense industry. It seems to me, it will be organic, and once again will emphasize the role of the Supervisory Board. KPI currently has the largest number of competencies in these issues, and there are modern approaches. Therefore, I fully support this, and we will implement it: DARPA will be born with the help of the KPI, necessarily at KPI.  

And what will be the role of the American side in this process?

To date, Mr. Teter, as a member of the National Assembly, carries out managerial functions within the framework of the competencies provided by the statute of the state concern. In the near future, the support office will begin to work and the work of the Advisory Board will begin. My task is to ensure constant communication between the members of the Advisory Board, the Ukroboronprom and defense enterprises. Mr. Teter will permanently establish mechanisms through which he will be able to fulfill his role as a member of the Advisory Board. As for the expert role of Mr. Teter, we had a close contact with him on his recent visit. He for a long time headed DARPA and has deep knowledge in the field of organization of the defense industry, and knows very well the approaches taken on this issue are in the US. We have discussed at length existing models, including the one when a private company is being created, but the technology that is contained in its activities is so critical that it is managed by the state. He knows this system thoroughly, and his help as an expert is really valuable. Often, brilliant things lie on the surface, and it's much faster to ask a person who knows how to do it better. That's why I'm counting on his help.

Is there any vision when this structure - GARDA - can be created?

It will appear probably this year already. In institutional form, we need to wait a bit, because I still need to make certain changes in the management body of the state concern, structure its activities, and move to an innovative component.

Ukraine is not the first, and not the only country that is carrying out reform of the defense industry. What is Ukraine's strategy on the extent to which foreign companies are present on the Ukrainian defense market, given the new long-term challenges of the hybrid war and the potential of military technical cooperation? Obviously, the answer to this question should not be formed chaotically? Is there a vision of who from the authorized authorities will regulate this market, or will it be regulated by other means? What is the role of government in this process?

There is a vision in the country of what should take place. The mechanism, what is most important, in my opinion, which should regulate the development of military-technical cooperation, is the so-called offset. How is this mechanism valuable for us? It allows us to acquire competences, obtain equipment and technologies, regardless of the market component: how much this product has the prospect of selling on the domestic market. We haven't worked out this mechanism fully yet. We have a provision that obliges the executive authorities to use offsets in the purchase of arms and military equipment for imports worth more than EUR 5 million. An offset commission has been set up at the Ministry of Economic Development and Trade, but this matter has not been finalized. There must be specific mechanisms, specific criteria. I think that in the near future we will launch this mechanism. As for the presence of foreign companies on the market, then, of course, the first criterion that we set for foreign partners is the localization of production in the territory of Ukraine. This is a complex issue, which, again, is related to the volume of our domestic market, the volume of the state budget, the stability of purchases and the introduction of these systems, which will be produced, the Armed Forces. But this question must be raised. No matter how complicated, but we will discuss it. That is, if someone comes to this market, we want some part of the production - if not all, then some part of the operation, needs to be localized here. And our people trained, employed and integrated in the process.

One of the branches of military-technical cooperation is also exports and direct purchases of arms and military equipment. Is there a vision, what can the share of foreign suppliers in rearmaments, as well as the risks of conflict of interests with domestic producers, taking into account the capabilities of the defense budget?

We again start with bad news, that is, budget possibilities. Those purchases of imports that are carried out by the Defense Ministry are carried out when a critical need needs to be met. And planning is also often carried out at a critical time, when you need to make a decision. Accordingly, it then affects the quality of the purchase. I understand that this is not the intentional fault of Defense Ministry. There are many external factors, and disunity, which everyone talks about. In principle, the president has already announced that next year we will have a civilian defense minister, and the entire system will change. This is positive, and it was discussed and supported by NATO partners. As for the share of imports, it is unlikely that it will be set rigidly. But I feel that it will be at least 30%. In many segments we have very good products, but very often there is no modern production line, and we still do not know what's available on foreign markets. Many conclusions in industry design bureaus are not done systematically, on the basis of what has been seen or learned. There is no connection to market electronic tools, where you can quickly get information, especially in electronics, where everything changes very quickly, where component stockpiles change constantly. The key is how to get information very quickly, to find out what's new on the market. There is more and more advertising at exhibitions. The best and most modern equipment is not always advertised. Again, the NATO countries have first and foremost an orientation toward the domestic market. So does Russia, which focuses on its domestic defense needs. The volumes there are quite different. Therefore, we need integration. If we say that this is a deliberate choice of Ukraine in favor of collective security and in favor of NATO, we must be integrated into their knowledge systems. This will take time. The other side wants to see market components. Here I do not mean political entities, but big producers. We want to see a component of national security, first of all. We will combine all this.

Attraction of private investments in the Ukrainian defense industry, including foreign ones, is a long-standing topic that has received new thinking in the changed geopolitical situation, which Poroshenko recently spoke about. Has the legal field, which meets the interests of ensuring this task, been formed in Ukraine today? What is the fate of the draft law "On guaranteeing the rights of investors and attracting private investments on the conditions of applying the mechanism of public-private partnership in the defense industry complex," as well as the bill on privatization of defense enterprises announced by the former government of the state concern?

The legislative basis has not created yet. Ukroboronprom took the first steps to create a legal framework to attract investment in the aviation industry. There are already projects - with the same Saudi TAQNIA to create a light multi-purpose An-132. We want to give the same tools to other clusters within the group and in the near future we will come out with a package of initiatives. Slowly we will begin rolling this out. On the other hand, I understand that economic conditions are important for investment.  Enterprises which attract investments are healthy and attractive to the investor in terms of predictability of profit generation, predictability of product realization, payback and return on investment. On the other hand, we understand that we must carry out a set of measures to improve these enterprises, to create a transparent, clear cooperation chain. This does not depend on the director, or on the deputy director, or on the chief engineer. Decisions in this cooperation chain are taken exclusively by the factor "price-quality-delivery time". This is connected, again, with the production culture, which is immediately visible.  As they say: you want to know that at the enterprise, go into the dining room.

But in addition to all the basic economic conditions listed by you, there must also be basic legal guarantees for investment protection, as our potential foreign investors say. What, in your opinion, why are the draft pieces of legislation in limbo? Is it because they are poorly conceived or because of the political situation?

Some 95% of what we have is related to our three eternal problems: they are fools, roads, and Russia. That's how we live. An example is that one of the very well-known audit organizations from the Big Five has drafted in 2015 a law on public-private partnership in the defense industry. We checked it - and it is a draft of the corresponding Russian law on public-private partnership in the defense industry, only in Russian, it is understandable. This is to say there are different approaches. The key is a conscientious and a systemic attitude that will help us overcome the so-called "provincial approach."

Is it necessary to understand that practical restructuring of the military industrial complex and defense industry privatization is a medium-term goal? Last year, the Ministry of Economic Development and Trade announced the corporatization of a part of state concern enterprises, two enterprises of the aviation cluster - the state enterprise Antonov and the factory of the state-owned repair enterprise "410 GA" - The Cabinet of Ministers has approved the decision for preparing to corporatize the entities.

Yes, the key word is "preparation." So that it does not turn out that if you go to the market, you sell it, and then you will cry: either you will sell at such a price, or there will be such an offer, which initially will devalue all your attempts to attract investments to this enterprise ... You need to prepare for corporatization. You need to create and to connect to these enterprises the possibility of using market instruments. For many enterprises, including industry brands, there is a question of modernization of production, which is complicated by the decline in sales. If we say that we want to attract an investor, we need to audit ... Besides, privatization in the conditions of military operations in the country is a lot of risks that will inevitably entail a decrease in multipliers.

What is the need for investments in modernization and preparation of the industry for corporatization and privatization?

To date, the need for investment "can be felt" in the money that is needed to prepare the production. This year it is approximately UAH 3 billion. This should be allocated from the budget through the Ministry of Economic Development and Trade. We have already verified these figures with the Defense Ministry, as a key state customer. We are today conducting a feasibility study of the enterprises for the expected efficiency of development of funds allocated for modernization.

What is your assessment of the performance of the import-substitution industry program? Who are we currently focusing on from the foreign partners attracted to the program, are you satisfied with the level of cooperation? By the way, NATO has also already declared import substitution, as one of the priorities of cooperation with Ukraine in the defense industry.

To date, the concern has carried out work on the subject of import substitution analysis: what we need to replace and where. This work is still going on, but we have already have compiled incomplete, albeit extensive catalogues. My task is to ensure that the import substitution mechanism works automatically. Today I can say that many enterprises are fond of the possibility of importing any components, so they do not pay attention to what they can replace. I want to implement the system under which an enterprise can justify the expediency of purchasing imported components and the impossibility of substitution, or provide a specific plan for carrying out import substitution. This task will be assigned to the deputy head of production. Let's start with metals and alloys, as well as armored vehicles ... Again, import substitution is associated with sales volumes: sometimes there is an understanding of the possibility of organizing a critical component production, but production volumes do not allow talking about its profitability, which creates difficulties in finding an investor. But these problems must be addressed, and many directors do not have an integrated approach to solving these issues. I hope we will implement solutions in the near future.

What is your position on the issue discussed in the corporate environment about the advisability of creating a single central authority to ensure the state defense-industrial and military-technical policy, the management of the defense industry and the regulation of the defense market in the new conditions?

My impression is that there has been no better mechanism than an interdepartmental commission for the military-industrial complex and military-technical cooperation in the National Security and Defense Council in the history of Ukraine. All decisions are recorded, adopted by voting, the position of all authorized agencies and agencies is taken into account and there is a work plan for the commission. For today - this is the site where the optimal point of intersection of interests of all interested parties is located. If the decision can not be taken, it is simply postponed for collecting and studying information. Our model is individually tailored and will be built in the near future. We are going to liberalize the military-technical cooperation system in the near future with the right to self-import for own production purposes and independent exports to producers for their own production. Rules are developed for private importers: for those companies that have a dealership with one of the foreign arms and military equipment manufacturers.

The question of the hybrid status of Ukroboronprom is complicated. I understand that there is a certain conflict in the fact that the concern is a hybrid of the management body and the business entity. There is a definite reason for the discussion - to talk about whom it should be subordinated to: the Cabinet of Ministers or the president.

In today's conditions it is very important for me that the president appointed me, and I have the opportunity to report the position of the concern to the head of state, as to the Supreme Commander-in-Chief. This is an opportunity to overcome bureaucratic obstacles. It will be difficult if the concern is brewed in this maelstrom, since the defense industry is one of the priorities today because Ukraine is at war. We can't simply throw Ukroboronprom into this bureaucratic maelstrom together with all its enterprises. Of course, I want the defense industry to be allocated administratively. We are accountable and in the operational subordination of the Cabinet, but the head of the concern is appointed by the president, and the concern has the opportunity to convey its position to the Presidential Administration and to the head of state. For me, this is important: it is the speed of decision-making, and an additional opportunity to ensure that the necessary decisions are made. Of course, time will pass - it is connected with corporatization, and with a possible change in the situation with the settlement of the question of the return of the Crimea and Donbas. When the situation changes, Ukroboronprom will be transformed and become an ordinary economic entity. It will happen someday, but there is still a lot to do before this time.

How do you assess the degree of risk of conflict of interests between the state Concern and the Ministry of Economic Development and Trade, considering that according to the law passed by the parliament in 2011, do you jointly ensure the management of state property in the defense industry?

Yes, we have a conventional so-called institutional conflict. It is due to the fact that we are a management body, but we are not the manager of budgetary funds. As they say in the army: "Away from the authorities, closer to the kitchen." And always this option remains: to be closer "to the authorities, or to the kitchen." I do not see that I can change this situation today. Probably, it will be fixed. On the other hand, I have no problem for today communicating with the Ministry of Economic Development and Trade (MEDT). I have the opportunity to convey the essence of important problems we face. I do not aspire to any authority, but if Ukroboronprom does something, I can at least explain why we do it.

We already discussed the position of Ukroboronprom about the expediency of liberalizing the system of military and technical cooperation of Ukraine and exporting arms in a new geopolitical situation. And how do you feel about the idea of transferring the right to independent purchase of defense imports to military and law enforcement customers?

Our position: we support it. Moreover, where we will be asked, we will assist the Defense Ministry and other law-enforcement agencies in the organization and transfer of competences. In the war years we passed a large school and thoroughly studied the army's needs, the characteristics of the necessary arms and military equipment, and also customers. Initially, all security officials, first of all, the Defense Ministry, will face problems, taking into account a wide range of imports. There will be fewer problems for Ukraine's SBU Security Service, Interior Ministry and State Border Service.

To obtain these competencies, they must apply to the authorized bodies. But to date, they haven't made any official query to the Economy Ministry, or to the State Service for Export Control of Ukraine, or to the Cabinet. There is their position directed to Ukrspecexport that the Defense Ministry, is against working with the import under a commission sales agreement. And a commission sales agreement implies that we act on their behalf, and they fully see all the pricing. We provide a service, and for this we receive a fixed commission. They refused this in writing. Why? Because it's probably convenient when you set 1% or 5% profitability, and then you can torment the supplier. In imports, this is not so critical. We already worked for working capital: all shortcomings and the speed of state financing were compensated for working capital. In fact, it is so convenient for them to work: you have a supplier in front of you, torture him, put forward demands to him, and he must adapt them to a foreign supplier. When you move to a direct relationship, you'll have to settle all these things yourself. And there are a lot of questions, because the technique is often complicated. And in order to conduct a normal dialogue and be sane by the buyer, one must have an instrument and one must have people. They will have to dial them. And then we will rest against: in the size of wages, in the number of the Defense Ministry, in the presence of duplicating structures in the General Staff and the Defense Ministry. This provision of independent rights of the importer will force the Defense Ministry to adequately reform both the system and the structures. They're going to do it. We fully support this and we will help.

On the issue of Defense Ministry reforms, private and state-owned enterprises of the military industrial complex are preparing another appeal to the Cabinet with a request to bring the pricing system for defense products to the conditions of wartime and the abolition of the military units that were introduced in 2016, which put an end to new defense developments and provoke outflow of personnel from the industry, profitability limitations on defense products: 1% for components, and 20% for other costs.

The key word here is: "to wartime conditions." Linking the norm of profitability to the cost of production and control of the state customer - this model moves the head of the defense enterprise to increase the cost of the product, and private producers - encourages collusion with import suppliers. This is what this system produces. On the other hand, there is a wartime factor. In view of this factor, we ask the government not to reduce the rate of return on production costs from 30% to 20%. As is known, Defense Ministry is guided by the limited possibilities of its budget, half of which are salaries, food, clothing, etc. And they still need to solve the issue of replenishing military equipment, to modernize and put into service new military equipment. Of course, they do not have enough money, and they are looking for some affordable mechanisms. But here it is necessary to find some accessible "middle", and taking into account wartime. I do not ask you to immediately abolish the existing state order system, under which updating a large array of regulatory frameworks requires considerable time. Therefore, we ask: let's leave at least 30% of profitability for production. The state order system should serve as a locomotive for the development of the defense industry.

In Brussels, we have previously agreed that NATO in May will hold a seminar on the experience of the alliance's existing military procurement system for its armed forces, as well as their experience in shaping the price of defense products and controlling this process ... We have other wisdom that is always more authoritative.

This is question to one of the leaders Ukraine's military industrial complex. Does the current strategy of the military technical cooperation of Ukraine in the world arms markets reflect the conditions of wartime, as well as the new tendencies and priorities of the defense strategies of the world's leading players? What factors will determine the potential demand for the well-known competitive level of development of Ukrainian defense technologies, including in the aerospace and cyber segments?

As is known, in times of war, the Defense Ministry received a veto on all exports, if they are necessary for the needs of Ukraine's Armed Forces or the supplier has outstanding obligations under the state military order. It happens that some deliveries are not coordinated. This, as a rule, costs money and causes losses for the enterprises.

As for the strategy, I see a significant expansion of sales of weapons and military equipment of Ukraine in the world market, if we have a mechanism for joining the joint venture and organizing international cooperation projects. For today, these opportunities are limited. Provided this mechanism is received, the synergetic effect of already well-established and promising cooperation will increase. Today we want to get an opportunity to organize a joint venture in a number of regional markets. The most vivid example is the Thai market, where the possibility of localizing the production of Ukrainian BTR-3 and BTR-4 is being discussed. Today we are waiting for funding. When the joint venture will be established, the question arises of how a state concern's enterprise can become its participant and make a profit. There is no such mechanism today. I need to create it and fix it in the regulatory framework.

In which other areas does Ukroboronprom plan to come up with legislative initiatives?

PB: Firstly, we need normative acts, which should allow us to attract foreign investments into the defense industry. In particular, this is the draft law "On the provision of favorable conditions for attracting foreign investment in the defense industry," aimed at removing restrictions that hinder the attraction of investments. Next comes the draft law "On the peculiarities of the transformation of the state unitary commercial enterprise OPK into a joint stock company." These bills have already been approved at the meeting of the Ukroboronprom's Advisory Board. In the near future we will forward them to the government for further submission to parliament.

Can the pre-election campaign already be reflected in your plans?

More elections mean less production. Thankfully, today we do not have parliamentary elections, when the number of deputies wandering about the enterprises increases in geometric progression every day. Elections, of course, influence badly on many processes: in elections there is always a desire to please voters. In such situations it is very difficult to make difficult, unpopular decisions. At the same time during the elections, it is urgent to extinguish payroll arrears.

In general, in your opinion, will the political situation influence the course of the defense industry reform in Ukraine?

I think that the political situation will not influence. We have normal relations with everyone, including the parliamentary defense committee. And on a number of priority issues, we have already met understanding. In particular, we plan to transfer inefficient enterprises to the State Property Fund, those which have lost their significance for the defense industry. Since this is the only body that has all the tools for recovery or privatization. This is up to 30 enterprises of the state concern, where there is no active production cycle today, and there are no products. According to the results of the analysis, the intellectual property of these enterprises is planned to be transferred to sectoral research institutes. I had the same opinion, and I discussed it, and according to Mykolaiv's "Shipbuilding Plant 61 Communards," where it is necessary to repay debts on wages and to lay off people ... By the way, construction of the cruiser "Ukraine" and wage arrears are different. There is a question about the content of the cruiser, which is on the balance of the Defense Ministry. For its maintenance, which is carried out, it is necessary to pay ... The Defense Ministry does not pay for the content of this cruiser, and even there are no agreements on the responsible storage of all stocks of "used" weapons and military equipment stored at the enterprises of Ukroboronprom. This is an eternal problem: on the one hand we say that the property is stolen, and on the other hand, no one is responsible for this. Why? Because the Defense Ministry either does not have the funds, or does not want to bear the additional costs of storing all those stocks that they have. And with the issue of storage are also related to the inventory.

How do you see the most promising areas of military-technical cooperation, taking into account the needs of the army, as well as recent decisions including the US and Canada to intensify military-technical cooperation with Ukraine? Recently, the US Department of State's special representative for Ukraine, Kurt Volker, announced Washington's plans to supply weapons to Ukraine on a comprehensive basis: in the framework of US government assistance, as well as on the basis of direct procurement, taking into account the needs of Ukraine's Armed Forces.

As for Canada, we now expect the Defense Ministry will formalize the nomenclature of military items we need from the Canadian side, after the visit of the head of the department to Canada, and we will be engaged in securing supplies.

Speaking about the US, we are very much looking forward to the first deliveries of Javelin ATGM. First, it is an effective and easy-to-use weapon. Easy to use - one of the advantages of American technology, it has very well developed protocols for its use, and even a very poorly trained person is able to learn how to use it. Our technique, as a rule, requires a well-trained instructor. On the other hand, the delivery of Javelin is a signal to all NATO partners that we can supply lethal weapons to Ukraine, and we look forward to these deliveries.

The United States itself does not hide that there have already been supplies of lethal weapons to Ukraine, which were directly carried out by producers, or by authorized contractors. Basically it is small arms. Also, under the program of international military cooperation between the General Headquarters of the Armed Forces of Ukraine and the US Armed Forces, we were provided with artillery detection systems for the trajectory of ANTPQ ammunition.

The US is our main partner here, and we hope that this cooperation will become an indicator and a driving force for other NATO and EU countries.