10:25 10.01.2024

Ukrainian light industry manufacturers ask to regulate procurement for Ukraine's Armed Forces

5 min read
Ukrainian light industry manufacturers ask to regulate procurement for Ukraine's Armed Forces

Ukrainian business, the Ukrainian light industry today, with appropriate planning, transparent procedures and requirements for suppliers, has every opportunity to provide all Ukrainian military troops – participants in the defense sector – with clothing, Director General of the Federation of Employers of Ukraine Ruslan Illichov said at the press conference "Light industry is for transparent procurement" at Interfax-Ukraine.

Every hryvnia invested in the economy returns almost 40% in taxes. Every year, more than UAH 30 billion is spent on providing clothing, of which more than UAH 12 billion are returned in taxes, which also go to finance the Ukrainian defense sector. Light industry has about 20,000 jobs, and it is very important today for the country's economy and cities where enterprises are located, as it is a matter of economic and national security, Illichov said.

Deputy Minister of Defense of Ukraine Vitaliy Polovenko noted that Ukrainian manufacturers will be involved in the production of uniforms for Ukrainian defenders.

Deputy Minister of Economy of Ukraine Nadia Bihun emphasized that the position of the Ministry of Economy is consistent – it is impossible to do without money in the budget, which is taken from taxes. Security and defense needs are financed by taxes and fees collected within Ukraine. The ministry tries to spend every kopiika from the budget on the domestic market, without spending on imports, to finance security and defense needs. The ministry, as a buyer, can increase the volume of tax revenues to the budget only by increasing the consumption of products made in Ukraine, and it is a matter of survival for an independent country.

"And to have money to buy uniforms, we should buy Ukrainian-made uniforms. Everything seems simple, but when we get to the implementation of this, we have many pitfalls. And here we understand our colleagues from the Ministry of Defense, because the tasks are set and tasks change very often," Bihun said, adding that a new procurement tool is currently being developed.

Requirements for manufacturers of products supplied to the army must be clear, understandable and the same for everyone, procurement must be systematized, they must be made transparent and corruption risks minimized, Chairman of the Defense Procurement Committee of the Light Industry of the Federation of Employers of Ukraine Oleksandr Sokolovsky said.

"Business and the public have the right to know and understand what criteria suppliers of the armed forces must meet. Secondly, we need equal rules and rights for Ukrainian and foreign enterprises, including in tax payment and customs regulation, criteria for acceptance of finished products, timeframes for executing contracts, and the procedure for recognizing force majeure circumstances. There cannot and should not be any preferences for anyone. And third, it is full transparency of procurement," Sokolovsky said.

If it is necessary to maintain the secrecy of procurement, Ukrainian enterprises always meet the state halfway, but demand respect for themselves, their employees and consideration of the interests of the Ukrainian economy, he added.

Director General of the state-owned enterprise State Rear Logistics Operator Arsen Zhumadilov is convinced that prepayment is a common mechanism for procurement and does not pose a danger.

He added that advance payments are normal practice; it is only important that the risks of non-fulfillment of contracts and non-repayment of funds are minimal.

"Here, as far as the defense sector is concerned, there is good news: all funds related to advances go to a non-budgetary account in the State Treasury Service, and these funds become available to the manufacturer only when it confirms one or another fulfillment of the state contract," Zhumadilov said.

He noted that certain cautions are understandable, since "everyone is traumatized by the experience of interacting with customers involved in corrupt practices."

The issue of the need for advance payments when purchasing for the army caused a debate. Bohdana Yarova, a member of the Public Anti-Corruption Council under the Ministry of Defense of Ukraine, spoke out against advance payments for the purchase of clothing supplies for the army.

"We didn't advance any payments to a single supplier this year: the payment was made only after we handed over the products to a warehouse and received the certificates. And I think that it is the correct story. If our manufacturer works with the Ministry of Defense, then there is no problem. But if we import and give a company engaged in construction a contract for the supply of molds, then we need an advance, yes. Then, we need to add working capital so that builders can buy jackets in Türkiye. But let's not forget that then we are boosting the Turkish economy and not Ukraine's," Yarova said.

Head of the Association of Veteran Entrepreneurs Serhiy Pozniak thanked the Ministry of Economy for its effective support of veteran business.

He added that he is engaged in sniper gear, and it is very expensive. For example, sights cost $10,000, and you also need to provide everything else, from weapons, transport, communications, equipment – you have to work under constant scarce resource pressure.

"And these resources are compensated by businesses and volunteers. That is, volunteers provide all this, buy it, and business pays for it all. Therefore, it must generate these flows in order to purchase all this," Pozniak said.

"Hundreds of thousands of new fighters are coming to us. Our military enterprises must adequately equip them, and they will be equipped if these enterprises and businesses have the opportunity to earn, work, pay taxes and obtain access to already existing transparent platforms, like Prozorro," the head of the Association of Veteran Entrepreneurs said.

At the press conference, Sokolovsky announced an appeal from light industry enterprises to the government regarding the need to ensure fair and prompt supplies of everything necessary for the front.