Over the past 3.5 years, UKROBORONPROM (UOP) has undergone radical changes, which became the foundation for the further development of the largest association of state enterprises of Ukraine’s defense industry.
Over the past 3.5 years, UKROBORONPROM has been steadily changing under warfare conditions, adhering to transparency, introduction of NATO standards, the use of modern business governance models, engaging private enterprises, and transition from the repair of old Soviet military equipment to high-tech developments. This was reported by Roman Romanov during the meeting of UOP Supervisory Board, member of which – on UKROBORONPROM initiative – was appointed Anthony Tether – former head of the Defense Advanced Research Projects Agency (DARPA).
UOP enterprises 100% fulfilled all State defense orders, having transferred armored vehicles, aircraft, helicopters, air defense systems, artillery systems, missile weapons and other armament samples to the military.
Starting from 2014, Ukrainian Army received from UKROBORONPROM 18,615 units of military equipment and weapons, of which 6,025 – totally new and modernized samples. During intense fighting, UOP specialists worked directly in the ATO zone as part of the mobile maintenance crews, restoring military equipment, destroyed in battles. These maintenance crews repaired more than two thousand pieces of military equipment in the field conditions.
Despite the limited resources and the ongoing war, over the years, UKROBORONPROM moved from repairing Soviet military equipment to development of new advanced models of weapons and military equipment. In recent years, AN-132D aircraft and UAV "Horlytsya" performed their first flights, missile system “Vil’kha” and cruising missile under "Neptune" project were tested, as well as dozens of other weapons, intended, first of all, for the Ukrainian Army.
The Ukrainian Army began receiving high-precision anti-tank missiles "Stugna" and "Corsar", the most protected armoured vehicles BTR-4, modernized combat helicopters and aircrafts. And if in 2014 the army received weapons, barely enough for one platoon, today UKROBORONPROM transferres military equipment in battalion sets.
--At UOP expense
UOP share in the State Defense Orders, for all time amounts to 59.6%, according to which UOP enterprises received from the Ministry of Defense, the National Guard and other law enforcement agencies UAH 15.8 billion. At the same time, UOP enterprises from 2014 paid taxes and fees to the budgets in the amount of 17.2 billion UAH.
UKROBORONPROM itself, thanks to its economic activity, paid for each unit of armament, manufactured for Ukrainian military under the State Defense Order, while paying for all necessary materials, for water and light, paying wages and additionally transferring 1,4 billion UAH to the budgets.
--From losses to billions in profits
Talking numbers. In 2014, UOP enterprises had 0.92 billion UAH of losses, and, according to operative data of 2017, the net profit of the UOP enterprises in 2017 amounted to 1.5 billion UAH.
At the same time, net income in 2014 amounted to 16 billion UAH, in 2017 this figure has almost doubled to 28 billion UAH. And the average salary at all UOP enterprises increased almost three times and now amounts to UAH 9,018, which is 36% higher than the average for Ukraine.
Having turned from unprofitable enterprises to industrial leaders of their regions and budget-forming enterprises for cities, UOP enterprises became a true driver of the economy.
While in the expenditure part of Ukraine’s budget there is no line with the word "Ukroboronprom", the UOP itself paid from 2014 to 2017 over 17.2 billion of taxes and fees to the budgets of all levels.
Only 7 UKROBORONPROM enterprises of Mykolayiv region paid more than 2.5 bln taxes, and 5 enterprises of Kharkiv region – 1.8 bln. Even the newly launched enterprise "Electric Systems" – the one that released its first products in October 2017, already enriched budgets by 12.6 million UAH.
--Engaging private enterprises in import substitution program
2014 became the year of breaking powerful chains, which united the Ukrainian defense industry with Russia. The import substitution program, launched by UKROBORONPROM, relied on the capacity of hundreds of Ukrainian enterprises, not members of the State Concern; these enterprises supplied a wide range of components.
Currently, 447 enterprises throughout Ukraine, of which 65-70% are small and medium-sized businesses, supply more than 4,5 thousand units of products and components, that are of vital importance for Ukraine’s defense capability.
In fact, import substitution program allowed UKROBORONPROM not only break dependence from the Russian Federation, but also attracted Ukrainian private business to work for Ukraine’s defense capability.
Two years before Prozzoro became obligatory, in 2014 UKROBORONPROM introduced e-procurement system at its enterprises. In fact, this system became the basis for Prozzoro. UOP is the first one among the industrial associations, having made procurement system transparent and open.
This solution allowed UKROBORONPROM to save more than 1.4 billion UAH, 40+ thousand suppliers were registered and more than 96 thousand tenders were conducted. And for all this time, UKROBORONPROM has not classified any procurement.
--UOP Anti-corruption program
In 2014, one of the main tasks for UOP headquarters was fighting corruption at UOP enterprises. In addition to transparent e-procurement, it was decided to create a special internal service that will collect materials on violations and inform the law enforcement agencies.
Thanks to work of UOP internal service, since 2014, 185 materials on violations at UKROBORONPROM enterprises were collected for the total amount of UAH 950 million. All these materials were transferred to the Security Service of Ukraine, the Prosecutor’s Office, the Ministry of Internal Affairs and other law enforcement agencies, becoming the basis for 42 criminal proceedings. At the same time, 28 heads of UOP enterprises were suspended from office, and another 70 officials were brought to disciplinary responsibility.
---The first international audit
UKROBORONPROM will become the first state industrial association in the history of Ukraine that will undergo international audit, which is one of the main conditions for the large-scale transformation of the State Concern. Up to now, no one has attracted top-level world-class consulting companies under open transparent tenders.
These measures will contribute to creating the most effective means for the development of the entire defense industry and for further Euro-Atlantic integration of the entire defense-industrial complex of Ukraine.
This will allow to transparently and rationally evaluate all UKROBORONPROM assets, to develop a clear plan for corporatization UOP enterprises with the further possibility of creating effective production clusters. This will enable the State Concern to create transparent management structures, attract private investors and integrate the Ukrainian defense industry into the global system and market.
Since 2014, transition to NATO standards was the only vector for development of all UOP enterprises. As a result, weapons, adapted to Alliance criteria – primarily aviation and armored vehicles – are already being developed in Ukraine.
UKROBORONPROM participates in NATO programs: from NIAG research and joining NSPA’s supplier base, to obtaining NATO certificates: combat aircraft and helicopter modernization. Implementation of air transportation under the SALIS program takes a separate position in a number of joint programs.
It is in recent years that UKROBORONPROM has consistently participated in joint developments with NATO member states, including creation of new battle tanks, military transport aircraft, artillery systems, surveillance and reconnaissance, small arms and other weapons. Projects, that ten years ago seemed unreal today are implemented.
--New production and education
For the first time in years of Ukraine’s independence, UKROBORONPROM began to develop production facilities. Over the past 4 years, new technological lines, workshops have been opened, perhaps for the first time in Ukraine’s independence, the country’s defense complex has started to build muscle.
Moreover, this year UKROBORONPROM launched a new enterprise – State Enterprise "Electric Systems", which will employ 2.5 thousand specialists and fill the budget of Ukraine with millions of tax deductions.
At the same time, UKROBORONPROM and leading Ukrainian universities began expanding cooperation: students and teachers joined the process of development and production of armament. More than 9 thousand students had their practical training at UOP enterprises, of which more than 750 were employed.
All these changes are the result of 80 thousandth UOP team – working at over 130 enterprises of the State Concern – implemented in the most terrible time of Ukraine’s struggle against the aggressor country for its territorial integrity and its existence in general.
UOP Supervisory Board approved the report of Roman Romanov, making a point that the enormous work was carried out by the ex-head of the State Concern and his team.
"The changes are striking, we are grateful to Roman Romanov and his team for their work," said Mykhaylo Zhurovs’kyy, Chairman of UOP Supervisory Board. In turn, Anthony Tether also noted the tremendous UKROBORONPROM progress in 3.5 years.