On 14 April, Ukrainska Pravda has published an investigative journalist’s report on criminal schemes employed by Ukroboronprom State Concern, involving multimillion procurements of fictitious works and tax evasion. The author of report believes that this situation became possible due to the lack of public oversight over the state concern’s enterprises and complete concentration of control over Ukroboronprom in the hands of the Ukrainian president and his placeman, the concern’s general director.
Therefore, the Independent Defense Anti-Corruption Committee (NAKO) reminds that Ukroboronprom still doesn’t have the Supervisory Board, an independent body responsible for controlling the group of the concern’s enterprises along with the general director. This is one of the main reasons for rampant corruption at Ukroboronprom.
“Ukroboronprom’s Supervisory Board hasn’t been created yet due to the lack of political will in the government. The Cabinet of Ministers, in the person of the Prime Minister and the First Vice Prime Minister – Minister of Economy, who oversee the country’s defense industry, failed to perform their direct duty. Therefore, all Ukroboronprom’s affairs are handled “manually” by the president’s people’, the NAKO Secretary Viktor Plakhuta believes.
Moreover, the Supervisory Board formation principles remain nontransparent, for the board’s three members are the president’s appointees, and the other two are designated by the Cabinet of Ministers. Therefore, the board has no room for independent members, who are supposed to constitute the majority.
The concern’s procurements are, for the most part, nontransparent, too. An analysis of the electronic procurement system ProZorro has revealed that only 22 of Ukroboronprom’s 128 enterprises are registered in this system, and of that number, only 15 enterprises have published reports on their procurement contracts.
To reduce corruption inside Ukroboronprom and eradicate the criminal schemes reported in the Ukrainska Pravda publication, NAKO demands the Government to take the following steps:
- Completing formation of the concern’s Supervisory Board, in which the majority of members must be independent. Organizing an open public discussion of candidates for the Supervisory Board.
- Developing and publishing a clear plan of reforming the concern, including responsible officials and implementation timeframes.
- Developing and approving the Strategy of Development of Ukraine’s Military-Industrial Complex as stipulated in the Concept of Development of Ukraine’s Security and Defense Sector, a document approved by the Decree 92/2016 of the President of Ukraine of 14 March This Strategy must serve as the guideline for reform and development of the country’s defense industry, and also, it is required for approval of a medium-term strategic document titled the National Program for Reform and Development of the Military-Industrial Complex for the period until 2021.
- It is important to create a government agency responsible for formation and implementation of the national military-industrial policy. It may be a body with special powers to oversee and coordinate defense industry, subordinated to the First Vice Prime Minister – Minister of Economy. This step could also boost effectiveness of the Government Committee for Economic, Financial and Legal Policy, Development of the Fuel and Energy Complex, Infrastructure, Defense and Law Enforcement, which oversees the military-industrial complex.
- Defense procurements must be open and transparent. Therefore, all Ukroboronprom’s enterprises must use ProZorro electronic procurement system and publish reports on their procurement contracts.
- The level of secrecy concerning procurement contracts and financing in security and defense sector must be lowered. To that end, the principles of secrecy in defense sector must be revised, and the Law of Ukraine On State Secrets and the Order 440 of the Security Service of Ukraine of 08.2005 on the approval of the Code of Information Classified as State Secrets must be amended accordingly.
These steps would help increase effectiveness and transparency of Ukroboronprom’s defense enterprises and enhance the nation’s defense capabilities. The six steps mentioned above must be taken immediately, because today, fighting in Eastern Ukraine shows no signs of ceasing, and Ukraine must defend itself against Russian aggression.