“Ukroboronprom” ceases to exist: the Cabinet of Ministers made a decision

21.03.2023 – Translated from Ukrainian via Google and OFP

The Cabinet of Ministers of Ukraine has decided to establish JSC “Ukrainian Defense Industry” (Українську оборонну промисловість or UOP) . It will become the legal successor of the reorganized Ukroboronprom. The renovated enterprise will be 100% owned by the state.

This was stated by Prime Minister of Ukraine Denys Shmyhal. According to him, the reform, which was being prepared even before the full-scale invasion of the Russian Federation, will help Ukraine build one of the most powerful military-industrial complexes in the world.

“The government is beginning to turn the state concern Ukroboronprom into a joint-stock company Ukrainian Defense Industry. The corresponding decision was made at today’s (March 21 – Ed.) meeting,” the prime minister said.

According to him, the new enterprise will, in particular, attract investments in the production of weapons, equipment and ammunition. A change in the management model will enhance interaction with Ukraine’s foreign partners.

Back in 2022, OBOZREVATEL received a draft resolution on the creation of a UOP. It noted that the replacement of Ukroboronprom with a successor would be an important step towards:

  • introduction of a corporate governance model for business entities of the Organization for Economic Cooperation and Development;
  • formation of prerequisites for increasing the competitiveness of state enterprises of the defense industry;
  • creating conditions for attracting investments in the defense industry.

The updated resolution on the creation of the UOP at the time of publication of the material was not yet available on the website of the Cabinet of Ministers.

Ukroboronprom is a concern uniting Ukrainian defense industry enterprises. It includes organizations and companies in nine industries, including scientific institutions and industrial enterprises. The Cabinet of Ministers performs the functions of managing the concern and supervising its activities.

As OBOZREVATEL reported, the state concern Ukroboronprom announced on March 14 that, in cooperation with the country of the North Atlantic Alliance, it began to produce 125-mm tank shells for the T-64, T-72, and T-80 tanks. The production of mortar and artillery shells takes place abroad.

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  1. I hope that the new entity will be more effective and efficient in the designing and production of weapons, weapon systems and ammunition. And, less corrupt, now that certain individuals have been removed.

  2. I understand the necessity of getting weapons and equipment prepared as quickly as possible for the AFU, but I’m concerned that this calls back to the soviet days. Wasn’t “state-owned industry” the essence of russia’s communism? Maybe I’m missing something because I’m American, but as I understand it, innovation is bred by the willingness to try multiple ideas towards one or more goals, and nurturing these ideas is knowing that thinking out these ideas will bring personal rewards to those who come up with them.

    Under the soviets, it was always the government’s ideas or methods, and no other was allowed. Independent thinking was strongly discouraged. Corruption was even more rampant under the USSR, than what I’ve seen so far of post-soviet events. I think also because state-control encouraged people to abandon religious morality against bad behavior because the state demanded overriding any potential rivals.

    • I share your thoughts about this, sir Mac, but I have hope that the current Ukraine is far removed from using soviet methodologies. They do, after all, want to join NATO and the EU. This should always be left in focus. Not to mention the utmost need to remain efficient with Moroder next door.

  3. I think it is indeed a very American idea to think that state owned companies are less efficient or innovative as companies on the free market.

    It all depends on management. You can mismanage both types of companies or manage them well.

    The Nordic countries have a lot of large state owned companies and they are very profitable, such as Vattenfal, an energy company that operates all over the world.

    They can even be more innovative, as they often have a long term strategy and a higher R&D budget as they think further ahead then just the next shareholders meeting.

    The reason these defense companies are not private is simple: they cannot survive on their own, meaning all production capacity will be lost if the state stops supporting them or no spare parts can be produced for the army.

    Take the Kharkiv tank factory as an example: in some years they are getting big orders, in other years they get no orders and are loss making.

    As a private company they would go bankrupt, but that would also mean Ukraine cannot get new parts for existing tanks as they are only made there.

    I don’t believe the assumption that state run companies are less efficient than private companies are accurate: you have efficient and inefficient state owned companies and the same goes for private companies.

    I have read a report in the Netherlands about the company managing the Dutch railway infrastructure. Some 10 years ago the government made them use contractors / private companies to maintain the railways instead of doing it themselves, as the government thought they were inefficient.

    This was effective for some years: indeed it was cheaper and faster. However, it only seemed so, as the report said that since private companies repair and overhaul train tracks, they only last 3-5 years while the government repaired tracks lasted 15 years.

    • That last point seems like a matter of inferior quality for the rail segments used. The steel producer I work for specializes in manganese alloy steel, but also produces something called “Fomag” rails. The shipping supervisor says it’s a somewhat different alloy than the manganese-steel, fomag lasts longer than typical steel rail by around five or ten years, depending on the quality. This also makes it more expensive of course, but for the endurance, it’s somewhat more cost effective, as it requires replacing far less frequently. I don’t know if fomag is available in that region though, perhaps the shipping costs aren’t too high for Holland.

    • I fully agree. A conglomerate can be mismanaged by government or by private entities, or managed very well by either one.
      Vattenfall, by the way, is German.

      • Correction, it’s Swedish. But, there is a Vattenfall GmbH, headquartered in Berlin, so I thought it’s German.

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