Introduction to the Defense Industry of Public Administration: While out of the Field of View of the Leadership of Ukraine

At the beginning of August, we published some results of the analysis of the state of affairs in the sphere of reforming the national military-industrial complex (MIC) and recommendations for the introduction of proper support for the formation and implementation of the state military-industrial policy (SMIP), as well as management of the enterprises, institutions and organizations of industry and science that are part of this complex (hereinafter – subjects of MIC) [1].

However, in the three months since then, a number of important events have taken place that encourage further discussion around these recommendations.

First of all, while we, as well as the ex-Secretary of the National Investment Council and ex-member of the Supervisory Board of the State Concern (GC) "Ukroboronprom" D. G. Arakhamiya and a member of the Board of the Ukrainian Institute of Security research V. Badrak considered it appropriate to recommend to the leadership of Ukraine to form a new profile Ministry (of Industrial and Military- Industrial Policy) to perform the following main tasks: ensuring the formation and implementation of SMIP; determining priority areas for the development of the defense industry; ensuring normative-legal regulation in this area; analyzing the state and trends in the development of the Defense industry, State management of its subjects; developing and organizing the implementation of State programs for the development of the Defense industry, etc. [1], [2].

As a last resort, it was recommended to form an Agency, for example, of the Defense Industry. However, his activities would be directed and coordinated directly by the Cabinet of Ministers of Ukraine by analogy (at the time) with the State Space Agency of Ukraine or the Cabinet would implement it through a specific Minister.

As of today, taking into account a number of the following events, the recommendation on education for managing the defense industry entities of the new profile Ministry (of Industrial or Military-Industrial Policy) is no longer relevant.

After all, on August 29, the Verkhovna Rada of Ukraine approved a new, significantly reduced Cabinet of Ministers of Ukraine. Compared to the previous Government, there are only 2 (not 6) Deputy Prime Ministers and 14 (not 19) Ministers who Head the Ministries. In addition, this Cabinet, in particular, introduced the post of Minister of Economic Development, Trade and Agriculture of Ukraine instead of the eliminated positions of Minister of Economic Development and Trade of Ukraine and Minister of Agrarian Policy and Food of Ukraine.

On August 30 of this year, the President of Ukraine appointed A. Abromavicius as the General Director of Ukroboronprom [3], who thus received a carte Blanche from the Head of State to implement the plans he had previously published in the media to reform this main subject of the Defense industry. This is a very important issue that should be discussed separately and carefully.

The Cabinet of Ministers of Ukraine (CMU) on September 2 of this year, in order to optimize the system of Central Executive Authorities, among other things, renamed the Ministry of Economic Development and Trade on the Ministry of Economic Development, Trade and Agriculture of Ukraine (Ministry of Economy) [4], to which it joined, after reorganization, the former Ministry of Agrarian Policy and Food of Ukraine. Based on this decision of the Government, a number of relevant changes were made to the regulations on the Ministry of Economy. But at the same time, its powers and main tasks in the field of Defense remained in the previous versions [5].

Recall that according to this provision, the Ministry of Economy, in particular:

 is the main body in the system of Central Executive Authorities that ensures forming and implements military-industrial policy, the State policy in the sphere of technical regulation, standardization, metrology and metrological activity, State policy in the sphere of state ownership objects management, including corporate rights of the state, public-private partnerships, intellectual property, state and public procurement and State order on training of specialists, scientific, scientific-pedagogical and personnel, advanced training and retraining;  ensures the formation and implementation of the state export control policy;  it is the authorized body for coordinating the implementation of the state defense order.  prepares and summarizes proposals for the formation and implementation of state policy in the field of functioning and development of the Defense industry, the development of scientific and technical potential in the field of weapons and military equipment, improving the mechanism of state regulation in this area;  determines together with other bodies of the security sector and defense priorities for the development of the defense industry, provides legal regulation in this sphere, analyzes the status and trends of development of the Defense industry, develops and organizes the implementation of State programs of the Defense industry development;  ensures coordination of activities carried out by Central and Local Executive Authorities in the field of functioning and development of the Defense industry;  performs a review of the Defense industry, develops a strategy for the development of the Defense industry of Ukraine;  forms and submits a draft of the State Defense order to the Cabinet of Ministers, coordinates activities for the implementation of the State Defense order;  together with the Ministry of Defense: organizes and coordinates the activities of the Central Executive Authorities in the field of military-technical cooperation; submits to the Cabinet of Ministers the draft laws, international agreements of Ukraine, and other normative legal acts in the field of military-technical cooperation;  ensures the establishment of state control over the implementation of activities related to international transfers of military and dual-use goods.

In such circumstances, it is unrealistic to expect that the Government will go to the formation of an additional narrow-profile Ministry for Industrial or Military-Industrial Policy.

In this context, the former Secretary of the National Security and Defense Council of Ukraine (NSDC) O. A. Danyluk said on September 7 of this year that the "Shareholder" of the Ukroboronprom group will be the Ministry of Defense of Ukraine [6]:

"Now (its) shareholder is the Cabinet of Ministers, my position is that the Cabinet cannot be a shareholder, some one of the Ministries should be a shareholder. The Ministry of Defense is the best option that we have discussed. This option also provides an appropriate link with the President (emphasized by us)," - Danylyuk said, adding that this decision has allegedly already been approved. "The most correct model is to turn it into a holding company, where a well-thought-out management system is the Supervisory Board, clear procedures — how the management is appointed, how its work is evaluated, audit, and procurement. In other words, all this should be built according to clear rules, as in a normal business. This is the kind of transformation we want to do now."

On September 13 of this year, The General Director of Ukroboronprom group A. Abromavichus opposed this proposal [7]: "now the shareholder, as it were, of Ukroboronprom group is the Ministry of Economic Development, Trade and Agriculture of Ukraine. And the view that it may be the Ministry of Defense is not a final decision. In my opinion, the Ministry of Defense has a conflict of interest, and the Ministry of Defense also has other defense companies that are in a very bad state. Therefore, the Ministry of Defense, unfortunately, does not have a quality approach to managing the State-owned enterprises. Therefore, I would like to see Ukroboronprom remain (we stressed) under the Ministry of Economic Development, Trade and Agriculture of Ukraine."

It should be recalled that even before that, in early July of this year, the former Secretary of the National Security Council of Ukraine O. A. Danylyuk made proposals on implementing reforms in the defense industry that were incorrect in legal and politically inappropriate. In particular, he announced the creation of a coordination center for the implementation of Defense Industry reforms, as a working body of the National Security Council, whose priority task will be to reform the SE Ukroboronprom.

According to him, this Center should implement"... a quick and comprehensive analysis of the current situation, choose the optimal model for reforming the Defense sector, in particular, in terms of completely eliminating the possibility of committing corruption and the participation of politicians in this area, and effectively coordinate (we emphasized) the process of reforms implementing." Then we criticized this proposal.

Because, firstly, such a Center, according to the Constitution of Ukraine, will only have the status of an Consultant Advisory or other subsidiary body. Therefore, it will not be able to coordinate the implementation of reforms in the Defense sector, but only to prepare proposals for the National Security Council on measures for such coordination.

Secondly, there is still an Interdepartmental Commission on the Defense Industry as a similar working body of the National Security Council [8]. And to create another such body would be nonsense. It has not been working for more than six months. And the Chairman of this Commission, former Deputy Minister of Economy Yu. P. Brovchenko, was recently accused of treason and is under investigation.

Thirdly, after a number of other well-known scandals in the Defense sector, in particular associated with the actions of the former first Deputy Secretary of the NSDC of Ukraine O. V.Gladkovskyi, we drew attention to the inexpediency of continuing the work established for the first years of independence of the State in the presidential structure (NSDC) in 2015, referred to the Interdepartmental Commission, given the fact that under the legislation the provision of activities in this sphere is the prerogative of the Executive branch [1].

It is known that September 30 c. y. The President of Ukraine dismissed O.O. Danylyuk from the position of Secretary of the National Security Council. The Proposed coordination center for the implementation of Defense Industry reforms under the National Security Council was not created. We hope that in the near future the Interdepartmental Commission on Defense issues under the National Security Council will also be liquidated.

In addition, it is worth supporting the above-mentioned proposal of the General Director of the Ukroboronprom group A. Abromavichus regarding"... to ensure that Ukroboronprom remains (as we emphasized) under the Ministry of Economic Development, Trade and Agriculture, " taking into account the following factors.

Both in the past and now, the management functions of the Ukroboronprom group and control over its activities are performed by the Cabinet of Ministers of Ukraine [9]. That is, legally, this Concern is not under the Ministry of Economic Development, Trade and Agriculture, and therefore it can not remain under this Ministry in the future.

However, for the implementation of this proposal, A. Abromavichus could be transferred in the prescribed manner to the management of The Ministry of Economy of SE Ukroboronprom. However, there are certain doubts about the desire and capabilities of the Ministry of Economy to implement such a step and, thus, will be responsible for carrying out specific reforms in the Defense sector. Their reasons are determined by the following.

On October 4 c.y., the Verkhovna Rada of Ukraine approved the program of activity of the Cabinet of Ministers of Ukraine 2019 [10]. Unfortunately, for the first time since the independence of our State, especially in the conditions of the war in the Donbas, the sections related to the activities of the Ministry of Economy do not contain any priority goal or even a task regarding its activities in the field of Defense industry, mobilization training of the State, and the State defense order, which are among the main tasks of this Central Executive Authority.

It is not known whether this happened accidentally or deliberately. But this can be seen as a self- removal of the Ministry of Economy and the Government from responsibility for carrying out reforms in the Defense industry and shifting it to the President of Ukraine and the management of SE Ukroboronprom.

By the way, a completely similar situation exists in the CMU Program and in the space and aviation industries, in which the Government has also not identified any priority goals or even tasks.

It is not for nothing that the President of Ukraine V. O. Zelensky, following a visit to a number of Kharkiv tank-building, aviation and other defense enterprises on November 6 c.y., had to instruct him to prepare a meeting with the Government to solve acute organizational, managerial, financial and other problems in the Defense industry.

The Cabinet of Ministers of Ukraine, after the previously mentioned optimization of the system of Central Executive Authorities in September, revised the system of Central Executive Authorities on October 20 c.y., and approved a new scheme for directing and coordinating the activities of Central Executive Authorities by the Government through its respective members [11].

It is interesting in this case that the changes provided for in this scheme also affected the State Space Agency of Ukraine (SSA). If in the past its activities were directed and coordinated directly by the Cabinet of Ministers of Ukraine, now it will be carried out by the Cabinet of Ministers of Ukraine through the Minister of Economic Development, Trade and Agriculture of Ukraine.

Related necessary changes have not yet been made to the regulations on the Ministry of Economy and SSA. At the same time, it can be predicted that now the Ministry of Economy, in addition to perform other main tasks, will also ensure the formation and implementation of state policy in the field of space activities. In turn, the SSA, instead of ensuring the formation and implementation of state policy in the field of space activities (as it was in the past), will implement this policy. In addition, it should be noted that in the above-mentioned new scheme, the Cabinet of Ministers of Ukraine directs and coordinates the activities of only 3 (out of 13 existing State agencies) Specific National Agencies: the National Agency for the prevention of corruption, the National Agency of Ukraine for the identification, search and management of assets obtained from corruption and other crimes, and the National Agency of Public Service of Ukraine. The activities of the other 10 State agencies, including the SSA, are directed and coordinated through the relevant members of the Government who is headed by the relevant Ministries.

Taking this into account the recommendation to create a State Agency (like the former SSA) for managing the defense industry entities, whose activities were directed and coordinated directly by the Cabinet of Ministers of Ukraine, is also no longer relevant.

The next option may be to create a State Agency, for example, the defense industry, whose activities were directed and coordinated by the Cabinet of Ministers of Ukraine through a member of the Government - the Minister of Economic Development, Trade and Agriculture of Ukraine. This is a possible, but, in our opinion, not entirely rational option from the point of view of the limited scope of activity of such an Agency and the list of its main tasks, as well as organizational, financial, human resources and other aspects of the formation of this Central Executive Authority.

It would be more appropriate, in our opinion, first of all, to form on the basis of the State Space Agency of Ukraine, for example, the State Agency for Defense, Aviation and Space Industry of Ukraine, whose activities were directed and coordinated by the Cabinet of Ministers of Ukraine through a member of the Government - the Minister of Economic Development, Trade and Agriculture of Ukraine.

Secondly, it is also recommended in the prescribed manner: transfer to the management of this Agency SE Ukroboronprom and other subjects of the Defense industry that are under the control of the Ministry of Internal Affairs and other Ministries and Departments of Ukraine, as well as those subjects that are under the management of SSA; state the content of part two of paragraph 1 of the General Provisions of the Charter of SE Ukroboronprom in the following wording :" the functions of managing the Concern and monitoring its activities are performed by the State Agency of Defense, Aviation and Space Industry of Ukraine (hereinafter - the Authorized Management Body)".

At the same time, the Ministry of Economy has, in addition to performing other tasks, to ensure the formation and implementation of the State Military-Industrial Policy and Policy in the fields of aviation and space activities. It will also give the specified Agency all its tasks for implementing the mentioned policies.

In turn, the State Agency of Defense, Aviation and Space Industry will, in particular, carry out: the implementation of military-industrial policy and policy in the fields of aviation and space activities; State management of SE Ukroboronprom, other state-owned objects in the defense industry, aviation and space industry; solve the issue of corporatization, privatization, liquidation of relevant enterprises, institutions and organizations, and perform other tasks and functions.

Thanks to these steps the restructuring and development of the institutional capacity of the defense industry can be performed under the existing strategy of defense industry of Ukraine development for the period up to 2028 [10], in particular by introducing a system of state control in this sphere by ensuring integrity of policy management objects of the defense industry from the public policy development of this Complex.

In addition, this may contribute to changes in the attitude of the Ministry of Economy and the new Government to solving complex problems in the defense, aviation and space industries, as well as prevent Ukraine from losing its status as an Aviation and Space State.

The special relevance of creating such a wide-profile Agency is also due to the fact that two trends are observed in Ukraine: an increase in the number of private industrial enterprises, institutions and organizations that develop and produce military and dual-use goods, including aviation and space technology, and the latest relevant technologies; and a reduction in the number of similar entities in the public sector. This requires periodic adjustments to the state military-industrial policy and policy in the areas of aviation and space activities, measures to implement these policies and improve the effectiveness of public-private partnership in these areas, which should be done by the proposed Agency.

It is also necessary to include this Agency in the established order in the security and defense sector of Ukraine, as defined in article 12 of the Law of Ukraine "On National Security of Ukraine".

We are aware that the proposed recommendations are debatable. Nevertheless, we believe that they can help to intensify the consideration and resolution of problematic issues related to the implementation of an effective system of public administration in the sphere of the military-industrial complex of Ukraine by the relevant State Bodies.

Author: Vadym Tyutyunnyk, USSI Adviser, Advisor of CACDS Advisory Board, a member of the Secretariat/Office of the NSDC of Ukraine in 1992-2010