G7 Countries Welcome Ukrainian Parliament Vote to Reform State-owned Defense Enterprises

G7 countries today welcomed a Ukrainian Parliament vote on Tuesday to reform state-owned defense enterprises grouped under “Ukroboronprom.”

The reform move is driven by Ukraine’s desire to join NATO. The U.S. has insisted on defense industry reforms as one of the measures that would facilitate Ukraine’s entry into NATO and into its arms supply chain.

"Properly implemented, these reforms will help increase the global competitiveness of Ukraine's defense industry and further ensure the country's security," the G7 ambassadors (to Ukraine) said on Twitter.

On July 13, the ‘Verkhovna Rada’ of Ukraine voted on a bill for the transformation of state-owned defense companies into individual defense-industrial companies - accountable to the state, open to investors and projected for partners, a press statement by Ukroboronprom said.

In general, the vertically integrated management model will strengthen Ukraine's defense capabilities by structurally resetting 118 separate enterprises of Ukroboronprom, 21 of which are located in the territories temporarily occupied by Russia, the statement said.

As per the bill, state-owned defense enterprises will be converted  into companies grouped into research and production associations on a sectoral basis: armored vehicles, radar systems, high-precision weapons and ammunition, marine systems, aircraft repairs and special exporters.

The Ukroboronprom Concern itself will also be transformed into a joint-stock company, 100% of which will be owned by the state, and will act as a corporate center (holding company), and thus take the lead in all organizational transformations of participating companies, and subsequently in attracting investment.

The G7 ambassadors welcome the adoption of the bill, which provides a solid basis for the corporatization of Ukroboronprom and the improvement of corporate governance standards in the sector in line with the OECD guidelines.

The newly established companies will have the opportunity to attract foreing direct  investment in order to manufacture modern models of weapons and military equipment, primarily for the needs of the Armed Forces of Ukraine.

As part of the reform plan, surplus and non-core property will be sold and its proceeds directed to the needs of transformed enterprises: the modernization of production, financing of innovation, improving social protection for workers and more. These funds will not be able to be withdrawn from the industry.