In Ukraine, along with the abolition of the Economic Code, an additional 7% fine for arms suppliers was also removed. As the authors of such changes note, the current legislation provided for three fines for enterprises of the military-industrial complex (DIC) for delay. As a result, the company could receive a fine, the amount of which is several times higher than the possible profit.

– What is the current state of the Ukrainian defense industry and what mistakes in government policy in this area could you name – We as a state want us to have a strong defense-industrial complex. Because we understand that this is our only real guarantee of safety.. Only with Ukrainian weapons and Ukrainian ammunition can we beat the occupiers where and when we want, and not where and when our Western partners allow us.

And although we need a powerful defense-industrial complex, government arms purchasers actually discriminate against Ukrainian arms manufacturers. Now I’ll explain in more detail. Firstly, manufacturers operate in a very closed, I would even say, monopoly market. They can only sell to the government. Although the Ukrainian defense industry can produce three times more than what the state can now buy.

That is, we tell them: you can only sell to the state, you cannot export and you cannot make money from exports..

Secondly, in the state you can have very small, limited profits. On average this is 5–7% per contract. And with all these restrictions, there is simply draconian regulation.

For example, for one type of violation three types of punishment are imposed at once. These are duplicate fines. And this is even if the manufacturer delayed the shipment of goods for objective reasons: missiles regularly arrive at defense factories, they depend on foreign components, including from China, there were problems with reservations and engineers were mobilized, blackouts, etc.. There are many objective factors that may cause a slight delay.

And government customers, even if there is a slight violation of deadlines and it happened for objective reasons, impose three types of fines at once. And these fines in total for the first month alone are twice as much as the entire profit for the year the company can have. This is a huge problem.

– We are talking about the total amount of fines of 13%. - Yes. 13%, despite the fact that the profit is 5-7%. What we offered? And who are “we” anyway We are a working group on investment issues and development of the military-industrial complex.

Over the past six months we have done a tremendous amount of work. Conducted an in-depth study of the problems of the Ukrainian military-industrial complex. We have united all defense associations of Ukraine. Together we made a road map: what needs to be done in legislation and regulations in order for the Ukrainian defense industry to develop and scale.

One of the points is the revision of fines. That is, it must be reasonable both from the point of view of jurisprudence and from the point of view of public administration. One punishment - one fine. Therefore, we have chosen the most effective late fee. The most effective fine is a fine. Because it is imposed for each day of delay. This is a progressive fine and really encourages fulfillment of contracts, plus it is lifting. And the second and third types of fines are to be removed.

We have already canceled the second type of fine, this is 7%, which was provided for by the Economic Code. And they began to work to abolish the third fine - this is the so-called charge for the use of funds, regulated by the Civil Code.

If only a penalty remains, this will be a balance of interests of both the military-industrial complex and government customers. Government customers will still have leverage over the execution of contracts, and weapons manufacturers will have adequate conditions.

– Have you studied what system of penalties for violating deadlines works in NATO countries – The fact is that in NATO countries there are no restrictions on the private sector. In Ukraine, we have driven producers into a dead end and are saying: “You develop there, but we will choke you.”. But please develop yourself"

There can be fines in contracts in NATO countries, and we should have them. But they must be reasonable. And fines cannot be twice as large as profits.

In addition, loans and various risks are included in the price abroad.. We require that manufacturers show cost calculations, and do not allow R\u0026D costs to be included there.. Research and development – \u200b\u200bresearch and development work. – Ed. ), no risks, nothing.

– The decision to reduce fines is actively criticized by representatives of civil society. There is an opinion that has a right to exist: are you in this way helping companies that do not fulfill their obligations to the Ministry of Defense – Those who do not want to fulfill contracts will not fulfill them. Even if the fines are 5000%. Therefore, first of all, it is necessary to make adequate conditions for those who want to fulfill contracts. If those who want to fulfill contracts are fined twice as much as their profits, they are created conditions in which it is extremely difficult to work. Some manufacturers simply cannot afford to pay extra to the state to supply weapons to the state.

We need to bring back common sense to government regulation.. The Ukrainian military-industrial complex operates under a state monopoly. And when a monopoly arises in a state, the state must intervene to balance the interests of the two parties. It is in this case that interests are not balanced. The state has the right to impose conditions, and these conditions are inadequate, and the contractor has no opportunity to say: “Let's renegotiate the contract.”.

And he is not allowed to choose another sales market, because export is prohibited. And profits are limited.

The defense industry is developing not thanks to, but in spite of government regulation. Imagine if government regulation is favorable. We can become independent and self-sufficient in supplying ourselves with weapons and ammunition.

Another example: we have had an effective and really very useful presidential program of soft loans “5-7-9” for four years now.. And it was available to all sectors of the economy except the defense industry.

Only a month ago the first soft loan was received by a defense enterprise. Because, again, our working group, the Ministry of Strategic Industry, and some other colleagues in the third year of the war said that it was necessary to introduce preferential loans for weapons manufacturers. We are belatedly reviewing government regulation and public policy.

– If you remove the profit limit, won’t this lead to abuse and the emergence of new schemes, where the majority of the cost of weapons will be profit – About a year ago, an experiment was introduced, when for a narrow group of products, namely drones, they allowed to earn not 5-7%, but 25%. And we actually had a blossoming of this industry. A huge number of manufacturers have appeared, a huge number of R\u0026D centers, and they really come up with absolutely innovative solutions not only within Ukraine, but also for the whole world.. These include sea drones, land drones, dragon drones, and drones that can actually replace long-range missiles.

This experiment was successful. He showed that if we give weapons manufacturers the opportunity to earn a little more, at least 25%, they will have a large amount that they can invest in innovation, modernization and scaling of production.

We have a discussion with the Ministry of Finance and we understand its position regarding the limited budget. Therefore, we do not force this process by limiting profitability.

But export is a different matter.. Not only can we export weapons, but we must export them. And I'll explain why. The Ukrainian defense industry can produce three times more products than the state can buy.

In addition, the defense industry is very diverse; it produces a huge number of items. In some places these are finished goods, in others they are components. And somewhere these are components that are part of the final product, which is assembled abroad. In Ukraine, this spare part cannot even be used, but it cannot be freely exported. That is, even what the state does not buy and cannot be used in Ukraine is prohibited from exporting.

As a result, now part of the production is loaded somewhere at 20%, somewhere at 40%, somewhere at 60%, and they can be loaded completely. Give people jobs, give more taxes and contributions to the budget. And most importantly, provide the opportunity to receive foreign exchange earnings. The stability of the hryvnia depends on this.

– Even a very patriotic business still primarily pursues the goal of making money. And if defense industry enterprises are allowed to sell where there are no profit limits and higher prices, won’t this lead to a shortage within the country – We are now talking about permitted exports – this is a very regulated area. Manufacturers must obtain permits and go through at least four sieves. The first is the Ministry of Defense and other arms customers. They must say whether such a product is needed in the country, whether there is enough of it, whether they plan to buy it this year, in what quantity. And only if Ukraine does not need so much of this product can it be exported. The second sieve is diplomats, this is the Ministry of Foreign Affairs, which must give its resolution. Next, intelligence must give permission, etc..

A lot of resolutions and permits need to be obtained in order to be able to export even with permitted exports. Therefore, any abuse is completely excluded, and even if it appears, it is very easy to stop it.

– Is our defense industry competitive abroad There are countries that are interested in our weapons? – We are already seeing how Ukrainian companies are moving abroad, where no one restricts them from exporting. And now some Ukrainian companies produce their goods in Europe, these are mainly Poland, the Czech Republic, and Slovakia. And the profit ends up in these countries, and does not go to Ukraine. And jobs are created for Poles, Czechs and Slovaks, and not for Ukrainians. And this is a very negative trend. I want to say more: the defense association " The results showed that 85% of arms manufacturers in Ukraine have either already relocated abroad or are actively thinking about it. And this is a very dangerous wake-up call that should force the state to urgently change something..

Our manufacturers are very competitive. The first competitive advantage is price. Almost any Ukrainian weapon is 1.5-2 times cheaper than foreign analogues. For example, Ukrainian armored vehicles are two and a half times cheaper than German ones and at least 25% cheaper than Canadian ones.

Just recently there was a situation, according to the German newspaper Bild: Germany planned to purchase and supply us with 400 BATT UMG vehicles - these are German armored vehicles. The price of one armored car with service was 787 thousand euros. But even at such a high price, the German concern did not have time to produce them in the required time and in the required quantity - 400 cars.

Therefore, a Canadian company that also produces armored vehicles, Roshel Senator, tried to claim the money allocated by the Germans.. Their price is 375 thousand euros. And at the same time, for example, Ukrainian armored vehicles such as “Kozak” or “Varta” cost only 300 thousand euros apiece. That is, a quarter cheaper than Canadian ones and 2.5 times cheaper than German ones..

And this is not to mention the fact that in the case of purchasing Ukrainian armored vehicles, this is not only about saving on the purchase itself. This also means that taxes will be paid in Ukraine, people’s salaries will be paid, jobs will be created - this is a serious contribution to the Ukrainian economy.

Our second competitive advantage is efficiency and innovation.. Lack of resources and public mobilization have led to the fact that we have learned to achieve our goals with minimal resources. At first there were ordinary FPVs, which were invented by Ukrainians. Then we had to invent drones that were resistant to electronic warfare. Now there are drones using fiber optics and so on. We constantly innovate. And we produce them very quickly, because there is a lot of cooperation and constant communication between manufacturers and inventors with parts on the front line. Fighters test and provide quick feedback to manufacturers.

I believe that the Ukrainian military-industrial complex can take first place in exports. Today, grain is in first place. Here is confirmation of Ukraine’s reputation as a raw materials appendage in the world. In the future, taking into account the development of innovation, the development of the military-industrial complex, the defense industry, if we allow exports, may take first place. And this will be a great achievement for our country. We need to produce value added products. This is necessary so that we can create jobs with high wages and social security. And this will also motivate Ukrainians abroad to return home..