Without the adoption of the "Defence City" bills, the Ukrainian defense industry will remain uncompetitive – experts

If the draft laws forming the framework of “Defence City” are not adopted in time, the Ukrainian defense-industrial complex will not be able to fully develop, compete with Western manufacturers, and attract investments. This was stated by experts during a press conference on the topic: “Will ‘Defence City’ be able to protect Ukrainian defense industry enterprises?”, writes UNN.

DetailsAs Ihor Zhdanov, head of the “Information Defense” project of the “Open Politics” Foundation, noted, these are draft laws that provide for tax, customs, budget changes, as well as changes to the Criminal Code. In his opinion, the adoption of these acts has long been overdue.

In wartime conditions, we have practically created a normal regime for our defense industry enterprises, although it is clear that they operate in a completely different mode. Our ability to survive depends on them (…) These draft laws provide for the exemption of defense industry enterprises from income tax in case of reinvestment, from land and environmental taxes, simplification of customs procedures, as well as the creation of a special register of defense enterprises.

The expert also emphasized that similar mechanisms for supporting the defense industry have long been in effect in the USA, South Korea, and Israel. In addition, participants of Diia.City enjoy preferences, and enterprises that ensure Ukraine’s defense capability are certainly no less important.

This is not an exceptional Ukrainian path – this is the same path that developed countries took to support their own defense industry. It will allow us not only to strengthen the defense industry, but also to increase IT capabilities, form a modern engineering school, create Research and Development centers jointly with leading Western companies, and develop joint ventures. This is critically important for the relocation and modernization of our production facilities.

In turn, military-political observer of the “Information Resistance” group Oleksandr Kovalenko drew attention to the economic disadvantage for Ukrainian manufacturers due to the lack of state support.

When we can already produce 155-caliber ammunition, the state often buys it, for example, from the Czech Republic, because it is cheaper there – due to mass production. Without state support, our price will always be higher, and this is not about corruption, but the logic of economics.

Kovalenko also believes that the adoption of the draft laws will allow enterprises to reduce production costs, increase production, and become attractive to investors.

At the same time, military analyst and veteran of the Russian-Ukrainian war Oleksiy Hetman added that without systemic support, the state loses the opportunity to create a full-fledged chain of weapons production, moreover, the development of our defense-industrial complex is not only an economy, but also an important political issue.

According to the military-political leadership, today we already independently provide up to 50% of the needs of the Armed Forces of Ukraine in weapons. If we continue to build up capabilities, we will be able to change the tone of negotiations with international partners. Because it often seems that we only thank and ask for help – although it was these countries, including the United States, that once undertook obligations regarding our security.

According to the expert, the defense industry can become the locomotive of the economy after the war, but for this, bureaucratic barriers must be removed and those “who try to profit from the war” must be removed.

The participants of the press conference unanimously emphasized the need for the earliest possible adoption of the “Defence City” draft laws, stressing that this is the first and key step, which will further require refinement and development within the framework of a comprehensive policy of supporting the defense industry.

RecallIndustry experts have repeatedly drawn attention to the fact that in the current version of the draft laws on Defence City, aviation industry enterprises may find themselves outside the scope of the envisaged benefits and special regime. The reason for this is a strict selection criterion, according to which at least 90% of the enterprise’s products must be for defense purposes. At the same time, most Ukrainian aviation companies, including such as “Antonov” and “Motor Sich”, operate in a mixed format, producing both defense and civilian products, as well as products for export.

Representatives of the Aerospace Association of Ukraine emphasize that the approach embedded in the draft laws does not correspond to the specifics of aircraft manufacturing enterprises and effectively excludes them from the list of potential residents of Defence City. They propose to adjust the inclusion criteria, in particular, to lower the threshold for the share of defense products to 50%, and also to take into account the existing list of aircraft manufacturing enterprises approved by the Cabinet of Ministers as a basic guideline.

In addition, experts draw attention to the lack of proper coordination during the preparation of draft laws between the responsible bodies, in particular the Ministry of Defense and the Ministry of Strategic Industries, which directly oversees most enterprises in the aviation sector. As a result, many companies were not informed about the requirements and did not have the opportunity to adapt, for example, by creating separate divisions or subsidiary structures that would meet the conditions of the new special regime.

According to industry associations, such a situation can lead to the systemic exclusion of the aviation sector from the processes of transformation of the defense industry, depriving it of access to support tools, investments, and simplified procedures that should be introduced within Defence City.