State-owned UkrOboronProm to sell idle enterprises

Ukraine’s defense production giant UkrOboronProm is let a number of affiliates get privatized, the Cabinet of Ministers said. In a decree issued late on Dec. 9, the government said that the state-run association of over 130 defense productions would hand 18 idle enterprises and joint-stock companies over to the country’s State Property Fund and auctioned off to private investors.

Besides, one more enterprise is to be transferred to the Defense Ministry mandate.

“We’ve expected this for almost a year,” as UkrOboronProm’s deputy director-general Mustafa Nayyem commented. “A year ago, we openly admitted the fact that UkrOboronProm has 35 enterprises that have in fact lost all ties to the defense industry a long time ago. All of them were either unprofitable or non-functional, attracting only various shady characters looking for a chance to illegally seize their properties and assets.”

According to official data provided by the UkrOboronProm, 11 of the listed enterprises do not perform any activities, and five are loss-making or failing. In general, the assets prepared for privatization constitute the value of over Hr 280.6 million ($10 million), while only in the first six months of 2020 they inflicted losses to the value of Hr 15 million ($530,000), and the total amount of their wage arrears reach over Hr 7.6 million ($270,000).

The list of enterprises sealed for privatization includes automobile repairs workshops in Zaporizhia, Rivne, Chernihiv, Kharkiv, as well as a number of design bureaus, and aircraft manufacturing and repair plant in Vinnytsya, and also a shipyard in Kherson.

All these enterprises saw their most glorious days as part of the Soviet Union’s giant war production machine. But due to a lack of military contracts and modernization, they sustained a bitter decline.

Kyiv-based company Ukrainian Cargo Airways, currently also part of UkrObonProm, is to be handed over to the country’s Defense Ministry.

Getting rid of loads of dead assets sucking resources out of the country’s state-run defense production sector was declared as one of the top goals by UkrOboronProm’s pro-reform management team led by former economy minister Aivaras Abromavicius.

According to Ihor Fomenko, who served as the UkrOboronProm acting head in October-November, idle enterprises and assets that exist only on paper consume nearly 30% of the association’s resources without making a valuable contribution in the production roll.

Many once-giant factories producing weapons and modern military hardware are now nothing but old dusty work stations and empty walls.

“An investor could give them a second chance,” as Fomenko told the Kyiv Post in a Nov. 5 interview.

“An investor might resurrect the old production or find a new niche. But this is a chance for enterprises to continue (operating).”

According to deputy director-general Nayyem, the privatization of unsuccessful enterprises would help top management concentrate on the reform of much more promising entities that, according to UkrOboronProm reform roadmap, would be transformed into several corporatized, industry-based arms production holding companies.