(UK) Стратегічний виробник озброєння – для Укроборонпрому розробили проект політики власності
(UK) Стратегічний виробник озброєння – для Укроборонпрому розробили проект політики власності Відповідно до проекту Політики власності, розробленого Міністерством економіки, ДК Укроборонпром визначено «центром управління» оборонними підприємствами, які забезпечують потреби сил безпеки та оборони України, зокрема, двох міністерств - оборони та внутрішніх справ. Окрім мети, політика власності також визначає цілі, підходи до управління та принципи діяльності Концерну, напрямки його роботи, основні показники ефективності. «Політика власності – це перша спроба держави дати відповідь на питання, навіщо їй Концерн та понад сотня оборонних підприємств, якими вона володіє. З ухваленням цього документу буде нарешті визначено мету існування Укроборонпрому та задано стратегічну рамку нашої подальшої трансформації. Також політика уповноважить нас, команду управлінців, провести системну реформу концерну - оптимізувати існуючу структуру активів, підвищити їх рентабельність та інвестиційну привабливість, аби успішно конкурувати на українському та іноземних ринках. Ми готові до цієї роботи і сподіваємося на якнайскоріше затвердження документу Кабінетом міністрів України», - наголосив генеральний директор Укроборонпрому Айварас Абромавичус. Перелік завдань, закріплених у проекті документу, свідчить, що держава бачить в Укроборонпромі не просто виробника озброєння, а інноваційну корпорацію, яка здатна виробляти високотехнологічну продукцію та ефективно управляти підприємствами, від яких залежить безпека та обороноздатність країни. Згідно проекту документу, функцію з управління самим Концерном та контроль за його діяльністю виконуватиме Кабінет Міністрів України, а Мінекономіки – координуватиме реалізацію державного оборонного замовлення. За міністерством оборони та міністерством внутрішніх справ закріплена роль основних стратегічних замовників Укроборонпрому. Політику власності ДК «Укроборонпром» розроблено Міністерством економічного розвитку України у консультації з різними стейкхолдерами, включно із Укроборонпромом. Проект Документу враховує кращі світові практики політики власності державних підприємств, зокрема OECD Guidelines on Corporate Governance of SOEs (Рекомендації щодо корпоративного управління державними підприємствами Організації економічного співробітництва та розвитку).
Aivaras Abromavicius: How we are building a new UkrOboronProm
Aivaras Abromavicius: How we are building a new UkrOboronProm What really is UkrOboronProm, the largest holding of state-owned defense companies? Six months ago, we did not have an answer to that question. Society didn’t have it, the president didn’t have it, our military, partners and clients didn’t have it; the country didn’t have it. Six months ago, I joined UkrOboronProm to provide an answer to this question and to start structural changes — reforms that will help Ukraine obtain a modern, high-tech state company in the defense sector. Back in 2015, we in the Ministry of Economic Development and Trade initiated the corporatization of the largest state companies that are of strategic importance. UkrOboronProm was excluded from this process by a political decision of the country’s then-top leadership – it was too tempting not to benefit from illegal earnings in the super-profitable sphere, where everything is labeled as “top secret” and offers a vast field for abuse of office. None of the state enterprises had to wait to be reformed as long as UkrOboronProm. In 2019, I joined the supervisory board of UkrOboronProm to finally start the process of transforming this economic entity into a transparent and efficient company working for the state, not for those temporarily managing it. In order to stabilize its work and quickly prepare for necessary transformations, I accepted the president’s proposal to become the general director of UkrOboronProm, to form a team and start the process of reforms. During the last six months, we have started to change UkrOboronProm, and it will never be the same again. Here’s what we did so far: Hard reset of the team and relations with all regulators, including our number-one client – the Ministry of Defense; Audit of financial statements, including a comprehensive assessment of assets that in practice turned out to be liabilities; Established new procurement principles. Together with the team, we assessed the condition of UkrOboronProm, which previously no one had done so carefully and meticulously, developed a strategy of transformation and formed a support circuit from key partners in government. We expect the state to pay more attention to the transformation of UkrOboronProm, to support radical changes that will improve the capabilities of the entire defense industry. What is UkrOboronProm? The domestic heavy engineering industry is going through difficult times and needs systematic state support. This is particularly noticeable at UkrOboronProm, which consists of 137 enterprises, 21 of which are located in the occupied territories, 85 are financially unstable and eight are bankrupt. The group has 68,000 employees, but revenue per employee is 5% of the global average in the industry. Even with Hr 4.2 billion (more than $171 million) in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2018, 90% of the group’s profit is generated by only about 10 enterprises. Several thousand buildings and structures of UkrOboronProm are housed on 11.4 million square meters and 5,500 hectares of land, but most of this inheritance is excessive, costly and not involved in the production of military goods. While competitors from neighboring countries (Turkey, for example) annually invest up to 25% of their revenue in research and development, our enterprises, unfortunately, feel absolute investment hunger and a complete lack of state support. Due to the total lack of modernization and production influenced by the Soviet era, within a few years UkrOboronProm will lose competitiveness not only in foreign markets but also in Ukraine. In order to reduce the technological gap and significantly upgrade production facilities to develop new products, I believe it is necessary to invest at least 10% of revenue, or $100 million per year over 10 years. Some of these funds will have to be raised by ourselves, including through the sale of surplus and idle assets that have not been used. During the transformation period, the group urgently needs to write-off bad debts and introduce tax benefits, have a more flexible dividend policy, direct financial assistance and the opportunity to sell assets independently, freeing up and directing resources to modernization and new developments. No major state-owned company in Ukraine has managed to get out of the difficult situation without state support: Naftogaz did so by raising tariffs on the population, Ukrzaliznytsia (the state railway) by raising tariffs threefold, while Ukrposhta (the state postal service) received compensation for unprofitable delivery of parcels to rural areas. So what do we do in the meantime? In 150 days, we were able to prepare the group for transformation and launch changes. We helped develop a property policy following the example of OECD standards – the first strategic document that answers the question: “Why does Ukraine need a state defense concern and what are its tasks?” We are waiting for the adoption of this document by the Cabinet of Ministers. A bill to write off bad debts for Hr 4.4 billion has been developed and submitted to the Economy Ministry. This will help such enterprises as Malyshev Plant, Kharkiv Aviation Plant, Zirka and others to get out of a very difficult situation. We applied business triage, analyzing the condition of each enterprise, its significance and role for the country’s defense and looked at exports and intellectual potential. As a result, we have three groups of enterprises, and for each of them we have a clear understanding of what to invest and develop and what to return to the state. Only 27 companies in the concern have annual revenues exceeding $10 million. These companies generate 89% of total revenue. The overwhelming majority of the UkrOboronProm’s companies, huge factories in the distant past but quite small by today’s standards, will be more successful when consolidated around larger “colleagues.” The team The group is no longer a closed club of traders of national interests. The human resources transformation of UkrOboronProm is almost complete. We created conditions to attract professionals of a completely different level, quality and value. It is no longer a toxic place where no one wants to work. It is no longer a club exclusively for friends and relatives of the powerful. It is already an organization capable of attracting the former head of Microsoft in Ukraine and bringing top managers from Western Europe home, back to the country. The entire top management of UkrOboronProm has been updated, as have the heads of large exporters. There have been and will be many people willing to put their protégés in key positions. And among such candidates, there are definitely no graduates from Western universities. Such people want to earn money. Perhaps, by showing flexibility in this matter, the concern could get more support in certain circles. But neither I nor my team is ready to answer for such people. Some eight large enterprises received new directors. Thanks to an open selection process, about 40 candidates applied for one position! A transitional Supervisory Board was also formed, which approved the corporate strategy, the plan of financial rehabilitation of enterprises and the reform of exporters. Last year, the new team already managed to meet the demands of state defense orders and to win an important victory over a Russian subsidiary company, which through the courts tried to force one of the concern’s enterprises to pay off debt for military goods that were not delivered. Without reforms supported by the state, UkrOboronProm will continue to increase debts rather than engage in enterprise development and innovation. For example, without backing from the government, it is simply impossible to financially improve the enterprises. First of all, we have to deal with unpaid wages. During UkrOboronProm’s first year of existence, there were already 27 enterprises with debts to their employees. And since then, this number has always exceeded 30. The salary issue has been brought under control. Today, the number of debtor companies has been reduced from 43 to 35. Exports After several years of decline, the concern’s arms and services exports grew by 19% to $908 million in 2019, compared to $766 million in 2018. The top importers of our products are India, Saudi Arabia, Turkey and other countries in Asia and the Middle East. The most popular products are anti-tank missile systems, gas turbine engines and services such as repairs of Soviet equipment and modernization of aircraft. Our export growth can potentially reach 30% in 2020 according to negotiations with dynamic key players. A serious breakthrough in the export market is hindered by a modest list of modern products, a lack of financial instruments to stimulate exports as well as unhealthy competition among our own exporters. To resolve this issue, UkrOboronProm has initiated changes in the work of exporters, aimed at improving coordination and cooperation by establishing a clear division of responsibilities. During the transition period, four exporters will work on foreign markets instead of six, with no more than two in the same market. As a result of the changes, only two special exporters will remain in the long term with a rule: one country – one exporter. The work of exporters is one of the examples of changes already introduced by the new team. The effect will be visible by the end of the year. But UkrOboronProm also has made changes that one can experience right now. These are in procurement practices, traditionally considered the most corrupt.  We proved that it is achievable to save money on state procurement. At UkrOboronProm, the structure of procurement was transformed within several months. Since the beginning of 2020, procurements that exceed Hr 50,000 are now transferred to the Prozorro system. Previously they were held behind the closed doors. Today in the Prozorro system, we have 2,430 tenders worth a total of more than Hr 1 billion. Savings this year have already amounted to Hr 120 million. For the first time, there has been centralized procurement of electricity and gas for the enterprises as well as audit services. For the third centralized procurement we managed to save more than Hr 60 million. The figures clearly prove that Prozorro works if the system is implemented by a team with zero tolerance for corruption. State defense orders In 2019, the enterprises fulfilled 69 contracts for the development and manufacture of military equipment worth almost Hr 7 billion. The state order was 98% complete. The concern’s enterprises supplied almost 3,889 units of military equipment to the Ukrainian army and other security agencies, which is five percent more than in 2018. Only due to well-coordinated work between all levels of power and the UkrOboronProm’s team was it possible to unblock the contract on BTR-4E manufacture and delivery (The BTR-4E is the export version of the BTR-4, an 8×8 armored vehicle personnel carrier (APC) designed by the Ukrainian company Kharkiv Morozov Machine Building Design Bureau.) In addition, 1,048 units of repaired and modernized equipment were handed over to customers. The repair plan was 99% fulfilled. We are looking forward to 2020 state orders. Unfortunately, the planning system and the old approaches have not yet changed, and UkrOboronProm as the largest performer of the state defense order, has no official information about the state’s needs from our products in 2020-2022. From media reports, we learn that there is a lack of necessary financing for perspective rocket programs that are realized by UkrOboronProm, which is unacceptable! This is crucial for protecting Ukraine’s territorial integrity. Planning and systematic approaches are paramount in the production process. Without it, it is extremely difficult to plan anything, and it disrupts cooperation with co-executing companies. It should not be like this. At the beginning of the week, I visited one of the concern’s enterprises in Ivano-Frankivsk – called Karpaty. They produce wiring harnesses for the German car industry. The enterprise’s capacities have been used by the well-known American company Aptiv since 2007. Such cooperation allows the enterprise to estimate its workload until the end of 2026! And this provides stable work for its 3,600 employees. UkrOboronProm is anxiously waiting for the adoption of the new law on defense procurement, which will allow planning for production for a longer period of time and will change the Soviet approach to pricing, which at the moment does not contribute to cost reduction. UkrOboronProm’s new team managed to achieve these and many other results and small victories in six months. We were able to do all this without political interference or corruption scandals. This helped gain the support of partners from NATO countries and attract the best corporate governance and transformation consultants. Now this reform must be implemented at both political and legislative levels, and within the group itself, to make the changes irreversible. Aivaras Abromavicius is the general director of UkrOboronProm, a group of more than 100 state-owned defense companies producing military equipment, including advanced weapons systems. Translated from Ukrainian by Olena Goncharova, published at Kyiv Post on Feb. 26.2020
Ukroboronprom during DefExpo2020: “Focus on deep innovation projects with India”
Ukroboronprom during DefExpo2020: “Focus on deep innovation projects with India” 5th of February, 2020. Lucknow, Republic of India: The State Concern “Ukroboronprom” (Ukrainian Defense Industry) takes part in International Defense Exhibition DefExpo-2020. The main priority for the Ukrainian delegation is to reach an agreement on increasing the share of innovative projects in military-technical cooperation between Ukraine and India. Also, the Ukrainian delegation, led by the Ukroboronprom General Director Aivaras Abromavicius aims to find a solution with the Indian side to improve the information exchange between the banking and financial institutions of both countries. This should speed up the execution of the signed contracts. “Nowadays we have a big amount of active contracts despite their relatively small value – about 50 - 100 million of dollars per year. We strive to change quantity to depth and quality. That means an increase of complex projects with a considerable innovative component. SC “Ukroboronprom” mainly supplies spare parts and components and provides services. At the same time, over the last 6 years Ukroboronprom enterprises have developed unique solutions for modernizing Soviet military equipment which continues being in operational use in India. These solutions were tested in the conditions of war and were taken into service by the Ukrainian army. They are also innovative and giving military equipment qualitatively new characteristics. First of all, it concerns Armoured vehicles, Air Defense systems and Aviation. These are the solutions we will offer to the Indian side.” – Mr. Aivaras Abromavicius General Director of SC “Ukroboronprom” said. It is worth mentioning that during the DefExpo-2020 SE SFTE «SpetsTechnoExport», that is a part of the State Concern "Ukroboronprom", presents a new upgrade program of T-72 battle tanks which are still in operational use worldwide. Negotiations of Ukrainian delegation with the Ministry of Defense and the General Staff of the Armed Forces of India, largest state and private defense corporations are scheduled during the exhibition. Ukrainian delegation of SC “Ukroboronprom” on DefExpo-2020 consists of: SE SFTE «SpetsTechnoExport», SE “Antonov”, SE “Kharkiv machine-building plant “FED”, SE ”Krasylivsky aggregate plant”, SE “ Zorya-Mashproekt”, SE “Izyum instrument-making plant”, SE “Mykolayiv aircraft repair plant “NARP”, SJSHC “ARTEM”. Reference: The DefExpo International Defense Exhibition has been held in India since 2000 each 2 years with a support of the Indian Ministry of Defense. It is one of the biggest Defense Exhibitions in South and Southeast Asia. The world's leading defense industry companies, in particular, defense giants from the US, France and Israel are presenting their projects at the exhibition.
LVIV ARMORED PLANT HAS FULFILLED THE STATE DEFENCE ORDER IN ADVANCE
LVIV ARMORED PLANT HAS FULFILLED THE STATE DEFENCE ORDER IN ADVANCE The State Enterprise “Lviv Armored Plant”, the enterprise-member of the SC “Ukroboronprom”, has fulfilled the terms of the contract for repair of the T-72 tanks in advance and cope the additional state defence order. This was announced by Deputy Director General for Armored, Radar and Special Vehicles of Ukroboronprom Ihor Fomenko. “Lviv Armored Plant managed to repair the T-72 tanks ahead of schedule and repaired another 3 units of such armored vehicles in the terms stipulated by the initial contract. This year’s state defence order was fulfilled by the enterprise”, - pointed Ihor Fomenko. Lviv Armored Plant can carry out the light maintenance and recuperation of T-72 tanks, armored recovery vehicles BRM-1, engineering disbarrage machine ІМР-2 and infantry fighting vehicle BMP-1. The plant specialists also conduct the repair of the tank engines, 1A-40 sights and T-72 tanks spare parts. It should be reminded that the SE “Lviv Armored Plant” is not only a repair plant, but also a production one. The plant can produce “Dozor-B” light armored personnel carrier, as well as GPM-54-01 fire fighting panzer.
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Combat module "Taipan" In the framework of international exhibition "Arms and Security" (Kiev) Ukrainian public premiere of the combat module "Taipan" - developed by UOP SE "SpetsTehnoEksport"  - was held. Specifications of the new combat module "Taipan" meet the highest Western standards. Installed system of backlash planetary gearboxes and ac converter-fed motors, provide precise targeting at ultra slow and high speeds make combat module “Taipan” unique. Owing to modern electronics, "Taipan" provides automatic targeting, keeps armament in the defined position, regardless repositioning  of the combat vehicle’s hull in motion, providing automatic tracking of a target. Automated targeting system - with allowance for weather, projectile type, armament type, angular velocity and target range - is installed into the combat module. Also fighting module installed automatically issuing commands guidance given weather conditions, such as shells, type of arms, angular velocity and range goals. Sight system can be adjusted both to the line-of-sight and horizon line. Currently, “Taipan” is equipped with a rapid-fire cannon caliber double-barreled 23 mm, the effective range of which reaches 1.8 km. Other combat module modifications can be equipped with a machine gun 7.62 mm or 12.7 mm, and 30 mm grenade launcher with a separate elevation drive unite. The minimum weight of the combat module is only 350 kg. In addition, this module can be mounted not on mobile platforms only, but also equip fortified structures - such as checkpoints - controlling the module remotely, or use it as a SAFU without power supply, the combat module "Taipan" can work 3 hours in such a mode. “Together with our Ukrainian partners we have created combat module technical characteristics of which will arouse Ukrainian armored vehicles producers’ interest. Moreover, all the electronics and software are designed by Ukrainian specialists”, – said director of SFTE “Spetstehnoeksport” Pavlo Barbul.  
Combat module "Taipan"
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BMP-1UMD UKROBORONPROM State Enterprise "Zhytomyr Armored Plant" adapted German Deutz engine for use in infantry fighting vehicles. Modernized infantry vehicle received its official name BMP-1UMD. The first public demonstration of BMP-1UMD took place at the exhibition "Arms and Security", October 11 at the International Exhibition Center in Kiev. Works on Russian UTD-20 replacement by Deutz TCD2013 L64V took only three months. This 4-stroke, 6-cylinder turbosupercharged engine with electronic control unit has 330 hp power, with the possibility of increasing power up to 390 hp, while UTD-20 engine has only 300 hp. In addition, the German engine has significantly more resources it quieter and more economical. "Infantry fighting vehicle adaptation for German Deutz engines use is another step in UOP import substitution program fulfillment. Other Ukrainian armored vehicles such as BTR-4 - produced by SE “Kharkiv Morozov Machine-Building Design Bureau” - are equipped with engines of this manufacturer,” - said the head of the SC" UkrOboronProm" Roman Romanov. Works on improvement of firepower, fire control, ergonomic and functional characteristics of the vehicle were carried out when working on BMP-1UMD. Special attention Ukrainian specialists paid to camouflage in visible and IR band.        
BMP-1UMD
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PHANTOM – WARRIOR OF THE FUTURE. PUBLIC PREMIERE AT "ARMS AND SECURITY" "Phantom" is one of the most advanced developments of UKROBORONPROM    SE "SpetsTehnoEksport". It is the first step in development of advanced systems that will replace traditional armament. The first public demonstration of tactical unmanned multipurpose vehicle "Phantom" took place at the exhibition "Arms and Security", which started on October 11 at the International Exhibition Center in Kiev. "Unmanned multipurpose tactical vehicle" Phantom" is a response to the challenges of technological era, pressing its demands to creating entirely new armament types: unmanned, multi-functional and capable of performing tasks that are now performed by soldiers only, endangering their lives. These are the characteristics, demonstrated by "Phantom", "- said the head of the SC "UkrOboronProm" Roman Romanov, explaining the peculiarities of the new unit of the military equipment. Tactical Unmanned multipurpose vehicle “Phantom” is a remotely operated mini armored carrier. Day and night sighting systems allow to fire at any time of the day for a distance of over 1 km. Its operational range is up to 20 km, it is operated by means of secure radio channel or via fiber cable of 5 km length. “Phantom” can transport ammunition, retrieve wounded from the battlefield and perform combat missions. "Phantom" capabilities are difficult to overestimate: they allow him to perform a wide range of tasks. This equipment can deliver ammunition and loads across the areas that are under the threat of enemy fire, or at risk of mining, to safely and quickly evacuate wounded from the battlefield. Different types of armament can be mounted on "Phantom" for fire support. For example, if "Phantom" is equipped with anti-missile system - the army receives nearly invisible, mobile and effective means of enemy armored vehicles’ destruction,"- said the head of SE "SpetsTehnoEksport" Pavlo Barbul. The XIII International Specialized Exhibition "Arms and Security - 2016" will be held 11-14 October 2016 at the International Exhibition Center, which is located at Brovary Avenue, 15.      
PHANTOM – WARRIOR OF THE FUTURE. PUBLIC PREMIERE AT  "ARMS AND SECURITY"
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