Economic development of Ukraine Part 3. Military-industrial complex of Ukraine

Economic development of Ukraine Part 3. Military-industrial complex of Ukraine

After the breakup of the USSR, Ukraine inherited a strong science and technology base of the Soviet military-industrial complex’s potential. Ukraine received approximately 2,000 enterprises and organizations where over 700,000 workers were employed.  Some USSR defence industry enterprises have always been, and continue to be, the largest players of the industry. These include the state enterprise “Production Association Yuzhny Machine-Building Plant named after A.M. Makarov” (YUZHMASH), a leader in the field of rocketry, and Kharkiv Factory of Transportation Machine-building of Malychev, a state-owned manufacturer of heavy equipment.

Unfortunately, the military-industrial complex has shrunk significantly over the years.  According to the Stockholm International Peace Research Institute, in 2014 Ukraine exported arms and military equipment worth US$ 664 million. Ukraine is ranked 9th in the list of the world’s biggest arms exporters. But it is likely that Ukraine would not be able to maintain high export growth in the nearest future, because Russia was the primary buyer of Ukrainian arms during the past year (US$ 155 million). This situation is of concern to the Ukrainian government. The government had decided to halt all cooperation between the Russian Federation and Ukraine in the military-industrial sphere.

The challenge for the Ukrainian enterprises is to develop domestic analogues and replace Russian parts and components. In total Ukraine has to produce 33 thousand new items for the military-industrial complex of Ukraine. These include both small parts and complex systems. At the moment Ukraine produces around ten thousand new items.

In case Ukrainian companies will not be able to implement an import substitution programme, they are ready to buy all outstanding items from Western countries, including NATO members. Leading defence companies from the United States are ready to invest in the development of Ukrainian military-industrial complex. This cooperation will ensure the transition to international standards and encourage entrance into new foreign markets.

Therefore, a successful implementation of the programme will ensure the deployment of high technologies for the armaments production and new enterprises will appear.

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