Land and property
In 2014-2019, the Ministry of Defence (MOD) lost over 250 buildings and over 270 land plots, totalling 400 million UAH. This is one example of a corruption risk that exist within the defence sector. Other risks for corruption include: managing land plots, Defence Industrial Complex (DIC) real estate, and surplus property; and effectively controlling fuel consumption. Corruption in these and other land and property management areas result in significant losses for the national budget every year.
The Strategy, as per NAKO recommendations, provides for auditing and accounting for all MOD land plots, the state registration of DIC real estate, registration and control over fuel consumption, and the inventory of DIC intellectual property.
Defence procurements and poor-quality products
The defence procurement process is excessively classified and lack proper competition, resulting in multiple cases of abuse and the waste of budget funds. In addition, the lack of transparent competition may have a negative impact on the quality of weapons and military equipment procured.
NAKO believes that, in order to minimize corruption risks for procurements, there would need to be: more transparency in procurements, the introduction of competitive procurements, and the creation of a transparent electronic register of entities fulfilling state contracts. The Strategy also provides for effective cooperation with NATO Support and Procurement Agency to reduce corruption risks in imports. In addition, implementing international standards and requirements in the national system of quality assurance for defence-related products would increase control over product quality.
Service personnel and housing
As of January 1, 2021, 44,900 families of service personnel are waiting for housing. The state funds allocated to reduce the number of waiting families are often used inefficiently. There are many service personnel who do not receive the housing guaranteed by the state.
The solution to this problem requires introducing an automated approach to the registration of such service personnel followed by a proper audit. In other words, first to verify the right to housing. There were many cases of certain officials receiving apartments for themselves and/or family members while others would have to wait for decades. This verification process is provided under the draft Strategy. The document includes alternative mechanisms for satisfying the housing needs of service personnel, specifically, state mortgage and leasing programs, and money compensations. In addition, the Ministry of Defence, as the chief controller for housing assets, would be required to submit detailed reports on housing provided.
National DIC and best practices in governance
The Strategy also provides for introducing corporate governance at public defence enterprises. This effort is mostly related to the State Concern UkrOboronProm, which shall be reformed into a new organisation. Governance standards are an important tool for combating corruption in Ukraine’s Defence Industrial Complex, especially considering the lack of transparency and best practices within the existing system.
The Draft Law No. 3822 on the reform of the State Concern UkrOboronProm serves as a major step towards combating corruption within the DIC. Unlike the Anti-Corruption Strategy, the second reading of this Draft Law could be happening next week.
President Zelenskyi recently reminded MPs of the need to adopt the Strategy because of promises he made during his presidential campaign. In fact, he declared that his administration would win “not only the fight against corruption but a total victory over this enemy”. Yet, without a national Anti-Corruption Strategy, the country has not even entered the ring and thrown the first punch. How much time does the Verkhovna Rada plan to postpone the unpostponable?
NAKO’s Advocacy and Communications Officer