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12 October, 2020
MoD State-Owned Enterprises: How to Overcome Corruption and Inefficiency?
In today’s legislative, financial and managerial reality, the Ministry of Defence of Ukraine as a government authority has not demonstrated the ability to ensure effective control over its own SOEs. Over the past four years, net financial performance of state-owned enterprises managed by the MoD has consistently deteriorated. Negative results of the financial and economic activities of MoD state-owned enterprises have led to worn-out state of fixed assets and accumulation of various types of debts to creditors and the budget. As a result, we can observe the economic inability to meet the needs of Ukraine’s Armed Forces.
In 2018, the MoD drafted a long-term plan to develop its SOEs which is still valid now. However, it seems that this document fails to answer the strategic question: which enterprises out of 114 (which, as of January 2020, are under the ministry’s control) are essential to meet the needs of Ukraine’s MoD and AFU, and which ones are of no benefit to the defence department. The lack of strategy to manage the state-owned enterprises, reorganization and liquidation processes which have lasted for years, and the ineffective HR policy of the MoD lead to accumulation of debts at state-owned enterprises and loss of their resources and assets.
Thus, today, the Ministry needs to review its own policy of managing the SOEs. In particular, this analytical report attempts to suggest alternative solutions to reform the Ministry’s SOEs. The solutions include a series of measures to reformat the operation of the enterprises and to introduce comprehensive changes in the existing legislation to increase the efficiency of those SOEs which are able to take part in meeting the AFU’s needs.