National Capabilities

tRANsfoRMAtIoN
of the defeNse
INdUstRy
After the breakup of the Soviet
Union, Ukraine inherited 30
percent of the USSR’s defense industry
and close to 20 percent of
its defense-related research and
development capabilities. Immediately
after independence, the
Ukrainian defense industry
was comprised of
1,840 companies employing
a combined workforce of 2.7
million. Military production was
the main business for seven hundred
of these companies employing
altogether about 1.3 million
people. A gradual decrease in the
number of defense industry companies
has continued ever since,
which was mainly due to the
lack of orders from the Ukrainian
Ministry of Defense. The defense
industry has only managed
to retain the manufacturing capabilities
of priority importance
which were able to withstand rivalry
on the competition-sensitive
global market for weapons,
military-technical items and defense-related
services, while the
defense industry transformation
is still under way.
Technological upgrade of the
industry remains to be a key
problem; fixed capital depreciation
ratio in the defense industry
hits 50 percent or higher, while 70
to 75 percent of all manufacturing
facilities have become technically
obsolete, have been operated
for 20 years or longer and, therefore,
cannot meet the up-to-date
requirements in terms of production
quality, working efficiency
or labor productivity. A great
deal of manufacturing facilities
is in need of massive refurbishment
and technical retooling. Deficient
components, subassemblies
and materials required by
Ukrainian defense companies
have been delivered by suppliers
from 16 nations. Sixty-seven
defense industry companies or
more than 40 percent of the total
number of companies engaged in
Government-funded contracts depend
on imported supplies. Most
critical levels of dependence on
imports have been seen in the aeroengine
industry, aircraft-building
and defense electronics sectors
of the defense industry. The
Russian Federation accounts for
more than 60 percent of overall
imports required by Ukraine’s
defense industrial complex.
In Ukraine, more or less modern-standard
R&D and manufacturing
bases are operated by
the defense industry sectors as
follows:
• Design/development and
manufacture of rockets
and missile systems;
• Designed/development
and building of specialapplication
aircraft
(military transport,
patrol and fire aircraft);
• Design/development and
manufacture of precisionguided
weapons systems;
• Design/development and
manufacture of radar
technologies and opticalelectronic
sensors;
• Design/development and
building of aircraft engines;
• Upgrades on Aviation
Materiel;
• Design/development
and building of armored
military equipment.
These are the sectors that have
managed to produce a number of
high-tech product types for military
and dual-use applications.
Ukrainian DEFEnSE rEViEW / JanUary-MarCH 2013 / 13