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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Between Convulsions and Diversion

12 October, 1999 - 00:00

Ukraine belongs to a rather small group of big league players on the international arms market. This was achieved, among other things, due to successful fulfillment of a series of tank contracts. However, the period when Ukraine could honorably represent itself, in terms of technology, on the traditional arms markets is ending, and Ukraine's future in this sector depends on hi-tech solutions for high-precision weapons, recently stated Valery Malev, Director General of the State Company Ukrspetseksport [Ukrainian Special Exports, the state arms export monopoly].

Another part of the once powerful Ukrainian military industrial complex, which “has beaten swords into plowshares,” is mentioned less and less often. Ukrainian military conversion is now out of fashion and forgotten in the Cabinet. Per se , the huge potential of the domestic military industrial complex, which switched over to civilian machinery, turned out to be unneeded. Let us review of the conversion problems, which remain unsolved.

Military conversion must become a part of Ukraine's economic restructuring. The latter is in full swing now, but unfortunately in the least desirable direction, destroying our hi-tech sectors.

A more or less normal conversion process requires a number of conditions to succeed, beginning from determining the capacity level that would ensure Ukraine's defensive capability and possible exports. But what kind of machines can our army buy, if the priority tasks it is now facing are where to get pay for its officers and food for privates? The Ukrainian defense industry is doomed not so much because of meager contracts and financing as due to the complete uncertainty concerning its future. The issue of exports is just as complex (we are not talking about selling supplies stored in the Soviet period but about domestic production). Any actions relating to the purchase of modern arms are based on political decisions. Such decisions take account of the current political and economic situation in the exporting country, and how this situation will develop in the future, because machinery is supposed to have a long service life, during which it has to be maintained and constantly upgraded, and the client wants to be absolutely sure that its partner will not suffer any cataclysms. From this point of view our situation is anything but favorable. The well-known tank contract with Pakistan is an exception, which only emphasizes the overall unfavorable condition. Preparations to conclude this contract took several years of strenuous efforts by many people and organizations led by a Deputy Premier. Many problems, this time of internal origin, had to be overcome in the process of fulfilling the contract. It is generally known that a whole series of decisions was adopted, even several laws, granting tax relief, loan privileges, etc. All this again clearly demonstrates the absurdity of our current economic system that renders unfeasible any project, if no privileges can be secured for it on a legislative basis, one way or another. Only a few projects can break through, although in all the world much attention is paid to profitable military export contracts. In Ukraine, this issue has been discussed for years, but without progress.

Arms exports constitute a very specific subject, and one should take with a grain of salt the cheerful reports by some media about various expositions, bids, and intentions, which are far from always put into practice.

Such developments with regard to the basic products of the defense industry have complicated the task of preserving its production and intellectual capacities, when switching over to making civilian goods. At the initial stage, in 1992 and 1993, there was a certain euphoria in this respect: a large number of different programs were set up and even financed somehow. But with deepening economic crisis the financing dropped dramatically, and most importantly the uselessness of conversion efforts became more evident against the backdrop of the overall decline in effective demand.

Converted enterprises have often been reproached for the quality and cost of their products. Such problems are inevitable, and they are solved by increasing output. But now this is impossible due to the financial standing of our budget organizations, which make the orders, say, for medical or training equipment.

Our customs policy has been senseless, to say the least. Our enterprises, enfeebled by various hardships, were not in a position to compete on an equal footing with powerful world leaders, or with cheap imported consumer goods. All this has led to the full stop not only of the conversion processes but of the enterprises themselves, to the almost complete extinction of industries, which other developed countries could only dream of. Many examples could be presented. But most severe damage has been caused to our leading sector, the electronics industry, where the decline was most dramatic. It seems that even the domestic market would provide work for tens and hundreds of plants. But the factors mentioned, along with the overall pauperization of the population, have done their part. You may not believe me, but it is true: for the first half of this year, 14,200 television sets (both color and black-and-white) were produced in Ukraine. In 1990, 3.774.000 were produced in the same period, that is 265 times more. Need I cite other examples?

But the failure of conversion programs like the overall condition of the defense industry is a natural consequence of our globally ruinous economic policy. From this point of view, the humorous definition of conversion as something between convulsion and diversion is far from funny. At present, the whole economy has gone into convulsions due to incompetent actions by the executive, which have done more damage to this country than any diversion.

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