Defence City: who will receive benefits, and who might be left out
Kyiv • UNN
A package of draft laws has been registered in Ukraine to create Defence City, which will provide tax and customs benefits to defense manufacturers. The initiative aims to increase production volumes, but selection criteria may exclude some enterprises, particularly aircraft manufacturers.
Ukraine is preparing for an ambitious breakthrough in the defense industry. A package of draft laws has been registered and is actively being discussed in parliament, which aims to create a special legal regime for Defence City to support Ukrainian defense manufacturers. UNN investigated whether everyone will be able to receive preferences and what kind of support they should expect.
Four draft laws, jointly developed by the Ministry of Defense and people's deputies, provide for the creation of a register of Defence City residents, which will be maintained by the Ministry of Defense itself. Their main goal is to provide enterprises in the defense industry with tax and customs benefits, support exports, and provide additional guarantees of protection within the framework of criminal proceedings. It was because of the latter point that the legislative initiative came under a wave of criticism from anti-corruption activists.
This package is an attempt to give a "second wind" to the Ukrainian defense-industrial complex. According to estimates of the initiative's authors, thanks to this, production volumes can increase by more than 3 times.
Despite the scale of the idea, in their current form, the registered draft laws create sufficiently strict selection criteria for enterprises to be included in the list of Defence City residents. In particular, the emphasis is on "exclusive" orientation towards defense needs.
In their current form, the draft laws may, for example, completely bypass the aircraft manufacturing sector. After all, even such giants as SE "Antonov" or "Motor Sich" will not be able to obtain resident status, because they historically work in both the defense and civilian segments. Formally, they do not meet the criterion of "90% military production", although they have state contracts and supply equipment.
Thus, although the idea of Defence City finds broad support, the expert community calls for not rushing the vote and finalizing certain provisions. This is, without exaggeration, one of the most important strategic steps in the last year. But that is precisely why it must be precise and balanced. Otherwise, there is a risk that Ukraine will build a new system of support for the defense industry — but exclude one of the most complex and important industries, aircraft manufacturing, from it.