Cabinet of Ministers is being urged to introduce a moratorium until consultations on reservation from mobilization are completed
Kyiv • UNN
Think tanks and businesses have criticized changes to the reservation rules due to risks to the defense industry, infrastructure, and the economy. The government will hold consultations.
Ukrainian think tanks and representatives of the IT industry have criticized the changes proposed by the government to the rules for reserving employees liable for military service. In their view, the innovations could lead to the loss of qualified personnel, the disruption of defense contracts, interruptions in the operation of critical infrastructure, and increased corruption risks. The Cabinet of Ministers is being urged to abandon the hasty revision of the criteria for enterprises' critical status and hold full-fledged consultations with businesses, UNN writes.
On October 13, the Cabinet of Ministers of Ukraine considered amendments to the resolution regulating the procedure for reserving employees liable for military service. According to media reports, during the meeting the government did not make a final decision on reducing the reservation quotas for critically important enterprises.
The draft resolution proposed reducing the percentage quotas for reservations at enterprises in the defense-industrial complex and energy sector—from 100% to 85%, and in the utilities sector—from 75% to 60%.
Businesses, industry associations, MPs, and the expert community sharply criticized the government initiative, noting that the Cabinet of Ministers had not held consultations on the proposed changes and had also failed to take into account the consequences of reducing the reservation quotas. In addition, according to the National Agency on Corruption Prevention, the resolution contains a number of corruption risks. After this, according to MP Yaroslav Zhelezniak, the government agreed to hold additional consultations.
Think tanks warn of critical risks for the state
Representatives of 16 think tanks appealed to the President of Ukraine, the Prime Minister, relevant ministries, and other government bodies, calling on them to review the changes proposed by the government to the procedure for reserving persons liable for military service.
The signatories of the appeal, which is in the possession of UNN, include CASE Ukraine, the Centre for Economic Strategy, the Institute for Economic Research and Policy Consulting, the Institute for Socio-Economic Transformation, Advanter Group, and other expert organizations.
The authors of the appeal support the need to combat abuses in the reservation process, whereby enterprises use this mechanism to illegally employ persons liable for military service in order to avoid mobilization. At the same time, they are convinced that the government initiative could ultimately cause significantly greater harm to the economy than the benefits it would bring.
The approaches proposed by the government pose critical risks to the fulfillment of defense orders, the functioning of energy and utility infrastructure, and the continuity of operations of enterprises that are critically important to the population; they increase corruption risks and uncertainty, encourage the shadowing of the economy, and reduce business activity
The analysts point to the lack of a proper assessment of the economic consequences of the proposed decisions. According to them, the government has not provided calculations regarding the possible impact of the changes on employment, production, budget revenues, the fulfillment of defense orders, and foreign-currency earnings.
Incidentally, representatives of the aviation industry also emphasized the last point, noting that airlines are currently fulfilling international contracts and ensuring foreign-currency inflows into Ukraine. And reducing the reservation quotas could lead to enterprises shutting down or leaving Ukrainian jurisdiction.
The third change to the rules in five months
The IT Ukraine Association also takes a critical view of the government initiative. Representatives of the technology sector identify the constant changes to the conditions under which enterprises can obtain critically important status and reserve employees as the main problem.
According to the association, over the past five months the government has already substantially changed the relevant rules twice—in May and July. Enterprises were forced to reconfirm their compliance with the updated criteria.
The problem is not even limited to the substance of individual innovations. For businesses, it is critically important to be able to plan their activities, form teams, undertake long-term contractual obligations, and understand at least six months to a year in advance under what rules the system will operate. Constant changes to criteria, quotas, and procedures create an additional administrative burden and regulatory uncertainty
The association explains that for most companies, the basic reservation quota is already 50% of conscript-liable employees. However, even if this figure remains unchanged, complicating the procedure for obtaining critical-status designation could negatively affect business operations.
The specific nature of the IT industry lies in the dependence of many projects on particular teams possessing specialized knowledge and expertise. The loss of even several key specialists could jeopardize the fulfillment of contractual obligations, while quickly finding replacements for narrowly specialized professionals is often impossible.
This creates additional risks for companies working on long-term contracts, particularly foreign ones, and required to ensure the stable execution of projects.
The defense industry could lose critically important specialists
Representatives of the defense-industrial complex viewed the proposed changes most seriously. In addition, the Ministry of Defense opposed reducing the reservation limit for defense-industrial complex employees from 100% to 85%.
According to Ihor Fomenko, head of the Federation of Employers of Ukraine (FEU) Defense, a decision to reduce the reservation of defense-industrial complex employees without a prior analysis of the consequences could directly affect the provision of weapons and equipment to Ukrainian military personnel.
Ukraine's defense-industrial complex reacted very negatively to the proposed changes to the reservation rules, since, in effect, there were no consultations with the industry. It is wrong to adopt, within such tight time frames, decisions that directly affect the provision of military equipment and weapons to the components of the security and defense forces
He explained that weapons production depends not only on engineers and designers, but also on employees who directly ensure technological processes.
This is not simply a matter of someone being dismissed or mobilized. Enterprises could lose people who operate machinery, control-panel operators, and drivers who know all the necessary routes and locations. All these employees perform specific functions in the production process. If they are absent, this will directly affect enterprise operations, contract deadlines, and the supply of products to the military
According to him, representatives of industry associations covering 97% of defense-industrial complex enterprises have already appealed to the President and the Prime Minister, asking them not to establish a reservation limit for employees of defense companies.
Fomenko separately draws attention to the interdependence of the defense industry, the energy sector, and public utilities. Even if defense enterprises retain the necessary personnel, disruptions in related sectors could halt production.
It is particularly dangerous to create additional risks for the energy sector on the eve of winter. I understand that certain abuses or falsifications may occur during the reservation process. But if such cases exist, they should be addressed individually rather than introducing restrictions that will affect everyone
The new Coordination Center could complicate the reservation process and create corruption risks
A proposal to establish a Coordination Center for organizing the reservation of conscript-liable persons is causing particular concern among businesses and think tanks. Under the government's plan, it would be the body to recommend to the Ministry of Defense which enterprises should have their critical status confirmed and which should not, as well as which enterprises should receive increased reservation limits. Its membership is to include 17 representatives of state bodies and security agencies. At the same time, business representatives are not expected to participate.
Analysts note that, due to the introduction of an additional approval stage, the procedure for obtaining critical enterprise status may take up to 17 working days instead of 10, as is currently the case. At the same time, the draft resolution does not specify decision-making deadlines for a number of other procedures at all.
It also does not specify a clear list of grounds for revoking critical enterprise status, or provide companies with the possibility of explaining or appealing the center’s respective decision.
Analysts recall that, in its conclusion on the draft resolution, the National Agency on Corruption Prevention identified corruption-generating factors in the draft. In addition, the Ministry of Justice, the Ministry of Energy, and the Ministry of Digital Transformation have already expressed their comments.
This raises a fundamental question about the balance of powers and responsibility. That is, the state body will formally continue to make the final decision, but the Coordination Center will de facto have a decisive influence on whether a particular enterprise receives the opportunity to reserve employees and to what extent
They insist that any negative decisions concerning enterprises must be substantiated, and that companies must have the right to review the materials, provide their explanations, and appeal the conclusions.
Moratorium and 90-day transition period
To avoid negative consequences for the economy, representatives of the analytical centers proposed a package of priority decisions to the government. They call for a moratorium on reviewing criticality criteria and revoking the respective enterprise statuses until the regulatory framework has been further developed.
In addition, analysts propose establishing a 90-day transition period during which existing reservations would remain valid. This would allow enterprises to adapt to the new requirements without the risk of a sudden loss of personnel.
Over the next 30 days, it is proposed to review the powers of the Coordination Center, limiting them to consultative and advisory functions, define transparent criticality criteria, and establish a clear procedure for revoking an enterprise’s critical status.
It is also necessary to assess the economic, fiscal, and personnel-related consequences of the proposed changes.
To develop the changes, it is proposed to create a working group involving the Ministry of Economy, the Ministry of Defense, independent experts, and representatives of leading business associations.
The position of the business representatives interviewed by UNN after the government initiative emerged is unanimous: combating abuses in the employee-reservation system must be targeted. Under current conditions, enterprises on which the state’s economic resilience and defense capability depend must not be weakened.