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17 November 2017

How Ukraine Can Win the War

David BraunСЕО Templatemonster

"For nearly four years, we have been in the war with the enemy that has considerably prevailing forces. Therefore, we have to win asymmetrically."

Republished from  НВ Бізнес

 

For nearly four years, we have been in the war with the enemy that has considerably prevailing forces. Therefore, we have to win asymmetrically.

Conventionally, technology innovations have worked as the multiplier in such warfare.

For the Ukrainian Army, such innovations primarily include the technologies connected with coordination of different units, automated combat control and intelligence. UAVs (unmanned aerial vehicles) may be a good example of such technologies. Before the military conflict in the Eastern regions of the country, we had no domestically manufactured UAVs, whereas, now, it’s a new industry with a substantial number of high quality offers.

The second issue is the finance required to create technologies with extra added value bringing about the innovation-oriented economy of the country.

The problem, in the first and second instances, is the investors’ fear to make investments into something that has no clearly defined rules of the game. In such cases, everyone tends to surmise a bad scenario: assuming no clear rules, I’ll be, probably, deprived of the product, or nobody in this country will need my solution. Moreover, a one-sided game is not the way to develop such a major sector as the defence industry. The common key to success implies changes and adaptations for both, the Government and the private sector. The brief explanation in this regard follows.

  1. The major part of innovation assets is represented by intellectual property. Poor protection of such property affects capitalisation in the industry. Despite successful starting, hi-tech projects wouldn’t survive in states having weak jurisdictions. Consequently, the level of intellectual property protection by Ukrainian laws has to be raised up to that of Singapore, the USA, Canada, Denmark, Finland, or, alternatively, businesses should be permitted to register their intellectual property rights in another jurisdiction, however, without prejudice to enforcement of such rights in their domestic jurisdiction. We’ve seen the examples when our scientists create a product, which further gains a continuous demand in other countries, and, finally, the company relocates to a more stable and convenient for the customer jurisdiction. Recently, it has been the case for one manufacturer of unmanned aerial vehicles, when the entire team migrated to China. Furthermore, the PPP (public-private partnership) mechanism does not work in Ukraine, and project authors are not protected from probable non-market behaviour of the Government.

 

  1. Governmental defence procurements are based on public defence industry orders, and it is an almost entirely secret process in Ukraine. Thus, if a Ukrainian company wants to sell its development to the Ministry of Defence, it is required to launch a new department for handling of secret documents, pass the certification and military acceptance procedure. In reality, it’s super obscured rather than super frightful. In other words, the business model is not obvious. Businesses and investors intentionally avoid such opportunities. Sure, some army supplies in warring countries should be subject to a secret procedure, but not all of them. We have to implement corporate procurement models in the Ministry of Defence, and regulate the relations between the private sector and the governmental customer in contractual responsibilities.

    Such mechanism is far from illusion. It successfully works in the NATO states. The standards of the North Atlantic Alliance should be reduced to practice right now, rather than wait for NATO accession.
     
  2. Our private defence sector does not work efficiently, and not so many private companies have been set up in this sector.

    The industry makes its first significant steps in this direction. This fact is evidenced by launching of the League of Ukrainian Defence Companies (the League). In my opinion, it was a very good idea to unite small companies for the purpose of quality changes in the Ukrainian Army.

    In addition, we have the Innovation Development Platform, the agency that currently develops defence projects uniting developers, investors and businesses in order to create competitive products.

    In terms of the number of such companies, it is more than sufficient to achieve more daring targets. For instance, speaking about UAVs, we may mention such domestic robotic technology leaders, as Ukrspetssystems and Spaitech, to name a few only.

    Everyone wins from a competitive market, and the market will see the boom of new businesses, like it was, for example, in Croatia. It has taken only a few years for HS, the local manufacturer of guns and other small weapons, to become a real competitor of Glock. Another company implemented manufacturing of helmets that have won the top global rankings, and also offers glasses and equipment. Croatia has the entity similar to Ukroboronprom; however, it also has GeoSystems Private Company acting as the export and import platform, and as the advisor for international institutions.
     
  3. Despite the gradual rejection of the archaic post-soviet marketing, we still lack high quality wrapping in a broad sense. Therefore, development accelerators, like the Innovation Development Platform, will play the increasingly significant role in the industry. Such platforms should shape the market and show the way to efficiently wrap ideas and products, speak the same language with investors, and remove all imperfections.
     
  4. When someone develops an innovation in Ukraine, and even wraps it in the right way, export opportunities still have to be sought for the sake of the financial result. In Ukraine, this function is assigned to specialising exporters controlled by Ukroboronprom (Ukrainian Defence Industry State-Run Concern). These are quite ordinary businesses interested in successful exports, since they earn fees from export operations. Yet, they suffer from the notorious reputation due to a number of corruption cases in the past. Consequently, public and private companies have to be more open, promote and practise new models of finance engagement, and learn to implement joint projects in cooperation with global companies.
     
  5. Innovations emerge at the junction of technologies, and many civil technologies are the simplified analogues of military ones. The USA and Israel have been long practising the scheme, whereby an innovative idea is developed, classified as secret and used for defence purposes, and, later, it is made available for public use. For instance, the idea of song recognising by the mobile application was originally developed for intelligence purposes, i.e. for real time recognition of terrorists’ voices.

    The Internet and GPS are very common things now. However, going back to their origins, we may see typical military developments of the US Department of Defense initiated by the Defense Advanced Research Projects Agency (DARPA).
     
  6. Old soviet systems may be efficiently upgraded and modernised using own know-hows. For example, there is a Ukrainian company that once won the US grant for modernising of the old soviet artillery arms of the Afghanistan war period, and, now, this company independently manufactures technology items, such as optronic sights, automated firing units with the considerably reduced shell hit time. Another company manufactures special systems of mobile communication suppression and supplies them globally. The results of such work won’t be obvious in a year; however, innovations are motivated in that way. 

 

Summing up, we have to become the second China in terms of military machinery and equipment production, but more honest in respect of others’ intellectual property, responsible for the quality, and having the same developed infrastructure and successful logistics. To this end, however, we should accelerate our pace.