Posts Tagged ‘R&D’

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A tangled web – The Ukrainian MIC

November 28, 2016

There are many (in)famous Ukrainian politicians, “businessmen” and recognised organised criminals historically associated with gun running and the defence industry/MIC of Ukraine.

In entries past, the names of Semyon Mogilevich, Leonid Minin, Sergei Mikhailov, Leonid Wulf, Alexander Zhukov, Vadim Rabinovych, Leonid Lebedev, Mark Garber, Kuzma Medanich, Andrey Vazhnik, and Anatoliy Fedorenko, are to name but a few “headliners”.

Since those gun running 1990s/2000 decades have passed, in recent years the Ukrainian military and MIC have been forced to undergo radical changes and retooling – nothing spurs such action as a confined yet nevertheless hot war with Russia in the eastern regions.  Also, no longer do trains loaded with armaments sat on rail sidings at Odessa Port go without more than a few photographs and a questions by both public and media alike.

That is not to say that whilst the hollowed out military is by no means hollow anymore, that the endemic corruption that enabled the gun running of the 1990s/00s has been systemically and comprehensively addressed.  Indeed now large lumps of GDP are heading to the military and MIC, and will continue to do so for years to come,  the eyes of the “rent seekers” so attuned to guzzling from the teat of State subsidies and embezzlement of State funds will naturally seek opportunities therein.

So too, it has to be said, will the Kremlin seek to infiltrate further such MIC structures.

Putting the military to one side, the Ukrainian MIC which is still predominantly State rather than private in its composition, will at some point surely be subjected to some form of scrutiny when it comes to the abilities and loyalties of those working within.  With more than 100 State MIC subsidiaries operating under the State Ukrboronprom umbrella there are a lot of managers with access to information that “others” may find “useful” and some skill sets that are clearly not optimal for their roles.

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Ukrboronprom is currently headed by Roman Romanov (a former car dealer who led the presidential election campaign for Petro Poroshenko in Kharkiv).  Beneath him spreads a large organagram of managers across the one hundred plus SOE subsidiaries.  Whether Mr Romanov has been either tasked or is even able to assess the professional competency and patriotic leanings of the management of those companies which collectively form the Ukrainian MIC is unknown.  A “single sweep” would be far from effective if that is all that results anyway.

Among the management of such subsidiaries certain names catch the eye being from Odessa – for example, Alexander Volkov.

Mr Volkov is currently acting head of Promoboroneksport – a subsidiary that has been busy with BMPs in Jordan and MiG 24V helicopters to Uganda throughout 2016.  All appears to have contractually gone well, and thus it seems very likely that Mr Volkov will become the substantive head of Promoborneksport.

Mr Volkov is best known is Odessa as being the long standing regional party chairman of the Social Democratic Party of Ukraine (united) – or SDPU(u) – and his work at the ports and roads industry.

The SDPU(u) is a party long and closely associated with the nationally loathed Viktor Medvedchuk (Godfather to one of President Putin’s children).

Promoboroneksport is a subsidiary of Ukrspetsexport, which is in turn a subsidiary of Ukrboronprom.

Ukrspetsexport is also headed by a native of Odessa, Pavel Barbul.

Mr Barbul is better understood by his father’s associations.

Alexie Barbul has long been associated with roadworks.  He once headed the roads department at Odessa City Hall, thus not only making him a close acquaintance of Mayor Turkhanov (who is well acquainted with several names listed at the beginning of this entry) but he is also with the company “Growth” (winner of many Odessa tenders) associated with Mayor Trukhanov, the aforementioned Alexander Zhukov, and Odessa’s most (in)famous mafia Don, Alexander (Angel) Angert.  The involvement in road infrastructure also meant that Alexie Barbul was well acquainted with Mr Volkov, who now heads a subsidiary subservient to that Pavel Barbul now controls.

Thus looking at recent, current and future appointments within a clearly tangles web, a reader may come to one of two conclusions – though neither are in fact mutually exclusive.

The first, with names such as Medvedchuk, Trukhanov, Zhukov, Angert nestling behind Messrs Volkov and Barbul, is that the Ukrainian MIC is subtly (or not so subtly) “zoned” – with the Odessa controlled “zone” being that of export, whether or not that export actually leaves from Odessa is irrelevant – this is to do with regional structures of power/influence, and probable sources of hierarchy in rent seeking and embezzlement arrangements.  (A look at the “Kharkiv names” would suggest that the “Kharkiv zone” will be far more production orientated – the same rules applying).

The second conclusion a reader may reach, considering the curriculum vitaes of many of the old names and their associations with organised crime, gun running historically, and with many a very questionable definition of “patriotism”, is that more of the same old schemes may well blight the international headlines in the years hence to the detriment of Ukraine.

A reader may also decide to keep a watchful eye upon the centres of R&D that fall within current university specialised departments.  Would any be surprised to see such centers, boffin brains and facilities included, somehow removed from the university and entirely (yet quietly) privatised, or subjected to a PPP arrangement where the private, rather than the public, in any partnership would seize control and almost all profit – with the Ukrainian taxpayer assuming all investment costs and/or loses?

How clear the horizon for such State-Private initiatives such as UaRpa at the forefront of military tech R&D?  Whose “zone” will it fall into, and when?

A reader may ponder given the direct involvement of several sovereign nations, notwithstanding NATO, in the development of the Ukrainian military and MIC whether they too are viewing managerial appointments within the MIC with the same cynicism as displayed within this entry – or not.  And if not, why not?  They have been active in Ukraine now long enough to spot a bad seed germinating, and currently still have the leverage to nip such dubious, yet increasingly obvious internal structuring in the bud.

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Move to transparent public procurement should be about more than avoiding corruption – Ukraine

October 10, 2015

The academic semester has once again begun after a summer of little more than “conferences” and “forums” in Odessa with titles that tended to mask nothing more than glorified trade and/or investment expo’s.

As such your author is once again “round tabling” on a fairly consistent basis both within Ukraine and occasionally abroad, sometimes as a panelist and other times lurking in dimly lit corners scribbling notes but saying little – or nothing.

A fairly recent local round table related to the issue of public procurement – an area that would have seemingly (despite having a very long way to go) improved since the on-line public procurement systems were introduced by the current government – albeit more transparent than ever before, it of course goes nowhere near to removing corruption from the procurement chain.

For example, the issue of sealed envelope bid  can be a single or double envelope bid.  The premise of a double envelope bid is that technical and financial issues are submitted separately and the tender assessed primarily on the technical merits (or lack of) without the influence of costings – for tender pricing is not necessarily the only or best way to select tender winners.  The quickest and the cheapest is not necessarily the best value for public money – there are many other considerations.

Sealed bids, of course, mean nothing depending upon the morality of those receiving them. If the committee is corrupt and/or self-serving, then there is always room for nefarious acts.

Nevertheless a little more light shining upon what has traditionally been a very dark and murky part of government mechanics has to be welcomed – and is – despite any reservations over the corrupt nature of those that remain involved in the process.

Having listened to the round table rightly deliberating issues of transparency, accountability and all such very necessary and relevant issues – there are public procurement issues that were not touched upon whatsoever.

In almost every nation “government” is one of the (if not the) biggest purchaser within internal economics – which is why corruption within the procurement system of the Ukrainian government is such a major issue.  Indeed in several market sectors, government purchases are a significant percentage of that market.  Whichever way you shake it, the Ukrainian government is a major player within the Ukrainian market as a buyer and will always remain so.

Government expenditure on “whatever project” is not a small driver within the domestic economy either.  That such projects always seem to be unfinished long after expected completion dates and at costs far greater than anticipated/expected maybe down to endemic corruption as claimed at the round table mentioned above – but it may also be down (at least in part) to extremely poor management both within the relevant government department and the contract winner.

It is without doubt that Ukraine is not the only nation where government projects fail to be delivered on time and on budget – far from it.  The civil service in many countries are replete with competent policy thinkers, but severely lacking in competent project managers.  Ukraine is not alone in the lack of competent project managers within government – something that will become far more acute when genuine “decentralisation” of budgets, responsibility, accountability and decision making occurs.  (Undoubtedly the lack of competent civil service policy thinkers will also become apparent at a local level rather quickly too.)

An exasperation of inefficiency and ineffectiveness of project management within the Ukrainian civil service seems all-but guaranteed.

A short term fix is obviously to bring in (expensive vis a vis a civil servant wage) private sector project management to work along side the local civil servants on major local budget projects – but it will certainly prove to be cost effective when viewed against losses from ineffective and inefficient project management – as well as making corruption a little more difficult.  It is not, however, the answer to the problem in the long term.

If the current government policy is to bring the Ukrainian economy from the Soviet epoch, leap frog the “acceptable”, and move to a cutting edge and dynamic economy whilst the opportunity exists, it would do very well to consider encouraging degree courses at universities in all Ukrainian regions in Public Administration – with part of the curriculum concentrating upon project management.  At worst such universities will become “feeder” universities to the civil service with employee that have studied public administration – at best it may produce capable civil servants that are policy thinkers yet also able to manage projects.

Unfortunately, at least within Ukraine, the idea of sabbaticals for existing civil servants within large corporations to witness quality project management or large and/or complex projects in action is a non-starter – for the large corporations in Ukraine are almost all State owned loss making, subsidy munching, inefficient and corrupt behemoths with horrendous management.  There are no BPs, Haliburtons, BAE Systems, DuPonts etc to send civil servants on a sabbatical.

There also seems to be a lack of clear-eyed use of procurement to develop the domestic economy over the long term.

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There are of course immediate issues that require immediate solutions.  Short term and low cost procurement may appear to save money, but it entirely ignores development of the national and local industrial development.  It is all very well buying existing “off the shelf” products (ultimately researched and developed by taxpayers in other nations) but that does nothing for domestic R&D or the existing domestic industrial base that needs to be weened from subsidies, transformed, updated and made competitive whilst delivery quality products – or otherwise simply closed.

As and when the sickly Ukrainian budget is freed from subsidising hundreds of soon to be privatised (or closed) State owned enterprises, presumably more efficient, better managed, streamlined entities will take their place – both nature and the free market abhor a void after all, and especially so when opportunities to tender for State procurement present themselves as a result.

Clearly directing government expenditure in some areas, such as IT, defence, education, space exploration, agriculture etc could and should be directed at home – and future needs directed at domestic R&D entities.  Indeed domestic R&D may well serve to more swiftly retool domestic industry to become competitive regionally.

It is not enough for Ukraine to simply look at the (gargantuan) tasks facing it today.  Clever procurement today will help in addressing some of the issues it faces tomorrow.  A solid commitment to science, technology and R&D by way of GDP % investment may seem luxurious today in such dire circumstances – but it will make tomorrow, when it arrives, much easier and far more dynamic.

Sadly one doubts the level of interaction and vision of the relevant ministries and Cabinet of Ministers over this issue when as an entity that would be the lead customer for many, it could be driving this issue when seeking efficient and effective solutions to its innumerable issues that require solving today and tomorrow.

Clever use of procurement, together with planning, will not only lead to growth, it will lead to effective and efficient growth.  Growth that is perhaps slow, but growth that is solid and reliable across all sectors of the economy where the government is a significant buyer.

Thus when faced with building a new nation, one has to hope that round tables of assorted boffins and activists, politicians and civil society that talking about procurement across Ukraine, are doing so without looking only at the issue as one of corruption and transparency, but also about how best to insure government procurement is effectively and deliberately used to build an entirely new economic  free market commensurate with the national challenges of tomorrow – rather than procurement that will only meet the fire-fighting needs of today.

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Ukraine and the Horizon (2020)

March 21, 2015

Yesterday, Ukraine signed up to, and became a partner within the EU Horizon 2020 programme.  It won’t get any serious media coverage, if any – although it should.

Thus (pending EU parliamentary ratification that will surely come) post-signing, Ukrainian innovators, researchers and businesses can now participate fully in this €80 billion funded project.

Carlos Moedas, European Commissioner for Research, Science and Innovation, and Serhiy Kvit, Minister of Education and Science of Ukraine

Carlos Moedas, European Commissioner for Research, Science and Innovation, and Serhiy Kvit, Minister of Education and Science of Ukraine

That Ukraine has decided to invest its resources, knowledge, and intellectual capital, in striving to meet the common goals of the wider European science and technology community, will undoubtedly be of mutual benefit – not withstanding the obvious deeper scientific integration, politically desired by Kyiv.

The signing of this agreement provides Ukraine access to the entire spectrum of activities funded under Horizon 2020.  It therefore presents a wide range of new opportunities to Ukrainian research institutions, universities, and businesses, throughout the entire research, development, and innovation value chain.

Also, Ukraine can now host European Research Council (ERC) grants, apply for financial support to innovative SMEs, benefit from support for scientific excellence, other research policies, and participate in the governance structures of the programme.

Indeed, Ukraine has joined an EU flagship initiative with the clear objective of pushing ever forwards EU competitiveness through its emphasis on excellence in world class science.  This clearly matters to Ukraine having ratified the DCFTA – ergo, ’tis far better to be a proactive part of that on the inside, than to be disconnected and reactionary entity on the outside.

All jolly good.

But  just as importantly – perhaps more so – is that this is the very first EU programme that Ukraine has chosen to fully immerse itself in, since ratifying the Association Agreement with the EU.  It thus sends the very clear message that Ukraine, under current leadership at least, considers research and innovation crucial for economic growth and the creation of jobs – as well as European/EU integration.

(For those wondering, the second such EU programme Ukraine is likely to fully embrace is the Euratom Research and Training Programme.)

It is a very encouraging development.

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Chess pieces, wiring and The Black Sea

February 18, 2013

A long time ago, 22nd October 2011 to be precise, I wrote a short blog entry on the importance and future usage of a geopolitical and and socio-economic entity called the Black Sea Economic Cooperation Organisation – or BSEC to employ the favoured acronym – in the chess game between the EU, potential members and partner states (be they disillusioned or clear eyed and keen), and of course  the geopolitical states that present almost systemic opposition to the EU in one way or another.

Of the 11 BSEC member states, Albania, Algeria, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine, the EU has hardly made any progress with regards to its transposition of sensibilities to the EaP members.

The EU has also certainly not increased its popularity within certain quarters in Bulgaria, Romania or Greece – the 3 EU members within the BSEC.

Even if the Association Agreement between Ukraine and the EU does get signed at the Vilnius summit in November, and agreements to begin similar documents with nations like Georgia and Moldova happen, none are likely to be ratified by the EU Member States any time soon.  That being the case, we can only expect the most politically and economically expedient parts to both sides to quietly be actioned regardless of official ratification as and when the time is right for either.

It is therefore necessary to have other hooks into Ukraine to stop it drifting whilst remaining in a more formally organised purgatory.  Some hooks are quite obvious, EBRD etc – some less so.

It should come as no surprise that this week the EU Commissioner for Maritime Affairs, Maria Damanaki, met with the Ukrainian Prime Minister to discuss cooperation over the Black Sea.  Inevitably leading to more agreements, memorandums of understanding, treaties and associated bureaucratic chains to tie one side to the other outside the Association Agreement and DCFTA.

We have statements from the Ukrainian Prime Minsiter “Ukraine is a maritime nation, so for us it is very important to develop cooperation with the European Union in the Black Sea region,”  – adding that Ukraine is ready to participate in the implementation of the EU’s integrated maritime policy such as conservation of fish stocks, sea cleaning, the development of infrastructure and the like. “This cooperation is especially significant now, when we started to develop the Black Sea shelf.

So for us it is important to decide on the notification by the European Union of the certificate, which is issued by the authorized bodies of Ukraine for fishing activities. This concerns not only the export of Ukrainian products from the customs territory of Ukraine to the EU, the volume of which is small enough. This is in the first place the delivery of products caught by vessels flying the Ukrainian colors.”  

In response, the EU Commissioner gave the expected responses relating to the importance the EU places on the Black Sea, and that without Ukraine it is impossible to do anything in the region.

The upshot – joint scientific research into the Black Sea, joint seabed mapping etc (funded by the World Bank apparently) prior to other  environmental and energy projects  – read monitoring the development of the Black Sea Shelf now that is eventually underway.

Thus, whilst all eyes remain looking at the obvious wiring between the EU and Ukraine, the circuitry in the background becomes ever more entwined in the event of any major short circuit on the mainframe.

Just how many more additional wires and hooks can be connected and inserted (over and above the numerous already existing) prior to the Vilnius summit – and what may be a success or disaster in equal measure as matters stand today – remains to be seen.

One has to suspect as many EU hooks and anchors as possible will be deployed in Ukraine over the coming months as insurance that in the event that the Association Agreement does not get signed (or in the event it does, but ratification is a very long way off) – Ukraine cannot drift too far eastwards easily.

It seems there is a flurry of activity on the chess board as the EU and Customs Union see November as a critical part of the game.

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European Space Agency – Ukraine assesses costs of membership

April 17, 2012

Space.  The final frontier.  These are the financial musings of Ukraine over whether to join the European Space Agency.  To explore strange new worlds, seek out new life and civilisations.  To boldly go where no Ukrainian has gone before.

No?  Ok, let’s try this:

Clangers, froglitts, Soup Dragons?

Errrm OK.  Maybe the aspirations, imagination and wondering of the night sky is not exactly going to be Star Trek in my lifetime, and the discovery of a Clanger or Froglitt would be incomprehensible, let alone a Vulcan, the Borg, or the appearance of a Vermicious Knid inside an elevator (with or without Willy Wonka).

Anyway, space is not exactly a new frontier as far as Ukraine is concerned.  Even if we completely and utterly ignore its experience and expertise during the days of the USSR, in the last 20 years Ukraine has propelled into space in excess of 100 bits and pieces.  In fact Ukraine accounts for approximately 13% of all global launches.

At the moment, amongst many space orientated things, it is heavily involved in a joint R&D programme with China, as well as closer neighbours east and west.  In the scheme of all things Ukrainian, space is something it does rather well.

It seems therefore natural that Ukraine would be interested in joining   the European Space Agency.  It would also seem a fairly good idea from a European viewpoint to have a tried, tested and successful new entrant to the agency.

Thus, it seems, Ukraine is now looking at membership and more importantly given the condition of the State coffers, the membership fees, rather closely.  One has to hope that when finances allow, Ukraine will decide to join the ESA.  It seems like a prima facie win/win situation for all.

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Ukrainian/Chinese trade set to exceed expectations‏

June 22, 2011

Well as you would expect when the President of China Hu Jintao is in town, trade and investment are high on the list of talks. Nobody wants to miss out on the ebb of cash China is strategically seeping in various directions around the globe and particularly not Ukraine.

That said, China would not overlook Ukraine. It is rich in all those things China needs to feed its economy. Ores, coal, fertilizers, chemicals, grain, metals and off-shore oil and gas which China has been invited to explore with Ukraine.

According to the Chinese and Ukrainian leaders, trade with China has increased by 80% this year. A very fortunate state of affairs for a commodity export economy like Ukraine of course. It is anticipate that Chinese/Ukrainian trade will pas $10 billion year, a figure that would exceed what both nations initially aimed to achieve.

Unsurprisingly, there is now a Chinese consulate in Odessa. You would expect nothing less for a nation projecting its influence. Odessa is a major logistics hub and a location where much going to and coming from China will enter and egress.

What the above link doesn’t say is that China also loaned Ukraine $3 billion yesterday. That said, you suspect the Chinese may feel safer loaning money to Ukraine than buying US Treasuries. At least Ukrainian loans can be repaid in ores, metals, minerals and all the things the Chinese economy needs if Ukraine should default by way of cash repayments. Raw materials and commodities must be a very attractive security in a world of fiat financing, much of which has no security at all.

I suspect a continued interest in Ukraine by China. Some mines and steel mills badly in need of investment will probably end up under Chinese ownership within the next 5 years. R&D in space will pick up by way of joint ventures. Energy, technology and raw materials will undoubtedly be a solid base for the Chinese/Ukrainian foreign and trade relations for the next 20 years.

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