Ukraine has allowed private companies to build underground production facilities for the defense industry. The decision of the cabinet in Kiev is from October 22 and is aimed at protecting military plants from Russian missile and drone strikes.
Investors will be able to build the facilities with their own or borrowed funds, and then sell, lease or provide them for use to companies that produce weapons. Thus, the state is looking for additional production areas without fully covering the costs of their construction.
“Private companies can build such facilities and subsequently lease or sell them to enterprises that directly produce weapons“, said Ukrainian Prime Minister Serhiy Koretsky. According to him, the measure will facilitate the expansion of production amid the increasing Russian attacks.
No customs duties and VAT for some components
The cabinet also introduced a mechanism for duty-free import of components used for the production of weapons when they are financed by international partners. Deliveries will also be exempt from value-added tax.
Checks and customs clearance of these goods will be carried out in a shortened procedure through the electronic system “Single Window“. According to Koretsky, the goal is for businesses to receive the necessary parts faster and to reduce administrative delays.
Underground factory for drone components
Part of the new model is already being developed through international partnerships. Croatian technology company ORQA and Ukrainian General Cherry are building an underground factory in Ukraine to produce components, electronics and communication systems.
The facility will supply products for drone interceptors and electronic warfare systems. Serial assembly of the finished devices for NATO allies will be carried out in Croatia, and the underground base will serve Ukrainian manufacturers.
“Producing components in Europe and importing them to Ukraine is less efficient and more expensive than directly manufacturing them locally,“ ORQA CEO Srdjan Kovačević told Business Insider.
More sustainable production, but at a higher cost
Ukrainian companies are already dividing their production between multiple smaller sites and periodically moving equipment. Decentralization reduces the risk of a single strike taking down an entire plant, but complicates supply, management, and control of the production process.
Underground infrastructure requires additional systems for ventilation, power supply, drainage, and material transportation. The costs often exceed those of conventional warehouses, and the conditions create additional risks for workers.
However, Kiev sees protected facilities as a way to maintain the production of weapons and critical technologies even in the face of ongoing air attacks.
Sources: money.bg, en.interfax.com.ua