Ukraine approves simplified mechanism for building underground facilities for defence industry

The Cabinet of Ministers has approved amendments to Resolution No. 1494, opening access for private investors and developers to a simplified mechanism for constructing protected facilities for defence industrial complex enterprises. The Ministry of Defence reported the decision.

In September, Defender reported that the Defence Ministry was only preparing the amendments and refining them following legal and anti-corruption reviews. The government has now approved the mechanism. We explain how the mechanism will work and who can attract developers.

How the mechanism will work

Developers can use their own or borrowed funds to build underground production facilities and other protected infrastructure. Once construction is complete, they may transfer the facilities to a defence industry enterprise:

• as ownership;
• on lease;
• for use.

The investor and the defence enterprise will determine the construction period, terms of use, and transfer procedure by agreement.

If only part of a completed facility is transferred to the manufacturer, it must account for at least 25% of the facility’s total area. The premises must be suitable for establishing, relocating or expanding defence production.

Who can engage developers

To operate under the simplified mechanism, developers must conclude an agreement with an enterprise in one of the specified categories. These include:

• Defence City residents;
• state contract executors;
• enterprises designated by the Ministry of Defence as critically important to the defence industrial complex.

The amendments also simplify the process of obtaining the permits required to build protected production infrastructure.

What this means for defence industry enterprises

The mechanism can be used to create new protected capacity, relocate existing production or expand it. Such projects may be financed with non-budgetary funds.

“Enterprises will receive protected production space, investors will gain a new investment avenue, and the state will gain additional capabilities,” said Deputy Defence Minister Hanna Hvozdiar.

According to the Defence Ministry, the approved changes should accelerate the creation and scaling of production capacity, as well as simplify the relocation of defence industry enterprises.