MOSCOW, Jan. 11 (UPI) -- It is impossible to overhaul the Russian defense industry's production facilities in the next two years because modern metal-cutting tools and automatic transfer lines are expensive. Local enterprises turn out only part of their required range, and the rest has to be purchased abroad. Add to this high import duties, which cannot be reduced or abolished. This problem persists despite efforts by the government and corporate managers to solve it.
Right now, the Army can buy only six to seven, rather than 10, fighting vehicles because raw materials, components, fuel, heat and electricity are becoming increasingly more expensive.
One should also mention the gap between real and "official" prices, and the need to support reserve defense factories, which have mothballed production but still have to pay heating and power bills and are subject to sanctions for their failure to fulfill the defense order.
Only 36 percent of strategic defense enterprises are solvent, while another 23 percent are tottering on the verge of bankruptcy.
Another problem has to do with human resources. Most skilled workers and scientists are nearing retirement age. At the same time, quite a few technical-college graduates are in no hurry to sign up with the defense industry because of low wages and insufficient career opportunities.
The lack of qualified personnel and up-to-date production equipment will inevitably impair product quality. In fact, India, Algeria and some other countries are beginning to file quality claims.
Property rights are a serious problem, too. The state controls some defense factories, while others have been privatized; there are also mixed companies. But the government is delaying the creation of holding companies that could help the defense industry.
Sergei Ivanov said only 16 out of 37 holding companies had been established by late 2007 and that the statutory documents of another 21 companies had to be submitted to the government by Jan. 1.
He said documents on just half their number were currently available and that the heads of some ministries and departments had to assume responsibility for failing to fulfill presidential orders.
However, the newly established holding companies are still unable to restructure production, to get rid of surplus core assets, to choose optimal development scenarios and the best weapons and civilian products.
Since 1992 not a single state defense order has been fulfilled completely and on time. It would be naive to hope that the industry's problems will be solved in a couple of years. Nor should we expect a major breakthrough this year. All we can do is work patiently, without deviating from the preset program.
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(Nikita Petrov is a military commentator for RIA Novosti. This article is reprinted by permission of RIA Novosti. The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.)
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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)
