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The shape of a defense-led recovery depends on whether Ukraine makes the right deals in Europe as it seeks to maximize the value of its expertise, according to Tamar Jacoby, director of the Progressive Policy Institute’s New Ukraine Project.
The defense sector has become increasingly decentralized to allow it to be flexible and innovate with real-time feedback from the frontline, but it means it often misses out on economies of scale.
Ukraine’s Ministry of Defense has also, until recently, banned weapon exports, and deals that have been permitted so far have been time-consuming and stymied by bureaucracy. The businesses that flourish tend to be the ones with the right connections, Jacoby said.
Regulations need to be reformed to speed up processes, tackle corruption, and encourage the development of a robust defense export industry, which will attract talent.
Jacoby compares Ukraine to Israel, which was able to build on its military experience to fuel an economic and technological boom through sales of high-end, cutting-edge weaponry, supported by a government apparatus actively pushing exports.
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