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. Last Updated: 07/27/2016

State Funds to Assist Military Conversions

Officials organizing a new government fund to help finance conversion of factories from military to civilian production expect to begin work in mid-August with a 1.5 trillion ruble ($300 million) kick-start from the federal budget.

Called the State Military Conversion Fund, the program is intended to lure foreign and domestic investors into potentially profitable conversion projects by providing loan guarantees and other financial support.

"Our fund is not a sack for ruble accumulation. Its primary task is to guarantee investors the return and growth of their money," Defense Industry Minister Zinovy Pak told a news conference Tuesday.

"We've got to get rid of the old habit in which a certain defense plant was given a state order to turn [production] from rockets to frying pans," Pak added. "Real conversion is a complex system which the fund is set up to implement."

Though government money is being used to start the fund, it aims to find other sources of financing, said First Deputy Economics Minister Yakov Urinson.

"We believe that the fund will provide for the most effective use of nonbudgetary and budgetary funds, including domestic and foreign investment, revenues from the sale of shares in converted enterprises, deductions from profits obtained from the sale of products manufactured with state support and other resources," Urinson said.

The fund will be chaired by Vladimir Salo, head of the defense industry department of the Economics Ministry. The 11-member trustees council will include Pak and Urinson. Moscow's Promradtechbank has been named to serve the fund's accounts.

The fund will support projects already under way as part of the military conversion program started in 1992, andwill be open to new projects as well.

Officials identified conversion projects in the aviation and aerospace industries as a top priority.

Salo said there would be emphasis on flexibility, citing as an example a newly developed "dual technology" concept.

"It makes it possible to have both military and civilian goods produced within two working shifts on a single production line without any machinery changes," he said.