The Future of the New Leadership of Restoration Ministry

On June 18, the government dismissed Mustafa Nayyem, the head of the Agency for Restoration, who had headed the body since last January. Earlier, a similar fate befell Oleksandr Kubrakov, the Minister of Communities, Territories and Infrastructure Development. In addition, along with the former heads, a number of deputies left the ministry and the agency at once. Therefore, in the end, both key bodies responsible for restoring the country from the consequences of the war found themselves in a state of uncertainty, which intensified following the rumors about the possible division of the Ministry for Restoration into two institutions.

According to the report of the Agency for Restoration, some areas of reconstruction are in jeopardy because the Cabinet of Ministers does not disburse previously allocated funds to continue the works. Without a clear position of the leadership of the bodies responsible for recovery, the funding situation is unlikely to change.

However, the policy vector of both the agency and the recovery process in general will largely depend on the new head of the ministry (or new heads in case the agency is separated). While the frenzy about possible candidates has waned, we have identified the key challenges that they will face in the field of recovery and the areas that we will continue to monitor.

Funding and its allocation

The main source of funding for reconstruction projects last year was the Remediation Fund. It was filled mainly at the expense of forcibly withdrawn funds of banks with Russian capital and part of the profit of the National Bank, which it transfers to the budget. In 2023, almost UAH 20 billion of the planned UAH 37.5 billion was allocated from the fund for areas related to reconstruction and compensation for damaged/destroyed housing. There is little money left in the fund for this year. Therefore, the new management will be forced to seek either new sources of money or other funds and programs to finance the reconstruction.

However, this is not the greatest challenge. To finance the recovery, another, already existing fund (for example, the national budget reserve fund) can be chosen, or even a new one (a similar attempt was made last autumn) can be created. The main question is how this money will be distributed.

We at Transparency International Ukraine have been advocating for a long time so that the funds for reconstruction are distributed according to clear priorities. Last year, the Ministry for Restoration finally approved a project prioritization methodology to remediate the consequences caused by the armed aggression of Russia against Ukraine, developed by World Bank experts. However, the problem is that this methodology is advisory in nature and applies only to projects financed by the remediation fund. It is important that new leaders responsible for reconstruction continue the course towards transparent prioritization. To achieve this, it is necessary to make the use of the methodology mandatory for the selection of projects for funding, regardless of the money’s source.

DREAM

The DREAM ecosystem is an innovative digital tool designed to ensure transparency and accountability of recovery processes in Ukraine. The DREAM system operates according to the principle of “everyone sees everything” and collects, organizes, and publishes open data at all stages of project implementation, from planning and approval to financing, procurement, construction, and reporting. To date, more than 5,000 projects with a confirmed amount of funding, including donor funding of UAH 89.1 billion, have been included in the system.

The system was developed in cooperation with the Ministry for Restoration, the RISE Ukraine coalition of CSOs, and international partners. Subsequently, the Ministry actively promoted its use. In particular, following its initiative, starting from 2023, regional and local reconstruction projects have been submitted for financing with the resources of the Remediation Fund through the DREAM system. In general, any initiator of a reconstruction project can now use the system. However, so far, this is only a pilot project, in accordance with the government decree.

The obligation to apply the DREAM system is not defined at the level of the law. Therefore, the fate of the system is in the hands of future reconstruction leaders. We hope that they will maintain the vector of support and promotion of the DREAM system, in particular in terms of enshrining the obligation to use the system at the legislative level.

The Agency for Restoration and regional reconstruction

Back in March, the Agency for Restoration was responsible for implementing approximately 40% of all reconstruction projects in Ukraine. This causes high corruption risks in its activities.

The key problem of the Agency is related to its structure. Regional recovery services operate as separate legal entities, due to which the Agency has limited influence over them. For example, last August, the agency developed methodological recommendations for holding construction tenders related to the reconstruction of civil infrastructure facilities. But not all recovery services applied them in their activities.

However, the services are the procuring entities of works on recovery projects, the implementation of which is the responsibility of the Agency. Therefore, it is important to reorganize the body into a single legal entity to increase control over the activities of regional units.

Another risk is the potential division of the ministry. Before the transformation in 2023, regional services had belonged to the vertical of the Ministry of Infrastructure. Therefore, after the separation, they are likely to remain in its sphere of management and, accordingly, will no longer be responsible for regional reconstruction projects. Instead, the new/old Ministry of Community and Territorial Development will have to create a new structure that will take over the restoration of the regions or choose it from among the existing ones; this will require significant time and human resources.

And last but not least, we should not forget about the personnel issue. First of all, the procedure for appointing the head of the Agency. For the period of martial law, this person is appointed without holding a competition, in accordance with the legislation on civil service. In addition, candidates for this position are not properly vetted for competence and integrity. Therefore, there are no guarantees of the independence of the head of the body.

Another risk is the fact that the Agency’s employees are in the status of civil servants—salaries in the agency are low relative to the need for qualified specialists, as well as high corruption risks of positions.

Considering all these risks and the responsibility, it is necessary to establish the procedure for appointing the head of the Agency for Restoration based on a transparent competitive procedure (similar to how the heads of anti-corruption bodies were selected) and provide guarantees for the independence of its activities, as well as establish reasonable salaries for Agency employees.

Public engagement

The Ministry actively cooperated with civil society in restoring the country from the consequences of the war. In addition to the development of the DREAM system, public experts were engaged in the prioritization of reconstruction projects and the overall development and discussion of specialized legislation.

This interaction ensures the realization of the rights of citizens to participate in the management of public affairs as well as in decision-making that takes into account the real needs and priorities on the ground. Therefore, close cooperation in the reconstruction sphere should continue. For instance, through the engagement of members of the public in working groups, expert councils, and other advisory and consultative bodies on recovery issues. An example of such engagement is the mandatory participation of the public in the commissions to consider matters of compensation for damaged property.

We hope that the new leadership will continue the course of openness and cooperation with the public.

Transparency International Ukraine will continue to work with the state in the field of reconstruction to ensure its efficiency and transparency. Whoever heads the reconstruction process, we hope that the priorities and course of the country will not change.

The new leadership of the bodies responsible for the recovery of the country will have to act in conditions of limited financial resources. However, despite this, we expect that the proactive policy in terms of the country’s reconstruction will continue. In such circumstances, the responsibility for ineffective or unreasonable decisions is significantly increasing, so future heads of these institutions need to be clearly aware of the challenges that they will face and how to avoid their negative impact.