In mid-September, the draft budget for 2024 was registered in the Parliament. It retained the priority financing of defense spending and provided for an increase in spending on social security and financing of part of the central authorities. Given the mobilization of funds for defense needs, the costs of restoring the country from the consequences of the full-scale invasion in 2024 are proposed to be reduced.

This applies directly to the Fund for the Liquidation of the Consequences of Armed Aggression, which is the source of financing the reconstruction of the infrastructure destroyed or damaged as a result of the war, as well as compensation payments within the framework of the eRestoration. The expenditures of other funds (the State Regional Development Fund, the State Road Fund) that could be used directly or indirectly to finance the country’s recovery needs will also be reduced. In addition, the relevant Agency for the Restoration and Development of Infrastructure fell under the cost reduction.

Given such budgetary prospects, the further reconstruction and recovery of the country will largely depend on the financial support of our international partners. But its provision will require the use of tools that will provide for the maximum level of transparency and accountability, targeted and efficient use of funds.

The National Restoration Fund could potentially become such a tool; it is proposed to be created as part of the national budget to eliminate the consequences of armed aggression and restore critical infrastructure, housing, and implement priority measures to restore the country.

The areas of financing by the National Restoration Fund mostly coincide with the Fund for the Liquidation of the Consequences of Armed Aggression, and the procedure for using the funds will also be approved by the Cabinet of Ministers. However, in other aspects, the National Restoration Fund will differ significantly.

The key difference is enshrining the provisions on the establishment and operation of the National Restoration Fund in the Budget Code. This should ensure its sustainability, in particular sources of filling it and financing of recovery needs. Institutionalization in the Budget Code will also reduce the impact on the fund on the part of various branches of the authorities and representatives of political forces during the budget process.

The main source of its funding will be the resources of international partners: both grants and loans from the European Union, foreign governments, international organizations, and donor institutions. Accordingly, the financing of the country’s reconstruction needs at the expense of international assistance and funds from sanctions and forcibly seized Russian assets will be divided; the Fund for the Liquidation of the Consequences of Armed Aggression will exclusively be filled at the expense of the latter.

The requirements to apply the methodology for prioritizing projects financed by the National Restoration Fund will also be enshrined in the Budget Code. This is important because currently, the methodology used in the selection of projects for financing from the Fund for the Liquidation of the Consequences of Armed Aggression is advisory in nature.

The decision on the allocation of funds from the National Restoration Fund will be adopted by the Cabinet of Ministers, but unlike with the Fund for the Liquidation of the Consequences of Armed Aggression, it will be done without the approval of the Budget Committee of the Verkhovna Rada. That is, in the case of the National Restoration Fund, it is proposed to eliminate the risk that we indicated regarding the Liquidation Fund.

Among the risks of the initiative are the following:

• the possibility of allocating funds for the construction or repair of facilities that were not destroyed or damaged as a result of armed aggression;
• preservation of expenditures for which separate funding is provided in the budget (for example, the purchase of school buses);
• the possibility of excluding certain expenditures from priority ones (financing other works and services for the implementation of restoration measures by the decision of the Cabinet).

By the second reading, the Budget Committee of the Parliament suggested rejecting the proposal to establish a National Restoration Fund.

We share the importance of defense spending. We are also convinced that in the context of growing state spending on social security, health care, and other basic areas of its functioning, the financing of the country’s recovery should continue. But the funds received, including from international partners, should be directed to the most important and priority needs. Therefore, a key aspect in the operation of the proposed National Restoration Fund or any other budget programs should be to ensure transparent distribution and efficient use of funds.

This publication was made possible by the support of the American people through the United States Agency for International Development (USAID) within the SACCI project. The contents of this publication are the sole responsibility of Transparency International Ukraine and do not necessarily reflect the views of USAID or the United States Government.

Ministry for Communities, Territories and Infrastructure Development of Ukraine (Ministry for Restoration), together with the RISE Ukraine Coalition, presented the communication platform of the unified electronic restoration management ecosystem DREAM (Digital Restoration Ecosystem for Accountable Management).

The communication platform is available via the link https://dream.gov.ua/ and contains information about the tasks, structure, and principles of the DREAM ecosystem, as well as a step-by-step plan for its implementation in 2023.

DREAM is a state digital ecosystem that will provide a single digital route for all reconstruction projects. It will collect all project data online, display it in the form of convenient tables, graphs, and charts, and ensure open data publication by the global Open Contracting Data Standard.

The ecosystem, the development of which began in the summer of 2022 by the RISE Coalition and the Ministry for Restoration, will allow monitoring of every stage of the project’s life cycle — from the registration of damage and destruction to financing, conducting procurement, and construction work, and putting the facilities into operation. Full transparency and access to data allow you to assess the progress of projects and make effective decisions regarding the attraction of investments and the development of specific industries, communities, and territories.

The DREAM ecosystem has two levels. The first is the already existing state registers, systems, and services that create a single route for the development of the project: Register of Damaged and Destroyed Property, Geoinformation System (GIS), Sectoral Infrastructure Reconstruction Management System, Diia, United State Register, Unified State Electronic System in the field of construction, Prozorro, Spending.gov.ua. The second level is the “umbrella” system, as it collects data from all first-level systems at each stage of the project and provides open access to them and management and control tools.

“The post-war reconstruction of Ukraine is tens of thousands of projects that will take place simultaneously, at different stages, throughout the country. Such a large-scale recovery plan involves attracting large amounts of foreign funding. A condition for attracting finance in full is transparency and accountability of all reconstruction procedures. Investors’ confidence is based on the “everyone sees everything” principle” principle, investors’ confidence is based. A transparent digital ecosystem allows this trust to be ensured“, emphasized the Vice-Prime Minister for Restoration – the Minister of Communities, Territories and Infrastructure Development of Ukraine Oleksandr Kubrakov.

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‍He added that DREAM is a powerful tool for international financial organizations, governments, and private investors. Thanks to DREAM, international organizations will be able to choose projects for financing through the general “showcase of projects”. They can also monitor how every penny of their money is used. Having access to all information on purchases, regular reports on the performance of works, audits, etc., investors can track the progress of each financed project.

‍Because all project ideas in DREAM fall on a single «bank of projects», each community can present its project to potential investors directly. At the same time, the sources of financing can be diverse: the state or regional budget, funds from foreign governments and organizations, private investors, or combined, within the framework of a public-private partnership.

‍“DREAM will become a real assistant for local self-government bodies. With the help of digital tools, instructions, tips, and templates, communities can create projects as easily and quickly as possible. And direct contact with potential donors will help attract funding. In this way, we strengthen the capacity of regions and stimulate their development“, said the Deputy Minister of Communities, Territories and Infrastructure Development of Ukraine, Oleksandra Azarkhina.

‍The task of the communication platform is to provide basic information about the DREAM ecosystem and explain its work’s main principles, in particular, to its key users. The platform also offers detailed clarifications on regulatory support for recovery processes, key tools, and procedures. In addition, the platform https://dream.gov.ua/ will become the primary source of information about the development of the system, tracking of key stages of its implementation according to the timeline, etc.

‍From November 2022, the Agency for Restoration is testing one of the key modules of the DREAM ecosystem – the Sectoral Infrastructure Reconstruction Management System. During this time, representatives of enterprises, institutions, and organizations belonging to the sphere of management of the Ministry of Reconstruction, as well as local governments, who joined the testing voluntarily, contributed about 5 thousand project ideas.

‍The first stage of the pilot project made it possible to test the Sectoral System and collect and consider user feedback. This week, the Government scaled up «the pilot» to central and local authorities throughout Ukraine (amendments to Resolution of the Cabinet of Ministers of Ukraine No. 1286). In addition, the project now extends not only to transport infrastructure but also to construction and real estate.

‍The first pilot projects of the system will become the basis of the portfolio of projects of the State Agency for Restoration.

“The DREAM electronic ecosystem will provide full access to information about each stage of reconstruction projects to all process participants and citizens. All stakeholders, including international partners, will have the opportunity to monitor every step of the implementation of restoration projects. There has never been such an array of open data on construction in Ukraine. I hope this system will become an example of publicity, transparency and openness”, noted the Head of the Agency for Restoration, Mustafa Nayyem.

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‍The development of the system was initiated by the Coalition of NGOs RISE Ukraine in the summer of 2022 and is carried out with the support of member organizations of the Coalition, particularly the Better Regulation Delivery Office (BRDO) and Transparency International Ukraine. Development financing is provided within the framework of Open Contracting Partnership projects with the support of the British Government. As in the case of the launch of such well-known state systems as Prozorro and Prozorro.Sale, upon completion of development, the system will be transferred to the state balance sheet represented by the Ministry for Restoration.

‍«Ukraine already has successful examples of cooperation between the public and the state, which resulted in modern digital systems and services that profess open data, full transparency, and accountability. The DREAM ecosystem continues this collaboration. Together with the Ministry of Reconstruction, we are creating a digital basis, a backbone for the effective, fast, and sustainable reconstruction of Ukraine, based on the principle«everyone sees everything», said the Head of Ukraine Support at Open Contracting, chairman of the board of the RISE Ukraine Coalition Viktor Nestulia.

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‍On August 26, 2022, a memorandum of cooperation was signed between the Ministry of Infrastructure of Ukraine and the Coalition of NGOs RISE Ukraine, in particular, regarding the introduction of an electronic reconstruction management ecosystem. The vision of the future system was presented during the expert discussion, you can watch the recording of the video stream from the conference here.

‍In November 2022, the Cabinet of Ministers passed Resolution No. 1286, which launched an experimental project on implementing a Digital Management System for the reconstruction of transport infrastructure.

 

The communication platform of the DREAM reconstruction management ecosystem was developed with the financial support of the BHP Foundation.

Transparency International Ukraine has developed a concept for the reconstruction of Ukraine. It embodies the vision of how to solve the greatest risks in the process of restoring the country.

We analyzed the experience of other countries in the matter of post-war reconstruction, the main shortcomings and their causes. And proposed an architecture of the reconstruction process, which should minimize risks during the implementation of restoration projects.

The basis of future trust in Ukraine’s intentions and aspirations will be the first steps towards the preparation of reconstruction. Namely, the formation of a new legislative field and the introduction of reforms and changes, some of which were postponed for many years due to the unpreparedness of the country’s political elites.

In particular, high attention will be paid to the fulfillment of the EU requirements (seven blocks of reforms), the implementation of which the EU has defined as a condition for Ukraine to retain the status of a candidate to join the European Union.

The reconstruction of Ukraine can be coordinated by an independent reconstruction institution, which will:

• develop standards and requirements for reconstruction projects;
• advise the initiators,
• administer projects,
• monitor the critical points of their implementation;
• analyze and evaluate the implementation of projects, develop recommendations;
• inform and report on the progress of reconstruction;
• connect all parties of the reconstruction process: international partners, the state, project executors (balance holders of objects), society (ultimate beneficiaries of reconstruction).

Reconstruction projects should be implemented as openly and transparently as possible, using electronic systems for identifying the project life cycle. Such tools can be:

1. Electronic reconstruction management system — information about all projects and their stages in one place.
2. The Prozorro e-procurement system — to implement all procurement transactions related to reconstruction projects, according to the same rules and in one system.
3. Geoinformation module and other systems for planning reconstruction needs.
4. Register of damaged and destroyed property.
5. Analytical systems for assessing losses and determining reconstruction needs.

As 2022 is drawing to a close, we have to accept the reality that 2023 will likely see the continuation of russia’s war of aggression against Ukraine. As of September 30, 2022, the total damage caused to Ukraine’s infrastructure amounts to more than $127 billion, with totals certain to far exceed this sum.

Reconstruction, especially when it takes place in an active war zone, is always accompanied by exceptionally high corruption risks. In this regard, Ukraine will be no different from any other country which has seen a massive influx of funds as a result of natural disasters or war.

Ukraine continues to need military support to fight back against Russian aggression, save its people and regain its territorial integrity. If corruption is allowed to go unchecked, Ukraine’s reconstruction would hand a massive victory to those who benefit from this subversive kleptocratic war.

Before the full-scale war, Ukraine managed to create a full-fledged ecosystem of bodies and a legal framework for fighting corruption. The results of the Corruption Perceptions Index show that, over the past ten years, Ukraine has significantly improved its score. Numerous reforms make Ukraine one of the most active countries in the region in terms of tackling corruption. 

The candidate status, received from the EU, is a chance to transform Ukraine, and this chance should not be wasted due to corruption or weak governance.

In July, ahead of the Lugano Reconstruction Conference, we highlighted our concerns about the insufficiently robust corruption infrastructure in Ukraine to mitigate these risks. Since then, attacks on infrastructure have intensified, and reconstruction efforts have begun in earnest, despite the ongoing security challenges. 

At the occasion of the International Anti-Corruption Conference, we take stock of progress made in the last six months.

On October 19, the Parliament voted for the draft law, which provides for the creation of a fund to eliminate the consequences of russian aggression. This is a special fund as part of the national budget for 2022, which will be filled exclusively with funds seized or received from the sale of assets of russia and its residents.

This is about closing a significant part of the country’s reconstruction needs — the construction of public buildings and shelters, reconstruction and repair of critical infrastructure, housing for IDPs and persons who lost it as a result of the military action, and even the procurement of buses and special vehicles for health care institutions and municipal enterprises.

In fact, MPs tried to solve two topical problems at once — providing partial financing of measures to eliminate the consequences of the armed aggression and settle the issue of disposing of part of the seized russian assets.

However, despite the important goal, the draft law has a number of doubtful provisions and shortcomings that will affect the effectiveness of the fund.

• The fund will finance a significant amount of expenditures — from the construction and reconstruction of critical infrastructure to compensation for damage to life and health caused in connection with the military aggression. However, the sources of the fund’s filling are limited — these are funds received from the forced seizure of the assets of russia and its residents. But they are unlikely to be enough to cover the government’s stated need of USD 3.4 billionthis year.
• Among the sources of financing of the fund, there are no confiscated russian assets. This mechanism is applied on a par with forced seizure — in early September, the HACC confiscated the assets of the russian oligarch Vladimir Yevtushenkov, and the Ministry of Justice is already preparing for new trials against sanctioned russians who have assets in Ukraine. However, without the procedure for disposal of confiscated assets determined at the level of the law, it is impossible to direct them to the needs of restoration.
• The draft law does not provide for a clear and transparent mechanism for using the money of the fund and prioritizing the areas of financing. This is a significant risk, which can lead to inefficient spending of budget funds.
• The power to dispose of the funds will be vested in the government, but the decision on the allocation of funds will be agreed by the VRU Committee on Budget. In this case, the role of the political component in the process is increasing, the consequences of which can be abuses in the financing of individual expenditures or blocking of funds.

The seized russian assets should be aimed at urgent measures to eliminate the consequences of the armed aggression. First of all, it concerns the restoration of critical infrastructure and housing in the de-occupied territories. That is why TI Ukraine recommends parliamentarians and the government to embark on changes immediately so that the fund becomes a truly effective tool.

Transparency International Ukraine recommends:

–       to separate and agree on the areas of financing of both funds to ensure the most effective use of funds and avoid their double financing when developing the draft law on the launch of the Reconstruction Fund of Ukraine;

–       to provide a transparent mechanism for the use of the money from the fund, which will determine the amount and procedure for the distribution of funding between areas, their priority;

–       to regulate at the level of the law the procedure for the disposal of russian assets confiscated in accordance with the Law on Improving the Effectiveness of Sanctions and to direct them to the needs of reconstruction of the country.

At the end of July, the National Council for the Recovery of Ukraine from the War published a large package of documents defining measures for the reconstruction of Ukraine in 24 focus areas. This is a set of plans for the next 10 years with a long list of what at least UAH 25 trillion will be spent on.

The publication of this plan was the second step after the conference in Lugano (which was mostly of a general nature) and was to form a kind of package of proposals from the Ukrainian Government to society and international partners, a certain vision of the restoration process by the state. 2,500 experts were allegedly engaged in the development of the proposals, but it is unknown to what extent their proposals were considered. It is more likely that these documents were created in the offices of specialized ministries because they often include context from similar proposals and plans from the past.

Limited Reconstruction Budget

Behind a thorough work of several thousand pages, in fact, there is a very heterogeneous package of documents, some of which resemble the “dream budget of a Ukrainian official.”

The content of the proposals and the amount of funds the National Recovery Council plans to spend raises many questions.

For example, main proposals in the field of agrarian policy are worth looking at.

Project	Measures	Amount	Sources of funding
Fruit and vegetables in Ukraine	Restoration/setting out new berry fields on the area of 49,800 ha, new orchards on the area of 230,700 ha, and nuts on the area of 8,400 ha.	UAH 210 bln (USD 7 bln)	State Budget, international loans and the EU donor aid
Meat and dairy independence	Increase by 480,000 tons of pork (64%), by 160,000 tons of beef (59%), by 500,000 tons of poultry (36%), by 7 bln eggs (50%), and by 1.8 mln tons of milk (20%).	UAH 229.9 bln (USD 7.66 bln)	State Budget, international loans and the EU donor aid
Export-oriented food factory: promotion and development of processing	Increase in raw material processing by 85%, from the current level of 20.1 mln tons per year to 38.8 mln tons per year in 2030.	UAH 474 bln (USD 15.8 bln)	State Budget, international loans and the EU donor aid

Multibillion-dollar state subventions of millions of seedlings and livestock are more reminiscent of the Soviet five-year plan than the plan for the reconstruction of modern Ukraine of the XXI century. They do not consider the prospects, nor the cost-effectiveness, nor the expediency of such costs. Unless we are thinking of returning to a planned economy, of course.

Is it possible to control how many millions of seedlings will actually be planted, and how many of them will survive the first winter?  Are we ready to invest (albeit together with international partners) almost a trillion hryvnias in what is likely to be stolen or not purchased at all?

Such proposals look like an official’s dream: a lot of money, whose efficient use cannot be verified. However, it is unlikely that such proposals will interest international donors.

A similar approach can be seen in many other areas. Proposals will provide for UAH 10 bln for the reduction of civil servants’ staff, the purchase of a bank by JSC Ukrposhta, expenditures on educational programs, which are usually included in the general budget, and much more.

It seems that all the secret desires that civil servants failed to include in the annual budget (because it is limited) they are trying to include in the “limitless” budget for the country’s reconstruction. But the problem is that, in fact, the recovery budget is not limitless, either.  

Essentially, it is a credit card, the limit on which depends on how effectively we use it. After all, for the most part, reconstruction will be financed by loans and low-interest loans. And no institution has yet made any commitment regarding a fixed amount.

Looking at the proposals of the National Council, it becomes clear why some international foundations and embassies support the idea of cooperation with individual cities (regions), rather than cooperation at the central level. At least the proposals of city authorities are usually more real and practical than investments in something big and abstract, like “Fruit and vegetables in Ukraine.” It is better to invest in a park of real trolleybuses than in something so “big.”

In addition, the great abstract project is like the “Ukrainian Wall” project. You can always say that there was not enough money, that it exists, but not completely… And you can use the funds in such a niche forever.

Not Exactly the Same as in Lugano

Going back to what the Ukrainian government presented in Lugano, the proposals of the National Recovery Council are very different from the initial message.

At first, it was mostly about the consequences of the war and the reconstruction of the country. We had the first estimates of how many houses and objects have already been destroyed and what needs to be rebuilt. But it is not about erecting the same building, but about creating a modern and safe project that will meet the needs of restoring the function of the previous object and at the same time will meet new security challenges and quality standards.

Instead, the proposals are a little different for now. For example, it is now planned to spend approximately UAH 1.3 trln on the reconstruction of the destroyed housing (only 5% of the total costs of the reconstruction project).  And it is planned to spend UAH 4.2 trln on the existing housing stock (energy efficiency and maintenance of apartment buildings).

Energy efficiency is undoubtedly important. However, is it rational to invest trillions of hryvnias in the housing, which is usually more than 30 years old, if new energy-efficient housing for hundreds of millions of square meters can be built with the same funds?

It is planned to allocate UAH 3.1 trln for the restoration of roads and bridges by 2032. These costs include current and average road repairs, which do not have a lasting effect in Ukraine. Is it worth repairing old roads designed in times of other weight standards, traffic intensity, and quality of materials? Or is it reasonable to build new roads according to new standards? Debatable.

Not Exactly What International Partners Expect

Obviously, the international partners in the matter of reconstruction expected Ukraine not to have a list of wishes with abstract titles and unclear budgets. Rather, it is a question of an effective concept of how the reconstruction process should take place.

The main issues that concern both Ukrainian and international society are how to avoid the risks of embezzlement and inefficient use of funds in the conditions of thousands of different projects and billions of dollars.

There is a high risk that international organizations will simply not rush to invest in a project in which it is difficult to predict the effectiveness of the use of funds. Therefore, the standard approach which Ukrainian officials apply to the formation of the state budget will not function here.

We need to look for answers to the questions:

• how will the reconstruction work?
• who will monitor the effectiveness of the use of funds?
• how will independent oversight be implemented?
• what role will the public play?

And many more!

So far, there are no answers to these questions. And in conditions of the announced wishes/needs for reconstruction finance, the risks seem enormous.

It should be clearly understood that international partners have a bitter experience in implementing similar projects for the reconstruction of Afghanistan and the Balkans. In both cases, most of the funds were spent inefficiently despite the formal mechanisms of independent supervisory bodies and international control. Therefore, until Ukraine develops an effective model for the implementation of reconstruction, which minimizes the political, corruption, and bureaucratic risks typical of Ukrainian state institutions, it is too early to talk about the reality of published projects worth more than UAH 25 trln.

Interestingly, the authorities also chose to discuss this plan through a standard bureaucratic process — bringing it to public discussion, which is usually used before approving regulatory acts. There is no voting for projects and proposals in Diia, no interactive information about the content of proposals. Even if citizens would like to understand what this plan involves, they are in for thousands of pages of complex and boring official text, tables, and forms.

 

The material was created with the support of USAID / UK aid project “Transparency and Accountability in Public Administration and Services / TAPAS”

During the Conference in Lugano on the restoration of Ukraine, representatives of the civil society and the state announced the creation of a new coalition of Ukrainian organizations and international partners — RISE Ukraine.

The goal of the coalition is to promote the principles of integrity, sustainability, and efficiency in the restoration of Ukraine.

RISE Ukraine promotes 10 principles of reconstruction and modernization of Ukraine. They have already been supported by the Ministry of Infrastructure of Ukraine, the Ministry of Economy of Ukraine, the National Agency on Corruption Prevention (NACP), and other leading government agencies.

RISE UA involves Ukrainian and international CSOs, initiatives, government agencies, and leading experts. The coalition will help the public sector, citizens, businesses, and international communities restore Ukraine and make it more resilient.

“Every Ukrainian should be involved in the restoration of Ukraine. Our citizens can and even should participate in the discussion of priorities and fair planning, monitor the implementation and, if necessary, report on potential corruption or its risk,” said Andrii Borovyk, Executive Director of Transparency International Ukraine.

The coalition will promote an open and constructive dialogue between Ukrainian civil society and the IT community, government agencies, international partners, donors, and authorities to achieve these goals.

“We want to create a compelling example of sounder, more open governance to inspire people to rebuild, just as our brave warriors do during the full-scale war,” Viktor Nestulia, Head of Eastern Europe and Central Asia, Open Contracting Partnership.

Members of the coalition are:

• Transparency International Ukraine
• Basel Institute on Governance;
• Ministry of Infrastructure of Ukraine;
• Ministry of Economy of Ukraine;
• National Agency on Corruption Prevention
• Prozorro;
• Prozorro.Sale;
• Open Contracting;
• Open government partnership;
• DOZORRO;
• Transparent Cities Program
• Institute of Analysis and Advocacy;
• DiXi Group;
• Center for Economic Strategy;
• Center for Innovations Development;
• Center for Public Monitoring and Research;
• Ukrainian School of Political Studies;
• BRDO Better Regulation Delivery Office;
• Agency for Legislative Initiatives;
• Anti-Corruption Headquarters
• Ukrainian Network of Integrity and Compliance;
• YouControl;
• VKURSI;
• “100% life”;
• OpenUp;
• Public organization “Philosophy of Heart”;
• CSO “Kharkiv Anti-Corruption Centre”;
• CSO “Platform for Public Control”

Let us remind you that on July 4, a conference on the restoration of Ukraine, Ukraine Recovery Conference, was held in the Swiss city of Lugano. During this conference, the Ukrainian government presented a plan for post-war recovery for 2023-2032 worth USD 750 bln. In total, it will include 850 reconstruction projects and provides for annual GDP growth of 7%.

 

 

Transparency International Ukraine is an accredited chapter of the global movement Transparency International, with a comprehensive approach to development and implementation of changes for reduction of the corruption levels.

TI Ukraine administered and transferred such electronic systems as ProZorro, ProZorro.Sale, eHealth, and Prozvit to the state. Moreover, we, as an innovation and expert center, have introduced city Transparency and Accountability Rankings, developed DOZORRO and DOZORRO.Sale communities to control public resources.

Media contacts: Olesia Koval, +380 93 808 82-78 (WhatsApp).

Despite the ongoing war, Ukrainian authorities, experts, and partners are already actively developing plans for the post-war restoration of our country. In this text, we explain what solutions are offered.

Reconstruction of Europe after the Second World War began only three years after its end. Before that, the viability of the post-war Western European economy was supported by imports from North America and subsidies and loans from the United States and Canada. This could not last long, which is why the Marshall Plan was developed — a program of technical and economic assistance to Europe not only to support but also to restore the economy.

If the country’s economy is not restored after the war, it will have to be constantly subsidized. And the latter as a result is much more expensive. It seems that world leaders have learnt this lesson well. After all, plans to rebuild Ukraine are already being talked about, although hostilities are continuing.

Who is developing this plan

On April 21, the President of Ukraine signed an order establishing the National Council for the Reconstruction of the Country from the Consequences of War. It is an advisory body tasked with developing a plan to rebuild Ukraine after the war.

According to the head of the Presidential Office, this plan has already been developed and presented to the Verkhovna Rada Committee on Economic Development on May 2. It has not yet been made public. However, Andrii Yermak shared the principles on which it is built:

• full access to the EU and G7 markets;
• obtaining candidate status and then full membership in the EU;
• building the economy on the principles of deregulation and liberalization;
• establishing logistics routes in the western direction;
• the transition from the export of raw materials to processing in those industries that provide the largest export revenue;
• development of the domestic military-industrial complex;
• self-sufficiency in energy will be achieved by increasing our own gas production and developing nuclear energy;
• climate modernization;
• localization not less than 60%;

The National Council for the Reconstruction of the Country from the Consequences of War consists exclusively of representatives of the Presidential Office and the Government. However, representatives of the public and international experts are also invited to the Council’s working subgroups. Authorities will listen to their advice.

The war in Ukraine is definitely a catastrophe. However, on the other hand, it opens a window of opportunities, in particular to engage world experts in various fields in the modernization and restoration of the country.

For example, the Center for Economic Policy Research has followed this path. It engaged eight world-class economists, including Kenneth Rogoff, Yuriy Gorodnichenko, Barry Eichengreen, and Sergei Guriev, to develop a “Blueprint on the Reconstruction of Ukraine.” In the document, the authors set out the basic principles on which the future reconstruction of the country after the destruction caused by the russian attack should be based. They also proposed 4 stages of action: one during the fighting to minimize damage and three — for gradual restoration.

At the same time, experts propose to create an International Agency for Reconstruction of Ukraine. Similar functions were performed by the Economic Cooperation Administration (ECA), which administered the Marshall Plan for Europe.

This agency must be affiliated with the EU, while being autonomous in decision-making and having a clear timeline. This body will advise Ukraine during the restoration and ensure that the money is channelled to its destination. That is, such an agency can co-exist with the National Council to assist it.

How will the restoration take place

First, before rebuilding, Ukraine is trying to minimize all kinds of losses from the war. This includes relocating businesses from the war zone to safer regions, housing for the temporarily displaced persons, and, in general, all measures to ensure that people and businesses continue to live and work, and that the economy lives on.

The second important step is to document the losses. On the one hand, it is needed to bring russia to justice for war crimes in international courts. However, on the other hand, such documentation helps to gather information about all the destruction and damage. Then it can be categorized and plans for reconstruction can be developed. For example, depending on the scale of the destruction, the house may need repair or reconstruction, or it will have to be rebuilt from scratch. To decide, firstly, information must be gathered about its damage, then it should be analyzed, and already on the basis of this analysis the choice must be made on what to do with the house.

A joint project of the Kyiv School of Economics, the Presidential Office and the Ministry of Economy, Russia Will Pay, and the Ministry of Digital Transformation are centrally documenting the losses from russia’s military aggression through the “Diia” application. Anyone can submit information about the damage the russian troops caused to Ukraine and its citizens: the destruction of infrastructure, housing, schools, looting, damage to the environment and much more. It is important that this collected information is then merged into one register, which will be used to plan the restoration.

Immediately after the end of hostilities, critical infrastructure will need to be restored. In particular — electricity grids, roads, railways, gas supply, water pipelines, Internet, rebuilding schools and hospitals, providing at least temporary housing for those who lost it. At this point, it will still be necessary to involve a lot of humanitarian aid. In part, this can be done before the end of the war — restoring the most essential things in the territories liberated from the occupation.

In the future, the state and partners will focus their efforts on restoring the economy as a whole and its stable growth. The main efforts will focus on job creation and permanent sources of income generation. These include programs for supporting and developing entrepreneurship, a balanced financial policy, and strengthening the energy sector.

As part of the post-war restoration, Ukraine will have to rebuild some cities almost from scratch. It is important that this reconstruction be not a blind reproduction of the destroyed. This is an opportunity to apply the latest approaches of urbanism and architecture to make Ukrainian cities more convenient and inclusive for their residents.

At the same time, for the movement to the EU, we will need to continue the reforms launched before the war and harmonize our legislation with the European one. For example, to introduce a European certification system, to continue large-scale privatization, anti-corruption and judicial reforms.

At the same time, it is critical not to lose previous achievements, but, on the contrary, to take them into consideration during reconstruction. Ukraine has made significant progress in ensuring transparency in public procurement. Currently, the Cabinet of Ministers has allowed procuring entities to purchase everything necessary under direct contracts. The only condition is to report on these procurement transactions either immediately or after the war. It’s the right decision. Just as it was right to allow everything necessary to fight COVID-19 to be purchased directly in the spring of 2020. However, military procurement transactions, as well as coronavirus ones at one time, will also need gradually to return to a competitive direction. How soon and in what way — the decision is being developed by the working group under the Ministry of Economy, together with Prozorro and experts from the public sector.

Where to get money

The restoration will be funded from all possible sources. The Ukrainian government has created several funds for this:

• Small and Medium Business Support Fund
• Army Support Fund
• Fund for Economic Recovery and Transformation
• Humanitarian Fund
• Public Debt Servicing and Repayment Fund
• Property and Destroyed Infrastructure Restoration Fund

For reconstruction, it is also planned to create a separate Ukraine’s Restoration Fund.

It would be more sound to unify all these funds into one. After all, it will be much more difficult to monitor the use of money from 6-7 funds — this will create confusion and corruption risks. Therefore, a general Restoration Fund for all money would be a good solution.

The accumulating of funds for the restoration of Ukraine is already thought of in Europe. The energy community has created a Reconstruction Fund of War-Torn Energy Infrastructure for Ukraine, the donors of which will mainly be EU member states.

In addition, the European Union plans to create a special trust fund for the restoration of Ukraine, which will work as the European COVID-fund.

How will these funds be filled? First of all, Ukraine hopes for the assistance of partner countries and international institutions — the World Bank, the International Monetary Fund, the European Investment Bank, the European Bank for Reconstruction and Development. 

A separate direction is the assistance of large international companies and charitable foundations.

Finally, part of the restoration costs can be covered at the expense of seized russian assets, both in Ukraine and in the world. However, in order for this to happen, it is necessary to make it possible from the point of view of legislation. The EU must decide how to seize these assets legally without violating the rule of law. At the same time, in relation to frozen assets, it is not always possible to establish a connection between a particular asset and, for example, an official from russia. It is also an issue that must be resolved by the European Union. It is necessary to create or open (if any exist) registers of beneficial ownership and generally improve the legislation on combating money laundering. A similar problem is now being solved in Ukraine.

Another theoretically possible source of funding is reparations from russia. However, they can only be talked about after the victory in the war and the capitulation of the rf. Russia must agree to compensate for the losses.

Ukraine takes into consideration the experience of previous wars of the 20th and 21st centuries and thinks about the restoration in advance. It’s not just about forming plans and funds for the future. For example, the reconstruction of critical infrastructure in the Kyiv region liberated from the occupation has already begun. And it’s great that the government responds quickly to challenges as soon as the opportunity arises. Thus, residents of the liberated territories will be able to return home faster, start working faster — the economy will recover faster.

However, it is now important that this recovery take place in a moderate and transparent way. Therefore, competent experts need to be engaged in these processes, and money must be spent effectively. Although the public sector is now actively engaged in supporting the army and providing humanitarian assistance, the restoration of Ukraine should become another parallel front for CSOs.