Rebuilding Ukraine – Hopes and Fears
When the guns fall silent, how can Ukraine restore its physical, economic and social landscape and escape the post-Soviet legacy of corruption?
As Russian missiles destroy Ukrainian homes, livelihoods, and essential services, Ukraine has been constantly rebuilding. The country will face an even bigger job when the guns eventually fall silent—to rebuild the shattered physical infrastructure and heal traumatized bodies, minds, and communities. Ukrainian and international politicians, thought leaders and activists envision the reconstruction process as an opportunity to build a renewed Ukraine: an environmentally green, high-tech country that has shed the vestiges of Soviet-era corruption and patronage politics, cares for the widows and the disabled, includes Ukrainians of any ethnic and language background, and encourages and capitalizes on the flourishing civil society initiatives that have helped the country survive the war. How can Ukraine and its supporters fund, organize and carry out those visions? Ukrainian and international policymakers, investors and thought leaders are full of ideas for addressing economic and political challenges.
A Marshall Plan for Ukraine: Challenge and Opportunity
As of mid-July 2023, it is anybody’s guess when and how Russia’s war on Ukraine will end. Various world politicians have generated proposals for negotiations and ceasefire that neither Ukraine nor Russia found acceptable. Russia’s military may seem on the verge of collapse, with top officers falling prey to arrest, firings, or assassins’ bullets, yet Russian mines and defenses have slowed Ukraine’s counteroffensive to a crawl.
Ukrainians face a day-to-day task of repairing bomb-damaged buildings and electric grids and providing humanitarian relief to displaced and dispossessed people. European Commission President Ursula von der Leyen noted on June 21, “In just over a year, Ukrainians have cleared rubble from 2,000 kilometres of roads, rebuilt over 40 bridges, renewed 900 train stations and depots. All of this while fighting a war for their own survival.” She added, “But Ukrainians are not just restoring what used to be. They show us how they are already reshaping their country. Ukrainians are reimagining their future amidst all the loss, the pain and the suffering.” Indeed, Ukrainian and global policymakers, thought leaders, investors and donors are planning ahead for the country’s restoration.
The RAND corporation, a US think tank, predicted that Ukraine’s eventual post-war reconstruction “might be the largest post-war rebuilding effort in modern history” and compared it with the “truly transformative” reform and reconstruction efforts in Western Europe following World War II, Central and Eastern Europe following the Cold War, and the Western Balkans following the wars in the former Yugoslavia.
Like the Marshall Plan for rebuilding Europe after the Second World War, it is a massive task. Rebuilding could cost anywhere from $349 billion to $1 trillion,” according to Chatham House, a UK-based think tank, not to speak of the organizational, political and emotional cost of restoring the political and social fabric of a physically and mentally traumatized population. In February 2023 the World Bank’s “Ukraine Rapid Damage and Needs Assessment” provided a detailed breakdown and estimated total rebuilding cost of US$411 billion.
Breakdown of Reconstruction Costs from World Bank’s “Rapid Damage and Needs Assessment,” February 2023. Source: Statista Chart of the Day, https://www.statista.com/chart/29652/reconstruction-costs-due-to-war-in-ukraine/
Also like the Marshall Plan, this is an opportunity to build a renewed Ukraine. Visionaries see Ukraine’s reconstruction process as an opportunity to build environmentally sound infrastructure and industry; labor conditions friendly to war widows and veterans with disabilities; and an economy that prospers from high-tech products rather than from natural resources, as Natto Thoughts has discussed previously.
A Ukraine recovery plan drafted for the so-called Lugano reconstruction conference in June 2022 phrased principles for reconstruction as follows: rebuilding better than before; openness and transparency; “rapprochement with fundamental European values and standards” in the hopes of Ukraine’s eventual admittance in to the EU; sustainable development and energy independence; inclusiveness; and civil protection (security). Subsequent vision statements echoed these priorities.
The RAND Corporation suggested a division of labor to carry out this vision, based on the example of the Marshall Plan and the post-Cold War and Yugoslav reconstructions. “In all of these cases, the United States provided seed money and security, and the Europeans provided the bulk of the funding and advanced the process of European integration.” In the case of Ukraine, RAND said, “Reconstruction will be most successful if Ukraine sets the priorities, the United States leads on security assistance, and the European Union (EU) leads on reform and economic assistance.” But even before that, the report stressed, “Security is essential for Ukraine's reconstruction; without security, reconstruction will falter.” (Intense debates over Ukraine’s security arrangements–whether NATO membership or an Israel-like “porcupine” model--show the difficulty of finding a solution to this problem).
Ukrainian Government Dedicates Organizational Resources
The Ukrainian government has been working toward the restoration of Ukraine ever since Russia seized Crimea and parts of Eastern Ukraine in 2014. An incomplete list of Ukrainian government entities and resources participating in this effort includes the following:
Ministry of Development of Communities, Territories and Infrastructure (Міністерство розвитку громад, територій та інфраструктури України)—or Ministry of Restoration (Міністерство відновлення) or Ministry of Regions (Мінрегіон or Мінгромад) for short--headed since 2021 by Oleksandr Kubrakov, who is also a Deputy Prime Minister for Ukraine’s Recovery. This oversees broad infrastructure policy.
https://mtu.gov[.]ua/, https://twitter[.]com/minfrastucture, https://t[.]me/s/miUkraune [sic]
State Agency for Restoration and Infrastructure Development (Державне агентство відновлення та розвитку інфраструктури України or Держагентство відновлення for short), created in 2023 and headed by Mustafa Nayyem, the journalist who sparked the Euromaidan revolution in 2013. This agency receives direction from the Ukrainian cabinet through the above-mentioned ministry and handles the task of jump-starting pilot projects, interacting with donors and prioritizing projects.
This agency operates the Recovery website. Citing a vision of Ukraine as “strong European country” and a “magnet for foreign investment,” with a goal of attracting over US$750 billion in the ten years 2022-2032, the website features national programs ranging from digitization to environmentally clean building, energy independence, macrofinancial stability and competitive access to capital, modern regional housing and infrastructure, education, modern healthcare, and social policy.
Ministry of Reintegration of Temporarily Occupied Territories
Mission of the Ukrainian President in the Autonomous Republic of Crimea, also known as the Crimean Platform (not to be confused with an August 2021 conference of that name), which plans for the eventual reintegration of that region into Ukraine after Ukraine’s hoped-for liberation of that territory (https://www.youtube[.]com/watch?v=3aNkXsXj2dM).
Ukraine Development Fund of the Ukrainian Ministry of the Economy, dedicated to attracting public and private capital and investing “in the form of concessionary capital across five key sectors of the Ukrainian economy: energy, including green steel and hydrogen, infrastructure, agriculture, manufacturing, and IT.”
Global Supporters Offer Funds and Ideas
Governments, multinational banks and other organizations have given or pledged millions of dollars to help restore Ukraine’s physical, economic and social landscape once the shooting stops. Think tanks, donors and other organizations have offered their ideas and resources, with position papers from the RAND Corporation, the German Marshall Fund and the Center for Strategic and International Security (CSIS), among others. Conferences--ranging from “Rebuilding Ukraine, Rebuilding the World” (https://www.youtube[.]com/watch?v=ZPtxZCks1jc) held in February 2023 at Harvard University’s Ukrainian Research Center, to the BEARR Trust conference “War in Ukraine: The Civil Society Response” in November 2022 (https://www.youtube[.]com/watch?v=MciprGGCnhY), to the Ukraine Recovery Conference discussed in more detail below--have discussed priorities and best approaches for helping Ukraine. Many of these efforts draw on experts with long experience in economic development and governance reform work in Ukraine and elsewhere.
Challenges
Visions for rebuilding a renewed Ukraine come up against challenges, particularly corruption and balancing the changing needs of social groups and regions, as described below.
(Other social and political challenges--including how to restore democratic rights that were limited under Ukraine’s martial law status, how to integrate traumatized veterans and prevent a postwar proliferation of small arms, and how to deal with Ukrainians under occupation who are deemed to have collaborated with Russian occupiers—will have to wait for consideration in a future Natto Thoughts posting).
Progress Against Corruption Is Essential to Investor Confidence
A particular concern is to help Ukraine outgrow the corruption that marred that country’s Soviet and post-Soviet history.
Ukraine’s ratings in Transparency International’s Corruption Perceptions Index have improved somewhat, from a ranking of 142nd of 175 countries in 2014 to 116th of 180 countries in 2022. Its score of 33/100 has improved by 1 point since 2021 and 8 points since 2013, but it remains the second most corrupt European country after Russia.
Concern about corruption is nearly universal. Opinion polls show Ukrainians who have offered their lives in defense of their homeland do not want to see it revert to its former corrupt ways, Mikhail Alexseev of San Diego State University has pointed out. Anti-corruption expert Don Bowser put it more dramatically, “One million Ukrainian veterans returning from the war, with missing limbs, who bled for this country, are not going to accept things as they were before 2014...they won’t be throwing corrupt officials into garbage cans like they did in the past, but hanging them from lamp-posts.”
For their part, international donors and investors are anxious that their own hard-earned revenues not disappear into unscrupulous officials’ pockets. As security analyst Mark Galeotti has noted, this is the golden moment to seize, when funders are making decisions on investments, to perform due diligence, extract conditions that prevent corrupt misuse of donated funds, and thus help nurture a rule-of-law environment.
Anti-Corruption Reform: Halfway There
Particularly since the Revolution of Dignity in 2014, Ukraine has had institutions and dedicated activists that identify and fight political and economic corruption.
The National Agency for Corruption Prevention (NACP) oversees public officials’ asset declarations and formulated a National Anti-Corruption Strategy that the Ukrainian parliament passed in 2022.
Law enforcement bodies include the National Anti-Corruption Bureau of Ukraine (NABU) and Special Anti-Corruption Prosecution Office (SAPO) to investigate and prosecute cases, a High Anti-Corruption Court to try them, and an Agency for Recovery and Management of Assets (ARMA) to handle seized assets.
Ukraine’s vibrant civil society groups and journalistic community have long experience in finding and publicizing cases of corruption. Civil society investigative organizations and transparency initiatives include Chesno [“Honest”], a website providing information on politicians’ records, and Nashi Groshi (“Our Money”), which investigates corruption in public procurement.
Technological approaches
Digitization tools help remove opportunities for personal favoritism and bribery during Ukraine’s reconstruction efforts. Natto Team previously discussed the Diia “state-in-a-smartphone” app. The US- and UK-funded Transparency And Accountability in Public Administration (TAPAS) e-governance program, featured in the earlier Natto Thoughts report, recently celebrated the third anniversary of the Single State Electronic System for Construction. Other US-supported systems that should help include the Prozorro system for tracking government procurement contracts and the registry of beneficial owners of companies. Another digitization innovation to counter judicial corruption is the random selection of judges for cases.
As a new tool to counter corruption during Ukraine’s reconstruction efforts, the Ukrainian Ministry for Restoration has developed a prototype of a digitized ecosystem called DREAM (Digital Restoration Ecosystem for Accountable Management) that coordinates the Diia app with other state registries and services. Local Ukrainian communities will be able to create entries for projects needing investment and interact directly with potential donors. For their part, international organizations and investors will be able consult DREAM to identify projects for investment and can track the use of their money and the progress of the project. As of mid-2023 the Ukrainian government was advertising for employees for the DREAM office, and DREAM was in pilot mode.
Ukrainian civil society groups will keep an eye on the government efforts. As one example, EU-supported “Recovery Spending Watchdog” project centers on a Big Recovery Portal, an independent database for tracking and analyzing recovery projects. The portal will interact with DREAM and connect with existing databases such as the Prozzoro e-procurement system and the comprehensive database of damaged objects (damaged.in.ua).
Crackdowns:
President Zelensky’s administration has also restricted the power of oligarchs to use their money to influence political decisions. They have undertaken some high-profile dismissals and arrests of officials, including a supreme court judge and a deputy defense minister, on corruption charges.
Worrying signs:
However, worrying signs remain. Ukraine’s Prosecutor General Andriy Kostin has faced charges of politicized decision-making and “sabotaging judicial reform.” Citing his case, CSIS commented, “This could be a sign that Ukraine’s political leadership is not quite ready to let leaders of anti-corruption institutions—created with substantial support from the transatlantic community—to work without interference.” Though SAPO is a formally independent unit of the General Prosecutor’s office, in practice its autonomy has limits.
Critics have accused NABU, one of Ukraine’s more credible anti-corruption efforts, of overreach. Ukrainian anti-corruption activists have also questioned the competence and background of the newly appointed head of the Asset Recovery and Management Agency. These controversies give a sense of the legal and political complexities that make Ukraine’s anti-corruption path far from straightforward. As Josh Rudolph and Norm Eisen of the German Marshall Fund summed it up, “The country is only midway through a generational process of evolving from a Soviet oligarchy into a modern political-economic system.”
Funding: Making Russia Pay?
Discussions of how to fund Ukraine’s reconstruction usually name four potential sources: international donors, private investment, Ukraine’s own government, and Russian assets that Western governments have frozen. Each potential funding source faces challenges.
International donors and investors need to feel confident that their funds will not be stolen.
Ukraine’s own gross domestic product sank by 29% in 2022, but tax revenues surprisingly dipped only 14%, to total about US$37 billion in 2022, according to the Economist, which attributes this robust tax collection to patriotism and to government crackdowns on corruption. One example of that crackdown is investigations of some European and Ukrainian businesses that avoided paying taxes on grain exports, depriving Ukraine of some US$140 million in revenue, according to the Organized Crime and Corruption Reporting Project.
As for “making Russia pay” for repairing the destruction it caused, legal and political challenges complicate plans for the use of frozen Russian state assets, while lawsuits may chill enthusiasm for confiscating the assets of sanctioned Russian private individuals.
Top Down or Bottom Up? Civil Society and Regional Interests
As Natto Thoughts previously reported, researchers assess that Ukrainian citizens are undergoing a “quiet revolution,” shedding past Soviet attitudes of alienation from and distrust in the state no longer seeing the state as a hostile power (https://www.youtube[.]com/watch?v=q_Sb9JIhxXk). Decentralization reforms from 2015 appear to have contributed to Ukrainians’ vibrant civil society (https://www.youtube[.]com/watch?v=FHJbbdTZoMI), increasing trust in government, and a sense of “ownership of the state” (https://www.youtube[.]com/watch?v=3aNkXsXj2dM). Ukrainian citizens are also coming to “believe they are entitled to hold government accountable” in confronting corruption and having a say in decisionmaking.
On July 20, reports of protests over local Ukrainian officials’ spending decisions–road repair or the war effort?–sparked a Twitter debate on whether this is normal democracy at work or a worrying sign of intense anger and war weariness.
Citizen input and regional needs can sometimes be overlooked, Ukrainian legislator VItaliy Bezgin, a key advocate of decentralization, argued in a June interview. Bezgin said the Ministry of Recovery does not prioritize regional policy or take account of shifting regional needs due to the war. For example, when the Russians occupied parts of the Kharkiv region in the east, many people fled to Lviv region in the west. Now the Kharkiv region houses many Ukrainian military personnel and facilities and fewer civilians, Bezgin noted. In areas Ukrainian troops liberate after long Russian occupation, restoring local self-government will take time. Finally, some decimated communities are simply not worth rebuilding. The tax bases and economic development of each region will have to be rebalanced in accordance with these shifts.
Ukraine Recovery Conference, June 2023
These challenges and visions were on display at the sixth annual Ukraine Recovery Conference, which the governments of the United Kingdom and Ukraine co-hosted in London on June 21-22, 2023. The event “focussed on mobilising international support for Ukraine's economic and social stabilisation and recovery from the effects of war” and “showcased the strength and potential of the private sector in supporting Ukraine to “build back better”, working alongside a broad coalition of governments, international organisations and civil society,” according to event organizers.
The conference drew together “Leaders, Ministers, and representatives of 59 states, 32 international organisations and international financial institutions, over 500 businesses, and 130 civil society organisations.” To accommodate broader civil society interest, UK-based think tank Chatham House held a “Civil Society Road to URC23" side event on June 20.
Wish Lists
In advance of the conference, several think tanks and other entities prepared white papers to assess progress and suggest priorities and approaches.
German Marshall Fund
The German Marshall Fund of the US (GMFUS), a Washington DC-based transantlantic policy organization, not surprisingly, had thought deeply about how to facilitate this modern-day Marshall Plan for Ukraine.
The German Marshall Fund’s white paper provided the following top-priority recommendations:
war insurance to give potential investors confidence that they would not lose their money,
a “decarbonized” energy system,
confiscation of frozen Russian state assets to help fund efforts,
a greater role for Ukrainian civil society (NGOs and other citizen organizations) in reconstruction talks,
greater strategic planning capacity for the Multi-Agency Donor Coordination Platform that the Group of 7 industrialized countries (G7) launched in early 2023
conditioning international aid upon continued Ukrainian anti-corruption
The anti-corruption portion of the German Marshall Fund’s proposal recommended concrete steps for various stakeholders should take. These included the following:
Ukraine should continue judicial reforms, further empower anti-corruption agencies, and restore asset declarations that were suspended during the war
The European Union should offer more support to Ukrainian journalists and anti-corruption agencies.
The United States Congress should “Continue appropriating ample security aid without conditions” but also “Condition macro-financial assistance upon the continued delivery of Ukrainian anti-corruption reforms” and further empower inspectors general to monitor progress.
G7 Donors should “Empower the Multi-agency Donor Coordination Platform to prioritize anti-corruption reform conditionality,” welcome advice from Ukrainian civil society experts, and “Agree that donor agencies and their implementing partners will use Ukraine’s DREAM transparency system.”
Organisation for Economic Cooperation and Development
The Organisation for Economic Cooperation and Development (OECD) Council, an intergovernmental body with representatives from 38 democratic countries, held a ministerial-level meeting on June 7-8 2023 and approved a “Ukraine Country Programme,” with advice for Ukraine’s path to EU membership. The document also detailed past OECD efforts for Ukraine, including help with public administration and electricity market competition reform, public-private partnerships, education help for refugees, integration of refugees in recipient countries, tax transparency, energy system recovery, green debt capital markets, and law enforcement capacity building.
Transparency International and the Basel Institute on Governance
International anti-corruption organization Transparency International and the Switzerland-based Basel Institute on Governance, like the GMFUS, similarly praised Ukraine for progress in some areas and provided specific suggestions for improvement, such as restoring the requirement that officials declare their assets and requiring transparency into the handling of seized assets.
At the Ukraine Recovery Conference
At the conference itself, government representatives provided at least verbal acknowledgement of most of the “wish lists” described above.
Ukrainian government representatives provided a progress report on their National Recovery and Development Plan, “outlined the vision for their future post-war economy,” and provided information on the Ukraine Development Fund, mentioned above.
European Commission President Ursula von Der Leyen hinted at modest progress in Ukraine’s efforts on judicial reform, combating corruption, and “new laws for media and national minorities”; she said, “the goal is in sight and we will work with Ukraine to get over the finish line.” She outlined a proposed EU grant and loan package and promised to formulate a proposal for using the proceeds from frozen Russian assets to help fund programs.
Other European Commission and multilateral finance officials signed five agreements, worth over 800 million euros, to mobilize private sector investment in rebuilding Ukraine's economy, energy and municipal infrastructure.
US Secretary of State Antony Blinken announced that the US planned to invest over half a billion dollars to help overhaul Ukraine’s energy grid and support energy market anti-monopoly reforms. He welcomed Ukraine’s reforms to “combat market manipulation and insider trading” in energy markets, and reiterated the need for “a just and lasting peace in Ukraine..a peace that upholds... sovereignty, territorial integrity, independence – that addresses both accountability and reconciliation, that ensures Ukraine’s full participation and assent, and that supports Ukraine’s reconstruction and recovery.” He vowed that “Russia will eventually bear the cost of Ukraine’s reconstruction.”
The Multi-agency Donor Coordination Platform for Ukraine held its first in-person meeting on the margins of the conference.
In their Final Statement, the co-chairs of the Ukraine Recovery Conference announced the following:
“Ukraine’s partners have agreed to provide a further $60 billion to meet the recovery and reconstruction needs of Ukraine” (more detail here).
“Nearly 500 global businesses from 42 countries worth more than $5.2 trillion and 21 sectors have already signed the Ukraine Business Compact, pledging to support Ukraine’s recovery and reconstruction.”
The conference launched a war risk insurance plan.
Countries pledged contributions to a World Bank investment guarantee fund and an International Monetary Fund financial stabilization plan.
Participants agreed to “explore all lawful routes to ensure that sanctioned Russian assets are made available in support of Ukraine’s reconstruction, in line with international law.”
Ukraine’s partners announced a Clean Energy Partnership and investments in Ukraine’s energy grid, particularly “low-carbon, affordable energy innovation.”
These resolutions addressed most of the items on “wish lists” of priorities that think tanks had formulated before the conference.
Civil Society’s Vibrant Role
Chatham House Conference Urges Greater Role for Civil Society
The June 20 Chatham House side event on civil society featured discussions on topics such as the transparency, accountability, prioritization and funding of existing recovery efforts; the involvement of civil society in ensuring the integrity of recovery; community-based recovery models; and the role of technology and digital governance.
An Action Document prepared for that gathering, entitled “The Role Of Citizens, Communities And Civil Society In Ukraine’s Recovery,” advised Ukrainian authorities to encourage and empower community-driven recovery and “give civil society a powerful role in safeguarding the integrity of the recovery process.” As one example, it said the above-mentioned DREAM app does no good unless Ukrainian citizens can use it and publicly demand accountability for any violations.
The session “Human Capital: Healing, Reintegration, Empowering” discussed how to adjust to a changed labor force, integrate refugees, and heal communities. An Action Document pegged to that session called for investing in education, mental health support, preparing to help refugees return, rehabilitation and workplace accommodations for people with disabilities.
Promising Civil Society Initiatives
As policymakers and pundits debate, Ukrainian civil society continues to innovate. Below are just a few examples:
Solar power:
“While the first year of war decimated much of Ukraine’s energy infrastructure, it also offered a crash course on the value of distributed renewable power,” according to a May 2023 report in Bloomberg. “Solar installations — ranging from small foldable panels hung from balconies to systems covering entire rooftops — have started to pop up everywhere.”
Sustainable reconstruction :
A group of architects and urban planners called Ro3kvit (for the Ukrainian word pronounced “rozkvit,” meaning “blossoming” or “renaissance”) will train local officials in techniques such as “circular” rebuilding, using rubble to repair damaged buildings.
Adopt-a-City:
The city and region of Mykolaiv, which Russian missiles pounded for 229 days in a row, has received help from the country of Denmark to address current challenges, which currently include restoring water infrastructure.
Mission Possible:
Mission Possible: Rebuilding Ukraine Now,” a photo exhibit pegged to the June 20 Chatham House civil society conference, presented 11 locations, including refugee housing, schools, and youth centers, that were rebuilt with assistance from civil society organizations.
How to Help?
Many reputable organizations and concerned individuals, such as historian and Ukraine advocate Timothy Snyder of Yale University, Harvard’s Ukrainian Research Institute, the Atlantic Council and the Eurasia Foundation have compiled lists of ways to help and organizations to support.
The one organization that reappears in many lists is Razom. This US-based non-profit, born during the Euromaidan movement of 2013-2014, is a network of partners, volunteers, and donors that organizes short-term humanitarian relief and long-term projects to “unlock Ukraine’s potential and build toward a more prosperous, democratic nation. The Ukrainian word разом means “Together.”
Here are just a few additional organizations that reputable people have recommended, though Natto Thoughts has not personally vetted them:
Project Nadiya seeks to help displaced Ukrainians “rebuild their lives, homes and communities” by providing medium-term housing and social and employment support services for refugees in western Ukraine and by building affordable housing for the longer term.
Nova Ukraina provides medical supplies for soldiers and essential supplies, such as food and diapers, for civilians. It is also working on demining and the evacuation of Ukrainian civilians who were deported to Russia.
The International Rescue Committee(IRC) is on the ground in Ukraine and is also one of the organizations managing the settlement of refugees in the US.
World Central Kitchen provides meals for Ukrainian refugees in Poland and other border nations and in frontline communities within Ukraine.
Selo provides online English language practice and a listening ear to rural Ukrainians.
Update August 8 2023: added URL and Twitter address for the Ministry of Restoration