Ukraine: modernization for now, reconstruction after winning the war

Luc Williams

The reconstruction of the Ukrainian economy after the Russian invasion was valued by the World Bank at $486 billion. Not only the destruction of buildings and other infrastructure was taken into account, but also the overall impact of the war on the Ukrainian economy. According to the World Bank's calculations, approximately 10 percent were destroyed or damaged. total housing stock, as well as 8,400 km of national roads and almost 300 bridges.

– Our analyzes show that a smaller amount is needed – said Bogdan Zawadewicz, director of the Economic and Geopolitical Risk Analysis Office at Bank Gospodarstwa Krajowego, and noted that the amount provided by the World Bank is more than 70 percent. refers to areas still occupied by Russia or closer to the front lines where projects cannot be implemented.

– Unless Ukraine gets them back. In the current situation, the amount needed for investments is lower, he emphasized, adding that the narrative should therefore be changed from the material reconstruction of Ukraine, which, in his opinion, seems to be a song of the future, to the modernization of the country.

– This one is very real today. When it comes to industries, energy, transport and infrastructure require the most urgent support, added Bogdan Zawadewicz.

According to BGK's analysis, the estimated costs of reconstruction and modernization in 2024 will amount to a total of USD 15.3 billion. The industry and services sector requires the most money – USD 3.6 billion. and housing and utilities – $3.1 billion. The next places are energy – USD 2.7 billion, social infrastructure and services – USD 2.4 billion, and transport and logistics – USD 2.3 billion.

However, when it comes to the territorial aspect, among the areas under the control of the Ukrainian authorities, the greatest needs exist in the Kharkiv, Kiev and Donetsk oblasts.

Leszek Gołąbiecki, vice-president of the management board and executive director of Unibep, said that the amounts may be higher, especially in the case of infrastructure, because the roads are already damaged abroad.

A time of war

Mustafa Najem, head of the State Agency for the Reconstruction and Development of Infrastructure of Ukraine, admitted that today, when there is a war, it is difficult to actually talk about rebuilding the country. When assessing the costs, one should certainly take into account economic issues and the fact that there are regions occupied by the Russians, such as Kherson, where the exact scale of destruction is difficult to determine.

– Houses will certainly have to be rebuilt, but the challenge for today and the future is infrastructure and logistics. This is needed for the country to function. Today, exports take place by land. The seaport was destroyed. So we need to modernize the road network. This is not only an expensive process, but also difficult due to lack of resources, he said. He added that many investments cannot be predicted, so making a plan for possible reconstruction is a huge challenge. Today, the biggest projects are those that were unplanned. He gave the example of a dam, the blowing of which deprived 1.5 million people of water. Therefore, it became necessary to build waterworks, and in a faster time than usual for this type of projects, i.e. not a few years, but several months.

– It will certainly be important to rebuild the energy distribution network. New bridges will be needed, as they have been massively destroyed. These are the investments we need to continue the war with Russia. And life requires new schools and hospitals, he stressed and encouraged investors to come to Ukraine to see for themselves the scale of destruction and decide how they can contribute to the reconstruction and modernization of the country.

– I encourage you to cooperate with Ukrainian business. This one still works. There are already many international companies that operate in Kiev. They are not yet involved in the implementation of specific projects, but they are analyzing the market and its needs in order to start investing as soon as possible, he added. He noted that there are new tender procedures in Ukraine and an agreement with the anti-corruption office, thanks to which a court judgment is not required to check the company's documents.

– So you can count on clarity and transparency – he emphasized.

Sergiy Orlov, deputy mayor of Mariupol for economic and investment strategy, calculated that EUR 13.5 billion is needed to rebuild this city alone. He added that we are talking about investments that will be carried out for years, not months.

– For now, we are focusing on helping the population. We do not have access to occupied cities, but to people who have been driven out of their homes, have moved to new places and need not only food and clothes, but also a place in schools for their children and knowledge where they can go to a doctor – he enumerated.

Business support

Volodymyr Lytvyn, president of the Polish-Ukrainian Chamber of Commerce, noted that the Ukrainian state receives financial and military support. However, it is also important for the private sector, because it contributes to the growth of the economy. Meanwhile, aid from the West is not directed to this area.

– Polish companies should take advantage of the opportunity that is created on this occasion. Establish cooperation, cooperation and implement projects. After Ukraine's victory, it may be too late to build market share. The baton will be taken over by the Germans and the Americans. It will be very difficult for others to break through, he noted, adding that investments by Polish companies in Ukraine require support. Organizations supporting investors have a role to play here.

– Ukraine's rating is low. This translates into investment insurance, which discourages people from implementing new projects, he said, noting that Ukraine's financial situation, despite the ongoing war, is good. This is the effect of, among others, reforms carried out before Russia's aggression in 2015–2016. According to the Statistical Office of Ukraine, in 2023 the country's economic growth amounted to 5.3%. In the first year of the Russian invasion, Ukraine's GDP shrank by almost a third. The country's authorities hope that in 2024 economic growth will amount to 4.6%.

– Therefore, technical barriers to investment must be eliminated – he emphasized.

Katarzyna Kowalska, vice-president of the management board of KUKE, admitted that insuring receivables against political risk is not a cheap solution. It is determined individually, and the amount of the rate and premium depends on the sales value, geographical directions, industry, recipient structure, payment terms and history of cooperation. The country's rating is very important. She noted that KUKE does not have the power to reduce the cost of such insurance for Ukraine. The rules in this respect are imposed by the OECD. Katarzyna Kowalska said that despite this, there are attempts by some countries to change the conditions by combining them with an aid program. So far, however, no country has decided to make such a move.

Experts noted that despite the high costs of insurance, investments in Ukraine are still profitable. This, in turn, is thanks to the government of Ukraine, which introduced tax incentives for investors.

Katarzyna Kowalska reminded that last year KUKE insured trade with Ukraine. Polish entrepreneurs who want to build or expand a plant or take over an existing entity in Ukraine can count on investment insurance. The agency also offers insurance for the repayment of financing incurred for the implementation of the project to rebuild Ukraine.

– Entrepreneurs who want to get involved in this process can also count on the support of BGK – reminded Bogdan Zawadewicz.

Polish fund

During the discussion, there was talk of the need to create a special Polish Fund for the Reconstruction of Ukraine, whose funds could be used by domestic entities interested in operating in Ukraine. Of course, by participating in tenders for investments in advance and maintaining the principle that the materials and raw materials needed for the implementation of the projects would be delivered from our country.

– Before the outbreak of the war in Ukraine, support for private business worked very well. Thanks to him, we built two shopping centers in Ukraine. We expect these types of programs to continue on a larger scale. Especially since the Polish economy will also benefit from them. Materials for the implementation of projects in Ukraine will come from our country – added Leszek Gołąbiecki and noted that he hopes that the reconstruction of Ukraine will start soon, because the country's investment needs are huge.

– Currently, the situation is such that companies from Japan and Korea appear in Ukraine because they have money. However, they do not make investments, they just ask us about the possibility of cooperation. They know that we have experience in operating on that market, said Leszek Gołąbiecki.

During the panel, attention was drawn to the fact that not only the lack of sufficient financial support is a barrier for Polish companies to enter and operate on the Ukrainian market.

– Moreover, there is a shortage of specialists and workers on site. Therefore, there is a risk that there will be no one to implement the planned projects. There will also be no one to physically work there. In addition, there is a huge risk of blackouts, which already threatens the continuity of operation of production plants, noted Bogdan Zawadewicz.

It was also wondered whether Polish construction companies would be able to cope if the funds from the KPO were released for good, and thus investments started in Poland. Especially since their accumulation is expected. Therefore, there may be no opportunities to conduct projects on both markets.

– When it comes to the country's good macroeconomic situation, Ukraine owes it to the inflow of external funds. It is stable, but it is not the result of market factors – noted Bogdan Zawadewicz.

He also referred to the new EU instrument, the “Ukraine Facility”, which is intended to provide this country with predictable financial support for the years 2024–2027, and thus help in reconstruction, reconstruction and modernization. Its value reaches EUR 50 billion in the form of grants and loans.

In order to receive financial resources, the Ukrainian government developed the so-called Plan Ukraine, i.e. a program of changes and investments in this country. It presents a vision of reconstruction, reconstruction and modernization of Ukraine and planned reforms on the way to EU membership.

It was also discussed whether the Polish presidency of the EU could change anything in the situation of Ukraine or accelerate its membership in the European Union.

– There is no measure that will open the way for Ukraine to join the EU. We help with our hearts, but we negotiate with our minds, concluded Jakub Wiśniewski, Undersecretary of State at the Ministry of Foreign Affairs, adding that it is important that Ukraine does not stray from the path of necessary reforms and the fight against corruption.

photo: press materials


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