Institutional architecture of recovery

10 January, 11:10 AM

The post-war reconstruction of Ukraine will cost $350-750 billion, and it must be started now

There is no need to argue on which principles the recovery process should be built. It is clear that the donors will demand the greatest transparency. It will also be necessary to ensure inclusiveness — different countries will participate in the reconstruction, and will share the risks inherent in complex projects.

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It is not worth debating whether this will bring us closer to joining the EU — it will definitely bring us closer; it is only necessary to ensure that the process of expressing the will of the European peoples does not stand in the way of the construction of individual airports, schools, and hospitals.

But this is just talk. Based on the experience of other countries, the reconstruction itself will take 7-10 years. In order to go through this process quickly and efficiently, we need to move from talking to building an institutional architecture of recovery, which many do not want to talk about.

Since 1947, when then-U.S. Secretary of State George Marshall proposed the European Recovery Program, the Bretton Woods institutions, and the G7 appeared, countries have joined the European Union, built the EBRD, the EIB, and more. That is, a full-fledged international aid architecture has been created with its own rules, operational procedures, and products that have already been used in other wars and natural disasters.

Based on the experience of other countries, the reconstruction itself will take 7-10 years

Therefore, it is unlikely that some huge fund will appear in Ukraine or abroad from which the reconstruction will be financed. There won't be a single big Marshall Plan. Instead, we need to learn to work with the tools of the European Commission, IMF, World Bank, EIB, IFC, development banks, and other such institutions. We need hundreds of project finance experts who understand the language of these institutions and are ready to join in the search for money for recovery.

But it's even more important to stop talking about numbers in the hundreds of billions of dollars. It is necessary to go much deeper into specifics. The World Bank has previously estimated the costs of housing reconstruction at $69 billion, of which $33 billion are costs for the next three years — that is, about $11 billion per year. One can already dream about such a figure in the balance sheets of international organizations. But it is necessary to go even deeper and ask how much money will be needed for the reconstruction of Borodyanka, Bucha, and other cities. What about individual housing in each of these cities? This is how we will reach numbers in the millions of dollars and build financial engines for financing just such practical projects. And this can be a reality.

Currently, the issue of reconstruction is taken care of by separate ministries, namely infrastructure, community development, reintegration, energy, and economy. But best practice shows that a separate non-governmental reconstruction agency should be created for long-term reconstruction.

Such an agency would be able to avoid the political risks that exist in the government. Within this agency, you can build an adequate system of corporate management, hire foreign experts who have already participated in similar projects, and pay market wages and receive funds from donors for this. As the first staff of such an agency, experts from the Reform Support Teams (RST), who have been working for several years in various ministries at the expense of the European Commission and the EBRD, can be hired.

Building the agency on the right foundations and values ​​will make a big contribution to the country's image and help resolve issues of trust in our institutions.

A full-fledged control and accountability mechanism needs to be built to link finance and the reconstruction agency. This mechanism should cover all stages of public investment projects: from damage assessment and reconstruction needs of individual objects, packaging of projects into separate programs, prioritization, planning and budgeting, search and allocation of resources for projects, to procurement organization. Next comes public and donor monitoring of reconstruction, along with setting up accounting, reporting, and control tools that will increase transparency. After completion, there will need to be a regular audit and evaluation of projects by the state and donors.

Currently, such a system does not yet exist. I am sure that the recovery process can be digitized and the necessary digital systems can be created, which will once again increase trust in Ukraine and help us go through the reconstruction with dignity. Having won the war, we cannot lose the peace.

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