In early July, high-level representatives from more than 40 countries met in Laguna, Switzerland, and they promised to support ambitious plans to rebuild Ukraine.
The Ukraine Recovery Conference was an important milestone in the preparation for the reconstruction of Ukraine, indicating that significant resources can be invested in the country after the war. But the conference did not shed much light on key issues, such as how reconstruction will be organized and who will control and direct the money?
These are difficult questions that require thorough consideration and must be addressed before significant funds are committed to Ukraine’s recovery. An optimal design would reflect the importance of several factors.
To get started, it is necessary to determine how centralized or decentralized the reconstruction will be. One extreme is Desploma, the Soviet agency that dictated the smallest details of the production.
At the other extreme is full decentralization with individual commitments. For example, Hamburg recently pledged to provide humanitarian aid to kyiv.
(Also: France and Spain, forced to restrict water consumption due to drought).
To begin with, it is necessary to determine how centralized or decentralized the reconstruction will be
This approach may be instrumental in increasing Ukraine’s local “ownership” of reconstruction: because kyiv has asked for help, it is more likely to deal with it well. On the other hand, decentralization can lead to duplication of effort and lack of coordination.
A related approach is to focus reconstruction on projects similar to those undertaken by development banks in emerging economies. This is a useful model to address specific needs; for example, the lack of electricity in a particular region.
But it is less suitable for the reconstruction of countries. The failed reconstruction programs in Afghanistan and Iraq after 2003 suggest that it is absolutely imperative that donors and recipients coordinate projects.
The recovery horizon must also be identified. This process can take years, so multi-year planning is essential. The Marshall Plan for Europe after World War II, which was designed in this way and lasted for four years, is often credited with laying the foundation for Europe’s rapid growth during the post-war period. But it didn’t start until three years after the war ended.
At the same time, the newly created United Nations also provided significant assistance to Europe. Unlike the Marshall Plan, however, the UN programs were so fraught with uncertainty about their anticipated duration that European governments could not trust them to continue from one year to the next.
risks
Ukraine’s experience as a recipient of financial aid to support the current war effort illustrates the risks. And once the immediate pressure to deal with Russia is eased, politicians in Ukraine and the West may change their priorities. To insulate reconstruction from such vagaries, it must be organized by a stable, technocratic organization that can oversee its planning and execution and remain relatively immune to the turmoil of political life.
(We recommend: Uefa applies a harsh sanction for chants in favor of Vladimir Putin in the Champions League).
Ukraine’s new status as a European Union (EU) candidate country should help here. We believe that reconstruction and accession must be joint processes. The reconstruction of Ukraine is not only about rebuilding the physical infrastructure, but also about a profound modernization of institutions and social infrastructure. His aspiration to join the EU is a powerful catalyst and should help overcome vested interests.
The reconstruction of Ukraine is not only about rebuilding the physical infrastructure, but also about a profound modernization of institutions and social infrastructure
This is important, given the country’s checkered history of reform: since independence in 1991, Ukraine has completed only one International Monetary Fund program.
The other ten were arrested after Ukraine failed to keep its promises. A large part of Ukraine’s future economic growth will come from foreign investment direct, and entries will depend on compliance with the rule of law and other EU rules.
Internal and external transparency will be crucial to the success of the reconstruction process. Since much of the funding will come from the EU, European taxpayers have every right to know how their money is being spent.
This will have to be a joint project: just as Ukraine must own the reconstruction, the EU must co-own it. Again, the experience of Afghanistan and Iraq suggests that when donors have little ownership in the reconstruction process (through joint decision-making, local sourcing, and community input), their lack of commitment can have disastrous consequences.
The EU’s most valuable role for Ukraine will be to provide an institutional anchor. Large budgets will need to be carefully and transparently planned, managed, reported and audited.
Although Ukraine has made great progress in eradicating corruption,n since the Dignity Revolution in 2014, much work remains to be done. For example, the National Anticorruption Directorate and the Specialized Anticorruption Prosecutor’s Office have been without a head for 18 months and the National Anticorruption Directorate has not had a head since April 2022, which limits the effectiveness of these bodies.
(Also read: Putin and Erdogan strengthen their business alliance after their meeting in Sochi).
While Ukraine has made great progress in rooting out corruption since the Revolution of Dignity in 2014, much work remains to be done
Through its institutional capacity and aid conditionality, the EU can help Ukraine ensure that reconstruction is not another gift to the “right people”, as it was during the privatizations of the 1990s.
The Economic Cooperation Administration (ECA), the US agency created to oversee the Marshall Plan, comes closest to meeting these criteria. The ECA was a largely technocratic institution with a multi-year planning horizon.
It coordinated closely with local governments to avoid duplication and waste, but local governments made requests for funding, thus taking ownership of the reconstruction process.
Where necessary, the ECA enforced conditionality to ensure that war-torn countries kept their promises of reform. The ECA epitomized America’s commitment to rebuilding Western Europe, and those who ran it felt responsible for achieving this goal.
We have learned a lot since then, of course, and the ECA prototype can certainly be refined. But it provides the model that Ukraine and its partners should use as they begin to plan the country’s reconstruction.
AUTHORS: Yuriy Gorodnichenko is a professor of economics at the University of California, Berkeley. Ilona Sologoub, editor of ‘VoxUkraine’, is director of political and economic research at the kyiv School of Economics.
Anastassia Fedyk is an Assistant Professor of Finance at the University of California, Berkeley.
© PROJECT SYNDICATE (BERKELEY)
Tatiana Babina (Columbia University), Tetyana Balyuk (Emory University), Tatyana Deryugina (University of Illinois, Urbana-Champaign), and James Hodson (AI for Good) co-signed this comment.
More news in depth
-Three other Ukrainian ships set sail with 57,000 tons of corn
-Culture: a form of resistance in the midst of the war in Ukraine
-Exports soar 74% thanks to oil and mining
#organize #rebuild #Ukraine