By Toby Gill
Chairman
Vladimir Putin’s illegal invasion of Ukraine drastically changed the European security landscape. It overturned assumptions of stability, and the sheer barbarity and ferocity of the conflict has demonstrated to the world that Russia is not open for business. The invasion acted as a reaffirmation of traditional diplomatic assumptions of Russia’s hostility towards its neighbours and has resulted in the ostracization of the country and any pro-Kremlin figures who dare speak out. Yet while the conflict rages on, with no clear sign of a thaw any time soon, there remains one overarching question that has become a focal point for discussion. The question that has taken centre stage at international summits, and corporate conferences alike over the past year; how will Ukraine rebuild after the war?
Ukrainian reconstruction is a behemoth of a task. With over $130 billion in damages to the country’s infrastructure alone, purse strings are going to have to be loosened, and the private and public sector alike must unite to ensure Ukraine’s post-war government has all the resources needed to revitalise their economy. But out of chaos comes opportunity. For western corporations and governments alike, there is a real prospect of radically reforming the Ukrainian political and financial landscapes, to encourage growth and investment. And Kyiv is leading the charge. The revolving door of lobbyists, policymakers, and politicians to and from the country creates an exquisitely unique environment for foreign investment.
But why is it unique? Since the invasion began, roughly 14 million Ukrainian civilians have been displaced, and over 700,000 Ukrainians have left the work force to volunteer in the armed forces. This has inevitably had a detrimental impact on the economy, causing the national GDP to plunge 30 per cent in 2022. The National Council for the Recovery of Ukraine from the Consequences of the War, which was set up by the government in Ukraine, similarly estimated that the country’s agricultural sector has suffered $40.2 billion in damages and lost revenue, as of April this year. Considering Ukraine’s agricultural exports is one of its largest streams of income, this has undoubtedly sent shockwaves through the economy. It’s therefore unsurprising that in June of this year, Chatham House figures suggested that $750 billion will be needed to fund the country’s National Recovery Plan. And with no end in sight for the conflict, that figure is only going to increase. Nevertheless, this is still a staggering figure. If we were to take the recommended level of aid to Ukraine and compare it to the United States Marshall Plan after the second world war, it’s a huge difference. While the socio-economic contexts vary greatly, as a mere point of comparison, the entire aid granted to European countries under the Marshall Plan in 1948 was $13.3 billion. That equates to around $150 billion today – nowhere near the proposed support for Ukraine’s rebuilding.
But it’s not only the sheer scale of support that makes the Ukrainian reconstruction a unique prospect. The war itself resulted in 8 million citizens fleeing the country – of which around 5 million have returned already. But they’re predominantly flocking to the western regions, out of the war’s reach, and away from the fighting. Those who are returning to the west may be able to return to their work and homes, but for the refugees whose homes are now in occupied zones, they face an entirely different predicament. ‘Homes might have been damaged or completely destroyed’, stated Frances Opperman, the deputy country director for the NGO ACTED Ukraine, when asked about this issue. ‘When [refugees] come back … their economic situation may be completely different’ he added. This presents an enormous humanitarian crisis for the government. Local authorities, especially around Kyiv, will have to accommodate huge swathes of internally displaced people, which means the focus must be on providing adequate accommodation. New jobs must be created, and the already over-worked healthcare system must adapt to cater to the new residents. And with no end in sight for the war, officials have got to assume that these new citizens are here for the long run.
Faced with these problems, the post-war Ukrainian government has got a lot on its plate – and this list barely scratches the surface. But this is where the opportunities arise for foreign investment.
There’s no blueprint for reconstruction that fits in with Ukraine’s comprehensive recovery plan. This is new territory. Unchartered waters for both the Ukrainian government and the EU, who will no doubt spearhead future investment programmes. But despite this, Kyiv has led the charge to secure investment. Officials from the Ukrainian capital have made countless trips to London to promote investment in the country, and earlier this month the Ukrainian deputy economy minister Oleksandr Gryban, told delegates at a London conference that his country would “become one of the best in the world in terms of opportunities” for investors. Officials from the treasury have wooed multinational financial institutions too. Earlier this year they signed a memorandum of understanding with BlackRock’s Financial Markets Advisory – separate from BlackRock’s asset management arm – to provide extensive support to the Ukrainian government on how best to attract Western investment. But it’s not an easy task.
Many corporations are fearful of investing too soon. The most obvious rationale behind this apprehension is the mere fact that no one knows when hostilities will end. Whilst some firms have been drawn into Ukraine, enticed by the money-making opportunities, a large majority are wary of the violence. Corporate lobbyists who do visit Kyiv are routinely faced with air-raid sirens and scuttled away to underground bunkers to resume their talks, and this understandably puts off a lot of businesses. But even the mere matter of where the money will go is of huge concern. Ukraine has a troubled history of corruption since it’s breakaway from the Soviet Union. Without delving too deep into the complexities of Ukraine’s oligarchy, or its messy state-structures before the invasion, it’s safe to say that it wasn’t a great place for investment. In 2021, Transparency International’s corruption perception index ranked Ukraine 122nd of 180 countries, making it the second most corrupt country in Europe after Russia. Famous examples of corrupt lobbyists like Paul Manafort, the man behind Trump’s election campaign who helped former Ukrainian President Victor Yanukovych embezzle billions from his state coffers, have shown the world just how deep-rooted Ukraine’s corruption issue has historically been.
But Ukrainian officials are eager to show how they have changed. Myron Wasylyk, a former adviser to Ukrainian energy giant Naftogaz, argues that many of the soldiers currently fighting on the eastern frontlines are veterans of the 2014 pro-EU protests, and that they will be the ones entering business and politics after the war. He argues ‘I don’t think coming back to Kyiv and having a political culture that still accepts corruption is something they’re going to accept’. And this is yet another example of the uniqueness of Ukraine’s reconstruction - there is genuine opportunity for change in the country’s political structure. Ukrainian lobbyists to the EU have been open about their troubled past and are working closely with European policymakers to ensure that the use of all future investments, loans and grants will meet EU regulations. Brussels is demanding considerable oversight of spending, and Kyiv is happy to grant it; the Ukrainian government is preparing a detailed plan on how the country’s redevelopment will meet EU standards on governance and public administration. Kyiv seems hell-bent on reform. They do not want to return to the state Ukraine was in just years ago, where state resources were so mismanaged that certain hospitals had to take bribes just to buy equipment, or where oligarchs bled the country dry. Ultimately for the west, there’s no reason to doubt this. Afterall, if we look at the Marshall Plan once more, all 17 countries that accepted aid after the Second World War transformed into stable liberal democracies with flourishing economies by the mid 1960s. An influx of aid, under the right supervision can grow Ukraine into a democratic, economic powerhouse.
And Zelenskyy knows it. At a meeting with Ukraine’s top business elites in June, the Ukrainian President stressed the need for “hundreds and thousands of companies to come to [Ukraine]”. For western lobbyists, they should be chomping at the bit. Ukraine’s government has enlisted the support of Rasmussen Global, a geopolitical advisory firm, to help shape the environment for future business and foreign investment. Rasmussen’s CEO, Fabrice Pothier, suggests Kyiv has been welcoming a growing supply of lobbyists representing sectors from oil and energy to pharmaceuticals. The opportunities for these lobbyists are endless. If companies come in, pledge their support and get their foot in the door early, so to speak, they will be practically guaranteeing a return on their investment after the war, argues Pothier. Kyiv is welcoming lobbyists, and it’s offering them the chance to influence laws and regulations from the ground-floor, making it the dream opportunity for a lobbyist’s future clients.
It's not just limited to the private sector either. The European Commission has pledged a ‘Ukraine Facility’, which is a modern-day Marshall Plan by all means. The proposed plan will provide up to €50 billion from 2024 to 2027. This is the direct result of this revolving door of lobbyists. Ukraine knows it’s on a fast-track to join the EU; it’s in the unions best interest to ensure that this 40 million strong country is economically healthy and democratic. Therefore, Kyiv is giving Brussels extraordinary influence over regulation, just as they’re doing with western corporations.
Ukraine is the definition of untapped potential. The country is ranked 25th globally for its mining output, and 6th for production of Iron. It also has over 33 billion cubic meters of underground storage facilities for gas, which has led some pro-Ukrainian officials to float the idea of Ukraine becoming Europe’s energy storage hub. Similarly, American lobbyists have suggested to Congressmen that Ukraine could become home to American industries keen to move operations away from Asia, citing the reduced logistical and export costs, especially for commodities traded with the European continent.
Ultimately, the potential for growth and innovation in Ukraine is immense. Kyiv has welcomed hundreds of corporate executives and influential lobbyists alike, in a bid to reform Ukraine into one of Europe’s most dynamic economies. The benefit is, with increased investment comes increased assurances. Ukraine has been extremely accommodating, and by allowing foreign investors a say in shaping legislation, they’re reassuring the west that they’re open for business, and have highlighted their shift away from the corruption of the past. As long as the foreign investment tap stays switched on, the future of the country is immensely promising.
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