Ukraine's Construction Sector Could Play Lead Role in Rebuilding Country – USAID

Even in the midst of the war, Ukraine has an asset that could play a crucial role in the country's restoration — the construction sector.

Recent research conducted by experts from the NGOs ‘Institute of International Economic Research’ and ‘the State Enterprise Ukrainian Industry Expertise’, with support from the USAID Economic Resilience Activity (ERA), reveals that Ukrainian enterprises have the potential to produce nearly 90% of the construction materials needed for rebuilding the country.

These findings are crucial, because Ukraine will require effective and timely reconstruction solutions to establish decent living conditions, welcome back millions of refugees, or simply catch up with the economic development and income levels of EU countries.

“In 2022 we supported research, by the Kyiv School of Economics (KSE), regarding the scale and cost of damage to infrastructure and residential buildings in Ukraine. In this research, KSE found that as of November 2022, damaged facilities will need construction materials and equipment worth about $62.8 billion”, says Brian Milakovsky, Deputy Chief of Party for USAID ERA.

To determine whether Ukraine could meet this demand domestically, experts analyzed the capacity of Ukrainian factories to produce building materials during the war.

They revealed that around 15% of businesses in the sector had been damaged or destroyed, but the sector as a whole still possessed a high production capacity for a wide range of construction materials, capable of supplying up to 90% of the required resources.

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While the amount might seem colossal at first glance, it is far from enough compared to the $486 billion needed to fully restore what’s been ravaged by Russia’s invasion.

Using Ukrainian-made construction materials would support the economy by preserving around 100,000 jobs and generate significant tax revenue. It would reduce Ukraine's reliance on external economic aid and lower the overall cost of reconstruction, by utilizing more affordable domestically-produced building materials.

However, there are challenges to overcome. Difficulties in accessing finance for investments, outstanding payments from construction companies, and the potential loss of skilled workers due to conscription into the Armed Forces are some of the hurdles the sector faces.

Despite these obstacles, Ukrainian companies remain committed to addressing the opportunities that reconstruction will present.

Furthermore, this research finding is particularly important for donors and international financial institutions because it highlights two key points.

·     Firstly, domestic producers of building materials can take a leading role in donor-funded reconstruction efforts.

·     Secondly, it identifies opportunities for technical assistance and improved access to finance to address specific challenges hindering the sector's recovery and growth.

For more details on the research findings, you can access the full report through this link.