What is the cost of a day of war? How much money will be needed for reconstruction? Where to get it, how to spend it correctly, and who will monitor it and be responsible for it?
All these questions may not be as acute as the question “When will the war end?” but they are super important for the preservation and development of the Ukrainian state. And if everything is more or less clear with quantitative estimates, the questions of mechanisms and efficiency are still relevant.
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Living in a country where almost a third of the territory is mined, entire cities and villages have been completely ruined, and critical infrastructure facilities have been destroyed and continue to be targeted by Russians, we cannot waste time, especially since we are totally dependent on our partners for financing the reconstruction of Ukraine, and Western bureaucracy is slow. Therefore, it is up to us to propose ideas and formats and we must start implementing effective models right now.
Fortunately, despite all the efforts of Moscow agents, the willingness of partners to support the reconstruction of Ukraine is currently increasing. Governments, international financial organizations, and businesses are ready to invest in industries and sectors of the Ukrainian economy, to rebuild cities and villages. This is extremely important, but now it’s even more important to build trust because rebuilding is a long game and its duration depends greatly on faith in us.
ISW Russian Offensive Campaign Assessment, July 2, 2024
However, the larger the amount of aid involved, the more critical the question of an effective partnership model, reporting, cost control, and quality of results becomes. Again, as a traditional cure for all diseases, the topic of fighting corruption is raised. At the same time, various models offered by the government, such as public-private partnerships, joint ventures with state-owned companies, distribution of funds through tenders for contractors etc., have certainly not proven their effectiveness.
At the same time, the scale of the destruction is so deep and the time is so critical, that despite all the tolerance for the war-weakened Ukrainian government, it is clear that it is unlikely that under the current conditions, even with the presence of stable financing from the outside, Ukraine can be fully rebuilt even in 15 years. Ukrainians want a completely different pace.
There is probably a way to do it faster and more efficiently. Moreover, the proposed approach makes it possible to eliminate the risk that the dynamics of reconstruction will directly depend on the Ukrainian state machine, which has never been a model of efficiency, and over the past four years has also lost a significant number of good personnel due to the complete cancellation of competitive procedures for civil service and state-owned companies.
Currently, no system of checks and balances in the system of public administration is working properly. The quality of the bureaucratic apparatus is low. A very realistic version of the development of post-war events is a significant limitation of external support. As Antony Blinken said in a recent interview, the task of the West is to make Ukraine not depend on foreign aid for life but to stand on its own feet. When the West decides that we can stand on our own, it depends solely on the West. The risk that after all the losses of the full-scale war, due to the ineffectiveness of the Ukrainian bureaucracy, we will remain in a dilapidated country, is significant.
To avoid this, I suggest that you prioritize relying on a time-tested approach, which is known as corporate governance through specially created companies, something like SPV (Special Purpose Vehicle). The proposal is simple: donor partners voluntarily turn into investors-shareholders of specially created enterprises that they, and not the government of Ukraine, will own and run through the management hired by them. The government and local authorities formulate technical tasks and determine the general parameters of the quantity, quality, and location of everything they need. Next, the task of the government and local authorities is administrative support. The main task is not to disturb.
Without taking money from the outside, the government should manage to formulate what and where it needs. Everything else, related to the transformation of money into a product of the material world, should be done by a private corporation, behind which stand specific governments, governmental, non-governmental, and commercial organizations of partner countries where all money is protected by corporate governance.
In this model, the shares of such companies will be purchased by donors who are ready to participate in reconstruction. In exchange for a legally formalized investment, donors do not receive political promises, but the status of a shareholder with all rights, including the appointment of an independent supervisory board, which will monitor and appoint a totally independent management. The size of the authorized capital of such enterprises must correspond to the agreed goals of the project. If it is, say, a thousand schools, it is not difficult to determine the approximate cost. The key feature of such an enterprise will be that the investor's goal is not dividends, but the result in the form of putting into operation or ensuring the quality functioning of the specified objects, with the guaranteed availability of financial reports certified by an independent audit.
The attractiveness of such a model lies in the fact that you can hire high-quality managers of any citizenship and pay the European salary level, without fear of populist tantrums. Also, the creation of such employers will be a magnet for the return of professional Ukrainians from abroad.
The most important thing is that the formation of a full-fledged corporate mechanism independent of the government under the control of the owner of the money will allow donors to feel safe, which in turn will give management the freedom to avoid the managerial obstacles of the modern Ukrainian bureaucracy as much as possible and minimize the risks of abuse by law enforcement agencies. All corruption risks are reduced to a minimum if, from the start, quality systems of selection, distribution of powers, internal control, audit, compliance, security, etc. are built.
If there is a political will, ensuring the functioning and safety of such a model is much easier than the mythologized system of investment nannies, industrial parks, “Diia City” or other innovative initiatives. The bet on specially created companies protected by corporate governance is an absolutely real mechanism for the qualitative reconstruction of Ukraine, which should be discussed at the highest level right now.
The views expressed are the author’s and not necessarily of Kyiv Post.
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