Section 1

Grygorii Leonidovich MONASTYRSKYI (MONASTYRSKYI Grygorii), Doctor of Economics, Professor, Professor in the Department of Management, Public Administration, and Human Resources at the Western Ukrainian National University, Visiting Professor at the University of Economics in Bydgoszcz (Republic of Poland), Member of the Scientific Council on Economic and Legal Issues of Urban Development at the Department of Economics of the National Academy of Sciences of Ukraine.

Postwar Economic Reconstruction in Ukraine: Challenges, Opportunities, and Transformations

Section 1. “Postwar Economic Reconstruction in Ukraine: Challenges, opportunities, and transformations” is dedicated to developing strategic initiatives to ensure the reconstruction and development of Ukraine’s economy in the postwar period at all hierarchical levels, taking into account the principles of sustainability, inclusivity, and a smart approach.

Research Areas for Section 1:

– The concept of Ukraine’s postwar reconstruction: the innovative dimension of economic development;
– Strategic planning for the recovery and development of regional and municipal economies;
– Key factors in organizational transformation in light of postwar challenges;
– Cornerstones of Ukraine’s economic reconstruction strategy based on sustainable development: the perspective of international partners.

Once hostilities have ceased, Ukraine will be able to begin a large-scale postwar economic reconstruction, which should be carried out based on a plan developed by the Ukrainian government and supported by international donors.

The key prerequisite for postwar economic reconstruction is for Ukraine to receive reliable security guarantees ensuring that hostilities will not resume on our territory.

It is clear that sustainable economic growth and development can only take place on a solid foundation of security. Security, by its very nature, is a public good that must be provided by the state and the international community. In the absence of this public good, private investment will dwindle to zero, economic activity will slow down, and security costs will be passed on to businesses, which will increase the cost of doing business and undermine business competitiveness.

Once this basic condition has been met, the key objectives of postwar economic reconstruction should be:

a) reconstruction of property and infrastructure destroyed or damaged as a result of the war;
b) rapid resumption of economic activity;
c) the return of refugees and internally displaced persons to Ukraine and their integration into economic processes;
d) laying the groundwork for sustainable economic growth.

Reparations from the aggressor country and assistance from the international community should be the most significant sources of funding for Ukraine’s postwar reconstruction.
The EU, the governments of partner countries, and international institutions—the World Bank, the International Monetary Fund, the European Investment Bank, and the European Bank for Reconstruction and Development—should play a key role in establishing a pool of international aid for Ukraine’s reconstruction.

The option of establishing a Solidarity Trust Fund for Ukraine, which would be responsible for mobilizing and coordinating international aid, now appears quite plausible. A key point is that the Trust Fund’s operations should provide support to Ukraine primarily in the form of grants (non-repayable aid), rather than loans.

The grant-based nature of the Reconstruction Plan’s funding, as opposed to loan-based funding, will help avoid a debt crisis and support the early stages of economic growth in Ukraine. As for historical precedents, under the Marshall Plan for Europe in 1948–1953, 91% of U.S. aid was provided in the form of grants. The 1996–2004 post-conflict reconstruction plan for Bosnia and Herzegovina provided for 82% of international aid to be channeled through grant funding. Between 1985 and 2015, 20 out of 35 countries that experienced armed conflicts received aid from trust funds on a non-repayable basis.

Another important aspect of Ukraine’s postwar reconstruction should be its seamless integration with the processes of European integration. At present, Ukrainian diplomatic efforts should be directed toward Ukraine obtaining EU candidate status and, subsequently, full membership. In other words, Ukraine’s post-war reconstruction program should be aligned with the requirements of EU membership and ensure Ukraine’s inclusion in European pre-accession programs. In this regard, there will be a need to replace or amend the Association Agreement between Ukraine and the EU. The new Agreement should enshrine the ultimate goal of the changes and reforms being implemented by Ukraine: full EU membership.

In a historical context, since the late 1990s, the EU has used programs such as “PHARE,” “OBNOVA,” “SAPARD,” and “CARDS,” as well as resources from the European Investment Bank and the EBRD. These programs were designed to strengthen cooperation between the Balkan countries and the EU and to lay the groundwork for their membership in EU institutions. The implementation of these programs was an integral part of these countries’ Stabilization and Association Agreements with the EU.

In 2007, the EU launched the Instrument for Pre-Accession.The instrument is designed to build institutions in candidate countries based on EU models, strengthen regional cooperation, improve the quality of human capital, develop transportation infrastructure, protect the environment, and promote economic development.

To develop a balanced reconstruction plan, it is extremely important to follow a specific phased approach or sequence of measures.

During Phase I (which will last from several months to one year), efforts should focus primarily on restoring infrastructure and social facilities and providing humanitarian aid. In particular, the following will be subject to repair and reconstruction: roads, bridges, railroad tracks, train stations, electricity grids and substations, water supply and sewage systems, farms and agricultural land, residential buildings, schools, hospitals, and administrative buildings.

During the second phase, which will last several years, the focus will shift to laying the groundwork for sustainable economic growth, while gradually scaling back rescue measures in the social sector and the critical infrastructure sector.

Here, the main focus will be on creating jobs and sustainable sources of income.

In general, the reconstruction of the economy, which was devastated by the war, should proceed along the following main lines:

  • reconstruction of physical infrastructure and restoration of the natural environment;
  • renovation of the housing stock;
  • rehabilitation of victims, restoration of social infrastructure and social services;
  • revitalizing the industrial sector, creating new jobs, and supporting small and medium-sized enterprises;
  • the creation of production capacity and the issuance of government contracts to strengthen the country's defense capabilities;
  • improving the quality of public administration and strengthening market economy institutions.
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