HOW TO SUPPORT THE RECONSTRUCTION OF UKRAINE

Politicians and businesspeople will gather on Wednesday some 1,500 miles from the Ukrainian front line to discuss what will be, in the long term, as important to Ukraine as the battles fought on the ground. The two-day Ukraine Recovery Conference is not specifically billed as a “pledging” event. But it needs to send very clear messages: that there will be a credible plan to rebuild Ukraine after the war and structures to deliver it, that the sums needed will be forthcoming, and that the country will gradually be made safer for investment. The World Bank estimated the cost of Ukrainian recovery and reconstruction after the first year of Russia’s war at $411bn — twice Ukraine’s prewar gross domestic product. That was before Kyiv’s counter-offensive even began, and before the disastrous destruction of the Kakhovka dam. With Russia still targeting infrastructure and pursuing a “scorched earth” strategy when it retreats, final costs might top $1tn. International public-sector financing must be the bedrock of the reconstruction effort. But since the private sector is expected to play a central role not just in doing the work but helping to fund it, mobilisation of private investment will be required on a scale with few precedents. Securing the funding requires several steps that will build confidence that post-conflict Ukraine will be “investable”. The first is to provide clarity on who, among donor countries, agencies, and international financial institutions and development bodies, will be responsible for what, and where the public money will come from. The G7 has already created this year a Multi-agency Donor Coordination Platform. But an institutional framework is needed to ensure the selection and management of projects has Ukrainian ownership, but is organised in ways that give donors transparency and assurances that money is well spent. A second priority is to provide war risk insurance to cover losses for foreign and Ukrainian investors — which are outside the scope of commercial insurance — potentially via IFIs and export credit agencies. Such insurance could ease the way for foreign business to deploy resources even before the war ends. High-priority rebuilding needs are estimated at $14bn this year alone. Third, guarantees are needed that reforms will continue to build up Ukraine’s institutional capacity to absorb and utilise such sums, and further curb long-endemic corruption. These should be tied to Kyiv’s ambitions to join the EU. The 27-nation bloc has rightly made Ukraine a membership candidate but set seven conditions, including on judicial reform and anti-graft measures, before it can start formal accession talks. The EU is also beginning to revamp its accession process to grant countries gradually deeper integration as they complete successive stages of the negotiations. The process should move much faster than after the wars in the former Yugoslavia — where the nature of the conflicts and the successor states meant reconstruction was much more ad hoc, but gradually closer EU ties were important in stabilising the region. A final piece of the jigsaw should be the security guarantees, or commitments to provide Ukraine with the means to deter future Russian onslaughts, that Nato will discuss at next month’s summit in Vilnius. Even with war insurance, private businesses will not launch big projects if Ukraine is in a state of “frozen” conflict and Russia could renew its aggression. The US is, for now, dragging its feet on such guarantees. Yet the arms and funds that western allies are pouring in to help Ukraine win the war will be for nothing if they allow it to lose the peace.