Ukraine reconstruction - some concerns

Things that worry me about Ukraine reconstruction/recovery efforts:

As we approach the much heralded/expectant Ukraine Recovery Conference due to be held in London later this month, I cannot help but feeling a little perplexed, or even disturbed by a number of developments - is it just me? But…

First, I am just amazed how quickly an industry in conferences and seminars has grown up around the whole topic of Ukrainian reconstruction. It’s great that there is interest in getting involved, and thinking thru the issues, but the shear number of think tanks, consultants etc who are now selling themselves as Ukraine or reconstruction, or both, experts, but who seem to have little historical experience is a worry. It feels a bit like a gravy train - and reminds me a bit of the whole EU TACIS/PHARE gigs from the 1990s and the approach to Emerging European, ex FSU reconstruction post the fall of Communism. We can debate the effectiveness of the TACIS and PHARE programmes but my take out, as someone who was there and involved first hand, was that a lot of Western consulting companies and consultants got the lions share of monies which should have gone to actually help the transition and development in these countries. And lots of waste on bureaucracy. I hope that this does not happen in the Ukrainian case.

Lots of talk, action?

We had the Lugano recovery conference, now the London Recovery Conference, let’s hope that decisions are made here, and that this is not just another talking shop for lots of warm words by politicians, and bureaucrats, but not much substantive action.

Second, there seems to be lots of duplication of effort, and little coordination, at least from the G7 side. On the military side we have the Ramstein process, and I think there is the need of something similar now from the Western side when it comes to helping better coordinate and focus efforts on the economic side of support for Ukraine. I know we have a new IMF $15.6bn EFF, but this is about macro stability not really about post war reconstruction.

Third, and linked a bit to two, I still don’t think we have a decision around the institutional setting for reconstruction. I have long argued the need for a single entity to manage the reconstruction effort, jointly managed/owned by the Western and Ukrainian sides. I have argued the need for a sovereign wealth style structure, a Agency for Ukrainian Reconstruction and Accession (ultimately to the EU), AURA There has been talk of an MDB, like the EBRD or World Bank acting in this role as a coordinator, but I don’t think that is appropriate and have argued that elsewhere - they have the wrong shareholder base and too broad a mission, beyond Ukraine. Maybe the EU is the right entity, but then it needs a special office/commissioner I think to manage that effort. But I think we need to quickly move on this, as any such entity will be a key partner for private business thinking of investing in Ukraine.

And I do think that we need a heavyweight business/political leader to lead this effort - someone who has international gravitas, credibility and standing and can lead this process. I remember the stellar job done by Paddy Ashdown in Bosnia and Herzegovina as the special representative soon after the war. Perhaps it could be an internationally recogised business leader - what’s Richard Branson doing these days? Maybe Jamie Dimon needs a break. Or maybe a Carl Bildt, or I hate to say it Mark Carney (I was never a fan of his stint as BOE governor, but he has the stardust factor for sure, and understanding of the IFI landscape, that can perhaps help to continue to focus light on Ukraine’s reconstruction needs). I might have said Tony Blair but can never personally forgive him for the Iraq war debacle. And please, please not Boris Johnson. I know the Ukrainians love him, but I fear that his solution to all problems seems to involve a microwave and I think this mission needs a little more substance in terms of leadership, and credibility. Ukraine does not need a circus. Lipton?

Fourth, I still don’t think Western governments have clearly thought through the huge financing needs of Ukrainian reconstruction, and who is going to pay for them. It’s clear that there is no appetite for Western tax payers to pay, and then government types tend to focus on the private sector, I fear without really understanding the private sector. The reality is that given the security risks, the track of Ukraine in terms of corruption and rule of law, likely lack of early international market access for Ukraine (high debt burden), lowly credit ratings, that the private sector will be slow to rise to the challenge here. So I think alternative sources of financing needs to be found - frozen Russian assets, innovative financing schemes to bring in the private sector. Recapitalising MDBs by $5bn extra a year for Ukraine reconstruction does not really touch the sides.

I would say that if the plan is to just rely on the private sector for Ukraine reconstruction, then it just won’t happen quickly enough. And actually it won’t happen. Maybe the EU accession anchor this time around will be different - it did ultimately work for the first round EE entrants in 2004, after a date was given for accession (as 2004) in the Copenhagen Treaty of 1994 - ironically the same year as the Budapest Memorandum. Copenhagen Treaty = Good; Budapest Memorandum = Bad.

I thought someone needed to say the above, so I did.