We publish a policy brief on what post-war reconstruction of Ukraine should look like (similar to the Marshall Plan). Here we list the main points, the full text is available in English and Ukrainian.
Authors: Torbjörn Becker, Stockholm School of Economics; Barry Eichengreen, University of California – Berkeley; Yuriy Gorodnichenko, University of California – Berkeley; Sergei Guriev, Sciences Po; Simon Johnson, Massachusetts Institute of Technology; Tymofiy Mylovanov, Kyiv School of Economics; Kenneth Rogoff, Harvard University; Beatrice Weder di Mauro, Graduate Institute Geneva.
Reconstruction of Ukraine opens a unique opportunity to modernize the country and secure its future. The key principles of international aid for reconstruction efforts are:
- put Ukraine on the path to EU accession;
- establish a stand-alone EU-authorised agency with significant autonomy to coordinate and manage aid and reconstruction programmes;
- ensure Ukrainian ownership of the reconstruction programme;
- encourage and facilitate inflows of foreign capital and technology transfers;
- focus aid on grants rather than loans;
- organise rebuilding around the principle of a zero-carbon future with minimal reliance on fossil fuels.
Reconstruction should include three distinct stages with different objectives and constraints. After just over a month of war, the required assistance from Europe and others already may reach €200 billion to €500 billion. The cost of reconstruction is growing faster every day as people spend more and more time away from home, children are traumatized and private companies break up.
On Feb. 24, 2022, Russia invaded Ukraine. Thousands of civilians were killed. More than a quarter of the population (41 million as of Jan. 2022, excluding Crimea) were forced to flee their homes, with more than 4 million moving to EU countries. Mariupol and many other cities in Ukraine are effectively destroyed. This intensity of destruction and refugee crisis has not been seen in Europe since WWII.
Of the four million displaced outside of Ukraine, about two million are children. Many families have been split by the conflict, with fathers frequently staying behind to fight. While most Ukrainian refugees have been taken into peoples’ homes in European countries, there are growing concerns about access to education, health care, and income earning opportunities for this population. In addition, more than six million people have been displaced within Ukraine, and they also face difficult conditions in most cases. The worst situation is faced by hundreds of thousands of people trapped in besieged areas, including 100,000 in Mariupol.
Various governments and international organisations have indicated their willingness to help Ukraine recover from the war. This policy brief outlines ideas for the design and requirements of this effort. We build on prior experiences with post-war reconstruction (e.g. the Marshall Plan after WWII, the reunification of Germany, and the reconstruction of Iraq and Afghanistan) and reconstruction following natural disasters. As more information about the outcome of the war becomes available, specifics of the reconstruction can be developed.
To administer the reconstruction, we propose to set up a separate agency endorsed by the EU, which on the one hand will accumulate funds from various sources, and on the other – will administer the reconstruction programs. The agency must have a defined period of existence – for example, it will have to be liquidated upon Ukraine’s accession to the EU, as well as considerable freedom of action, including with respect to hiring.
Potential sources of funds for reconstruction can be:
- Bilateral aid (funds from individual governments)
- International institutions
- Private companies and individuals
- ceized Russian assets
- Russia’s current revenues from oil and gas (for example, directing a share of these revenues to a separate compensation fund or a tax on them, which will be collected by the EU as compensation for grants provided for the reconstruction of Ukraine)
Reconstruction of Ukraine will have four stages:
- Stage 0 (should start immediately in order to minimize losses),
- Stage I – 6 months after the end of the war – the restoration of critical infrastructure,
- Stage II – 3-24 months after the end of the war – rapid reconstruction of infrastructure and economy (at this stage, public policy will return to “normal”),
- Stage III – laying the foundation for future growth and modernization.
As a result of this plan, Ukraine should receive not only modern infrastructure and an influx of investment. The main thing is establishment of institutions (legislation, state, service, judicial system, anti-corruption bodies) that will allow Ukraine to gain full membership in the EU.
The authors do not work for, consult to, own shares in or receive funding from any company or organization that would benefit from this article, and have no relevant affiliations