The use of funds for the reconstruction of Ukraine must be controlled by the West in the most efficient and transparent way to deliver as much benefit as possible to Ukraine and its people. This principle, among other, will allow us to get much more aid than the principle of “give money and leave.”
Ukraine is living through the most difficult moments in its recent history. Our belief that we will become even stronger after the war, that we will recover fairly quickly helps us to go through this period. Unlike our enemy.
Now the majority of economists agree that Ukraine will fall sharply and quickly but will recover very quickly too. But Russia will stagnate for a long time after a decline that will be mathematically smaller than in Ukraine (after all, bombs are falling on our cities and villages, and our ports are blocked). Figuratively speaking, the trajectory of the Ukrainian economy will resemble the letter V, while Russian – their favorite symbol Z.
But what makes economists think that Ukraine can recover quickly after such a devastating blow from the war? After all, it is clear that now we all will become poorer, the infrastructure will be damaged and the destruction will probably be bigger. In the near future, there are two factors underlying the forecast of rapid economic recovery. The first is European integration. The second is significant support from the collective West, implementation of the so-called Marshall Plan that will in some ways replicate the model of Western European reconstruction after World War II.
The West is already actively supporting Ukraine with money. Ukraine’s budget deficit is now about $5 billion a month. Western support is helping to fill this gap. And this is very important because the alternative is money printing, uncontrolled emission, which can lead to hyperinflation, devaluation and even deeper economic decline, i.e. going along the path of the famous Russian ship in its “structural transformation” from cruiser to submarine. Therefore, the statement of the German Chancellor that the world’s leading countries should provide Ukraine with €50 billion this year is very valuable. Unlike many other statements by German leaders.
But this statement is about current support, for Ukraine to go through the war. And the reconstruction will begin after the war. The Marshall Plan is possible only after the end of military fighting. So far, we have only the blueprint of a future aid project. But the key issue is efficiency. Namely, how to prevent Ukrainian corrupt officials and businessmen from destroying everything? How to prevent these funds from falling into their hands? How to prevent Ukrainian rent-seekers from undermining the victory of the Ukrainian army? How to turn the reconstruction plan into a plan of Ukraine’s transformation into a new Eastern European tiger? How to combine the money, reforms and energy of the Ukrainian people that has been released now? Especially amid the significant increase in the interest in Ukraine in the world, including Europe that has ‘discovered’ Ukraine, which was previously considered something like Eastern European Afghanistan. At the same time, unlike Europeans, Ukrainians are really “hungry” and therefore can create an economic miracle.
But there is one hitch. Ukraine has never lost a chance to lose a chance. And this chance, unfortunately, we can lose as well.
We already hear manipulative statements that the West should just give Ukraine money because the Ukrainian state has proved its ability to defend itself. These statements embed the idea that there is no need to control the efficiency of spending, no need to insist on reforms. You just have to provide money and leave. However, we know what will happen at this moment. Ukrainians can unite against an external enemy, but the internal enemy is much more dangerous. Today Ukrainian rent-seekers already see billions of dollars flowing into their pockets thanks to self-sacrifice of thousands of ordinary people. Under the disguise of the national feat, they want to level it down. This is not surprising because rent-seekers in Ukraine have never lost their chance. And they are cynical enough to cover their own enrichment with the victory of citizens.
What is important in the international support? It should be used for the benefit of Ukraine. For the benefit of those heroes who defended Ukrainian independence. What does this mean? This means that this money should help build a more efficient and richer country. After all, all the “diseases” of Ukraine – in particular lack of the rule of law and high level of corruption – that we had as of February 23, unfortunately, will not disappear after the war. They will have to be treated. Therefore it is important for every Ukrainian that the West does not just give money while turning a blind eye to how it is spent. Because then there will be no change inside. The chance will be lost – again.
What does “for the good of the people” imply? Firstly, control over the use of funds. Secondly, these funds should stimulate changes that make people’s lives better. What did the war show? Reforms work. After the Maidan, we had some real reforms. The first is army reform. Thanks to it, we got a real Ukrainian army, not a reduced copy of the Russian one. The second successful reform is the banking sector. The ways in which Ukraine overcame this crisis, the NBU actions and survival of the banking system will be studied in the world-class economic universities. The third successful reform is decentralization. We see how, without additional instructions ‘from above’, local authorities together with citizens heroically defend their settlements, take care of their neighbors, restore water and electricity supplies. This is exactly the goal of this reform – so that every resident feels responsible for their city or village. Without these reforms, we would be much weaker. And poorer.
For efficiency, during implementation of the Marshall plan the funds must be managed by people with an impeccable reputation. These people should be hired via a transparent competition by representatives of Western governments and international organizations that will finance the reconstruction. These people should be independent of Ukrainian politicians. Ukrainian politicians, at the behest of voters, can determine the needs of the country, formulate priorities for reconstruction which they know better. But after that urban reconstruction projects, road or bridge reconstruction etc. should go to the funds manager who will implement these projects with minimal corruption risks and with involvement of the best available world expertise. This will allow to build the most efficient infrastructure using the most modern technologies. If we give money to politicians, we can be very disappointed. First, the effectiveness of spending will be very questionable. Secondly, the corruption scandals that will inevitably arise in this case will destroy the faith of Ukrainians in the new country, will be a huge demotivating factor in the country which needs to keep people from emigration, and will return the image of Afghanistan to Ukraine. That would be the greatest betrayal and should not be allowed. In addition, corruption scandals will prevent Ukraine from getting the maximum amount of money in the shortest period of time. We could lose tens of billions of dollars.
Secondly, the allocation of these funds should be connected to the reform program, as it was in 2014-2015. Unfortunately, so far for Ukraine this is the most effective method of promoting change. It is unpleasant to admit. But why deceive ourselves? We must be completely honest with ourselves.
The West has a sense of guilt for Ukraine. It’s true. And it is deserved. But this guilt should not be blinding. The West feels guilty about the Ukrainian people and must help them – ordinary people, not rent-seekers. If this feeling is genuine, then the West must genuinely help Ukraine. Instead of buying off our country and its own conscience. Despite a big temptation to do this – because it is so much easier.
Ukrainians need to understand that a true friend must do just that. A true friend should help us become stronger. And there will be no insult. There will be no humiliation here – despite whatever talking TV heads might say about “external management”. After all, when we go to the doctor, we understand that it is unpleasant but necessary. And we do not call it “external management” of our body.
The author doesn`t 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