Rebuilding Ukraine – the involvement of Polish companies, an opportunity or another myth?

Rebuilding Ukraine – the involvement of Polish companies, an opportunity or another myth?

June 23, 2023

The reconstruction of Ukraine will be the largest international transformative and investment project since the Marshall Plan. The impact of Polish companies on this process depends on their proper preparation for tenders, competent project management, and government support in securing financial and insurance risks. There will be no preferences for anyone, including Polish firms.

The Russian aggression against Ukraine is ongoing. There is still no answer to when the war will end and whether it will be successful. The definition of this success is still a subject of discussion in Ukraine and the international community. For Ukraine, it is crucial to regain the occupied territories and return to the borders of 1991, as well as achieve lasting peace under international guarantees, preferably through NATO and European Union membership.

Despite the ongoing war, Ukraine and the international community have begun preparations for the country’s reconstruction. The concept of reconstruction, its implementation methods, the participation of commercial firms, and financing methods are being developed. This is the right moment for the Polish government and its agencies to take active steps and prepare support for Polish companies participating in the reconstruction of Ukraine.

I will provide a brief overview of the most important information regarding preparing the concept of Ukraine’s reconstruction.

The extent of destruction How extensive is the destruction in Ukraine? The estimates are not final due to the ongoing war. There are many different data from various sources. I rely on data from the Kyiv School of Economics from April 2023 to illustrate the scale of destruction.

Housing: Over 158,000 blocks and detached houses have been destroyed, with losses of $53.6 billion. Infrastructure: Roads, bridges, railway networks, and airports, with losses amounting to $36.2 billion. Industry: Industrial facilities, with losses amounting to $11.4 billion. Educational infrastructure: Over 1,500 schools, over 1,000 kindergartens, and 538 higher education buildings, with losses amounting to $9.1 billion. Energy: Power transmission networks, with losses amounting to $8.3 billion. Municipal infrastructure: Water supply, sewage systems, wastewater treatment plants, with losses amounting to $2.7 billion. Trade: Shops, wholesalers, and goods, with losses amounting to $2.6 billion.

The losses were estimated based on book values, and the replacement value is much higher. Infrastructure and construction in Ukraine are outdated, largely dating back to the Soviet era. The above data does not include the consequences of the explosion of the Kakhovka Dam by aggressors and the resulting massive flood. The cost of rebuilding the dam is estimated at $1 billion.

Costs of reconstruction Similarly, there is a wide range of data regarding reconstruction costs, justified by the ongoing war and the lack of a defined reconstruction concept.

In January 2023, Ukrainian Prime Minister Denis Shmyhal, during a conference in Luxembourg, estimated the costs of reconstruction to be between $600 billion and $750 billion. The large range in these numbers reflects an expert assessment rather than precise calculations.

In April 2023, at a meeting of the International Monetary Fund (IMF) and the World Bank (WB), WB President David Malpass presented a report with conclusions regarding Ukraine. These institutions have tremendous credibility and expertise. Since 2014, they have been supporting the Ukrainian government in reforms and are the country’s main source of financial aid. They estimate the costs of reconstruction at $411 billion, twice the annual GDP of Ukraine. Reconstruction will take at least 10 years, and the funds should be allocated to infrastructure (22%), housing (17%), energy (11%), social protection of residents (10%), demining (10%), the public sector (8%), and education (6%).

To sum up, the reconstruction of Ukraine is a huge challenge and opportunity for the country and foreign companies, including Polish ones. The scale of destruction in Ukraine is enormous, and the reconstruction costs are estimated to be in the hundreds of billions of dollars. The involvement of Polish companies in the reconstruction process will depend on their preparation, project management, and support from the Polish government. However, it’s important to note that there will be no preferential treatment, and the competition will be open to all companies.