Oleksander Gryban, Deputy Minister of Economy of Ukraine, analyzes the enormous stakes linked to the reconstruction and economic recovery of the country, eighteen months after the start of the war.
L’Express: The war does not seem to be over. Why, however, is it important for Ukraine to prepare today for tomorrow?
Oleksander Gryban: We believe that winning the war is one thing, but not losing the peace is another, equally important. Of the many factors that will come into play, one of the most critical is economic recovery. If there is no recovery in this area, we will be condemned to eternally asking our partners for money. We have to develop ourselves, otherwise our partners will burn out, and reduce their support.
Your country has been bombed for a year and a half. What are your priorities in terms of reconstruction?
In view of the considerable destruction, the World Bank evaluated in March the amount of reconstruction at 411 billion dollars. We estimate that Ukraine will need at least $1 trillion to recover. It will take decades to rebuild everything. International aid has so far fallen into three broad categories. Filling the budget deficit (around 3 billion dollars per month): this amount covers the salaries of civil servants, social expenditure, army costs, etc. The reconstruction of vital infrastructure. And the economic development program.
For now, the focus is on the immediate recovery of the economy. After GDP fell 29.1% last year, we expect moderate growth this year. We will again be faced with big challenges next year. But our partners – the United States, the European Union and the IMF – will support us as long as necessary. At least that’s what we hope.
In the longer term, how can Ukraine convince private investors to take the risk of investing?
The greatest challenge for long-term development is the establishment of insurance mechanisms to cover international investors against war-related risks. The demand on this subject is considerable. This is the prerequisite for attracting foreign capital. We are very mobilized on this subject. We are not moving as fast as we would like. But there is progress, and I believe that the problems will eventually be solved.
This type of instruments could be a catalyst, the first step that will allow investors to flow. Only a few export credit agencies actually cover war-related risks. So it’s a matter of convincing governments to get their development finance institutions and export credit agencies to get a little bolder on Ukraine. We are also actively working on the creation of the Ukrainian Development Fund, in close collaboration with a consortium made up of BlackRock, JPMorgan and McKinsey, who share their best practices.
Another lever, the legislation on industrial parks: companies that set up there can obtain up to 30% reimbursement of their investments, as well as various advantages, in terms of taxation or customs duties. They are also provided with turnkey solutions, with all the necessary services or equipment.
Finally, we have the Advantage Ukraine platform, launched by President Zelensky, to gather the best investment projects and present the opportunities offered by Ukraine, including deregulation and incentive measures. The combination of all these tools will eventually convince investors to return to Ukraine.
One of your main challenges is the return of the 6 million Ukrainians who left the country? How do you plan to convince them to come back?
It is a huge issue. One of the current priorities is the reconstruction of essential infrastructure (roads, bridges, stations, schools, nurseries, hospitals, etc.). People will only come back if they exist, and work.
But employment is even more important. We have to show those who had to leave the country that they will have career opportunities in Ukraine and that the salaries are attractive. Companies fight for example for good engineers. The latter are beginning to receive salaries in our country comparable to those observed in Poland or the Czech Republic.
The weight of heavy industry has decreased while Tech has developed a lot. What economy do you imagine tomorrow in Ukraine?
The Ukrainian economy will necessarily be very innovative. We must use technological leverage everywhere and in all sectors. We must also begin our ecological conversion, comply with environmental, social and governance standards – because this is the only way to be integrated into international production chains. In terms of economic development, Ukraine has wasted the last thirty years, since independence, when all developed countries were on the path of the new industrial revolution. We missed the mark. But a new chance is offered to us. Because the engines of growth are changing. We have talent in the most advanced technologies and high-performance start-ups. A venture capital industry is beginning to develop. And the government has created a special ministry of digital transformation so as to structure the whole ecosystem in place. For Ukraine, the technological revolution can be a springboard to compensate for all missed opportunities and even get ahead…
We also believe that the European Union’s green transition can be a huge opportunity for Ukraine – and for Europe. Our country, which has a huge land area, can indeed accommodate as many gigawatts of renewable energy as necessary. Not to mention that we also have significant nuclear capabilities – also sources of carbon-free energy.
Agriculture remains a heavyweight in the economy. How big is the challenge of land clearance?
Ukraine is today the most mined country in the world. This demining work could take half a century! Obviously, the agricultural sector is primarily concerned. But we must also take into account “humanitarian demining”: schools, nurseries, parks, theatres, restaurants, energy installations… We have just created a special demining agency responsible for “securing” all places of ‘public reception. But the fleet of machines is insufficient. At the moment, we are very dependent on foreign aid. Eventually, we can also imagine that private companies develop in this sector, improve technologies, offer smarter solutions than today, because the needs are considerable.
What prospects would integration into the European Union offer Ukraine?
To begin with, Europe will be stronger with Ukraine. Because Ukraine is a large market and a large country that can serve as an alternative to China for European industrial groups wishing to repatriate part of their production tool to the continent. The pandemic has shown the need to secure and shorten production chains. The workforce is talented, inexpensive, the road and energy infrastructures inherited from the Soviet Union – this is undoubtedly one of the only good things we have inherited – are numerous.
For Ukraine, the benefits of joining the European Union are obviously considerable. A very long integration process is underway. In the shorter term, let’s say over the next 3 to 5 years, Ukraine should benefit from European funds to feed the budget, finance reconstruction, help develop the private sector. It will absolutely be necessary to ensure that these funds are used in the most transparent and efficient way possible.
Although the government has tackled corruption, it continues to plague the country, as recent scandals have shown. Isn’t the fight against this scourge essential to Ukraine’s economic recovery?
This fight is crucial! For now, we are victims of a sort of optical illusion. If the cases revealed are numerous, it is also because the fight has clearly increased. But it would be an illusion to imagine that we can solve the problem in a few years. Here again, on this subject, we are 30 years behind. Corruption has spread in some sectors. But we are in the process of building a very effective vertical anti-corruption system with a national anti-corruption office, a prosecutor in charge of the subject, a separate anti-corruption court which is now also engaged in the nationalization of Russian assets. This subject is taken head-on at the highest level of the State and the President is showing the political will necessary for the reform of Justice to be carried out.