In February last year, Russian tanks rolled over the border, resulting in the destruction of swathes of Ukraine. One day, it will be the world’s diggers and cranes rolling over the border to rebuild it.
The scale of the rebuild in Ukraine grows day by day as missiles and shells rain down on the country, particularly as Russia targets critical large-scale infrastructure. A few weeks ago Ukrainian Prime Minister Denis Schmyhal posted that damage done already at “more than $750bn (€762bn)” and many have warned the number could easily pass $1trn.
This scale of rebuilding that is required has not been seen since the highly successful Marshall Plan after World War II, in which the US helped bankroll the effort to put Europe back on its feet.
The success of that plan was recently cited as the inspiration of a new plan for Ukraine, proposed by German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen and signed by the G7.
"We have to start building destroyed residential buildings, schools, roads, bridges - the infrastructure and the energy supply now so that the country can get back on its feet quickly,” the two said in a recent op-ed in Frankfurter Allgemeine Zeitung.
Sholtz added that the scale of the rebuild is a “task for generations”, but one that “must begin now”.
Delivering a potential $1trn of construction is a mammoth task, requiring capital from all possible sources, whether that’s via multilaterals or even Russian oligarchs via frozen and seized assets.
Importantly, the private sector is being placed as a key player in terms of financing Ukraine’s rebuild, and work on creating the pipework to let this money flow is already underway.
In November, Ukraine tapped BlackRock to help create a “special platform to attract private capital” into the country's future infrastructure. The American giant will advise on the platform’s implementation, including helping create its structure, mandate and governance.
“We hope that this ‘recovery platform’ will become an effective mechanism for mobilising investments in key sectors of our economy,” said Yuliia Svyrydenko, first deputy prime minister & minister of the economy. “It is very important for us to demonstrate to the whole world that the war does not disallow investment in Ukraine. After all, investments are the key to the future rapid and effective economic recovery.”
But alongside financing, the private sector has other strings to its bow to offer. Partnership models offer skills, ideas and capacity alongside money; as well as strategic benefits such as creating transnational investment flows.
Ukraine has already put PPPs firmly in the picture, recently passing a vital PPP law that shores up the market. It has also signed key draft agreements, such as one in October with the IFC to work on more projects.
In that memorandum, Shmyhal said it will allow the country and the IFC to “jointly identify and work on the financing of PPP projects in various areas of the economy. We are talking about projects in the energy sector, infrastructure, and other sectors.”
The government is sending signals that it will call upon the private sector, and particularly PPPs, to help rebuild the war-torn economy.
Key government allies are also placing PPPs and similar models at the heart of their plans.
The UK recently set out both short and long-term plans for investment in Ukraine, which features the creation of a Ukraine-UK Private Finance Partnership that will “bring together the UK financial services sector to provide advice and explore how best to unlock the flow of private finance needed for Ukraine’s economic recovery”, the UK government said.
Across the Atlantic, the US Department of the Treasury's Office of Technical Assistance (OTA) is looking for P3 advisors to help its overseas infrastructure programs by providing “hands-on technical assistance as well as policy advice”, notably stating that those speaking Ukrainian and Russian would be “highly desirable”.
One of the major pluses for these pushes is that Ukraine has been building up a strong foundation for using PPPs: back in February (before the war) the government said it was having a “productive beginning” to the year as it passed amendments for the “systematisation and harmonisation” of its PPP enabling environment.
It was making these amendments off the back of a number of successful tenders, particularly in the port sector - which plays a major role in Ukraine’s economy through the export of vital food supplies around the world, as has been made painfully clear to many countries around the world in recent months.
Projects such as these, and those in the transport and energy sectors are taking the first steps forward already. In August, the IFC started looking for consultants to advise on port projects on the Black Sea again - perhaps marking one of the first concrete signs of a future pipeline of important and numerous PPP projects.
Ukraine will call on the PPP industry to play its part in its future, the industry must be ready to answer its call.