#DevTalks: The Political Economy of the Postwar Reconstruction of Ukraine

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

Konstantin Usov Hello and welcome to Dev Talks. I'm Konstantin Usov I'm a student here at HKS doing my MC/MPA mid-career masters. Dev Talks are a series of conversations with senior policymakers and academics working on economics and international development and is organized by the Growth Lab. It is my pleasure to welcome today Vladyslav Rashkovan for the session on the political economy of the postwar reconstruction of Ukraine. Since 2017, Vladyslav is a member of the International Monetary Fund Executive Board. As an alternate executive director, Vladyslav represents Ukraine and 15 other European countries. Prior to IMF, Vladyslav had a distinguished banking career serving as a deputy governor of the Central Bank of Ukraine and being responsible for the banking sector reforms in central bank transformation. Just one more important thing that before joining the NBU in 2014, Vladyslav occupied the position of Chief Financial officer of the UniCredit Bank in Ukraine, also been engaged in the leadership of the group turnaround projects in Central and Eastern Europe. Since the Russia's invasion of Ukraine, Vladyslav stands in the center of many international projects to provide financial support to Ukraine and plan its postwar reconstruction and modernization. Vlad also serves as a member of the International Advisory Panel for the National Recovery Council. So, Vlad, welcome to the talks and the floor is yours.

Vladyslav Rashkovan And thanks for asking me. First, thanks to Ricardo for inviting you know, we discussed this possibility in May last year and I promise to come for November. But this is only the first week with I managed to find some sort of free weekend. I am here more to represent myself rather than IMF as you understand because IMF is not a development organization but we build the framework for future reconstruction and what I do on reconstruction goes a little bit beyond the IMF, you know, the mandate landscape and small with my cooperation with the government, different think tanks, etc.. You know, for those of you who follow Ukraine deeply might be a little bit surprised of the invasion, but you might know that this is the fifties war between Russia and Ukraine and not the first invasion and not even the first invasion in the in the modern times because the current war started in 2014. There were many others. And I've spoken at Yale and Harvard now for different students, especially those who study history clearly, they know it better. The current stage, we are in the war now, It's more or less already on the seventh stage. There were different moments of initiative coming both from Russia and from Ukraine. Now clearly initiative is on our side. How effective it will be, as Ukrainian, I strongly believe in that it will go as as long as possible and also reaching the, you know, the borders of 1991. But it's very clear that there are many other potential scenarios on the table. This is what we analyzed with some students. So, you know, there could be you know, the war can end or continue soon, depending on who will have an advantage, you know, in the next in the next months. Clearly Ukrainian, I would say minimum target is to come to the to the war victory, a return to the 1991 borders. But as I said, there are many other options potentially are possible, likewise that are also some more positive, you know, maybe developments, including like a fragmentation of Russia and change of regime in Russia. But the also and the in a much worse situation than like in the First World War and even nuclear war.

I mean, Ukraine does everything possible to be on this side in order to reach this target. And thanks to the West, the Western allies who help us of that. But what is more important is the end of the war is not an obstacle to start the reconstruction because Ukraine controls the major part of its territory. Yes, its many elements are destroyed, but and moreover, the reconstruction has already started. And for that, you know, we need to understand that the reconstruction itself is a very complex project process, and it includes many different elements. You know, we say starting with maybe military, as I said, we still need. Win the war. But also we need to release our prisoners and return deportees. But one of the major elements for the military respect to consider this a potential reparations from Russia. You know, we speak about 300 plus billion dollars of Russian assets frozen in different parts of the world. And there are many groups now who are working in order to develop the solutions on Russian assets that are legal solutions, there are economic, there are financial solutions for that matter. I mean, this situation shows that maybe not so soon, you know, because the political process is complicated. Complicated in Europe, complicated to U.S. So another element is obtaining war insurances, especially for the business. So again, there will be London conference soon, which will also focus on these on this topic, how to get it. It's very clear that the West became not prepared for the global world, came not prepared for such a big war, and therefore the need of such big insurance in the war. We also need to have some sort of insurance in insuring security guarantees for the future, one of which could be entering NATO.

Vladyslav Rashkovan But not only, you know, there is another working group led by the Rasmussen, you know, the former head of NATO on thinking what kind of security guarantees could be and how these security guarantees would not be the best memorandum for Ukraine, which will not be respected. Diplomatic side on diplomatic side that are clearly some peace building initiatives. As you know, there is a formal of silence key about the peace that is also now on the table, the sheet formula of the peace. And as I predict, there will be a contest of different peace formulas from different players. Clearly something will come from Erdogan, from Netanyahu, from Mbaise in Saudi Arabia. Maybe something will come from United Nations. Macron already President Macron already went to China. They came with some ideas. Something will come from Warsaw of underline, you know, maybe from Pope. I don't think something will come from Modi because he is a little bit outside. But Lula said he wants to be a part of the peacekeepers from Brazil. And, you know, something will come from U.S. So I think there will be a lot of initiatives. How what could the peace look like after the war? But also another important element is a part of diplomatic efforts. And this is where I also play some role, is updating, updating international aid and coordinating donors. So in terms of the international aid. Last year, Ukraine got $52 billion of international aid that already by this February, Ukraine had 50 plus billion commitments. And as of today, after the spring meetings, the commitments for these year around $42 billion. So and the debt is created the donor coordination platform. I will say a little bit later about that, one of the clear, you know, path of clear, you know, the task for diplomatic side is a Ukrainian building path towards the European Union, which is a strong anchor for Ukraine Postwar reconstruction. Political. I mean, it's also not easy, you know, postwar topics in terms of the reconstruction, because we speak about something which is not necessary. And I would say slightly later about that, everybody wants to come to Kiev. You know, everybody wants to make the picture. So the Ukrainian leadership in Kiev, but Ukrainians, a decentralized country, you know, and therefore we need to rebuild not only Kiev, we need to rebuild a lot of the cities outside, and we need to build the proper relations between city and center and between regions. And we need to ensure that the regions also have a proper absorption capacity. And you know, money also for the for the reconstruction. Currently, clearly, there is a big gap there.

Vladyslav Rashkovan But not only now, we need to think about the elections, you know, boundaries and martial law in Ukraine. During the martial law, there is no fundamental election. There is no president elections. According to the plan, the parliamentary elections were supposed to be this year and the present elections next year during Marshall law. They therefore they are postponed. So there will be an interesting dialog, how long they will be postponed and what, you know, different players will speak about that, including in Europe. And as we understand also, one of the parts of the war is some sort of censorship, media censorship against Russian propaganda, which I think is absolutely acceptable. We need to return back to more free media after the war. Economic parties, a lot of macro adjustments needs to be done because the economy became shrink by 50% last year. At the same time, the budgetary cost is still very high. You know, the deficit now is very high. The debt is pretty high, public debt.

Vladyslav Rashkovan But we need to come back to the issues of debt relief for the country. And this is also some part of our job, which we are doing, also is an IMF program. Now, there will be a lot done for restoration of infrastructure, postwar economic development. And again, each of these elements, which I am just saying could be a book. You know, postwar economic development. I'm sure that some professors from Harvard books about that, too. You know, likewise, also you know working on how to organize international aid, It's another book, you know, and there are several of them, about 1990's, about the 2000's. And I'm sure they will be one of the case studies in the future. So if you as professors want to analyze it, please do that. Humanitarian part will be also important part, not less important than the restoration of infrastructure, because we need to understand what to do with the refugees, what to do with internally displaced people, and how to integrate them in the reconstruction, postwar reconstruction, how to help them to find the new place, but also how to provide them necessary housing, you know, the schools, medicine, something which they don't have now because, you know, being part of Ukrainian territory is destroyed. There are more than 700,000 families which completely lost their houses, according to the World Bank. Damage needs assessment. Social. In other part, the important for Ukrainians is how to ensure justice. You know the the issues of potential new tribunal for the for the Russian crimes during the war starting from the soldiers in butcher and they're paying to the Russian leadership. And there is another another group which is working on setting up these people now, like Nuremberg type tribunal for Russia.

Vladyslav Rashkovan In general, mediating postwar reconciliation between people, between people who were in the occupation, who left the country, between the people from territories which will which will be needed to be integrated, let's say, in Donbas. When we regain Donbas, this will be very important topic, again, a topic for the projects which could be led by the Harvard researcher, Harvard professors, for sure. And there will be a lot of initiatives coming from, you say, from the US government, to finance, finance this institutional also institutional process. Institutional element is important is how to build this absorption capacity, how to I said yesterday during the panel that the agency, which now is created for reconstruction is in the past was managing around $5 billion per year, a little bit more than $5 billion budget and the needs are hot 400. So you can easily say about 80 years if only this agency will work. So it's very clear that you need to enhance capacity, how to enhance capacity in private sector, in the government, in this agency, outside of this agency, how to experiment with different agencies, how to do it from outside of Ukraine, inside of Ukraine. Again, this is a topic both for research but important for implementation, technological. You know, what we discussed yesterday during the panel is you need to get lead from post-Soviet standards, acknowledges go more to European standards, which is a big and you need to do it faster if you want to enter fast in the fast track to European Union. But what is important, we need also to leapfrog. We cannot go to the same path like Poland or Hungary, Slovakia, Slovenia, when 20 years ago, if we want, we need not to look to the Poland of 20 years ago.

Vladyslav Rashkovan We need to look at the European Union 15 years from us today. So European Union in 2035, how it looks like because we need to try to get there rebuilding our institutions and that's why we cannot do it without leapfrogging. Otherwise we will be left behind, lagging behind for so many years. In general. I mean, speaking about, yeah, what is important is that we need to work. Reconstruction means factually all this together in parallel, not consequently. You know, we really need to work on this simultaneously. In general, when we speak about definitions. We speak about the fast recovery which is going now. You know, there is the need for fast recovery this year, around $14 billion. We speak about reconstruction, which is more physical infrastructure, reconstructing physical infrastructure. We speak about modernization, which is more about institutions. But also, you know, the approach is cultural changes in the country. We speak about the structural reforms which are needed, and we speak about EU accession as anchor for us. Again, all of these together, not in parallel, not consequential. Speaking about the figures, we need to understand that our figures of damages, losses, you know, and the reconstruction needs. And what I said yesterday, and this is done now by both by Kiev School of Economics and World Bank assessment that the damages until the war and expected at least on the level of $500 billion as of today after one year of the war, we have $155 billion already recorded, which means factually documented fact of damages for Ukrainian economy. 60%, $60 billion is a loss of our GDP. You know, 290 billion is expected loss of the potential GDP because of low productivity, because of the refugees, because of the damages of infrastructure and economic capacity.

Vladyslav Rashkovan $105 billion is the immediate needs, what the World Bank estimated last time for the next 56 months. And the 14 billion I think is more capacity for this year. What they expect from the government and the and and and the private sector totally. The last assessment is 1411, $411 billion as the reconstruction needs for Ukraine. Together with Barry Eichengreen, together with Genco, we estimated that the reconstruction needs will be at least $750 billion. But if you speak about investment needs for the leapfrogging also to get more than $1 trillion, you know, and this is us yesterday was saying it's ten plus ten, 15 years at least the job is at the best. What is important and this is another book was differentiating about that , whatever is needs, whatever Ukraine is requesting, what is pledged by the, you know, institutions and the national national countries, what is committed and what is disbursed to a completely different figures. And they are also different from absorption capacity. If you put today hundred billion dollars on the table for Ukrainian reconstruction, there is no way to to to use it for from any perspective, not institutionally operational, even banking sector will not be able to adjust these this amount. Therefore, we need this to maximize, but we also need to maximize these and to to decrease the gap between the figures.

Vladyslav Rashkovan Speaking about the main part. You know, the and this is what we discussed with Ricardo last year during the conference, which we had organized together in the School of Economics in May. There are many embedded conflicts or I would say crossroads for the Ukrainian reconstruction. And they are actually the base for the political economy debates in the country. And I'm sure we can add much, many more, but this is I see much major ones. So the first one is who is driving the reconstruction. I mean, on modernization of the country, is it Western? Was it driven by the by the Ukrainians? I mean, Ukrainians say it's our country, we are sovereign. So, you know, we will have our future. We own our vision. We own our future. The West says, guys. but we already saw it, already saw it in other countries. How it's going Iraq, Afghanistan, Iraq, Afghanistan, maybe not the best cases of the, say, you know, but nevertheless, there are other cases, Hurricane Katrina later, they say, about Indonesia. And in addition, in Nepal, Mozambique, Sri Lanka, you know, there are many different cases, some remember Salvador and Colombia, you know, so there are many cases where you can learn something. So it's not a unique case of the reconstruction after the war. And I think the answer should be clearly there should be Ukrainian ownership and the vision should come from Ukraine, but there should be strong cooperation with other donors. The second is about the the conflict between short term needs and the long term vision. You can have a long term vision that you will have, as we discussed yesterday, Amsterdam instead of Kiev. But you need to fix the roof for hundreds of thousands of people who are staying as internally displaced people and actually not 100,000, but they are 8 million. And you need to find solutions for them. You need to find for them modular housing today. And this is what you and is doing. We are habitat is doing, UNHCR are doing in Ukraine today. Red Cross is doing finding the possibility for interim temporary housing.

Vladyslav Rashkovan As you understand this one, as we have temporary housing with me, let me stay forever. So you need to understand how to balance these in the short term needs with a longer term vision. Later, there is a some sort of rivalry between national players like European Union. We will run the reconstruction you exercise and we. What about us? Canada says. We also want to participate. Turkey says we also participate, you know, and the institutional support in the World Bank says or EIB European Investment Bank will be ready We will be the champions of the of Ukrainian reconstruction find none of them has a capital to do that if you are seeking for a capital. European Investment bank is seeking for capital allocation for Ukraine, World Bank has limits. So factually they also cannot cannot do it. And we need to have more coordination here. And clearly we need to strive for the modernization of the country. There are many other topics. So should we speak more of donors and therefore potentially expecting only the grandson, which is clearly more, you know, desirable for the reconstruction. But there is also a problem of Dutch disease. So if you have an only grandson, you know that you don't need to work. You expect that others will finance you. Therefore, or you have loans which easier to give. But you need to think what to do in the future. Already. Debt to GDP. Public debt to GDP in Ukraine more than 70% because GDP went down. And last year the combination of loans and debt and brand grants was like the 65 to 55 last year out of these $52 billion. Clearly, what I strongly believe is not loans or guarantees or or grants, the Ukraine can be reconstructed only way of private capital in future, only with investments and how to bring this investment.

 

Vladyslav Rashkovan This would be the major task for the government. That's why the structural reforms is so important. I already said about the centralized country versus decentralized, you know, strong capital of western regions. Ukraine is a decentralized country It should be clearly kept. So how to build the capacity in the regions is a big question. Democracy strong hand during COVID. Strong can during the war. I mean, clearly, I mean or democracy and freedom. I strongly believe in democracy and freedom. You know, therefore, it should be preserved after the war. And also what we see now, there is an increase during COVID and during the war, strong increase of the of this of the state, the state's role in the economy. And I mean this if we if we to put it to the limit and therefore everything will be state economy will be small state economy versus big state economy on the on the nature of small stuff, the economy will always lose to the state, the state economy. So for the small, open liberal economy, supported by the, you know, economic freedoms clearly will win towards the, you know, the state economy. Last year we developed these more or less mechanism. We've we've Ricardo in London so that I'm like frame which many people found it is as relevant. There are some prerequisites which are needed for reconstruction. Everybody speaks about the principles of reconstruction is again, the EU as a as  as anchoring. There should be clearly transparency, Ukrainian ownership. If you put all people together who wrote about principles, we can have a big book already about that vision. This is what I said yesterday. So far as missing vision should come from Ukraine. But Ukraine now is more focused on the short term needs again and also on military, how to win the war, the long term vision So far as missing EU accession frame, there is a process to you reframed the junior departments or those department which is working on the neighboring countries, and they're developing a plan together with Ukrainians recovery plan was there was some attempt to develop it last year before Lugano conference in July. Unfortunately, there was not much  traction about this plan. There is more now fast recovery topics, but other elements which are more important is how to finance, how to build the implementation capacity, how to build the, you know, the governance around the reconstruction, how to coordinate donors. You know, I will be happy to to answer, your questions. There are some slides which you probably will will use for that answer. And one of the question is, do we need to have some real champions or Mr. or Mr. Marshall, you know, in the future? This is a good question. I don't know what it should be individual, personalized leadership. And this is about the leadership classes of people, or it should be a more institutional leadership in the current world. This is a I don't know, but the politicians will play a big role in that because unfortunately, they will have to make so many choices and they will need to think either they will sacrifice their careers or they will make their careers. Maybe someone will make a career also doing the reconstruction well.

Konstantin Usov Thanks for this presentation, Vlad. Let's follow it up with several questions and then open it up for the audience. You mentioned that the reconstruction in Ukraine has already started. I'm aware of this, but as this fact probably surprises many. Could you elaborate on who has begun the reconstruction? Where? Who pays for it?

Vladyslav Rashkovan Yeah. There are several levels. I'll give you an example. You know, it was recently in Kiev and I went to two European, which is a city now by Kiev. And you might remember the the bridge which it was on there, all the pictures on the fiscal march seats where people were evacuating from Europe and they were under the bridge totally.

I think something like 90,000 people moved from European to to Kiev under this bridge in the next days. So I was staying in front of this bridge and I created such like a metaphor, which I think Ukraine looks like this bridge today. So the the main bridge is still destroyed, like Ukraine. On the right side, the Ukraine, Ukrainian authorities, Kiev authorities, European authorities, they built an interim road there on the the bottom of the of the river. It's a very, very small, very narrow. But it's there the cars they're using, it is how Ukraine is tackling fast recovery today. And on the left side of this bridge, the new bridge is already under the construction. You know, and this is how Ukraine already starting is still far from palatial. But this is how Ukraine already started. There are only two questions. When this bridge was started building, was there proper tender process? I simply don't know. And the second is, and the builder is a Turkish company, which is also interesting. You know, just in general, we appreciate all the investors. And the second part is, is this bridge built according to the 21st century standards on ecology. Will this road be prepared for self-driving cars in the future? You know how many CO2 emission was spent, you know, for the you know, for this bridge? I think nobody was asking these questions. And this is not a modernization. You know, this is going back. What we actually tried to recover the bridge, which was before. I mean, spending money, if we do that, as I said yesterday, I think it would be the the crime of the 21st century. We really need a chance to rebuild the rainy weather.

Vladyslav Rashkovan So if there will be no this faster recovery, which is starting with energy. You know, the Depression was attacking them for their missiles, were attacking the Ukrainian energy system, and only one of the November 11, there was one go out of the generation and the city was damaged was if this will not be recovered before going to Connecticut, will not be investing in the recovery. And they will, with the money of the government, with most of the money of the dollars. Yes, there will still be too many of the you know, if they will not do it, there will be very strong electricity shortages in some parts of the country. If a few days ago you started the export of which you suggest. So it is, you know, while in December we had a huge this huge you know, so we are what I mean we are recovering that you know you know, recovery is fast recovery. No single foreign leader will be able to come to give but train by the car because it was well, if there will be no recovery, it will be very into the mobile connection because the Russians were getting also the the thought was about power. So all these are being done by the private sector. There didn't up we were in Kiev and the ceremony when you were met with visas, one person from business said I had the these two warehouses total value of 70 million. The site both ruined one. I will use money for another one for the new project. This is one of the projects of mega you know, of ensuring and you investments in one of the part of this and in I was I have one company we are ready to build office.

Vladyslav Rashkovan So these are not only the economy, but also the investments by the companies. So both businesses got a one from the budget and the financing from the economies. If this part of the economy is contributing in fostering a female cycle, you cannot rebuild the country with female cycles. We still have some longer than we want to do.

Konstantin Usov Just to clarify, are you aware of Spain from the bridge? The capital loan? Got it. My question to you, should there be capital expenditures in a quickly engineered and quickly designed capital projects in Ukraine? At this stage with my which might end up as being as outdated as something that has been destroyed before.

Vladyslav Rashkovan The answer to this question is a little could be a little bit provocative. I would say even more. Even if there is a huge risk that this may be even destroyed tomorrow. It's still to be built. Okay, You know, because, I mean, you should do it. You cannot wait. What if there will be a missile tomorrow? You need to act. What if you win tomorrow? Not if there will be a missile tomorrow. So therefore, I mean, do you need to invest as if this is like the old technology? So, again, I told you about this conflict between the first, the first needs and the longer term vision. If we will stick to only to the first answer, you know, therefore only for the immediate danger. And we do of everything only for immediate need. So there will be a, you know, a problem for the future. We will spend a lot of money, but we will not rebuild the country for the future.

Vladyslav Rashkovan I give you again, we're speaking about the political economy. Therefore it's more choices of people. Give you an example. You are internally displaced person one Internally displaced. Person two Internally Displaced persons one go to temporary house, modular house. So now you build a new house. Who will you bring that house? That who doesn't have a house or who has a modular house is a choice.

Konstantin Usov Just another piece of information. So there is there was no traditional peaceful due process to procure the construction of that bridge that you mentioned. What's your stance on this balance of meeting the sense of urgency versus meeting the due process that would, in its turn, project our readiness to be transparent better than yesterday and reliable?

Vladyslav Rashkovan Yeah, you know, the this is a again, a very interesting question when you look at today for today today for today, you always say for sure it's important to build today. Because you still need it. Therefore, your choice would be Let's do without any tender procurement, any, any contracts, etc. If you find yourself with any tab mod that that moment of life for you, will all of us choose that option because we need to do it today. If you start including a little bit of, I will show you what exactly these elements are, which is my model of the Public Financial Investment Management. PMA. This is our development, see, you know, including climate. This is the model which I developed, but it is actually including several models. So we start from this assessment today. You do the strategy improvization today, for the future. You know, you do programing. So you're saying we need to build city number X or we need to build them. You need to build the the airports.

 

So if you start today asking, do we need to rebuild this city or this airport? I would tell you, let's think one second more. Let's put people, urban planners from Harvard, let's put the you know, the the people who do strategy from, you know, MIT Media Lab, CityLab. Let's put someone from Amsterdam putting them together as a team to think of it. And then when you say, well, we said there is no time, I will tell you that this already 14 months of the war and 13 months ago we had already, who should have started that? Not today, but if we didn't do it 13 months ago. We need to start it today in order to be able to to build it, because this process, because procurement only goes here. Point number nine. Before that you should have done a lot of reprocess that bridge probably for interim. You didn't need any thinking more, but for the main bridge, probably you need.

 

Konstantin Usov Just to build up what you've mentioned. So the Harvard Growth Lab institutions like these ones, what should be their role in designing the policy, implementing the policy and supporting Ukraine's efforts to recaim itself? And the fact the second part of it is a little bit more provocative, do you think that there is enough open mindedness in Ukrainian wartime government to build a cooperation with such organizations?

 

Vladyslav Rashkovan Answer to the second question for sure, yes. Because when you say government, I hope you don't. I don't mean only central government, because I said a few minutes ago it should go also on the regional level and therefore to the mayors, you know, and the mayors, why not? The mayor of Kharkiv would not be interested in cooperating and thinking about it, it's future planning. You know, but speaking what can be done. And this is a more practical question, but it's not "what if." There are 50 plus think tanks in the world already engaged in Ukrainian reconstruction? Some would do that. We were discussing with Ricardo how that can be implemented. There were some ideas before about the the evidence based policies, about the thinking about future European Union integration and therefore, which regions of Ukraine may be more integrated to the European value chains and therefore trying to work together in a targeted way with a with the company staff.

 

Konstantin Usov But just for the sake of truth, the Harvard is not engaged yet.

 

Vladyslav Rashkovan Yeah. And this is what I'm what I was saying about the the championship, you know, So this is like a do we need a champion, you know? And the academy remember part of this slide, you know, from last year, But you see the number of faces increasing, you know, so there are different people who can who can play some sort of role. What EFA is a question I don't know if you're if you know that and again, taking out all the potential, you know, association which probably that time it was not super successful. But in the early nineties there was a Harvard Institute for reforms in the emerging markets and it had a pretty big budget and they were trying to convey the messages about the different economic policies which need to be done in the country. And the true saying that time I think it was a some conflict between the IMF and this institute in terms of messaging about the reforms. But for reconstruction, we don't have such an institute, we don't have such a champion outside of Ukraine, which would be a intellectual center for the for the reconstruction of Ukraine, for modernization of Ukraine.

 

Vladyslav Rashkovan Why it cannot be and I would not say Harvard. I would say Harvard is here about the science pool, you know, because it should be still, we are not in Marshall plan concept because we still have European Union in the US. Why not? And this center could be properly financed, could play a role as intellectual center for the reconstruction. And who could unite all those think tanks outside of the country of who would help, you know, other countries like European Commission and the IMF, World Bank, EIB, to build this kind of intellectual support, because intellect is here, politicians are there and intellect is here.

 

Konstantin Usov I was so glad to hear that mayors are ready. Is central government ready?

 

Vladyslav Rashkovan Yes, sir. Also, we were discussing this during the spring meetings, we had several discussions on the topic. So far, the initiative is coming more from companies like BlackRock, Jp morgan, Goldman Sachs, and other than from Harvard, Yale or M.I.T. But I do hope and I do my part of the job in order to institutions, to academia, also to come to play the role.

 

Konstantin Usov Thanks Vlad. So we'll now open the floor to questions. If you have any. Just raise your hand, please, and make sure to introduce yourself.

 

Attendee Hello. Hi. Thank you very much for the talk. I'm from the Growth Lab. And I was wondering about the one aspect that I don't think you've delved into so much, which is maybe what you would call the demographic reconstruction of the country. You know, beyond the unfortunate casualties of the war. There's a lot of people who have left their countries, especially women and children. Now these people are building lives of their own wherever they can. I was wondering how you think about the role of this new Ukrainian diaspora in reconstruction and how you would want to engage the world So, you know, just build a case for them to participate in that reconstruction.

 

Vladyslav Rashkovan You're more thinking after the war ends. Yeah, we discussed this issue slightly yesterday during the during the panel, and I was sorry for for not mentioning this. I mean, and I said yesterday that as a result of the war, clearly we will have several important new social groups. One will come from veterans. And we may speak about probably a million people including volunteers, some veterans. We will speak about the families of the fallen soldiers. We don't know the figure today, but it would be small. We will speak about the internally displaced people, which is around 8 million people, and we will speak about refugees. These four groups, I mean, they will create another conflict between socialism and capitalism and our crossroad, because clearly there needs to be most is social. And the government and politicians will tend to address their immediate needs rather than to create out to think more about the longer term because the immediate needs of these people will prevail. And I understand politicians. For the refugees. What you could you ask specifically the I'm working with UNHCR, which is doing with help of some Ukrainian social sociologist service but permanently you know, in different countries what they are going to do. The figures are showing that more people will spell the broad spend abroad, the more they will make a choice for their kids. The. And to give and what they need back. They need security. They need housing. They need jobs. They need medicine and schools. All of these things. And again, as I said about the social things you can try to do faster, but even fast, it will not be fast. You know, unfortunately, you know, but you can do it really fast trying to do this.

Vladyslav Rashkovan Like for schools, you need to build down schools or rebuild the schools to make the bomb shelters. Because people come back, and especially those who are out of the country, they are putting those people in the schools to be open that they need to have. But at the same time, I think what is slightly missing is an essential. So, you know, you may eat the grains because in the case we are more online. Online schooling, how to do this is the question.

Attendee Do you also have proposals, you know, how to what are the lessons from other case, other conflicts or how to keep students, you know, kids integrated with Ukraine or over the country of the conflict?

Vladyslav Rashkovan Uh, in the longer term, even if they stay outside is the question is a task you know, for the, for more for academia, for research and, and the politicians to take a decision. Politicians can take emotional decisions, but hopefully they can make decisions which would be in all the evidence based and based on the some previous research. Answer to your question what to do next, though? I don't think the answer is how to work with diaspora. So I think our factor is that anything which can bring people back. The answer for me is the opportunity. So for the for the parents, you will need to make sure that they will they will be a job for them. Plus all what I said before. And as soon as you do these things which we discuss about political economy, you you are politicians. So who will you prefer first? Those who already stayed in Ukraine or who left the Ukraine to build one house? Who you will give it to? One who was in Kiev staying during all the years, during all the year of the war or the one who left the country? It's a question for political choice because maybe you will not have $2 to build two houses, or at least you will not have $2 in the of the moment of time you will have one after another. And it's still a political choice. How you sell this political choice is another after how you work with your European colleagues in Poland, who is really happy to have a million of Ukrainian workers there and ready to integrate them in the all the economic policy in button in Poland, in Germany as well. Secondly, your study kids who know German or Polish. It will be more and more difficult to reintegrate them again and search for this opportunity and opportunity link for reconstruction. We discussed that, that this will be a huge challenge and for any professional, it would be a dream to participate in this such a big project, especially if you are patriotic and want to help your country and also if it's paid for.

Konstantin Usov Real quick, since so since my family's here and we are really considering and I'm going back for sure the summer and I'm also considering taking them home, I would say that the the the factor that I'm hugely analyzing is a factor of certainty. So I would say that I would ask you, do jobs together with housing, together with education, health care constitute the notion of certainty? Or there is something more to it?

Vladyslav Rashkovan I think we live in the world where certainty becomes this word, very rare in general. So we live more in a very vulnerable and uncertain world, longer with further to go in the future, more uncertainty. It doesn't mean that you don't need to plan, though. You know, as I said, that you need to strategize more. You need to have more scenario approaches to be ready for a good scenario and better to not need to have a contingency planning what you do before. But what I see is Ukraine is fighting not only for its own independence, as we know, you know, because if Ukraine loses this war and the scenarios are different, you know, we believe as Ukrainians, it will not happen. You know, but the it is very clear that the West will lose as well, you know, And therefore, we I think everybody understands in the West it's not only our war, it's really the war of the West and of the humanity of humanitarian values. You know, the the open liberal ideas and the democracy against of everything, which is could be antonym to that.

Vladyslav Rashkovan Therefore, I strongly believe nobody will want to live in Syria type or Aleppo type in the country in the center of Europe. And there will be a huge exercise for European Union also to contribute for its own, you know, rebuilding, because it will be, let's be frank, it will be a big business for the European business financed by European capitals, you know, by by different types of bonds which can be issued or or other things. Again, it will be a topic for European politicians how they want to behave and participate, position themselves in the future history. You know, so far, most of them probably except the few leaders that clearly show that they want to be on the right side of the history. And I think after the after victory, they will continue to do that as well.

Konstantin Usov More questions for Vlad? Professor Hausmann.

Ricardo Hausmann So thank you. Thank you very much for a very broad and encompassing presentation of the many, many issues. We last met in person last May. Since last May it's been, say, ten more months of war or 11 more months of war and and also of articulation of the international community. Questions. In the last, whatever, 14 months of the war, what have we learned about the willingness of the international community to support Ukraine? And what does that tell us a little bit in terms of a is how solid is this report? Before the plan just shared with us?

Vladyslav Rashkovan Because of the all the all the reasons which we discussed with you last year, all month, it was about the, you know, the rest of this. Nevertheless, Ukraine got $52 billion in support last year. Last May we were only pretending that it will be $5 billion in mothballs. And even if Ukraine did not receive any single month, $5 billion. The maximum was, I think, 4.4. Nonetheless, $52 billion was there and already for this year and last my last May, we didn't have any perspective so far. We need only we knew only the amount. What we need now, already in February, 50 plus billion dollars was committed for this year. Now in the in we are in April 2004, 11 months later we have IMF program which last May was not possible. The fund never financed the country in the active part of the war. And you may say about the period of 2015 when the fund did finance Ukraine, but that time the concept, the Western concept, was that the war already finished and there is some conflict on the east, which is, I think, one of the misconceptions of the West. Then I was telling today that in the morning to the poor, the Ukrainian students and therefore but the $15.6 billion of Ukrainian support is almost nothing against the total package which the Western countries already committed as a anchoring government program of total $115 billion for the next four years, which already committed and embedded in IMF program. So there is a $115 billion commitment from the G7 leaders to finance Ukraine in the baseline scenario. In the downsides to that and beyond is a dream written in the IMF documents. This is one thing which is done. The second element which is done, and we were discussing last year about the need of coordination of donors. And you remember how donors were saying there is no need of coordination. We are very well coordinated. They were not. But these December G7, after our push for many months, the G7 leaders said there is a need of coordination. And in general the G7 multi-donor coordination platform has been created for Ukraine. There are already two meetings. It still to be improved, but the process is there. And without this platform to be very hard now to coordinate the the international aid for Ukraine. The European Union, Ukraine in last May didn't have any perspective for European Union. It became, though, the candidate for European Union with some expectation of the plan, which is hopefully will come this year. And there is an intensive discussion. And there, as I said, the Junior Department of Labor and the neighboring countries in the European Union, European Commission, they recently restructuring to have really, you know, a lot of people to be focusing on the Ukrainian integration, Ukrainian accession and also on Ukrainian reconstruction. So there efforts, US..where they discussed last year grants versus loans, U.S. asked grants and they provided grants we discussed through which we'd cost will be IMF World Bank special because Ukraine does give money directly. They use the World Bank multi-donor fund of the World Bank last year it was not there and they use the instrument. Moreover, the IMF created administrative account for that and they are $5 billion for that account.

You know, a lot of money went through the World Bank account. And the more a World Bank does the certification of this money. They work well as a unit which works with the Ukrainian government in order to to cooperate, you know, to to certify the money. And they later certified this to the Congress. And only after the certification from World Bank that the money spent, according to the guidelines from the Congress, the next tranche is coming. The US created the inspector general. You know, there are four inspectors general who already came to Kiev separately. At least there is a report from January. I think they came twice to Ukraine, maybe once or twice, you know, and there is a teams which are built now for the for the inspector for analysis of the of the support function is the support of Ukraine. So there is a lot of institutional building around the construction process is ongoing. In Ukraine you have vice prime minister on reconstruction who became a direct counterparty for both for you asked for European Commission. You know, there is the agency created for reconstruction. We discussed last year how it's better to be done. We wrote about it in the article about that, how  to build this agency. Yes. Is built not outside of Ukraine, but inside the Ukraine. But they know that article impact that creation and agency. And I worked with a directive of a head of agency in order to structure it, you know, now. So there is a lot of institutional process behind the the money came. Money will be there. Also, there is some portion of money already committed for reconstruction itself. There's $1.5 billion from U.S. that is 1 billion from you, 400 million from Japan.

Vladyslav Rashkovan So there is a process these money are not compatible with, you know, the needs of 111 billion. But as I said, there are also the working groups on Russian assets on the on on on other elements of the reconstruction. Therefore, you know, a lot of things changed from last May. And it seems that it looks like the West is ready to support and commit to the Ukrainian reconstruction.

Ricardo Hausmann Any comment on within the West who are the outperformers in war, the disappointments?

Vladyslav Rashkovan We have thanking all international partners for support. And I would love to have a topic maybe here at Harvard, the role of Asia for Ukrainian reconstruction or the role of Middle East for Ukrainian reconstruction, because so far it's really in the West. I mean, within the West, you go to the IMF now to the Ministry of Finance website, and you see clearly a few figures. First is the is money from U.S. and the European Union. The first investor I mean, first of all, of Ukraine, today's IMF, Japan now committed $5.5 billion to the G7 president, which will be which will be disbursed for quarter this year, first quarter next year. U.K. did a lot and Germany provided 1 billion grant last year and other contributions for European Union World Bank money. And later, you have EBIT in AIB, but they are mostly financing the enterprises. And one of the elements which I said also today to the students, to Ukrainian students, is we need to build a proper digital system to track money because so far we can track only the central government money. But we don't have a view on what is given like between Twin Cities in in-kind support, for example, or even like money to the state owned enterprises as loans. We don't see the in the in the government official statistics.

Attendee Hi. Hello. My name is Felicia, also the growth research fellow originally from Moldova. So thank you for for your presentation. So my question was kind of related to to your last point that of there has been a lot of support from the West. There has also been bilateral support, institutional support. At the same time, there have been some fragmentation within even the European Union. You know, we recently saw Poland or Hungary kind of implementing those unilateral bans on grains. There was obviously also some criticism regarding allocation of aid towards Ukraine at the expense of other either countries or, you know, instances that will not be receiving about aid and that have been asking for it for quite a while. So how does this reconstruction plan kind of take into account what you're suggesting in your opinion on how does that take into account what the losses might be, both among the West, but also on how it's incorporating some of that criticism from outside of the West? Thank you.

Vladyslav Rashkovan Yeah, it's a good question. Speaking about Moldova, you should know that Moldova, in all the programs now and the West goes Ukraine and Moldova. And then this again about the political economy. You know, in the different countries in Poland, you have elections this year. So you make a choice between the local domestic political battles and the some optics of Ukrainian support. Are there any countries which are benefiting from the Ukrainian war in Europe? I mean, you should simply think about two things. If tomorrow there is still ongoing war in Ukraine for a long time and there is a conflict which is ongoing, every 1% of the European GDP is $100 billion, which will be needed to invest, for example, for military.

Vladyslav Rashkovan These are money which will be not invested in the medical, in health, in education and social support of people. And all of these what politicians now saying about the grain that this will be completely wiped out, you know, all the potential short term benefits. And this again, between the short term and the longer term, longer term vision. Hungary is a little bit on different side. You know, they they they chose politically to be on another side of the history. And this could be a longer term problem for European Union because for many aspects, it looking like Europeans Ukrainians are more Europeans now than others since few others. And you know so it's a complicated. But even with Hungary, you know if we want to be in the same house with European Union, we need to find a dialog dialog with the Hungarian minorities. I mean, if there is a dialog. So if European Union finds a way for a dialog with Hungary and giving on not giving European Union funds to Hungary. So I think we also need to find that do dialog on other issues some more because I think Bulgaria also came today with ideas about the ground and they used the case of decreasing the grain prices, which is actually Ukraine helped Europe with inflation also providing the grain. But now the local producers are not so happy, but the grain is going down in most of the markets. So is the question more about local politics, how they wanted to use the case of Ukraine? They say the politicians say that we will do only the transit means that we will work on transit. You know, there is still a live in so many countries which need the grain. In Africa, which are really seeking for rain. But we will work on that. So I think it's more short term political, you know, battle, you know, to show more domestically, you know, rather than a longer, longer term problem. On the longer term is this issue between the peaceful plans, between, you know, Ukraine and and between difference between China, between the Zelensky plan and plan XI in plans formula of peace was announced is written that we need to have a possibility to export free and then in in XI plan in St and to facilitate the Ukrainian export especially grain facilitate means what is going on today when you need to agree with Russia you know in Turkey about the what will be done there will be inspections. This is not you know, supporting longer term because it's limiting our export and including that our export is not only grain, we also export metallurgy and many other elements. We also import many things, you know, and it's clear that if you import them by buy by ships, it's easy. It is easier than to do it, to bring it by make trucks. So I think this will be a diplomatic topic is one of the diplomatic one. There is a path to recovery and we will do this, you know, numerous time.

Attendee Thank you. My name's Bob Powell. I'm a fellow at the Harvard Advanced Leadership Institute. Urban planner by background. I'm really interested in what you were saying about decentralization and the cities and the combination of needing to create a vision ahead of all the projects. So if is all the institutions in place during the war and martial law at the city level to allow that to happen? I mean, if if funds were available to an individual city right now, could that city get all of the right stakeholders together to create that vision so that you then got the platform for all of the rest of the process?

Vladyslav Rashkovan There are few answers to this question. If you go to Kiev, absolutely, yes. Moreover, key is Kiev now worked with UK consulting company, one of the big four on designing the strategy of the of the postwar reconstruction of Kiev city. It is true that he was not so damaged, but still I think it was the right approach to do it now. I was participating, you know, from the first days on these. The result, I was not super happy with the result, but what was go to the strategy. But I think it is better to have it, not to have it. When you speak about other cities you come to, The first issue is a demand. The demand is there. The second question is absorption capacity. If you go to training, if I'm sure you will not find mostly anyone to speak with you. But yesterday, while I was on the panel here at Harvard, I missed the call, which we organized with the School of Economics in Kiev and donors to design the program, which would bring people both in Ukraine and outside of Ukraine to train, to speak on the topics which you said both city planning, strategy, project management, speaking, European Union language, what means to be build back better managers. And this is again, if Harvard wants to play a part of that role, it also would be interesting, you know, because you also need leaders for that as well, you know, but you much more will need people on the lower levels to do that. And the the process will will go. Now, I would say the cities of the second, third year, they missed that element of the absorption capacity. It should be developed for sure and will be developed. So thank you to everyone for your thoughtful questions and contribution.

Konstantin Usov Thank you, Vladyslav Rashkovan, for your for sharing your views and opinions. And I hope that we can all we will all stand for Ukraine and please, please contribute to that.