“A platform should be created in Poland for the reconstruction of Ukraine, with the participation of the World Bank, the European Bank for Reconstruction and Development, or the European Investment Bank, among others. It would facilitate more efficient spending of funds allocated for this purpose. Ukraine's benefits from this will be counted in billions of dollars”, says Franek Hutten-Czapski, Senior Partner and Chairman of the Boston Consulting Group in Poland.
What is the key for the reconstruction process in Ukraine to be successful?
It is very important to categorize the necessary measures into short-term measures ‒ those that help Ukraine survive the winter ‒ and long-term measures.
First, resources must be found. The need is enormous. Multiple estimates put the sum required at $330 billion. This is the minimum reconstruction amount needed, of which $90bn is needed for critical infrastructure so that the country can function within one to two years. According to the indications of the National Recovery Plan, the reconstruction costs may even reach $750 billion, of which $300 billion is for critical infrastructure. The World Bank cited a figure of $350bn, of which $105bn would be used for critical infrastructure.
The country's budget deficit - between $20bn and $120bn - has to be considered as well, depending on how the situation develops.
In the short term, money is needed for the power grid, water and sanitation, logistics and transport infrastructure, the agricultural sector, as well as the metals and building materials sector. All of this is critical infrastructure. Unfortunately, Putin is destroying it because he wants Ukraine not to survive the winter.
Who could provide this kind of money?
The United States and the European Union are pledging to provide $38‒54 billion, and some of it has already been transferred. International financial institutions, such as the World Bank, the EBRD, and the EIB are talking about support amounting to between $12bn and $50bn. Here, too, some funds have already been transferred, but the plans are not fully crystallised. The EU member states are pledging between $2 billion and $20 billion. When all this is added up, the total comes to between $52 and $124 billion, which is too little in relation to the need, although it is already something.
So the first thing is money. The second is considered by some to be just as important; namely, the mechanism for spending it. This is about ensuring that money is not misappropriated or used for some wrongful purposes because of corruption in Ukraine. There needs to be a system, an evaluation process. This is what banks are good at – providing loans and grants, assessing the credibility of clients, projects, tendering, or purchasing processes.
The third important thing is substantive technical support. This is somewhat about what happened in Poland in the 1990s when Communism collapsed. We received substantive support from international institutions, the World Bank, and other organisations, which at that time helped us to manage the incoming funds.
The fourth thing that was important in Poland then, and will be important in Ukraine now, is the requirement to involve financial organisations, i.e. banks. This is to make sure that funds are not going to be spent in the dark, so to speak.
There is also a fifth issue, which is fundamental: appropriate conditions for reconstruction must be in place. Although the issue is complex, some say that funds can only be dispensed once the war is over. This is not true, but neither can they simply be handed over now.
As I said at the beginning, separation is needed. Some funds must be injected now - money for critical infrastructure and survival. For things such as electricity generators, rebuilding vital bridges, or providing drinking water. As for the more substantial funds, those for development, they should better wait until the situation has stabilised.
We spoke to dozens of military experts, at various military organisations and governments. The most likely scenario is a prolonged war. Under such a scenario, unfortunately, the long-term resources will be disbursed more carefully. If the war merely smoulders, as in the case of Israel and Palestine, or if the country functions as if there is no war, as South Korea does, the situation would improve.
What could be Poland's role in the reconstruction process? And what needs to happen for such a scenario to materialise?
Poland's role can be fundamental because of our geographical location, our cultural affinity with Ukraine, and the bonds between people as well as companies. This is a huge opportunity for Poland, a bit like the reconstruction and development of Poland and Central and Eastern Europe after the fall of Communism was an opportunity for Western Europe. Everybody ended up as a winner then.
The risk is that all that would be played out over our heads. Western entities are bigger, have more capital, are well organised, and have enough clout. They work with many international organisations; they are great at navigating the business world. It is also about relations with development banks, which operate in many countries ‒ in Poland it is BGK or development funds like PFR. Individual governments will be very active, they will lobby, because of course the money will be spent by the Ukrainian government.
It is very telling that the conference on the reconstruction of Ukraine was held in Lugano. In my opinion, it is a shame that it was not in Warsaw. When President Volodymyr Zelensky spoke at the conference, he said that he was delighted that there were so many organisations in Europe involved in rebuilding Ukraine, but it was a pity that it was so far away, as it was a huge logistical problem to travel to such an expensive country.
I believe that in order to counteract this, a platform for the reconstruction of Ukraine should be established in Warsaw, or Poland in general. It should primarily bring together Polish companies, as well as such Polish banks as are capable of financing these kinds of activities, that is, state-owned or private banks; as well as support organisations, such as BGK, PFR, KUKE, and PAIH. In addition, the Polish-Ukrainian Chamber of Commerce and other organisations should be involved, so that everything that has to do with the reconstruction of Ukraine would be in one place. International organisations, such as the EIB, EBRD, and the World Bank, as well as companies from Ukraine - many of which have moved to Poland - should be involved. All this with the participation of the Polish government so that we can become a support hub.
This is a very practical solution, which, I think, is just asking to be implemented.
Would such a commitment from Poland have a tangible effect?
The point is to position ourselves within this stream of flowing money. Global organisations have great resources, but they operate a bit in the dark. They don't even know who to contact. We have extensive knowledge, for example, Kredobank, with Polish capital and operations in Ukraine, is very effective there; it provides loans and understands the market. Poland, when adding its funds, should first supervise how they are spent and coordinate the connection between the recipients and the donors. For Western Europe, let alone the rest of the world, Ukraine is difficult to understand. It is as if Poland were to take part in the reconstruction of Indonesia, for example. It would be exotic for us. We understand certain processes, we already operate in Ukraine, we have interpersonal relationships, and we are closer linguistically. Besides, we went through something like this in Poland 30 years ago, and we know what mistakes to avoid. I think we need to be that last link in the chain - and help. If the money is spent 10‒20% more efficiently thanks to this, with $100 billion at stake, it would make a huge difference.
Speaking of human relations and what is already happening, I'd like to ask about your initiative, the Ukrainian Virtual Hub. How did it come into being and what are the results?
Indeed, this is one of our initiatives, a virtual office that recruits Ukrainians from all over the world; however, it is a Warsaw initiative. We have people from the United States to Australia participating, alongside Ukrainians from Poland that we have recruited in our Warsaw office. This gives them a sense of being part of a community. They don't feel lonely, they are together; this helps them a lot. These people will be the keystones in Ukraine's reconstruction projects. They are already prepared to participate in them. These projects have to be created by Ukrainians for Ukrainians - just as Poles did things for Poles in the 1990s, with support from abroad. Besides, we provide jobs, which is, of course, important as well.
I often meet these people at the office. We talk and those conversations can be very touching, amazing. I remember talking with a girl who had received a prestigious scholarship in Sweden. It happened two days before the war broke out and her entire plan collapsed. Instead, she ended up in a basement hiding from bombs. Now, she participates in projects related to Ukraine.
We also benefit from this because it gives us more diversity. Such teams work better.
As for business actions regarding Ukraine, how much of it is just business, and how much is it another motivation?
Now is the time when everyone can assert what values they stand for in life. This requires taking a stand, not being passive, but taking action and saying what you think. Again, it's a bit like the 1990s, when Poles spoke out against Communism and started to build Poland - for better or worse, but certainly ours and certainly free. It was hard work. Here the issue is different, it is about the war. It seems to me that everyone should be active, speak up and give something of themselves. Not being indifferent to what 'does not concern me'. I believe that what is happening in Ukraine concerns each and every one of us, and I appeal to everyone to act, in whatever way they can. I have been involved in services all my life, but I see that we - as a company - cannot be indifferent to what is happening either. History has shown time and again that when people are indifferent and do nothing, the evil often becomes an even greater evil and the good is quashed.
Jacek Pochłopień