Oleksandr Klymenko Official website
Articles | 673 | 04.06.2015

After the war. Is Ukraine capable for restoring Donbas?

Any war ends with peace. This is a rule. After the end of hostilities there is the most difficult process – renovation of those objects, which were destroyed

 

The main problem of our country – the war in Donbas – remains “behind the scene” in Ukraine. This is understandable, people are tired of war. The unpleasant truth is ignored as usual. Nevertheless, the unalterable rule is, no problem has ever been solved by hushing up. The more we keep silent now, the more difficult it will be to talk about it in future.

News reports on ongoing firing, armed clashes and casualties are general disturbing background noise in Ukrainian news. However, there is no discussion on the two main issues. The first one is how to stop the war. Nowadays we have Minsk Agreements, but there is no consistent policy of its implementation in practice. Both the heads of the countries and unrecognized “republics” talk about peace rather rarely, reluctantly and in vague terms. They say nothing about required steps to resolve the conflict.

The second is how to cope with the consequences for the region and its residents. So far, unfortunately, neither expert, nor scientific institution has attempted to apply multiplication and evaluate the whole range of daily economic damage in Ukraine.

How wrong they are! Silencing in this case creates a threat of new socio-economic upheavals. Let us get down to numbers. Donbas conflict lasts for more than year. During this time, 6,000 civilians were killed and nearly 16,000 were wounded, over 1 200 000 became IDPs.

Adaptation of displaced persons in the new location and finding jobs for the unemployed is a huge social burden on the budget. Has anyone calculated it?

Has anyone announced how much Ukraine owes to its citizens blocked on the uncontrolled territory? Does the government secretly hope to save on these payments in future?

Finally, there is an evaluation of the consequences of the hostilities. According to various reports, up to 20% of Donbas capacity on transporting and delivering the electricity, about 35% of the transport infrastructure, more than 20 thousand houses, hundreds of public facilities are destroyed or damaged

Dozens of large Donbas enterprises have terminated its operation. For instance, coal production in Ukraine decreased by 35% due to the termination of operation of the mines in 2014. In 2014, the volume of industrial production of Donetsk region declined by 31.5%, Luhansk – by 42%. As a result, the specific gravity of Donetsk and Lugansk regions in the production of gross regional product can reduce from pre-war 16.4% to 5.6% in 2015. This will inevitably affect the overall financial results of the country and, as a consequence, the living standards of citizens.

In general, according to approximate official estimates, restoration of Donbas and overcoming the consequences of hostilities will cost around 8 billion dollars. With the current exchange rates, it is over 176 billion UAH. This is a third of the annual state budget.

The country’s budget for the current year provides 1.5 billion UAH for “Improving national defense and security as well as restoration of Donetsk and Luhansk regions”. However, only the military needs are financed in fact. Nothing was allocated for civilian construction. Another 300 million UAH for restoration is factored in grant-in-aid to Donetsk and Lugansk regions. This is a drop in the ocean.

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Ukrainian budget does not have money required to restore Donbas. The only output is borrowed and granted funds from abroad.

By the beginning of May, Ukraine has arrangements to receive 1 billion 689 million USD for overcoming the consequences of hostilities in Donbas. It is less than 20% of the total necessary amount.

The most significant help to Ukraine for overcoming consequences of the war was promised by Germany (565 million USD), Poland (113 million USD) and Switzerland (100 million USD).

Nowadays, funds from international organizations are extremely important. For instance, the UN has allocated a non-repayable grant aid amounted 316 million USD for this purpose. In its turn, the European Bank for Reconstruction and Development has guaranteed a loan of 791 million USD. In fact, by today Ukraine has received only 332 million USD, which is 4.15% of the required amount.

Under the conditions of total deficit of internal funds, Ukraine has no other choice but to continue to seek money from international organizations and foreign countries. Donors and lenders are quite willing to allocate the money for such projects, if they are assured that the funds will be used for intended purposes and bring real benefits.

There is only one way to convince foreign partners. Ukrainian government has to create a transparent system of management of borrowed funds.

Originally, these issues were assigned to the State Agency of Ukraine for the restoration of Donbas, which was formally established by the Ukrainian government in September 2014. It was intended that this executive government agency will implement state policy related to restoring Donetsk and Lugansk regions (Donbas), namely, to carry out measures to restore infrastructure in the region, work with issues of social security and welfare of internally displaced persons, develop proposals for the renovation of peaceful life.

The agency should have become the center, which would control distribution funds allocated from other countries to restore region’s infrastructure.

However, this agency, like other ones in Ukraine, during the 7 months of its existence had not begun functioning. Its head was in office for only 22 days. After this he was fired. In fact, Ukraine has obtained another bureaucratic authority, which have never done for the country.

A key condition of the agency operation should be the termination of hostilities. However, it has more than enough work even now. Comparing to May 2014, uncontrolled territory of Donbas decreased twice. More than 1 million persons have questions, which should be answered by agency. Unfortunately, the agency does not deal with it.

As a result, Donbas and its residents or displaced persons remain with their problems alone. In fact, its resolving rests on the shoulders of local authorities, voluntary organizations and citizens who care about it. It is obvious that the Ukrainian state cannot or does not want to resolve even the existing issues, without taking into account issues related to future restoration of the region.

Nowadays, the most realistic possibility to restore Donbas is creating an international fund for the aid to the region under the auspices of UN or European Council. This Fund should operate on the principles of transparency and controllability by the public and investors.

A similar practice was used quite successfully for restoration of post-conflict areas in former Yugoslavia.

From 2000 to 2008, offices of the European Agency for Reconstruction operated on the territory of Serbia, Kosovo, Macedonia and Montenegro coordinating international projects related to reconstruction of the affected territories of the former Yugoslavia. During their work period, approximately 3 billion euro was funded for projects in the areas of public administration reform, transportation, border control, agriculture, trade, energy, the rights of minorities and refugees, investment, European integration, public health, media, civil society, justice and ecology. Information on the expenses was published annually in the Official Journal of the European Communities, and information on current projects was uploaded to a website.

Suchlike international Fund could operate in Ukraine through the direct allocation funds for restoring Donbas region (not through the “transparent” Ukrainian authorities). For instance, it could be done by targeted tranches directly from the International Fund to contractors, who conduct remedial work. In its turn, spending money, progress and quality of restoration work should be under control of the same international experts.

Another urgent step is developing and adoption of a unified state program for overcoming the consequences of war. Moreover, on the assumption of the extreme importance of such document, it should be adopted by Verkhovna Rada as Ukrainian Law.

If we don’t get started on eliminating the consequences of war now, it will get more and more difficult and expensive. Trouble spot in the heart of Europe (Donbas today) is necessary neither Ukraine, nor international community.  Destroyed Donbas by war is just unprofitable. A united approach to issues of restoring Donbas will help the region not only to rise from the ashes of war like a phoenix, but also to become a driver of economic development of the whole country.

Link to source: Forbes

Photo: GettyImages/fotobank.ua

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