Since the outbreak of the full-scale invasion on February 24, 2022, the Russian Federation has caused Ukraine losses of over 55 billion USD. Residential buildings, schools, hospitals, enterprises, thermal power plants, transformers, and the Kakhovka hydroelectric power station – that is what has been destroyed. Entire cities have been completely destroyed by Russian shelling and scorched-earth tactics during hostilities.
The war is still lasting, while the amount of destroyed Ukrainian infrastructure is only growing. The issue of restoration is not just on the agenda; some affected regions where active hostilities are not underway are already being rebuilt at the expense of private, state, or grant funds. The reconstruction system itself is now quite complicated by various by-laws and government orders. Therefore, the Ministry of Restoration initiated a government bill “On the Principles of Recovery of Ukraine”.
We consciously created this material as participants in the “Window of Restoration” network. You can find all about the recovery of the affected regions of Ukraine on the single platform recovery.win
What changes does the draft law “On the Principles of Recovery” make to the system of rebuilding Ukraine’s infrastructure?
The Ministry of Recovery presented the government draft law “On the Principles of Recovery” in May 2024. This draft law should make recovery in Ukraine transparent and accountable, involve people, and facilitate conditions for sustainable economic growth. One of its main goals is to create tools so that partners can be confident in reliable cooperation with Ukraine.
The war between Russia and Ukraine has caused enormous damage and destruction of infrastructure. According to the KSE Institute, as of January 2024, the Russians had damaged or destroyed over 250 thousand residential buildings, including 222 thousand private houses, over 27 thousand apartment buildings, and 526 hostels. The infrastructure of 78 small, medium, and large private enterprises, as well as 348 state-owned enterprises, got destroyed or damaged.
All sectors of Ukraine’s economy have incurred losses. For example, the agricultural sector suffered losses of over eight billion USD. Russian army also damaged hospitals and municipal infrastructure through missile/drone strikes. The most destroyed infrastructure was in Donetsk, Kyiv, Luhansk, Kharkiv, Chernihiv and Kherson regions.
The war is still lasting, but the issue of reconstruction is already relevant now. Reconstruction of social and housing infrastructure should sustain the economy and facilitate the residence of Ukrainians. In the regions de-occupied in spring 2022, reconstruction is ongoing. 29 thousand buildings were destroyed or damaged in the Kyiv region. Among them, as of April 2024, over 17 thousand buildings were restored.
In Chernihiv region, over five thousand civilian infrastructure facilities were damaged, including schools, hospitals, and residential buildings. Kharkiv, Donetsk, and Kherson regions have faced the worst situation concerning reconstruction. In Kharkiv region, there is a more vital “elimination of the consequences of armed aggression” than actual reconstruction. In the most destroyed towns, reconstruction has not yet begun due to their proximity to the front line, for instance, in such cities as Kupyansk, Stary Saltov, and Chuhuiv.
As of September 2024, reconstruction in Ukraine is still governed by the law “On the Principles of State Regional Policy” and numerous government by-laws aimed at regulating the practical aspect of reconstruction that reconstructors and local authorities have faced in the process of reconstruction.
The involvement of various sources of funding in reconstruction (e.g. state, local, grant, and private ones) also creates a problem of control over reconstruction projects. Regulation of financing and transparency should make such projects public, and, most importantly, mitigate the risks of corruption in reconstruction projects. Regulation and control are carried out through the State Agency for Reconstruction.
Martyna Bohuslavets, CEO of the Institute of Legislative Ideas says that it is necessary to adopt a comprehensive law that should regulate the activities of the main bodies responsible for reconstruction, as well as govern the use of reconstruction funds, drafting strategic documents and programs for digitalization of the reconstruction process, such as the DREAM.
She noted, “Draft law “On the Principles of the Recovery of Ukraine” aimed at governing such issues has been developed since September 2023. Meantime, the wording submitted for discussion to the Ministry of Reconstruction, among the above issues resolves only consolidation of the DREAM system: a positive step forward, but insufficient”.
The analyst added, that for the avoidance of corruption risks during the reconstruction of Ukraine, the draft law should contain provisions for the following:
1. Regulating the use of costs from the fund aimed at financing reconstruction projects;
2. Improving activities of the Restoration Agency as a key body responsible for launching reconstruction projects;
3. Resolving the issue of the conflict between the development of programs and plans for reconstruction in communities.
The draft law on recovery has already been criticized for granting the government increased powers in the system of control over reconstruction financing. The Association of Ukrainian Cities made a statement on the need to finalize the draft law.
The draft law also introduces the concept of a private consulting engineer for reconstruction projects. Ukraine already has state architectural and construction control over development, whose representatives also conduct reconstruction projects. The powers of consulting engineers duplicate the powers of state control bodies. The Association believes that this introduces corruption risks into the reconstruction system.
The government receives expanded powers to control the financing of infrastructure facilities. This provision contradicts the law on decentralization, where the main powers regarding infrastructure decisions are given to local authorities. Centralization of such a process will undermine one of the main reforms of Ukraine in all the years of independence.
What is the DREAM system and how will it affect the organization of reconstruction?
The draft law “On the Principles of Recovery of Ukraine” governs the procedure for keeping and using the DREAM system for the purpose of managing reconstruction projects. It provides access to everyone: officials, local authorities, investors, and even journalists.
The DREAM system is currently in test mode. The system should collect, organize, and publish open data at all stages of reconstruction projects in real-time. It also makes it possible to monitor the effectiveness of project implementation at each stage and mitigate risks, create accurate reporting, and improve the overall efficiency of the project.
The DREAM system facilitates filling in the register of damaged and destroyed property, registration of reconstruction projects, and project analysis from financing to the implementation plan. This should be a full-fledged monitoring of the reconstruction of infrastructure facilities.
Anatoliy Komirny, the Deputy Minister of Community, highlights, “This will allow us to see at each stage what is happening with the project, whether its estimated cost has changed or not and why (if yes), who is responsible for it, who carried out the first work projects, and why he made mistakes. If everything is fine, we need to understand: are we on time with the deadlines and why, if we are not on time. People should understand in advance when they will be able to move into renovated housing when their children will go to a rebuilt school, and so on. From the partners’ point of view, this is an opportunity to make sure that the money they provided was spent for good reason”.
As of September 2024, over seven thousand reconstruction projects have already been registered in the DREAM system. Their aggregate budget exceeds 371 billion UAH. If the draft law “On the Principles of Recovery of Ukraine” is adopted, the DREAM system will become mandatory for conducting reconstruction projects in Ukraine. The Ministry of Reconstruction hopes that the DREAM system will help them to digitalize the entire reconstruction process in Ukraine.
Martyna Bohuslavets says that the DREAM system is really being built on the principle that everyone sees everything, which should significantly increase the transparency of reconstruction projects.
She notes, “Although the introduction of the DREAM system is positive, this system alone is not able to secure fully transparent reconstruction because for this an independent system of key bodies with accountable financing mechanisms still needs to be created. In addition, it is important to secure the publication of information on the prices of material resources during public procurement (including upon reconstruction). This will allow a comparison of the prices set for the restoration of facilities with market prices. This will make it possible to establish the presence or absence of overestimation of reconstruction cost. For this purpose, the Supreme Council registered draft law No. 11057 dated 04.03.2024, which is currently adopted as a basis”.
Anatoliy Tkachuk, Director of Science and Development at the Civil Society Institute, believes that the draft law “On the Principles of Recovery of Ukraine” in its current state does not resolve the most important issues. However, they need to be resolved for a reasonable and systematic reconstruction.
He summarized the goals of the draft law on the principles of recovery in an analytical note, “It seems that the main goal of adopting this draft law is to legislatively fix one of the possible instruments in the DREAM system aimed at recovery. This is not a good practice and is being proposed for the first time in Ukraine. Adoption of this draft law may be harmful to recovery planning. Regulations laid down in this draft law level the entire planning system and introduce new concepts that contradict those fixed in the legislation”.
Anatoliy Tkachuk says that the draft law itself complicates the developed network of laws and by-laws on infrastructure reconstruction in Ukraine and requires more changes to legislative acts than the Ministry of Recovery is talking about.
He added, “In Ukraine, there is a systemic law “On the Principles of State Regional Policy” governing a significant part of recovery issues. However, the actual situation in this area, the existence of duplication of planning documents for restoration, and the absence of clear financing rules require coordinated changes to several legislative acts of Ukraine, in particular, the laws “On the Principles of State Regional Policy”, “On Regulation of Urban Planning Activities”, “On the Procedure for the solution of certain issues of the administrative-territorial structure of Ukraine”; the Budget Code of Ukraine; the Land Code of Ukraine and the Civil Code of Ukraine”.
Therefore, it is unknown whether the DREAM system, like the government bill itself, will be able to influence the reconstruction in Ukraine, to improve it and to mitigate corruption risks. Now the draft law is at a public hearing.
Political prospects of the draft law in the Supreme Council
A draft law on the principles of recovery has not yet been submitted to the Supreme Council. Therefore, its consideration is expected, first in the committees of the Supreme Council, and then at the meeting of the Supreme Council itself. But this draft law, as stated by Olena Shulyak, People’s Deputy from the “Servant of the People” faction, is part of Ukraine’s implementation of the “Ukraine Facility” plan from the European Union. Thanks to it, Ukraine will be able to receive assistance of 50 billion euros.
But at the moment, the government draft law gives the government great powers over the entire reconstruction system. It provides that the restoration will be carried out by the following institutions: the Cabinet of Ministers, the Ministry of Restoration, the Restoration Agency (Integrity Council), as well as specialized central government bodies, such as the Ministry of Health, the Ministry of Education, the Ministry of Internal Affairs and Communications, and others. Local authorities should also conduct restoration projects, but the expanded powers of the Cabinet of Ministers will centralize the reconstruction itself. The Cabinet of Ministers will receive the authority to decide which objects should be subject to reconstruction or not.
The use of the DREAM system for the restoration of infrastructure facilities at the expense of the state budget or at the request of the state will become mandatory. Authors of the draft law believe that this will affect the transparency of the process. However, based on the DREAM system, certain objects can be prioritized over others. The only question is how objective this prioritization will be.
People’s Deputy Olena Shulyak commented upon the draft law at its presentation, “This legislative framework is aimed to secure effective, transparent, and accountable restoration of Ukraine, reduce the damage caused by military aggression of the Russian Federation, and ensure sustainable economic growth. Introduction of this legislative instrument will allow us to overcome consequences of the war and to facilitate conditions for socio-economic growth, improve the lives of the population and business”.
Throughout August, the Supreme Council Committee on the Organization of State Power, Local Self-Government, Regional Development, and Urban Planning held public consultations on the draft law. This means that it will soon be transferred to committees for consideration and approval. Martyna Bohuslavets, CEO of the Institute of Legislative Ideas says that the draft law will expand the already broad powers of the government in reconstruction. Transparent mechanisms for using funds for reconstruction would allow for attracting more international assistance for reconstruction.
She summarizes what needs to be added to the draft law before its consideration in the Supreme Council, “Therefore, we at the Institute recommend that the draft law on recovery will fix the following: mandatory prioritization of reconstruction projects; publication of all information regarding the work of the commission/working group that will make decisions upon distribution of funds; a clear procedure for determining the administrator of funds. In addition, it is local governments that are most aware of the community’s needs for recovery. Therefore, local governments should have the right to independently submit projects for funding. In addition, representatives of local government associations, as well as representatives of the public, should be part of the commission/working group that will make decisions on the distribution of funds”.
Anatoliy Tkachuk, Director of Science and Development at the Civil Society Institute, believes that the draft law “On the Principles of Recovery” will in no way affect the process of systemic recovery, which is not currently taking place in Ukraine.
He noted, “We can adopt any draft law, regardless of its quality and necessity. It all depends on the will of the president or on the agreements of the main vote holders. Such draft law can also acquire the status of a law, but unfortunately, it will not be able to work on systemic recovery. Changes will be required if real recovery begins. Given the situation at the front, there is no question of comprehensive reconstruction of the territories along the front line and the border with Russia at the present moment, while recovery of damages in other territories does not require for adoption of a new law”.
The draft law “On the Principles of Recovery” solves only specific problems of reconstruction, such as the distribution of funds, which are not enough for all reconstruction projects. The transparency of reconstruction via the DREAM system has not yet been studied through testing the system. In addition, it is unknown whether the prioritization of reconstruction takes into account the needs of the local population, the urgency of the reconstruction of the facility, etc. The principal task facing the reconstruction of Ukraine is to determine by what principle to rebuild. First, where people are now, or to plan for the future; either to rebuild quickly or to modernize the infrastructure according to new standards. The draft law does not solve this problem.
