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Now is the time for businesses to look at Ukraine

War can bring out the best in people, but it also sadly takes away many of the best among us. Around one-third of the more than six hundred member companies at the American Chamber of Commerce in Ukraine (AmCham Ukraine) have seen employees killed during the full-scale Russian invasion of Ukraine. Almost half of all member companies have experienced some form of damage to plants or facilities as a result of the invasion.

These figures reflect the tragic toll of the war on the Ukrainian people. Thousands of lives have been lost, and millions of Ukrainians have been forced from their homes. The scale of the destruction caused by Russia’s invasion has also been staggering and already runs to hundreds of billions of dollars in material damage. This total continues to rise on a daily basis.

Despite these horrors, the mood on the ground in Ukraine remains remarkably resilient. While lionhearted Ukrainians defend their country on the battlefield, companies work hard in the business arena to safeguard Ukraine’s economy and pave the way for future recovery. The Ukrainian business environment remains strikingly dynamic and innovative; for example, since the start of the full-scale invasion, AmCham Ukraine has welcomed 88 new member companies.

Businesses throughout Ukraine have adapted impressively to the many security, logistical, and economic challenges of the war. They continue to pay taxes, create jobs, invest, rebuild communities, support humanitarian efforts, and deliver essential services in exceptionally difficult and unpredictable circumstances. Looking ahead, they are ready to show the whole world what they are really capable of once peace returns to the country.

AmCham Ukraine has conducted nine surveys since the beginning of Russia’s full-scale invasion to gauge the mood within the Ukrainian business community. Many of the survey findings have been consistent throughout the entire wartime period, and have reflected the courage and confidence that have sustained Ukrainian businesses amid the physical hardships and mental trauma of the invasion.

As the war passed the eighteen month mark in late August, 84 percent of AmCham Ukraine member companies were operational. Many confirmed that they already had upbeat plans in place for Ukraine’s recovery and rebuilding, with 74 percent planning to create jobs within the framework of existing projects and 63 percent looking to invest in new projects or facilities. Meanwhile, an overwhelming majority of member companies (92 percent) expressed their confidence in Ukrainian victory.

As Russia continues to bomb residential buildings, schools, hospitals, and Ukraine’s civilian infrastructure, the safety and security of employees and clients remains the number one priority for all businesses operating in today’s Ukraine. Other pressing war-related issues include de-mining, the conscription of employees, the ongoing Russian naval blockade of Ukraine’s Black Sea ports, transport queues at Ukraine’s land borders with the country’s EU neighbors, war risk insurance, cyber security, and much more. Nevertheless, clear indications of durability and innovation can be seen throughout the Ukrainian business community, with the Ukrainian economy expected to experience modest growth in 2023 following an inevitably sharp decline during the first year of the invasion.

My message to the international business community is unambiguous: It is risky to invest in Ukraine right now, but it’s riskier not to invest. There are countless examples of companies throughout the Ukrainian economy that successfully operate in-between air raid sirens; meanwhile, many multinationals have resumed operations in Ukraine’s regions and are building shelters or other infrastructure to address the specific security challenges created by the Russian invasion. It’s a risk-and-reward model in action.

I am convinced that now is the right moment to begin looking at Ukraine as a once-in-a-lifetime business opportunity. The biggest national recovery project in Europe since World War II is already underway and will gain considerable further momentum in the months and years ahead. Those who join this process during the early stages will benefit from a range of advantages.

Ukraine is a vast country with a large population, bountiful resources, and an excellent workforce. It is ideally located on the border of the European Union, with EU accession on track. Today’s Ukraine is an increasingly self-confident country that has turned away from Russia and is advancing toward greater Euro-Atlantic integration. Over the past eighteen months, Ukraine’s resilient response to Russia’s criminal invasion has captured the imagination of the watching world; Ukrainians are now more determined than ever to build the kind of future their nation deserves. This will create opportunities that no ambitious investors or international businesses should miss.

Andy Hunder is President of the American Chamber of Commerce in Ukraine.

Source – Atlantic Council

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Shifting the focus from survival to development – business plans and forecasts for 2024

Throughout one and a half years of full-scale war, businesses have adapted to new challenges, and their primary objective now is not survival but recovery and growth. This is the prevailing sentiment among businesses voiced during the European Business Association’s Global Outlook meeting held on September 11. We spoke with officials and business leaders from various industries about their forecasts and plans, and below, we summarized the main ideas and key points.

Oleksandr Kamyshin, Minister for Strategic Industries of Ukraine, emphasized that, in his opinion, the only strategically important sector during the war was the defense-industrial complex. This sector is seen as crucial for Ukraine’s victory and economic recovery. Currently, in this sector, there is an increasing demand for labor, rising wages, and a growing number of new companies, among other things. In other words, the sector is gaining momentum. For example, in the spring, there were fewer than 100 companies in this sector, and now there are more than 200. Additionally, a significant number of Czech entrepreneurs have come to the country to study the sector and understand how to operate here. The future goal of the defense sector is to produce even more.

Mr. Kamyshin pointed out that from an economic perspective, it’s also crucial to shift more enterprises toward military-related activities. This, essentially, can compensate for the loss or reduction in development in the civilian sector for some businesses. Therefore, he urged businesses to collaborate with the defense sector – the Ministry and defense industry enterprises are actively seeking partnerships to fulfill specific tasks, such as repairs and more. The Minister emphasized his commitment to making the defense industry more transparent and understandable. For example, UkrOboronProm already has a long-term anti-corruption strategy in place, and initial results have been achieved – they have collected energy consumption data from all plants and completed procurement. Additionally, he invited startups in the military tech sector to take a look at the BRAVE 1 project, which helps innovative startups go from idea to implementation, providing grants (ranging from 5,000 to 25,000 dollars for this purpose through the Ukrainian Startup Fund).

Ukraine’s Finance Minister, Serhii Marchenko, noted that in 2023, the country’s financial situation is more stable and manageable compared to 2022. Thanks to international support and comprehensive measures taken by the Ukrainian government, priority budget expenditures are fully funded and timely, ensuring stability for 2024. Furthermore, the macroeconomic situation is stabilizing, the hryvnia exchange rate is strengthening, and GDP growth for the current year is projected to be around 3%. However, the level of imports is increasing more than exports, which is a concerning signal for the economy. At the same time, 2024 will not be an easy year, as substantial expenditures need to be allocated to the defense sector, no less than in the current year. The Finance Minister emphasized the importance of cooperation with the IMF and the implementation of structural reforms within the framework of the cooperation program with the Fund. This is critically important for other international partners as well, as collaboration with the IMF is a sign of trust in Ukraine.

Therefore, Ukraine needs to demonstrate transparency and accountability in the use of funds from its partners, particularly through commitments to reforms: effective anti-corruption efforts, establishing the rule of law in the country and ensuring macroeconomic stability. The Finance Minister noted that this year, donors have committed $42 billion in direct budget support to Ukraine. The priority is to create conditions for these funds to work for the country’s economy, stimulating development rather than increasing consumption. However, these funds must contribute to the country’s economy and enable businesses to generate taxes. At the same time, Finance Minister Marchenko emphasized that there are no plans to increase taxes.

The economic results of the past and current years have exceeded business expectations. According to Dragon Capital’s macro forecast, economic growth of +4.5% should be expected this year. The state of the economy in the following year will depend on the course of the war. In the coming days, the Ministry of Finance is expected to present the budget proposal for 2024, which is anticipated to include high expenditures for the defense sector throughout the year. The projected exchange rate for the dollar at the end of 2023 will be 37.5 UAH/1 USD if the National Bank adopts a flexible exchange rate in the fourth quarter. In 2024, the average annual exchange rate for the dollar will be 38.6 UAH, and it may rise to 41 UAH by the end of the year. Inflation is gradually slowing down. According to the forecast, the GDP in 2024 is expected to increase to $190 billion, nearly equaling the record value of 2021.

Currently, Dragon Capital has over 50 different investment projects, including those in the defense sector. According to Tomas Fiala, CEO of Dragon Capital, the government should focus on investors already working in Ukraine, both Ukrainian and foreign. In Mr. Fiala’s opinion, it is these investors who are already present in Ukraine that will continue to invest new funds until the end of hostilities. The appetites of new investors are currently relatively modest, so the government should concentrate its attention on existing companies in Ukraine and their needs, particularly in areas such as combating corruption, ensuring fair courts, and upholding the rule of law.

International organizations have not ceased their support of Ukraine since the beginning of the full-scale invasion. In particular, the International Finance Corporation (IFC) has invested over 400 million dollars since then, with more than half of the funds directed towards supporting critical exports and imports. Some donor funds’ purposes have been changed in response to the current needs. For example, 50 million euros from the energy efficiency program were redirected to the immediate repair of multi-story buildings affected by the conflict and the support of cities providing temporary housing for internally displaced persons. Olena Voloshyna, the head of the IFC office in Ukraine, provided this information.

According to the World Bank’s assessment, Ukraine’s reconstruction needs amount to 411 billion dollars, of which 14 billion are required this year. The World Bank identifies the most affected sectors as the housing sector, energy, trade, transportation, and agriculture. Recently, the IFC conducted its own study to determine the role of the private sector in the recovery process. According to this study, the private sector can generate around 70 billion out of the 411 billion needed without significant progress in reforms and nearly 140 billion with successful reform implementation. Moreover, the recovery of certain sectors, such as retail or agriculture, can be fully covered by private funds (except for the irrigation system in agriculture). Furthermore, if Ukraine can demonstrate successful reforms, the amount of private sector investment could increase to 434 billion dollars, addressing critical needs within the RDNA framework and other sectors.

To support SMEs, IFC offers banks a partial credit risk guarantee, enabling the allocation of additional credit resources. According to Ms. Voloshyna’s opinion, the private sector, which used to generate 70% of GDP before Russia invaded Ukraine, requires more support. To address this, the IFC Board of Directors has approved a support program worth 2 billion dollars, with 1 billion dollars coming from IFC’s own resources and the remainder aimed at accumulating through partnerships with donors and development partners.

Oleksandr Komarov, President of Kyivstar, calls 2023 a consistently difficult year. However, the industry is gradually recovering. Despite a significant decrease in the subscriber base (around 10%), there is some growth, particularly with a 25% increase in internet usage. Kyivstar is actively restoring capacity and expanding infrastructure. In the past year, following the operation in Kharkiv, 700 sites were restored, and an additional 1200 sites were built since the beginning of the war. During this time, LTE was introduced in over 3000 settlements where it was not available since the start of the conflict. At the same time, Mr. Komarov points out that a morally and psychologically challenging factor for the team is the presence of sanctioned minority shareholders in the company. Approximately 48% of Veon’s shares are owned by the international investment company LetterOne, based in Luxembourg, which includes sanctioned individuals among its minority shareholders. As a result, the company is forced to operate while taking this risk into account and under increased media scrutiny.

In Kyivstar, they expect the situation to improve in 2024. The company, along with other operators, is preparing to return to temporarily occupied territories and is actively planning for the restoration of communication services in Crimea. Kyivstar plans to reinvest $600 million in Ukraine’s economy. Additionally, the 15 billion in taxes paid by the company also contribute to the country’s defense capability. Kyivstar is getting ready for the challenges of the winter season and assures that they are better prepared than last year. They have changed their approaches to dealing with the aftermath of shelling and have increased the number of generators to 2,000 (compared to 700 last winter) and the number of people involved in recovery efforts.

As Alessandro Zanelli, CEO of Nestlé in Ukraine and South and Eastern Europe, explained, there has been growth in the FMCG industry this year – a 17% increase in monetary value, while at the same time, there has been a 7% decline in volume. Therefore, volume recovery will be a crucial task for the next year. The market significantly declined in 2022 due to the physical absence of goods at the beginning of the invasion, the loss of nearly 9 million consumers, and the occupation of some territories. Now, they have managed to overcome almost all the challenges, ensure the availability of goods through imports or local production, establish logistics, restore active communication with consumers, and even introduce innovations and launch new products, supplying them to store shelves. Mr. Zanelli also considers the resilience of the retail industry to be an extremely important factor in the development of the FMCG market, as it adapts very well to the conditions and challenges of full-scale war, including blackout periods, while simultaneously recovering and expanding.

Nestlé has completely shifted its work priorities – from a focus on financial results and market share increase to safety, employee support, societal contributions, and the ability to continue operations. The company has devoted significant efforts to support the physical and financial well-being of its people, mental health support, rehabilitation programs for veterans, and support for Ukrainian society as a whole. This year, the company has allocated approximately 8 million Swiss Francs for charitable purposes, in addition to last year’s 13 million. This year, the company is demonstrating a 10% growth in monetary terms, which is slightly below the market. At the same time, this year, they have experienced a 5% decline in volumes (compared to a 15% decline last year). All factories are operational. Currently, safe working conditions are in place at these facilities, and they are operational, including for exports.

European Business Association would like to thank all speakers and participants for interesting insights and lively discussion, as well as Kyivstar for supporting the event!

Source – EBA.com

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Poland will insure Polish and other foreign investors concerned in reconstruction of Ukraine 

Andrzej Duda, the President of Poland, signed an amendment to the law on export insurance, which allows the state-owned Insurance Corporation KUKE to provide more effective assistance to private business entities concerned in reconstruction of Ukraine, as reported by the Ministry of Economy of Ukraine. 

Yuliya Svyridenko, Minister of Economy, notes, “This is the first such comprehensive insurance tool supporting investments and activities of Polish companies in Ukraine. We hope that such a crucial step taken by Poland will be an impetus for the insurance market and other countries to more actively provide guarantees to companies operating in Ukraine. As the result, it will contribute to attraction of more investments and entry of new players into the Ukrainian private sector”. 

The law serves as grounds for Ukrainian Reconstruction Program with Polish business involved. It cover three aspects: 

• Safe trade with Ukraine. Insurance covers a wide range of risks, in particular, it protects Polish companies against losses caused by non-payment for delivered goods or services. There is also transport reinsurance and a guarantee that protects the banks that issue letters of credit. 

• Investment support of Polish companies. It guarantees support for entrepreneurs in financing investments implemented in Poland for export to Ukraine, as well as investments to be implemented directly in Ukraine, First of all, in the form of new absorption and acquisition projects. 

• Support for development of Ukraine. It provides security of financing of investment projects of Polish or foreign entrepreneurs for investors from Ukraine (both private and state-owned). 

New solutions include, inter alia, reinsurance by other insurers in cases where the risk is above average or if it is impossible to obtain reinsurance on the commercial market, related mainly to transport risks. Therefore, Polish entrepreneurs will be able to carry out transportation to Ukraine and to participate in the reconstruction process, the Ministry highlights. 

The new Polish law also facilitates insurance of Polish branches of foreign companies on a par with local companies. This will allow Ukrainian companies to expand their business on better terms. 

Source – hromadske.ua

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A step towards logistic and export development: Ukraine is associated member state of the Three Seas Initiative 

Ukraine received the status of an associated member state of the Three Seas Initiative, which will contribute to development of logistics in the region and facilitate export of the Ukrainian goods, including foodstuff, as reported by the Ministry of Economy based on the results of the summit of the Three Seas initiative held in Bucharest on September 6, 2023. 

Yuliya Svyridenko, First Deputy Prime Minister & Minister of Economy, notes, “It means that our country has gained access to all the tools that have been developed as part of the initiative”. 

She adds, “Partners called us to participate in the restructuring of the region’s architecture, which is the need of the hour due to russian gostilities”. 

For Ukraine, as well as for (associate) member states the Three Seas initiative, key direction of efforts shall be development of logistics and trade in the region. 

Yuliya Svyridenko highlights, “For our partners, outbreak of the war served as grounds to think about the need to change global approaches, such as updating infrastructure, transport systems, food supply, attraction of investments in energy and other strategic sectors, in order to completely get rid of russian oil and gas”. 

At the summit, Ukraine drew attention to the need to solve problems in trade relations between the countries. First of all, it concerns removing barriers to trade and restoring the export of Ukrainian grain and other crops. At the summit, Yuliya Svyridenko discussed all these issues in her report. 

First Deputy Prime Minister & Minister of Economy emphasizes, “the states participating in this initiative are already developing transport capacities to facilitate exports from Ukraine. Therefore, despite the war and regular shelling, trade in the Danube and trade routes that go to the ports of Romania, Bulgaria, Croatia and Greece will develop rapidly”. 

Yuliya Svyridenko mentions, “With the victory and restoration of full freedom of navigation in the Black Sea, we will see a new reality of trade in the region of the Three Seas Initiative, i.e. free and efficient, thanks to the developed infrastructure”. 

A step towards logistic and export development: Ukraine is associated member state of the Three Seas Initiative 

Ukraine received the status of an associated member state of the Three Seas Initiative, which will contribute to development of logistics in the region and facilitate export of the Ukrainian goods, including foodstuff, as reported by the Ministry of Economy based on the results of the summit of the Three Seas initiative held in Bucharest on September 6, 2023. 

Yuliya Svyridenko, First Deputy Prime Minister & Minister of Economy, notes, “It means that our country has gained access to all the tools that have been developed as part of the initiative”. 

She adds, “Partners called us to participate in the restructuring of the region’s architecture, which is the need of the hour due to russian gostilities”. 

For Ukraine, as well as for (associate) member states the Three Seas initiative, key direction of efforts shall be development of logistics and trade in the region. 

Yuliya Svyridenko highlights, “For our partners, outbreak of the war served as grounds to think about the need to change global approaches, such as updating infrastructure, transport systems, food supply, attraction of investments in energy and other strategic sectors, in order to completely get rid of russian oil and gas”. 

At the summit, Ukraine drew attention to the need to solve problems in trade relations between the countries. First of all, it concerns removing barriers to trade and restoring the export of Ukrainian grain and other crops. At the summit, Yuliya Svyridenko discussed all these issues in her report. 

First Deputy Prime Minister & Minister of Economy emphasizes, “the states participating in this initiative are already developing transport capacities to facilitate exports from Ukraine. Therefore, despite the war and regular shelling, trade in the Danube and trade routes that go to the ports of Romania, Bulgaria, Croatia and Greece will develop rapidly”. 

Yuliya Svyridenko mentions, “With the victory and restoration of full freedom of navigation in the Black Sea, we will see a new reality of trade in the region of the Three Seas Initiative, i.e. free and efficient, thanks to the developed infrastructure”. 

https://www.epravda.com.ua/news/2023/09/7/704034/

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Investment nanny: a strategy for foreign investors in view of the war in Ukraine

In the context of the ongoing war between Ukraine and the russian federation, it is more difficult for foreign investors to assess risks and find successful investment opportunities. In such a dangerous and unpredictable environment, investment nanny can become an indispensable partner, providing support and expertise aimed at capital safety and growth.

What is an investment nanny?

Investment nanny is a financial professional acting as a consultant and manager for foreign investors having their interests in Ukraine. In wartime conditions, an investment nanny has in-depth knowledge of local financial market, economy and political situation, which allows him/her to identify opportunities and to mitigate risks.

Role of investment nanny.

Risk analysis: Investment nanny conducts a comprehensive analysis of risks correlated to investments in Ukraine in wartime conditions. (S)he assesses political and geopolitical situation, economic effects of the conflict and possibility of regulatory changes.

Portfolio Management: Investment nanny helps a foreign investor to develop and to manage a diversified investment portfolio in wartime conditions. (S)he recommends asset allocation, with regards to sustainability and potential returns of various sectors and companies.

Market Monitoring: Investment nanny monitors dynamics of the financial market and changes in legislation related to the war. (S)he provides regular updates to clients regarding the current situation and impact on their investments.

Safety Advice: Investment nanny develops safety strategies for foreign investors aimed at reducing their risks in wartime conditions. (S)he may consult upon the issues of asset protection, use of insurance tools and additional security measures.

Advantages of cooperation with investment nanny.

Expertise and market understanding: Investment nanny has deep knowledge of the Ukrainian financial market and understands its peculiarities in wartime conditions. This allows foreign investors to receive informed advice and strategic decisions.

Risk mitigation: Due to risk analysis and security strategy development, investment nanny helps to reduce the impact of military conflict on investments. (S)he understands potential threats and provides to his/her clients the tools aimed to protect themselves.

Individual approach: Investment nanny develops strategies with regards tp individual needs and goals of each client. This allows you to create investment solutions that meet their unique requirements.

Conclusion

In view of the war between Ukraine and Russia, there are extremely difficult conditions for foreign investors. Investment nanny can be an indispensable partner, providing expert knowledge and support aimed aimed at capital safety and growth. Cooperation with investment nanny will help foreign investors to effectively manage risks and to find opportunities in the Ukrainian financial market even in wartime conditions.

However, procedure of obtaining investment nanny for the relevant investor is a bureaucratic and complex procedure with lots of formalities. INTERLEGAL lawyers are ready to assist investors by representing and lobbying their interests in order to obtain such a tool as investment nanny.

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Ukraine Recovery and Reconstruction Projects: Key Legal Tips for Foreign Construction Companies

Understanding procedures, stakeholders and milestones of Ukraines future recovery is essential for all parties planning to be involved in that process, including on the construction side. In this effort, the key messages currently available are as follows.

Corporate Presence in Ukraine

Foreign construction companies can carry construction activities in Ukraine by establishing one of the following structures:

There are important remarks to each of these items, which should be addressed on a case by case basis.

Regulatory Presence in Ukraine. Licensing of construction activities 

In Ukraine, construction of certain facilities (i.e., facilities with medium and significant consequences so called CC2 and CC3) is subject to licensing. 

There is currently no procedure of recognition of foreign construction licenses.

The procedure for obtaining a construction license is rather complex and has significant gaps and uncertainties. Due to several reasons, including incomplete reform of construction regulations, licensing procedure is currently not functioning and so obtaining a license is technically not possible. In the meantime, as a temporary solution for the martial law period, the right to conduct construction activities may be obtained by business entities based on a declaration.  

What does the declaration mean?

The declaration means submitting an application in electronic or in paper form through electronic service delivery portal (Diia) or one of the administrative service centers. The applicant should be entitled to start performing the declared activities upon submission of such declaration. However, it is advisable to wait for the licensing (permitting) authority (i.e., State Inspection of Architecture and Urban Planning the Inspection ) to process and include the submitted declaration into the respective register, which will eventually serve as a formal confirmation of the right to perform construction activities.

Such declaration procedure, essentially being a substitute for a license, is temporary. After the end of martial law, the entity must apply to the Inspection and obtain a permanent license as applicable.

Old licenses

For the period of martial law, the licenses and permits issued earlier are deemed automatically extended for the period of martial law plus three months from the date of its termination.

Overall, from a policy perspective, licensing remains an open issue and is pending legislative solution. It is broadly expected that this area will be further reformed after the war in Ukraine ends. 

Local Clients for Recovery Projects

To understand who should be approached for potential cooperation on the future construction / recovery projects, hence are the main options in the public sector.

The State Agency for the Restoration and Development of Infrastructure of Ukraine (the Restoration Agency )

Restoration Agency is a body aimed to manage recovery projects previously submitted by local communities through a digital system and agreed with the government. For this purpose, the Government of Ukraine has created a Digital Restoration EcoSystem for Accountable Management (the DREAM ) a state digital system that will provide a single platform for all reconstruction projects in Ukraine, where local communities can create and present necessary reconstruction projects, as well as investors and counterparts will be able to track the entire reconstruction cycle, from design, public procurement, construction, reconstruction and repair to commissioning of the finished facilities. DREAM system is designed to introduce clear accountability and transparency in the reconstruction process. 

State bodies, enterprises and organizations as clients of separate projects

Large state owned companies operating in certain infrastructure sectors, such as Ukrainian State Railways (the national railway carrier), the Ukrainian Sea Ports Agency (the authority managing Ukraine s port infrastructure), Naftogaz (the gas supply provider), Ukrenergo (electricity transmission system operator of Ukraine), Energoatom (the largest producer of electricity in Ukraine), Ukrhydroenergo (the largest hydro generating company in Ukraine), Gas Transmission System Operator of Ukraine, local utility companies etc., may also be contractors for individual reconstruction projects in certain infrastructure areas. Typically, such projects should be organized through direct cooperation or public procurement (if applicable).

Structuring Partnership Relations in Construction Projects Parties can structure their relationships with partners as corporate or contractual joint ventures (although the latter are subject to rather burdensome regulations in Ukraine). Subcontractor arrangements are broadly used as well. Joint venture arrangement can also be considered for project financing purposes. However, note that Ukrainian law provides for an exhaustive list of instruments to attract funds to finance construction of the residential premises. Joint venture agreement is not included in this list and therefore can only be used for non residential projects.

Procurement and Financing 

As far as a project involves budgetary spendings, procurement laws should be applied.  Local tender procedure is applied if any payments/contracts exceed a certain value threshold (subject to certain statutory exceptions). Within the period of martial law in Ukraine, this threshold is as follows:  If a project is funded by international financial institutions (such as World Bank, IBRD, EBRD etc.), such institutions keep the powers to introduce their own procurement rules and regulations. In practice, therefore, construction projects with international financing are usually carried out based on standard procurement procedures of the respective finance organization, being the most known and comfortable standard for international bidders.

If a project is funded by other external sources (i.e., charity funds, international donors funds, etc.), the public procurement procedures may not apply, although this should rather be assessed on a case by case basis.

In addition, there are certain exceptions to the above thresholds, which will not be subject to the tender process, namely in cases of procurement of goods, works and services needed to restore the facilities of the electric power, nuclear power, coal mining and oil and gas complexes during the martial law period.

https://www.lexology.com/library/detail.aspx?g=7254db90-0118-44d7-985f-693414c0ce52&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2023-09-06&utm_term=

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The Netherlands will reimburse to foreign businesses 25 million EUR of investments in Ukraine 

The Netherlands Agency for Entrepreneurship has announced a state subsidy program for Dutch and international companies that are ready to invest in Ukraine recovery projects, as reported on the agency website. 

Companies are offered to receive reimbursement in the amount from 500,000 EUR to 5 million EUR. Aggregate subsidy cost makes up 25 million EUR. The Dutch government will reimburse 100% of the companies’ costs in their recovery projects. 

Projects are limited to water supply, health care and agriculture. 

Program of the Ukraine Partnership Fund (UPF) was developed by the Ministry of Foreign Affairs of the Netherlands. 

The agency explains, “Due to russian hostilities, Ukraine needs huge support. Most often, reconstruction projects cannot be financed through commercial sector”. 

A mandatory condition for receiving a subsidy shall be launching restoration project jointly with at least one Ukrainian company. 

The Ukrainian Ministry of Reintegration comments, “Initiative of the Netherlands shows readiness of international partners to participate in restoration of Ukraine. It will allow foreign companies to be involved in such project and will provide experience we can use in future”. 

https://finance.liga.net/ua/ekonomika/novosti/niderlandy-kompensiruyut-inostrannomu-biznesu-25-mln-evro-investitsiy-v-ukrainu

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International companies ready to enter Crimea after de-occupation – President Zelenskyy

Many international companies will enter Crimea immediately following the peninsula’s de-occupation. Today, on August 23rd, the first corresponding document will be signed, according to a statement by Ukrainian President Volodymyr Zelenskyy during the Crimea Platform Summit.

He revealed that powerful international brands have expressed readiness to start their businesses in Crimea, including hotels, airlines, banking, IT, industrial, and energy companies. Thus, the peninsula will become a part of the global economy.

“Today, we are taking the first step. Today, we are signing the first document with companies ready to enter Crimea after its return to Ukraine. This is an open document for other honest businesses to join,” Zelenskyy noted.

The head of state clarified that in Crimea, the following entities are interested in starting operations:

  • Ryanair
  • Royal HaskoningDHV
  • SkyUp
  • JoinUp
  • Vodafone
  • Luxoft
  • Genesis
  • Ribas Group
  • Okko
  • Lifecell
  • Fozzy Group
  • Hyatt Ukraine
  • Nokia

The Crimea Platform

Today, on August 23rd, the third summit of the Crimea Platform is taking place in Kyiv. Its purpose is to bring the issue of the peninsula’s de-occupation to the international agenda.

The initiative was launched by Ukraine in 2021 when the inaugural summit was held. At that time, a joint declaration of the Crimea Platform participants was adopted. Representatives from 43 countries took part in the meeting.

Interlegal’s comment (Dmytro Ochkolyas, leading lawyer, attorney):

As shown by this article, Royal HaskoningDHV was mentioned among the key international companies by the President of Ukraine. It should be noted that Royal HaskoningDHV is one of the global leading consulting engineering companies. Interlegal and Royal HaskoningDHV have been cooperating their resources in the framework of international consulting projects in Ukraine for a long time. Such projects are related to critical, port and other infrastructure, land issues, as well as marketing research.

If it is necessary to obtain infrastructure consulting (ports and terminals, railway, dry ports, etc.), investment risks and due diligence, Interlegal is ready to offer its expertise to concerned parties.

https://www.rbc.ua/rus/news/potuzhni-mizhnarodni-brendi-zaydut-krimu-1692794568.html

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Where will Ukraine get funds for post-war reconstruction and what will it be spent on? 

One should understand right now, how to start rebuilding a war-torn country and where to get money: better late than never. 

For over one year, Ukraine has faced a large-scale destruction due to russian military aggression. Since outbreak of the war, the country’s economy has shrunk by almost a third. Today own funds are enough mainly to finance military expenses, while social payments are largely provided by financial remittances from international partners. 

Despite this, it’s not so early to form the clearest possible vision and, with regards thereto, a strong and predictable financial basis for the future post-war reconstruction of Ukraine. 

Ukrainian government officials, business entities, scientists and public sector, jointly with our international partners, are actively working on developing a vision of priorities for future reconstruction and forming the appropriate infrastructure. 

See LIGA.net materials: how the Ukraine’s reconstruction infrastructure will look like and what sums are involved. 

War-time priorities 

Rostyslav Shurma, Deputy Head of the President’s Office and manager of economic sector of the President’s Administration, in his interview for LIGA.net recently spoke about the priorities of the Ukrainian government in post-war reconstruction of the country. 

He sees the following structure of the state needs: “Basic need for our state is to continue functioning. It is not just a reconstruction; it is aimed at payment of pensions and salaries. Next need is quick reconstruction, followed by large-scale reconstruction”. 

Therefore, the most vital issue is survival of the state, which is not related to recovery anyway. Next stage is the so-called Fast Recovery Plan, in respect whereof there is a clear understanding what should be restored and who will be responsible for it. 

Fast recovery 

This stage of reconstruction is primarily related to meeting the people’s needs, namely: 

• restoration of housing; 

• reconstruction of critical infrastructure (i.e. power/heat/water supply, mobile communication, etc.); 

• humanitarian aid (schools, hospitals, kindergartens); 

• transport infrastructure (roads, bridges). 

For this work, the government created a special body called the State Agency for Reconstruction and Development of Ukraine’s Infrastructure, in the form of merger between Ukravtodor and the State Agency for Infrastructure Projects. 

The Agency is responsible not only for transport infrastructure restoration but also covers construction and reconstruction of residential facilities, social and public facilities, housing, energy infrastructure, protective structures, etc. 

Mustafa Nayem, Head of the Agency, notes that priority will be given to projects in the most affected regions, such as Odesa, Mykolaiv, Zaporizhzhia, Kherson, Dnipro, Donetsk, Luhansk, Kharkiv, Sumy, Chernihiv, Zhytomyr and Kyiv regions. 

Recently, the President signed the law on launching a compensation mechanism in favor of Ukrainians for destroyed or damaged housing. The sources of funding such reimbursement are the Recovery Fund, state and local budgets, funds from MFIs, investors, international partners, as well as reparations and confiscated russian assets. 

See the link for details: who can rely on reimbursement for destroyed or damaged housing. 

Internal financing sources 

President Volodymyr Zelenskyy stated the need for 17 billion USD just for the Fast Recovery Plan. 

People’s Deputy Danylo Hetmantsev, Secretary of the National Recovery Council, an advisory body at the President of Ukraine, reminds it in a comment for LIGA.net that it occurred in October 2022, before the large-scale destruction of power supply infrastructure, Each subsequent enemy shelling will cause increase of Ukraine’s losses due to the war. 

“We update the damage assessment on a monthly basis: plus two-three-five billion dollars every month” 

The state budget can offer much smaller amounts. State budget for 2023 provides 52.5 billion UAH for the Fund for the Liquidation of Consequences of the russian federation’s Aggression, i.e. slightly less than 1.4 billion USD. 

In February, the government approved the procedure for using such funds. First of all, costs will be aimed at construction and repair of public buildings, housing for war victims, purchase of school buses and special vehicles for health care facilities and utility companies. 

Apart to the aforesaid 52.5 billion UAH, Mr. Hetmantsev notes that the state is planning to allocate additional funds for reconstruction in various ways, e.g. 5.3 billion UAH of subventions to local budgets, 2 billion UAH from the State Fund for Regional Development, jointly with smaller amounts. But this is far from 17 billion USD. 

International aid 

Ukraine prefers to receive the rest from partner countries and international financial organizations. There are many financing channels. 

In late January 2023, the European Union launched a donor coordination platform for recovery of Ukraine. The EU itself is ready to allocate 1 billion EUR for rapid recovery projects. 

Accumulation of funds for recovery of Ukraine also takes place through the World Bank fund and the international special fund for power supply recovery. 

Certain countries have also created their own funds. For instance, Denmark allocated 1 billion USD for Ukraine’s needs, including 0.4 billion USD for post-war reconstruction – not directly, but through financing by Danish companies. 

International aid for Ukraine also comes through the official United24 fundraising platform. 

Ukraine also relies on one more funding source: reparations from the russian federation and confiscated russian assets. But it is a long-term prospect: it makes no sense to rely thereon at least this year. 

The current situation and further priorities 

As declared by the Ministry of Finance of Ukraine for LIGA.net, in 2022 the European Investment Bank (EIB) allocated 1.05 billion EUR as part of launching joint investment projects aimed at financing measures to prepare housing and communal facilities for the heating season. 

In addition, costs were allocated to restoring and updating road facilities damaged by hostilities, in particular, artificial structures and railway infrastructure, power/heat/eater supply, residential and communal infrastructure facilities, securing energy efficiency and energy saving. 

In September and October 2022, EIB funds in the amount of 1 billion EUR were transferred to a special fund of the state budget. However, 50 million EUR from the EIB loan funds were directed to the state enterprise Ukrenergo for financing auxiliary services, balancing production and consumption of power energy. 

In the framework of financing the above facilities, 400 million EUR were transferred to the State Highway Agency of Ukraine in order to take measures aimed at support of functioning road management and transport infrastructure under martial law. 

As reported by the Ministry of Finance, a decision is being drafted upon allocating 600 million EUR in 2023 for the purposes of design, restoration, construction, modernization, arrangement and repair of construction facilities. It will cover mainly public facilities, social sphere objects, cultural heritage and household services. 

In priority there are engineering and transport (public highways of state importance), railway, power supply infrastructure, checkpoints across the state border for road traffic, other facilities having an impact on people’s life, as well as infrastructure of air, sea and river transport. 

In late 2022, Prime Minister Denys Shmyhal reported that aid amount declared by partners just in power supply sector of Ukraine reached ca. 1.5 billion USD. 

Who will receive funds? 

Delegates of regional and Kyiv city state administrations may submit Applications for receiving funds from the Recovery Fund to the Ministry of Infrastructure, the Ministry of Energy, the Ministry of Health and the Ministry of Education and Science. There will be no single manager of fund recovery in Ukraine. 

There is an institutional framework headed by the Deputy Prime Minister (currently Oleksandr Kubrakov), a ministry subordinate thereto and a special reconstruction agency, as Danylo Hetmantsev noted in a comment to LIGA.net. 

He added, “There is no single manager, since there are many channels for obtaining funding. As for part of the international funding through the budget, the ministry responsible for certain reconstruction projects is directly defined in the agreements”. 

Martyna Bohuslavets, CEO of the Institute of Legislative Ideas, states that a problem may be the fact that only heads of regions can apply for funds from the Reconstruction Fund, while mayors of cities and communities become dependent thereon. 

Mrs. Bohuslavets believes that, despite creation of special working groups that will study applications for receiving funds, the final decision will be made by the ministries and the government itself. Therefore, the process of cost distribution will be centralized and will function in manual mode, i.e. non-transparent and non-public. 

Large-scale reconstruction 

As for financing the stage of large-scale post-war reconstruction, there are even less specifications. 

According to the State Recovery Plan presented by the Ukrainian government delegation in July 2022 in Lugano, Switzerland, the Marshall Plan for post-war Ukraine is designed for 10 years and is estimated at 750 billion USD. 

Rostyslav Shurma clarified in an interview with LIGA.net that there may be various sources of obtaining such funds: for instance, international government funds, reparations, confiscated russian assets and concession capital. But the main potential source is private capital. 

Deputy Head of the President’s Office highlights that the success of large-scale recovery will depend on the private capital volume, because private capital makes up 80% from the above 750 billion USD. 

Ukrainian government officials understand that attracting funds from private investors is impossible without structural reforms, primarily in terms of the rule of law and anti-corruption gains. 

“We are currently working with our international partners, i.e. BlackRock and J.P. Morgan, upon formation of development bank or development fund, which will be the first locomotive of investments in the first dozens of projects and which will help open Ukraine to the whole global business”. 

In addition, the Ministry of Economy has created the Advantage Ukraine platform aimed to communicate with potential investors. According to the Ministry, Ukraine has already received over 500 investment requests. 

In the framework of stimulating international investments, the Ministry of Economy is actively trying to introduce in Ukraine, in particular, military business risk insurance. Victory on this front will be a keystone on the way to a significant increase in the flow of foreign private investments into the Ukrainian economy development: we already have success just now.

https://finance.liga.net/ua/ekonomika/article/gde-ukraina-vozmet-dengi-na-poslevoennoe-vosstanovlenie-i-na-chto-ih-potratit

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Mr. Usenko, the President’s adviser, states that losses caused by russia’s war against Ukraine make up a trillion USD dollars 

Oleg Ustenko, economist and adviser to the President of Ukraine, told the Ukrainian Radio how the Fund for Liquidation of Consequences of russian Aggression is replenished, what is the amount of losses caused by war, when costs will be transferred to Ukraine from seized assets of the russian federation, and how the so-called Marshall Plan should work for the country. 

About the Fund for Liquidation of Consequences of russian Aggression 

The Fund for Liquidation of Consequences of russian Aggression has already been created. But there are some organizational issues related to its creation and what these funds will be used for. With regards to replenishment of this fund and the latest resolution of the Cabinet of Ministers, we are talking about 6.6 billion UAH. These are not enough funds for full recovery of the Ukrainian economy and the country in general. In this war we have suffered losses much exceeding $750 billion previously estimated. 

That’s why a big conference is starting to work in London, related precisely to the issues of the Ukrainian economy recovery. Losses caused by russia should be fully compensated: this is one of positions discussed in the Peace Plan of President Zelenskyi. Such losses cause buildings damaged by the russian army, enterprises that need to be rebuilt on a new technical and technological basis and a crucial part of our key infrastructure. 

About the amount of losses 

We are talking about recovery in two directions. The first is quick recovery, immediately and now. It covers the most crucial part of the key infrastructure. Therefore, 6.6 billion UAH are directed specifically to its restoration. 

As per preliminary assessment, one trillion US dollars, or 40 trillion UAH include direct and indirect losses caused by russian armed forces. Therefore, they should compensate us the debts we had to incur, the interest we will pay upon such debts and the lost property. Moral compensation will also be required. 

About funds from russian assets seized abroad 

Currently, the principal issue is that the seized funds of russia, in particular, funds of their Central Bank and nomenklatura, should be transferred immediately for the needs of Ukraine. We hope that the process of their transfer has already commenced. We expect that the first funds should appear in Ukraine quickly enough, in a month or two. 

About state investments 

The allocated 6.6 billion UAH, like any state investment in infrastructure projects, gives the opportunity to work primarily to private business. There can be no business when you do not have access to power supply or it is supplied under unclear schedule. There can be no business if there is no logistics corridor and you cannot transport goods simply due to destroyed bridge, but you have to transport by some other ways, which increases transport costs and, accordingly, prime cost and price. Therefore, such type of state investments shall provide an opportunity to receive additional impetus for economy development. 

About the Marshall Plan aimed at reconstruction of Ukraine 

While speaking about the complete reconstruction of Ukraine, we mean also that it will be necessary to rebuild the entire destroyed infrastructure. That’s an additional boost for economic growth not just because the state spends money, but because new jobs are created in construction-related industries. In general, new jobs appear because people receive additional funds and, accordingly, can spend more. This is a classic economic restart. 

That is why they are talking about the so-called Marshall Plan aimed at reconstruction of Ukraine. It was based on the fact of giving impetus to development at the expense of state investments in infrastructure. One can build infrastructure and facilitate conditions for normal development of private business. Further, private business gets an opportunity for growth. The main task in the post-war period is to return our economy to the pre-war level as soon as possible. 

Mr. Usenko, the President’s adviser, states that losses caused by russia’s war against Ukraine make up a trillion USD dollars 

Oleg Ustenko, economist and adviser to the President of Ukraine, told the Ukrainian Radio how the Fund for Liquidation of Consequences of russian Aggression is replenished, what is the amount of losses caused by war, when costs will be transferred to Ukraine from seized assets of the russian federation, and how the so-called Marshall Plan should work for the country. 

About the Fund for Liquidation of Consequences of russian Aggression 

The Fund for Liquidation of Consequences of russian Aggression has already been created. But there are some organizational issues related to its creation and what these funds will be used for. With regards to replenishment of this fund and the latest resolution of the Cabinet of Ministers, we are talking about 6.6 billion UAH. These are not enough funds for full recovery of the Ukrainian economy and the country in general. In this war we have suffered losses much exceeding $750 billion previously estimated. 

That’s why a big conference is starting to work in London, related precisely to the issues of the Ukrainian economy recovery. Losses caused by russia should be fully compensated: this is one of positions discussed in the Peace Plan of President Zelenskyi. Such losses cause buildings damaged by the russian army, enterprises that need to be rebuilt on a new technical and technological basis and a crucial part of our key infrastructure. 

About the amount of losses 

We are talking about recovery in two directions. The first is quick recovery, immediately and now. It covers the most crucial part of the key infrastructure. Therefore, 6.6 billion UAH are directed specifically to its restoration. 

As per preliminary assessment, one trillion US dollars, or 40 trillion UAH include direct and indirect losses caused by russian armed forces. Therefore, they should compensate us the debts we had to incur, the interest we will pay upon such debts and the lost property. Moral compensation will also be required. 

About funds from russian assets seized abroad 

Currently, the principal issue is that the seized funds of russia, in particular, funds of their Central Bank and nomenklatura, should be transferred immediately for the needs of Ukraine. We hope that the process of their transfer has already commenced. We expect that the first funds should appear in Ukraine quickly enough, in a month or two. 

About state investments 

The allocated 6.6 billion UAH, like any state investment in infrastructure projects, gives the opportunity to work primarily to private business. There can be no business when you do not have access to power supply or it is supplied under unclear schedule. There can be no business if there is no logistics corridor and you cannot transport goods simply due to destroyed bridge, but you have to transport by some other ways, which increases transport costs and, accordingly, prime cost and price. Therefore, such type of state investments shall provide an opportunity to receive additional impetus for economy development. 

About the Marshall Plan aimed at reconstruction of Ukraine 

While speaking about the complete reconstruction of Ukraine, we mean also that it will be necessary to rebuild the entire destroyed infrastructure. That’s an additional boost for economic growth not just because the state spends money, but because new jobs are created in construction-related industries. In general, new jobs appear because people receive additional funds and, accordingly, can spend more. This is a classic economic restart. 

That is why they are talking about the so-called Marshall Plan aimed at reconstruction of Ukraine. It was based on the fact of giving impetus to development at the expense of state investments in infrastructure. One can build infrastructure and facilitate conditions for normal development of private business. Further, private business gets an opportunity for growth. The main task in the post-war period is to return our economy to the pre-war level as soon as possible. 

https://suspilne.media/512157-suma-zbitkiv-zavdanih-vijnou-rosii-proti-ukraini-triljon-dolariv-radnik-prezidenta-ustenko/