Restoring the temporarily occupied parts of Donetsk and Luhansk regions will require around $10 billion, Ukrainian President Volodymyr Zelensky’s economic advisor Oleh Ustenko said.
“Preliminary estimate: that’s around $10 billion, which will be needed to restore the uncontrolled territory. That is 5-7 per cent of our GDP,” Ustenko told The Donbas.Realities radio station on Saturday.
Once those areas have been reintegrated, it will be necessary to set up a fund with money from donors among others, he said.
Ukraine is developing an ambitious economic strategy for Donbas and in September its roadmap may be presented to the Cabinet of Ministers of Ukraine, said Vice Prime Minister of Ukraine – Minister for Reintegration of Temporarily Occupied Territories, First Deputy Head of the Ukrainian delegation to the Trilateral Contact Group Oleksiy Reznikov.
“Ukraine is currently developing an ambitious new economic strategy for the east of the country. A key focus is the development of the parts of Donetsk and Luhansk regions currently under Ukrainian control. This approach is perhaps best described as a Ukrainian take on the notion of “special status” for the region, with the goal of transforming the investment climate and implementing a new economic model at the regional level. According to his idea, this process should begin to gain momentum as soon as possible in the regions of Donbas, which are currently under the control of the Ukrainian government, and then it could spread to the regions occupied by Russia after their liberation.
Reznikov said that investors work in hot spots in the modern world, and he held dozens of conversations with foreign diplomats, international business representatives and Ukrainian investors who are much more concerned about the state of the Ukrainian justice system than proximity to the front lines.
“Our goal is to create a special investment regime in the part of Donbas controlled by Ukraine. We consider the extension of the rules of international commercial arbitration to the region as an integral part of these plans. Additionally, the Ukrainian state should assume at least some of the insurance burden against the kind of political and military risks that are hard for investors to predict. To help make this approach sustainable, we envisage a special-purpose fund to encourage and assist investments rather than relying on donor aid,” he said.
The Deputy Prime Minister hopes to present to the Ukrainian government a roadmap for the economic development of Donbas in September. “It will then take an estimated six months to prepare the necessary bills. This will require expert input. Ideally, this input would come direct from potential future investors,” he said.
Reznikov drew attention to the need to “set the right tone from the outset. This is not a matter of crisis relief for the Donbas, but a bid to create an advanced and innovative economic zone that can have a positive impact on the whole of Europe.”
In his opinion, in the context of the crisis caused by the coronavirus epidemic, Ukraine is ideally suited for diversifying production outside China and having high-quality production facilities closer to the EU countries, and the Donbas region has many specific characteristics necessary to play a leading role in this process.
Reznikov considers it obvious that in the seventh year of the war, the Russian interpretation of “special status” is unacceptable for Donbas.
“Rather than helping to resolve the conflict, Moscow’s approach is tailor-made to precipitate the disintegration of Ukraine. The sooner this dead end model is discarded, the better. A durable peace can only be achieved by creating a brighter future for the people of eastern Ukraine that undermines Russia’s ability to destabilize Ukrainian society,” he said.
Ukraine’s deputy prime minister drew an analogy that European investment could create a “new era of growth opportunities” in Donbas, as they once turned the region into one of the continent’s industrial engines in the nineteenth century.
Reznikov also pointed out that the aggression of the Russian Federation “destroyed the Donbass of the pre-war era” and it is already pointless to talk simply about “restoring the region”, and instead, one should focus on creating a new economy.
“The rebuilt and renewed Donbas can become the center of new approaches to production. The tragedy of the war has turned Ukraine’s industrial centers into ruins, but this devastation also creates space for bold innovations and original thinking, which are not always possible in more developed economic conditions,” he said.
The Ukrainians are ambivalent about the possibility of granting autonomy within Ukraine to the temporarily occupied territories of Donetsk and Luhansk regions for the purpose of ending hostilities and peaceful conflict settlement in Donbas.
During a nationwide poll by the Social Monitoring Center on July 8-15, 42.7% said they “would support” or were “likely to support” such an autonomy for Donbas, according to the poll’s findings unveiled at an Interfax-Ukraine press conference in Kyiv on Tuesday .
At the same time, 39% would rather “not support” or were “certain not to support” a Donbas autonomy.
On the regional level, the autonomy is seen as a solution by 64.2% in Donbas, 59.2% in the south, 57.3% in the east and 41.6% in the Central Region, and by only 15.7% in the west of Ukraine.
Most in the Western Region (66.9%) said they would “rather not support” or were “certain not to support” a decision to grant Donbas an autonomy. The figures for central, eastern, southern and Donbas regions were 38.2%, 27.2%, 21.9% and 17.5%, respectively. A total of 18.3% were undecided.
Asked whether direct talks with Russia are necessary to attain a peace, 38% said yes, absolutely, 31.6% were inclined to agree and 8.7% were inclined to disagree, and 12.1% said absolutely not. Most of those who said such talks were necessary for peace in the east and Donbas were 50.2% and 46.5%, respectively; in the latter group, 20.7% were respondents in western Ukraine.
The poll entitled “Opinions and views of the Ukrainian population, July 2020,” surveyed 3,035 respondents; margin of error: 1.1-1.9%.
Executive Director of the Ukrainian Institute of Politics Mykola Spiridonov has said, while commenting on the results of a sociology survey conducted by Active Group, that making peace in eastern Ukraine could be the only chance for Ukrainian President Volodymyr Zelensky to complete his presidential tenure successfully.
“Everything has failed. The economy failed, the social policy failed, the foreign policy failed. If Zelensky managed to put an end to the war on the least acceptable terms, he could become a part of history as a successful president. Then everything I have just said about the economy and social policy would be forgotten in 50 years, while the end of the war would be written down in history with capital letters,” Spyrydonov said on the Expert Club YouTube channel.
The political expert said that the government tries to reach a compromise in the settlement of the military conflict in Donbas.
“Zelensky wishes to put an end to the war, but he is not familiar with the instruments. The president doubts. We can set as an example Sivokho, who was appointed and then dismissed under pressure of the nationalist forces,” the expert said.
According to the sociology poll, which was presented by Active Group and Expert Club at the Interfax-Ukraine News Agency on June 22, 2020, some 80% of Ukrainians said that the incumbent government is delaying the end of the war and doing nothing or doing not enough to finish it. Only 6% of respondents said that Zelensky’s team does the utmost under current conditions for this purpose.
The full video is available on the Expert Club YouTube channel:
The potential reintegration of Donbas might add up to 1.5 percentage points (pp) to Ukraine’s GDP growth during two or three years, Bank of America (BofA) has said in its analytical review.
BofA said that the potential integration of territories could increase nominal GDP by 3-5 pp and accelerate growth by 1-1.5 pp in the period after the post-war recovery.
The analysts said that the post-war recovery might be partially financed with external donor assistance.
Both Donetsk and Luhansk regions accounted for more than 15.7% of Ukraine’s GDP in 2012, before the war. The contribution of these regions, still under Ukrainian control, fell to about 12.7% of GDP in 2017. BofA believes that this might indicate a one-time increase in relation to nominal GDP values of at least 3%.
According to the analysts, the normalization of economic relations with the region could accelerate the growth of real GDP in the first year by 0.5 pp.
President Volodymyr Zelensky called on Ukraine’s international partners and business representatives to become involved in the implementation of infrastructure and social projects in the Donetsk and Luhansk regions affected by the armed conflict. During his speech at the Ukrainian Lunch in Munich, the head of state said that a global fund had been created to restore the Donbas infrastructure in Ukraine.
“It combines two ‘windows’. The first is for international partners, organizations and foundations. The second is for the Ukrainian fund, which will attract funds from the private sector and individual donors,” the head of state said.
According to the president, the key priorities of the fund are large infrastructure projects, work with local business and its affordable crediting, care for the least protected groups of the population, overcoming the consequences of the war – with a focus on youth, women, children and veterans.
“For the first time such a fund is administered jointly by the World Bank, the Office of the President and the Government of Ukraine,” Zelensky stressed.
In addition, the head of state told about the plans to establish the Ministry of Reintegration and Restoration of Donbas.
“I urge our international partners to join and start fundraising for the reconstruction and reintegration of Donbas together with me,” the president summarized.