On July 4-5, Ukraine Recovery Conference was held in the Swiss city of Lugano, which was attended by delegates from 41 countries, as well as representatives of the Council of Europe, the European Bank for Reconstruction and Development, the European Commission, the European Investment Bank and the Organization for Economic Cooperation and Development as well as representatives of private sectors.

As a result of the conference, the participants signed a document condemning Russian aggression, confirming support for Ukraine and indicating the intention of the signatories to contribute to the restoration of Ukraine. And although the document stresses the absence of legal obligations, the Lugano summit is an important event that provides the beginning for the process of restoration of Ukraine.

The Ukraine Recovery Conference in Swiss Lugano managed to raise about $2 billion. According to Prime Minister Denys Shmyhal, an agreement has been reached with the World Bank on support for $1.2 billion. This is financial assistance to the budget, support for the Ukrainian agricultural sector, and funds for preparing for the heating season. Agreements have been made with the European Bank for Reconstruction and Development on support worth EUR 300 million to ensure a sustainable passage of winter as well,” the Prime Minister noted. Earlier, President Volodymyr Zelenskyy said that due to the war with the Russian Federation, this winter will be the most difficult for Ukraine for all years of independence, therefore, large-scale work is now underway to prepare for the winter and attracting funds to the energy sector is one of the priority directions. Currently, a special government headquarters under the leadership of the head of the Ministry of Communities and Territories Development is working on preparations for the heating season. This winter, the Cabinet of Ministers will reduce the minimum temperature in the premises to 16 degrees.

In addition to the World Bank and the EBRD, the European Investment Bank will allocate 120 million euros for digital transformation projects, according to the head of the government. And the Governments of Switzerland, Sweden, and Great Britain will provide funds to finance budget needs, support farmers, digitalization, repair of energy infrastructure, as well as for the recovery of Ukrainian small and medium-size businesses. Denys Shmyhal also reported that Ukraine has concluded an agreement with Switzerland on Swiss investments in public and private "green" projects.

Supporting the Ukrainian economy under the conditions of a war of attrition is an extremely important task, because wars are won not only at the front, but also in the rear. According to the World Bank, Ukraine may lose up to 45% of its GDP, and further support for the functioning of the state largely depends on the help of international financial institutions and partner countries. However, the Ministry of Foreign Affairs of Ukraine, as well as President Volodymyr Zelenskyy, in their speeches and addresses during June, repeatedly emphasized the desire to attract private investments, regardless of such a negative factor for the investment climate as the war. In particular, Dmytro Kuleba called on international companies that are still doing business in the territory of the aggressor country to leave Russia and move their business to Ukraine, where they will receive all the necessary support. Ukraine plans to open business offices abroad, with their subsequent transfer to Ukraine, as well as the creation of regional hubs covering the CEE countries, the Black Sea region, Central Asia, and the South Caucasus. It is proposed to open central offices of companies responsible for a certain region not in Russia, but in Ukraine. The first company to make such a decision was the Irish Kingspan, which is investing 200 million euros in a new technological construction hub in Ukraine.

The Ukraine recovery plan, which consists of 15 national programs in various sectors of the economy and social life, was laid as the basis of the conference in Lugano. Funding in the amount of 750 billion dollars is foreseen, of which one third will come from the private sector, 250-300 billion dollars will be attracted thanks to partnership grants for defense, critical emergency funding, rehabilitation of housing and other facilities, infrastructure development as part of the EU. 200-300 billion dollars are supposed to be attracted as credit funds from partners, which will be used to finance infrastructure modernization, energy projects, support of the financial system and co-financing of private investments. It is assumed that part of the funds will be covered by Russian reparations and frozen assets.

The first phase of recovery will be an immediate implementation plan aimed at emergency humanitarian assistance, such as restoring water supply and bridges; the medium-term program from 2023 to 2025 is aimed at restoring life in destroyed communities through the reconstruction of schools, hospitals and housing. The third stage is a long-term modernization vision from 2026 to 2032 for Ukraine's green digital economy, which will finally leave behind the Soviet era and prepare the country for possible EU membership. The plan stipulates that the Ukrainian economy will grow by 7% every year during these 10 years. The leadership of Ukraine also emphasized that the blow to the Ukrainian economy is so significant that Kyiv needs another 30 billion dollars to stay afloat until December.

It is important that the decision to restore Ukraine in Lugano is tied to the decision of the European Council to grant Ukraine the status of a candidate for EU membership and the recognition of the country's European perspective. This is directly stated in the document and it can be considered that Ukraine has the first positive results of the candidate status obtained at the end of June. It seems that the EU will play a central role in the economic reconstruction of Ukraine. According to the Bloomberg agency, the European Commission plans to allocate 523 billion dollars for these needs. The EU is also preparing to organize several donor conferences for Ukraine, which will be held in the fall.

Among other things, the document emphasizes the need for reforms and the importance of accountability. It is likely that the progress in internal transformations will be one of the factors that will affect the amount of aid and the willingness of partners to participate in the implementation of the proposed projects in Ukraine. In the future, it is planned to create a coordination platform for Ukraine and its partners in order to further implement the Recovery Plan of Ukraine. To ensure the transparency of the use of funds, the state should digitize state registers and ensure limited access to them.

Ukraine proposed an ambitious plan. However, its implementation will be a difficult task. Investment in a country at war can be limited due to objective risks, however, if the intentions of companies like Kingspan are realized, it will be a good example for further investment. An important issue is the political will of the government officials of the partner countries. The countries of the Euro-Atlantic area are already feeling the consequences of the Russian war against Ukraine. There are still questions regarding the implementation of the initiative to transfer seized assets of the Russian Federation to Ukraine. Also, no decision has yet been taken on the transfer of 9 billion euros of emergency aid to Ukraine.

The summit in Lugano initiated the process of rebuilding Ukraine. The projects still need to be detailed, and funds should be attracted for their implementation. In the future, work on the implementation of projects will take place in working groups, while additional funds will be attracted, in particular, at similar conferences. The organizer of the next conference on the restoration of Ukraine, according to the Minister of Foreign Affairs Elizabeth Truss, will be Great Britain.
 

Sources:
1) Denys Shmyhal: The complete Ukraine Recovery Plan envisages a change in the paradigm of the state, 09.07.2022,
URL: https://www.kmu.gov.ua/en/news/denis-shmigal-povnij-plan-vidnovlennya-ukrayini-peredbachaye-zminu-paradigmi-derzhavi
2) Ukraine Recovery Conference (URC2022) in Lugano on 4–5 July 2022,
URL: https://www.eda.admin.ch/eda/en/fdfa/fdfa/aktuell/dossiers/alle-dossiers/urc2022-lugano.html
3) Дана Гордійчук, Україна представила план відновлення на $750 мільярдів: як виглядатиме повоєнна відбудова, 04.07.2022,
URL: https://www.epravda.com.ua/news/2022/07/4/688833/
4) Ярослав Вінокуров, План Маршалла з полів Лугано: як будуть відбудовувати Україну за 750 мільярдів доларів, 05.08.2022,
URL: https://www.epravda.com.ua/publications/2022/07/5/688861/
5) Конференція з відновлення України -2023 пройде в Лондоні, 04.07.2022,
URL: https://www.ukrinform.ua/rubric-economy/3521828-konferencia-z-vidnovlenna-ukraini-2023-projde-v-londoni.html