Ukraine, economy: Lugano reconstruction conference: July 2022

“Lugano declaration” sets out ambitious reconstruction plans, but lacks focus

A high-profile “Ukraine Recovery Conference” was held over two days in early July, hosted by the Swiss authorities in the city of Lugano.

Bringing together representatives from some of the big industrial economies, such as the US, the UK, France and Japan, with ministers and civil society leaders from Ukraine, the purpose was to set out and discuss detailed plans for Ukraine’s economic recovery, in alignment with its EU integration goals, which received a boost at the end of June with the award of EU candidate status.

The reconstruction plan itself was put together by Ukraine’s National Recovery Council, a new body established by Volodymyr Zelenskyi, the Ukrainian president. It envisages a three-stage process, of immediate economic repair, short-term post-war reconstruction and long-term modernisation, focusing on five key areas of infrastructure, the economy, digitalisation, the environment and society. Among the guiding “Lugano principles” for the operation of the recovery plan are listed:

• the alignment of reforms with the goals of EU integration and economic sustainability;

• the pursuit of a variety of social and economic rights, alongside a reduction of economic inequality;

• partnership and involvement of interested parties from outside and inside Ukraine (including the private sector, civil society and academia); and

• popular accountability and participation.

Initial estimates of the cost of the recovery plan range from US$750bn to more than US$1trn, with an underlying aim of replacing and augmenting the country’s physical capital, badly damaged in the war with Russia, in order to achieve average annual real GDP growth of 7% over an extended period. This is probably at the top end of what is possible, and was only achieved by Ukraine once before in the post-communist era, in 2000-07, mainly owing to favourable developments on world markets.

The recovery plan, then, serves then as a demonstration of the Ukrainian administration’s broad intent, and perhaps also of its competence and composure to be able to think ahead, even amid the pressing demands of an ongoing devastating war.

At the same time, while echoing many of the buzzwords favoured by the leading international agencies, the reform plan is painted in fairly large brush strokes, while lacking an overarching focus. Moreover, it retains ideas—such as on deregulation and flexible labour markets—from an earlier development agenda that have since been superseded or rethought.

In particular, reform of political and corporate governance institutions could act as just such an overarching reform objective, because the success of reforms in many other areas will depend on it (for example, attracting investment in sufficient quantities will require the reasonably even-handed enforcement of property rights by a reasonably independent legal and judicial apparatus). Moreover, successful adaptation of the plan will need to incorporate a broader understanding of the factors that create the conditions for prosperity, as involving not just economic and legal change, but also interlinked processes of political, social and cultural change too.

Comments

Post a Comment

Popular posts from this blog

Ukraine: The politics of institutional reform: Zelenskyi’s “de-oligarchisation” drive, Dec 2021

The president's “de-oligarchisation” drive addresses issues vital for Ukraine’s development, but is unlikely to produce lasting change (December 2021, for the EIU) The president’s claim that a Russian-linked coup is being organised against him may be part of a wider domestic political struggle set off by his “de-oligarchisation” drive.  De-oligarchisation addresses the key developmental issue facing Ukraine. This is that, by restricting political and economic competition, the collusive, behind-the-scenes politics of Ukrainian elites has acted as a fetter on economic growth, helping to explain the country’s low living standards. Concerns have been raised that the policy could be applied selectively to damage the president’s political rivals.  The measures may be too limited to produce lasting change. Moreover, Zelenskyi appears to lack both the resources and the durable domestic political alliances that would be required to affect a long-term transformation of national governan...
Read more

Falling between two stools

A review of Marko Bojcun’s Towards a Political Economy of Ukraine: Selected Essays, 1990-2015; Ukrainian Voices, vol 3; Ibidem-Press, Stuttgart. A. The history of post-Soviet Ukraine could be written as that of a succession of self-serving political leaderships, and of inspiring but failed popular protests, resulting in chronic economic underperformance that has left the country’s dwindling population among the poorest in Europe. A glance at IMF data, for example, shows the country vying for bottom place in the European income rankings with Moldova. In these essays, written close on the events they analyse, Marko Bojcun reminds us that this need not have been the case, and that other trajectories at times seemed possible. One example is to be found in an article from 2001, in which the prospect of Russia’s European integration is still in the air, just about, whereas from the vantage point of today, this is almost unthinkable. B. The collection covers key waypoints in the politic...
Read more

Ukraine: EU begins to disburse next tranche of financial assistance, Oct 2022

In late September, EU bodies approved an additional €5bn in macro-financial assistance (MFA) to Ukraine, and in early October, Ursula von der Leyen, the president of the European Commission, announced that the first payment, of €2bn, would be made shortly, with the rest to follow by the end of 2022. This is the second instalment of a €9bn package first announced in May, and follows the delivery of €1bn in early August. It is designed to address the substantial budgetary shortfalls facing the Ukrainian government linked to the ongoing war with Russia, which has closed off access to capital markets, but led also to agreements with creditors for delays in debt repayments. The latest EU funding comes in the form of “highly concessionary” long-term loans—that is, at a low interest rate, but still adding to the stock of public debt. The form of the final €3bn of the facility—whether it will be offered as a loan or a grant—has yet to be decided among the 27 EU member states. As the EU Commiss...
Read more