Bloomberg: Restoring Ukraine will cost $1 trillion, there is already a rough plan

Bloomberg: Restoring Ukraine will cost $1 trillion, there is already a rough plan

Although the war is not yet over, Western leaders and public and private companies are already drawing up plans for Ukraine’s post-war reconstruction and are eyeing the largest contract since at least World War II.

According to Bloomberg, Western governments, leaders and investors are already trying to find a place for the post-war reconstruction of Ukraine, which, according to estimates by the European Investment Bank, could amount to more than $1 trillion. Adjusted for inflation, that’s five times more than the US-funded Marshall Plan that fueled Europe’s industrial revival after Germany’s defeat in World War II.

Basic scale of reconstruction

A review of reconstruction efforts across Ukraine—even as fighting continues into its third year—provides a glimpse of what the scale and shape of the country’s overall recovery might look like.

Thus, German and Austrian companies are planning ventures in infrastructure and defense, JPMorgan Chase & Co. is waiting for working groups for “pre-project planning”, and Denmark has so far allocated 120 million euros ($130 million) for the restoration of the shipbuilding hub in Nikolaev.

The largest steel producer, Metinvest BV, estimates that after the start of large-scale reconstruction, about 3.5 million tons of steel will be needed to restore housing and social infrastructure within five to ten years. The company says it is ready to meet this demand.

German companies follow their government, which supports Ukraine on a bilateral level. In February, defense giant Rheinmetall AG announced plans to set up a facility in Ukraine to produce much-needed 155mm artillery ammunition.

Construction materials manufacturer Fixit has been opening a new production site in western Ukraine since last year, and chemical company Bayer AG announced investments in seed production.

The Austrian company Waagner-Biro Bridge Systems, which produces modular steel overpasses crossing rivers and valleys, has already begun production at a site in Western Ukraine. Last year, company CEO Richard Kerschbaumer said in an interview that “there will be enough work for decades.”

“Given where the funds will come from, American and European companies will likely receive the lion’s share of contracts,” Bloomberg writes.

Turkey is not far behind

Turkish companies are rebuilding bridges and roads, supplying power generators and mobile hospitals, hoping to have an edge when competition for big contracts begins.

During two years of war, Turkish construction contractors completed 70 projects in Ukraine totaling about $1 billion. The largest of them, Onur Group, is repairing blown-up bridges, including the bridge in Irpen on the outskirts of Kyiv.

In collaboration with South Korean Samsung C&T Corp. Onur Group also built mobile hospitals in Ukraine. Subsequently, the company wants to resume the reconstruction of the Dnepr International Airport, as well as some highway construction projects.

While competition for contracts will be fierce, Turkish companies hope their experience in countries struggling with conflict or corruption will give them an edge.

Istanbul-based Dogus Construction, which has been working in Ukraine for many years, is rebuilding three bridges with British support and expects to one day receive contracts worth "several billion dollars" for reconstruction, according to its representative in Ukraine Suha Kanatan.

Corporate sentiment

Representatives of the companies note that no matter what happens in the near future, the reconstruction of Ukraine must begin someday. Corporations just need to make sure they are prepared for this.

For example, the Hungarian engineering company Ganz-Mavag, based outside of Ukraine, noted that one of the reasons for participating in the tender for the purchase of the Spanish train manufacturer Talgo SA was to increase capacity to meet demand in Eastern Europe over the next decade. This will be driven by reconstruction in Ukraine when it begins.

In Mykolaiv, consultants and local authorities are developing a master plan for the city’s development until 2050. According to Jesper Karup Pedersen, technical director and project manager of the Danish engineering and consulting company Cowi, which is working on the reconstruction of Nikolaev, many of them remain only on paper, since further progress is impossible until the end of the war, many projects may become targets for bombing. In addition, today it is complicated to obtain documents from local authorities, because people are taken to the front and this creates gaps in public administration.

Most of the municipality’s funds from Denmark were used to purchase generators, water pumps, heaters and support demining efforts in Mykolaiv, whose population has declined since the Russian invasion two years ago.

At the same time, the chief economist of the European Bank for Reconstruction and Development, which has provided Ukraine with 3.8 billion euros in funding since the beginning of the war, Beata Javorczyk, noted that the focus should be not only on money, but also on people.

But, Bloomberg writes, every person responsible for the reconstruction project in Ukraine today cannot know what size the country’s territory will be after the end of the war.

“The map of Ukraine will depend on what part of the currently occupied territory Kyiv regains, as well as on when and where more than a quarter of the country’s pre-war population decides to live. The Russians today control about 18% of the territory of Ukraine,” the agency writes.

It is also unknown how to ensure that after the peace agreement, the Russians will not again occupy the areas and areas where restoration work will be carried out.

The head of the State Agency for Infrastructure Development and Reconstruction of Ukraine, Mustafa Nayem, noted that the country has a chance to rebuild better than it was in the USSR.

In his opinion, the success of the largest investment project since World War II requires the patience of Ukrainians. According to the official, much will depend on Russia whether it will adhere to the peace agreements.

“Many people think in terms of “the war will end and...”, but we don’t know when it will end. And even when it ends, what will we do with such a neighbor? We will definitely need a lot of time to restore the territories that were liberated or located on the front line,” Nayem said.