The reconstruction of Ukraine – critical infrastructure, housing, hospitals, and social facilities – is already underway. This major effort has been significantly assisted by international support. Ukraine’s commitment to transparency, coupled with specific regulations under martial law, has been instrumental in achieving this progress.

Reconstruction Management: Pilot Projects

To ensure the comprehensive implementation of reconstruction projects, the government established the State Agency for Reconstruction and Infrastructure Development of Ukraine (Agency) in January 2023. The Agency was formed on the basis of two existing state agencies with extensive experience in implementing infrastructure projects, often in cooperation with international financial institutions. Oversight of the Agency’s activities is coordinated by the Ministry of Infrastructure of Ukraine. The specific legal framework for the first pilot projects, focusing on the reconstruction of six settlements in Ukraine, was adopted in April 2023. This legislation provides for bottom-up management of reconstruction, where projects are prioritized at the local level, prepared for reconstruction (including land allocation, surveys, and damage assessment), and then reviewed and approved by the Agency. The amendments also introduce the delegation of customer functions to the Agency and its local authorities, which will facilitate the reconstruction of private or social projects that do not have relevant experience to manage them.

Transparency and accountability in the Agency’s projects are ensured through DREAM, a dedicated e-platform that collects, organizes, and publishes open data in real time at every stage of reconstruction projects. The establishment of the Agency provides a clear understanding of the responsible authority for future reconstructions and collaborations.

Enhancing Transparency in Construction

The construction industry faced the war during the reform aimed at ensuring transparency. In pursuit of this goal, the Unified State Electronic System in the Construction Sector (E-System) was launched in 2020, laying the groundwork for the consistent digitalization of the entire construction cycle. Currently, the E-System serves as a platform allowing anyone to verify the legitimacy of construction projects online. The system handles a significant part of the decisions autonomously, reducing the influence of the human factor.

Streamlining Construction Procedures

Since the outbreak of the war, several legislative changes have been introduced to speed up the restoration of damaged property and address urgent priorities. The first of these was to simplify the requirements for acquiring and developing land for certain activities. This speedy response aims to provide practical solutions for the relocation of businesses from areas of hostilities, the provision of temporary housing for internally displaced persons, as well as the placement of river, maritime terminals, and other infrastructure facilities. Furthermore, to streamline the repair of damaged facilities, no re-designing and re-permitting is required – instead, a simple set of documents is sufficient.

Moreover, new legislation allows the commencement of complex constructions (so-called CC2 and CC3 complexity classes) during and three months after the war, based on a construction declaration instead of applying for a traditional license. This self-declaration approach, which can be completed within a day through the E-System, is also available to foreign contractors, although they would have to register a representative office and obtain an electronic key from the tax authority. Simplifications have also been introduced to the environmental impact assessment (EIA) procedure, which is becoming effective on December 29, 2023. These changes aim to significantly reduce the implementation period and promote digitization through relevant e-registers. The public hearings of the EIA can be held online, which is especially relevant given the security situation in some regions. At the same time, major reforms in construction legislation are still to come and can be implemented after the signing of draft law No.5655.

De-Risking Mechanism Available to Investors

Lastly, an additional breakthrough is the adoption by the Parliament of draft law No.9015, which allows the Export Credit Agency of Ukraine (ECA) to provide insurance coverage for domestic investments against military and political risks. Subject to the implementation of relevant by-laws, Ukrainian investors will be able to apply directly to the ECA, banks, or insurance companies that cooperate with the ECA, and benefit from war insurance. This, in turn, will significantly expand the opportunities for domestic investments to restore the industrial and processing industries. It is worth noting that many investors have already benefited from obtaining political risk insurance (including war risk) from national ECAs who started providing coverage for Ukraine after a short break in 2022, as well as from international and development institutions who support Ukraine by providing war insurance for projects in Ukraine.

Authors: Oleksiy Feliv, Managing Partner and Tetiana Storozhuk, Senior Associate

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