Actualités • Наш погляд на • Аналіз та дослідження
Newsletter #15 Reconstruction Ukraine - July 2024
Dear readers,
July has been a month of devastating and tragic events for Ukrainian citizens, marked by intense shelling across the country and numerous casualties among the civilian population, including children. One such missile attack led to the destruction of Okhmadyt Children’s Hospital in Kyiv, the largest children’s hospital in Ukraine, along with maternity wards and other civilian infrastructure.
Amid these frightful events, the population and international partners have come together in unity, compassion, and collective action through immediate assistance and fundraising initiatives.
In this 15th edition of our newsletter, we will revisit the consequences of the attack on Okhmatdyt Hospital. We will delve into macroeconomic figures for the first half of 2024, highlighting international financing initiatives, human capital statistics, and the challenging issue of booking employees liable for military service—one of the most pressing concerns for companies operating in Ukraine today.
You will also find updates on the DREAM ecosystem, news about new financial packages for Ukraine, the establishment of Ukrainian Defense Industries representation in the USA, research on the Dnipro River, and cooperation projects by French defense and security company Thalès in Ukraine. Additionally, we cover fundraising news from Esper Bionics and the development intentions of German companies in Ukraine.
We hope you find these insights useful and wish you a refreshing summer break!
Ukraine Reconstruction: Key Figures
- Macro
In 2024, the Ukrainian economy maintains steady progress despite significant challenges. The primary obstacle to economic development is power shortages, which have a negative impact on business operations and slow down overall economic activity. Nevertheless, in June 2024, the Ukrainian economy demonstrated continued growth, with GDP rising by 1.1% compared to June of the previous year according to the Ministry of Economy of Ukraine. It forecasts a sustained upward trend, projecting a real GDP growth rate of 3.5% for the year.
- 4.1% [±1%] GDP growth in the first half of the year according to Ministry of Economy of Ukraine
- $37.9 billion are Ukraine’s international reserves as of 1 July 2024 according to the National Bank of Ukraine
- $16.02 billion is a total amount of financing of the state budget from international partners as of July 2024 according to the Ministry of Finance of Ukraine. The largest contributors are:
- EU: $8,503 million
- IMF: $3,078 million
- Japan: $2,131 million
- Canada: $1,471 million
- UK: $515 million
- Norway: $295 million
- World Bank: $23 million
- 4.8% inflation rate as of June 2024, which rose compared to 3.3% in May, according to the National Bank of Ukraine
Source: Ministry of Economy of Ukraine, National Bank of Ukraine, Ministry of Finance of Ukraine
- Human Capital
The war continues to have a negative effect on Ukraine’s human capital. According to research by the Centre for Economic Strategy, the percentage of people saving money for food has risen since June 2023. A significant number of individuals remain internally displaced or have sought refuge abroad. However, there is a positive trend in employment rates, with continual monthly growth, and an increasing number of job vacancies.
- 3.7 million people remain displaced within Ukraine as of January 2024 compared to 5 million as of April 2023
- 6.3 million Ukrainians remain abroad compared to 8 million as of April 2023
- 3 million of people were prevented from falling into poverty because of sustained donor support, the government delivered social transfers to vulnerable households
- 13.1% the unemployment rate in Ukraine in June 2024 compared to 16,1 % in December 2023
- 25.6% is a proxy indicator of poverty level in June 2024, reflecting a negative trend compared to 23.1% in June 2023
- The number of new vacancies on the market remained at around 90% of the average level in 2021
Source: UNHCR, Centre for Economic Strategy, World Bank
Important News
- Russia struck Okhmatdyt National Children’s Hospital in Kyiv
On 8 July, during a massive shelling of Kyiv, a Russian missile hit the Okhmatdyt children’s hospital.
Okhmatdyt is Ukraine’s largest pediatric non-military diagnostic and treatment facility and one of the largest in Europe. The hospital had a total capacity of 720 beds and performed approximately 9,000 surgeries annually.
The missile completely destroyed the toxicology building and damaged 4 more. 10 surgical departments, 5 oncology departments, 2 somatic departments, intensive care, 2 intensive care units, operating units, radiology and radiotherapy departments, and part of the country’s only onco-hematology laboratory were damaged.
Currently, there is ongoing work to restore critical medical services at Okhmatdyt. The list of priority equipment includes more than 55 items (242 pieces of equipment in total) with an estimated value of UAH 400 million (approximately EUR 8,8 million).
As of the evening of July 11, more than 470 million UAH (approximately EUR 10,3 million) had been collected in Okhmatdyt’s official charity account and the Okhmatdyt Foundation’s account. All these funds will enable the commencement of urgent restoration work.
The officials are currently working on a comprehensive assessment of the damage. Once it is completed, Okhmatdyt will announce a call for tenders for the restoration work.
Sources: Ministry of Health of Ukraine, Okhmatdyt
Key developments for Ukraine’s Reconstruction
- DREAM ecosystem updates overview
Recently, the DREAM ecosystem, Digital Restoration Ecosystem for Accountable Management, initiated by the Ministry of Restoration mid-2023, has been enhanced with a number of additional features and capabilities to facilitate its functioning. The project has already shown significant results with 5346 projects with a total budget of UAH 280.16 billion (EUR 6,2 billion).
From now on, all initiated projects are included in a single register (Pipeline), where they compete with other projects for the opportunity to be financed and implemented. The ecosystem allows the user to select and monitor projects using filters by region, sector of the economy, status, initiator, donor, etc., as well as to create a personalised list of projects adjusted to specific needs and interests. The availability of information about the project customer allows businesses to contact communities directly.
The project card also shows the history of its participation in financial programmes. In the “Funding Sources” block, you can view a list of financial programmes to which the project applied, details of funding received under the programme, or reasons for refusal.
A separate profile “Financial Programs” is available in the menu tab on the main page of dream.gov.ua. It will contain information on available IFI programs, as well as budget or donor programs. Businesses can track funded projects, find out the reason for the refusal of funding etc.
Currently, this block contains the following:
- Information on the distribution of UAH 2.5 billion of subvention for shelters and catering units, initiated by the Ministry of Education and Science of Ukraine
- A separate list of projects created within the framework of the financial program, with the possibility to filter them by various parameters and access detailed information
For more information, you can visit the website via link.
Sources: Ministry for Communities, Territories and Infrastructure Development of Ukraine, DREAM
- Reservation of employees for critically important enterprises
To facilitate the reservation of employees of critically important enterprises during martial law, the government has presented the algorithm for the reservation system. To reserve an employee, enterprises must take the following steps:
1. Submit proposals to the relevant state body to designate the enterprise as critically important.
2. Obtain approval from the Ministry of Defense for the lists of military-registered employees of the enterprise.
3. Submit the approved lists to the Ministry of Economy for a reservation decision.
4. The Ministry of Economy checks the lists and makes a reservation decision, sending it to the Ministry of Defense and the state body.
5. The enterprise issues the employee an extract from the Ministry of Economy’s reservation order and sends a notification to the Territorial Centers for Recruitment and Social Support.
The possibility of reservation extends only to critically important enterprises that meet at least three criteria specified in Order No. 76 (total taxes, income, strategic importance, average wage level, no debts, etc.). A simplified procedure is provided for certain enterprises (fuel and energy complex, property managers, media, international transportation).
The electronic reservation service for employees liable for military service was also launched on the Diia portal. The companies that have the status of a critical enterprise and defence companies will be the first to use the service.
In order to make a booking on the Diia portal, the following steps are required:
- The head of the institution or an authorised representative submits a list of employees for reservation through the Diia portal.
- The system checks the criticality of the enterprise, the correctness of the employee’s documents and his/her data in the Oberig register
- If the employee’s data is correct and available in the Oberig system, Diia sends a response about the results of the reservation for each employee. In case of refusal for one of the employees, the reason is indicated.
- The booking information is pulled up in the Reserve+ application.
It is also possible to download the booking extract on the portal and print it out if necessary.
Unlike the traditional application, the Diia portal allows to make a booking instantly and with less effort.
Sources: Ministry of Economy of Ukraine, Diia.City
- The opening of the first foreign representative office of JSC Ukrainian Defense Industries in USA
On 9 July, the first foreign representative office of JSC Ukrainian Defense Industries was opened in Washington, DC. The representative office will work in three key areas:
- interaction with business and expert organisations
- cooperation with government agencies and defence organisations
- support of Ukroboronprom enterprises’ projects in the United States and partner countries
The opening ceremony was attended by the Ministry of Strategic Industries,Ukrainian Defense Industries, and representatives of U.S. government agencies.
Among the objectives of opening the office are seeking investment opportunities and potential military-technical partners in the USA. Additionally, the office aims to identify and evaluate latest technologies and innovative developments, facilitate collaboration between Ukrainian and foreign teams for the effective implementation of technologies, and manage joint ventures, among other goals.
Minister for Strategic Industries Oleksandr Kamyshin stated that currently, Ukrainian companies already have a number of arrangements in principle with their American counterparts. The representative office of Ukrainian Defense Industries in the United States will help speed up their implementation and strengthen the integration of Ukrainian defence into NATO’s defence industrial base.
Sources: Ministry of Strategic Industries of Ukraine, Ukrainian Defense Industries
International Benchmark
- Ukraine and Germany started cooperation within the framework of the ReWarm project
Ukraine and Germany started cooperation in district heating reform within the ReWarm project.
The relevant agreement was signed by representatives of the Ministry of Communities, Territories and Infrastructure Development of Ukraine, the German Society for International Cooperation (GIZ) and the Reform of the District Heating Sector in Ukraine (ReWarm) project during the official opening of the project.
The ReWarm project aims to transform heating systems in Ukraine at both national and local levels and to facilitate sustainable modernization of centralised heating enterprises. These efforts will significantly enhance energy efficiency and play a role in reducing CO2 emissions by at least 19% from 2019 to 2030.
To implement the ReWarm Project, the Government of the Federal Republic of Germany is providing GIZ with up to EUR 4.5 million. In addition, the German side will provide expert support for the projects. For its part, the Ministry will support the project and assist in communicating with local governments and district heating companies on energy efficiency issues.
Cooperation with the ReWarm project involves several tasks, including:
- analysis and monitoring of the current economic and legal situation of district heating companies
- development and implementation of a comprehensive district heating strategy with the participation of local governments, accompanied by a decarbonisation strategy, for example, through cogeneration and increased use of renewable energy sources
- adjustment of the regulatory framework
- pilot implementation of adapted business models for district heating utilities, including district heating tariffs
- qualification and consulting of specialists and managers of pilot local governments and their utilities, multi-level consultation and experience exchange procedures, etc.
Kyiv, Odesa, Kryvyi Rih, and Zhytomyr have been selected as the first pilot cities.
Sources: GIZ, Ministry for Communities, Territories and Infrastructure Development of Ukraine
- Ukraine attracted about USD 2.2 billion from the IMF under the Extended Fund Facility arrangement
On 3 July 2024 Ukraine received the fifth tranche of about USD 2.2 billion from the International Monetary Fund under the four-year Extended Fund Facility (EFF) Arrangement. The IMF Board completed the Fourth Review of the extended arrangement under the Extended Fund Facility (EFF) for Ukraine on 28 June, enabling a disbursement. Ukraine’s performance remains strong under the EFF despite challenging conditions. All quantitative performance criteria for end-March were met, and all structural benchmarks through end-June were implemented.
Minister of Finance of Ukraine Sergii Marchenko stated that Ukraine continues to work actively on the implementation of the jointly defined reforms under the Arrangement, which contributes to macro-financial stability and creates conditions for further recovery and development of Ukraine’s economy on the path to EU accession.
The next measures that Ukraine will have to implement for the fifth review are set out in the joint Memorandum of Economic and Financial Policies between Ukraine and the IMF and include the ongoing structural reforms in public finance, the financial sector, monetary and exchange rate policy, governance, anti-corruption, and the energy sector.
Sources: International Monetary Fund, Ministry of Finance of Ukraine
- Launch of the Ukraine - UNIDO Green Industrial Recovery Programme 2024-2028
On June 28, 2024, the Government of Ukraine and United Nations Industrial Development Organization (UNIDO) officially launched the Green Industrial Recovery Programme 2024-2028. The programme sets out a strategic vision for the transformative and resilient recovery of Ukraine’s industry in line with the 2030 Agenda and particularly Sustainable Development Goal 9 "Industry, innovation and infrastructure". The programme is also aligned with the Government’s early recovery priorities, policy reform vision and national sectoral strategies.
To fulfil UNIDO’s mandate in the unique circumstances facing Ukraine, the organisation has developed a tailor-made programme addressing three key intervention areas:
- Creating opportunities for individuals and communities
- Supporting businesses and attracting investment
- Fostering a green economy
Over the past year, UNIDO has intensified its efforts in Ukraine and already delivered a number of crucial results, allowing for a swift and efficient scale-up of joint activities. UNIDO has prepared a comprehensive industrial diagnostic study on Ukraine’s industrial performance, which provides important primary data and unique analysis on the micro, meso and macro levels. With the support of various development and funding partners, UNIDO has launched new activities in 3-D prosthetic production, institutional capacity-building including municipally, women’s and youth economic empowerment, quality infrastructure, energy provision, and more.
As a new major milestone, UNIDO is preparing a large-scale project in cooperation with the Ministry of Economy of Ukraine and the Ministry of Economy, Trade and Industry of Japan to enable technology transfer in a number of critical thematic areas.
Sources: UNIDO, Ministry of Economy of Ukraine
- Canada provides new financial package of USD 350 million
On 10 July, President of Ukraine Volodymyr Zelenskyy met with Prime Minister of Canada Justin Trudeau on the sidelines of the NATO Summit in Washington.
The Canadian prime minister stated that his country was ready to provide the necessary medical support to the victims of the Russian attack on the Okhmatdyt children’s hospital in Kyiv and announced a new, additional military support package for Ukraine worth CAD 500 million (USD 350 million).
The two leaders also discussed Ukraine’s defence needs and coordinated cooperation within the fighter jet coalition.
Source: Office of the President of Ukraine, Prime Minister of Canada
- Dnipro River Research by Ro3kvit
Ro3kvit, urban coalition for Ukraine, in collaboration with Greenpeace, Ecoaction, the State Agency of Water Resources of Ukraine, the Kremenchuk City Council, the Kharkiv School of Architecture, and the American Planning Association, launched the Dnipro River Integrated Vision project.
This research is a compilation of facts and experiences from the past and present, an analytical work proposed for consideration in discussing future opportunities for the Dnipro River. The project employs a multi-layered approach, encompassing historical, geographical, and legal contexts, as well as practical applications in urban and regional planning. It analyses the economic impact of the river as well and raises the topic of its economic and energy future.
The primary goal is to bridge the gap between theory and practice, enhancing understanding and collaboration among stakeholders. By presenting diverse perspectives and actionable recommendations, the initiative seeks to ensure the Dnipro River’s protection and sustainable use for future generations.
The full study is accessible via link.
Source : Ro3kvit, project website
Webinar Replay
Our 10th episode of webinars dedicated to the reconstruction of Ukraine was devoted to the subject of the French €200M fund for the reconstruction of critical infrastructure in Ukraine.
We were delighted to welcome Ms Elise Benyo, Project Officer to the special delegate for aid and reconstruction in Ukraine, and Mr Jean-Baptiste Brasseur, Head of the Economic Service (DG Treasury) at the French Embassy in Ukraine, who presented the opportunities offered by this fund, the objectives pursued, the sectors in focus, as well as the conditions and procedures to follow in order to apply and set up your project.
It was an extremely informative webinar, which we invite you to review in replay.
Focus on private sector
- Thales signed three agreements with Ukrainian industry
On 19 June at Eurosatory, Thales signed three agreements with Ukrainian industry under the auspices of the French Ministry of the Armed Forces and the Ukrainian Ministry of Strategic Industries.
The three agreements were respectively signed on behalf of Thales by Pascale Sourisse, Senior Executive Vice President, International Development, Christophe Salomon, Executive Vice President, Secure Communications and Information Systems and Hervé Dammann, Executive Vice President, Land and Air Systems.
The primary aim of these agreements is to strengthen the operational support for the Ukrainian Armed Forces’ front-line operations and reinforce local defence capabilities. Domains of cooperation include electronic warfare, tactical communications, air defence systems and radars, as well as unmanned aircraft systems.
Two agreements concern one of the enterprises of the Joint Stock Company, Ukrainian Defence Industry:
- The first agreement outlines Thales’s intention to establish a joint venture in Ukraine, which will facilitate the delivery and operations of equipment for the Group’s portfolio of defence systems, including Electronic warfare, as well as Tactical communications equipment, Air Defence systems and radars.
- The second agreement, focused on electronic warfare, according to which Thales will provide extensive maintenance, testing and specialised training. This agreement aims to boost local maintenance capability within Ukraine, which will reduce repair and maintenance cycles and ensure the best operational availability.
In a third agreement, signed with Ukrainian UAV and UGV specialist FRDM, Thales intends to co-develop and manufacture with FRDM an Unmanned Aircraft system able to carry and release munitions.
Source: Thales
- Ukrainian-founded company Esper Bionics has raised $5 million in investment for scaling up
Ukrainian-US startup Esper Bionics has raised a $5 million investment to develop the first bionic ecosystem in the world.
The round was led by YZR Capital, and co-financed by European Bank for Reconstruction and Development (EBRD), and uventures. The funds will fuel the company’s research and development, scale production, and upgrade the Bionic Ecosystem.
The investment will increase the company’s capability to provide better options for people around the globe to enhance their abilities.
Source: Esper Bionics
- 43% of German companies with existing or planned business activities in Ukraine plan to invest in Ukraine
The German-Ukrainian Chamber of Industry and Commerce (AHK Ukraine) and KPMG in Germany conducted a joint business climate survey, called ‘German-Ukrainian Business Outlook’. In this survey, 142 companies with existing or planned business activities in Ukraine were questioned.
The survey shows that more than four out of ten German companies surveyed (43%) are planning new investments in Ukraine already in the next twelve months. Almost half of German companies (48%) see access to the Ukrainian market as a business opportunity.
Reiner Perau, Managing Director of AHK Ukraine said that Ukraine is one of the largest countries in Europe, has a qualified labour force, and in particular, technical and scientific education has always been good. It also has fertile soil and its location is logistically favourable within Europe. The country is an attractive location for nearshoring.
More than one in four companies (28%) further cited Ukraine’s high level of digitalization, including an excellent digital infrastructure and the large number of IT specialists in the country, as a business opportunity.
For more than half of the German companies surveyed (61% and 51% respectively), political and economic stability are the key requirements for expanding their activities in Ukraine.
You can read the full survey via link.
Source: 2024 German-Ukrainian Business Outlook
Podcast
We are pleased to put the spotlight on Saint Gobain CP Ukraine!
We all know Saint Gobain as the prestigious French mirror manufacturer that Minister Colbert supported a long time ago. How does this French historical excellence manifest itself on the Ukrainian market?
In this episode Kyrylo Pesenkov, General manager at Saint Gobain CP Ukraine, tells Sébastien Gobert everything there is to know about the company’s presence in the country.
🔹 1997 is a year to remember. Since then Saint Gobain is active in Ukraine and it has diversified its production of high quality construction materials.
🔹 Given the context of war, Saint Gobain CP stands as a firm supporter of Ukraine’s reconstruction efforts, both as an emergency response and long-term efforts.
🔹 As all French companies that are present in Ukraine for a long period of time, Saint Gobain CP’s expertise and skills would be best enhanced by a strong and coordinated construction effort with the support of institutional partners.
Tune in to listen to this engaging conversation with one representative of French savoir-faire in Ukraine!
