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Newsletter #19 Reconstruction Ukraine - December 2024

Dear Readers,

As we begin 2025, we would like to send you our very best wishes and our warmest thanks to all those who have supported us in monitoring the reconstruction of Ukraine. The year 2024 was marked by persistent challenges, but also by remarkable advances driven by resilience, innovation and unfailing international solidarity.

This first edition of the year celebrates the progress made in 2024 and takes an optimistic look at the opportunities and projects that will shape Ukraine in 2025.

We begin with an overview of Ukraine's dynamic IT sector, which continues to thrive despite the current climate, reinforcing the country's strategic position on the world stage. We also look at recent developments in employee booking for critical infrastructures, notably through the Diia platform, with up-to-date information on its benefits and requirements.

We also highlight the invaluable contributions of the international community to Ukraine’s recovery: 

• New financing programs from the EBRD, targeting energy, infrastructure, and insurance. 
• France’s efforts to bolster Ukraine’s energy resilience. 
• The launch of a World Bank healthcare project and the FAO’s latest grants for agriculture. 

Finally, we explore the progress of the private sector in Ukraine, with promising projects such as Kronospan's investment and the expansion of drone production in the country.

We hope you find this edition informative and inspiring for the New Year.

Enjoy reading! 

Ukraine Reconstruction: Key Figures

• IT sector: key figures

The IT sector remains a vital pillar of Ukraine's economy, even amidst the ongoing war. On November 21, the Lviv IT Cluster presented the findings of its IT Research Ukraine 2024: Sustainability as a New Reality project. This comprehensive study delves into critical aspects of the IT industry in Ukraine, including its economic significance, development potential, business activity among tech companies, and the expectations and plans of market participants. It also highlights the available pool of technical talent and other key insights.

Below, we explore the study's key findings:

General data:

• 38% of total services are computer services, making the IT sector the largest exporter of services in Ukraine.
• 11.6% is a share of computer services in total exports of goods and services for 9 months of 2024. The IT sector ranks 2nd in the overall structure of Ukrainian exports, after food exports.
• 4.4% is a share of IT in Ukraine's gross domestic product of Ukraine.
• $4.8 billion in total export revenue of IT services for 9 months, 4.9% less than in 2023

IT companies and the talent market:

• 2118 active verified IT companies. Among them:

47% are outsourcing companies;

31% of companies are product companies;

19% have a mixed business model;

3% are outstaffing companies.

• 302,000 IT specialists, 40% of them women (7% more than last year).
• 34% of C-level positions are held by women.
• Almost half of those employed in the IT industry have completed or are completing a technical degree in computer science.
• More than 43% have over 6 years of total IT experience, including 9% with over 15 years.
• More than 82% of the entire pool of technical talent are Middle, Senior and Lead specialists.

Overall, despite the fact that IT exports have been declining for the last 2 years, the industry remains a leading contributor to the Ukrainian economy, facilitating GDP growth. With a robust talent pool and a dynamic mix of business models, Ukraine's IT sector is well-positioned to adapt and thrive in a rapidly changing landscape.

You can access the full research via the link.

Source: Lviv IT Cluster

Key developments for Ukraine’s Reconstruction

• Government restores online booking of employees through Diia portal

Since December 1, the Ukrainian government has reintroduced the possibility for companies to book their employees via the Diia digital portal, in a fully online framework. The aim of this system is to simplify procedures and ensure more efficient management of essential employee bookings.

Key changes:

1. Online Applications Only: Paper orders are no longer required — all applications are submitted via Diia.

2. New Criteria for Businesses:

Mandatory criteria for business include:

• The average salary at the enterprise must be at least UAH 20,000.
• No tax or Unified Social Contribution (USC) debts.

Additional criteria, the company must fulfil at least one of them:

• Payment of taxes and duties in excess of EUR 1.5 million per year (equivalent in UAH at the NBU exchange rate).
• Foreign exchange earnings of more than EUR 32 million per year, excluding loans and credits.
• Strategic importance for the state (defined in the list of strategic objects).
• Important for a particular sector of the economy or the needs of the local community.
• The level of average wages is not lower than the regional average for the fourth quarter of 2021 for utilities.
• Resident status of Diia.City.

3. Terms of confirmation of the criticality of the enterprise: Enterprises must update their critical status by February 28, 2025.

4. Reservation of employees: In order to book a new or existing specialist from 1 December, the manager must declare that the employee's accrued salary before all taxes will be at least UAH 20,000 when submitting the list for booking on the Diia portal. This will allow businesses to book newly hired employees immediately if they meet the salary requirements.

This marks an important step in modernising administrative procedures, while supporting strategic businesses in a difficult economic climate. The companies concerned are encouraged to comply quickly with the new requirements in order to take advantage of this essential facility.

More detailed information is available on the website of the Ministry of Digital Transformation of Ukraine.

Source: Ministry of Digital Transformation of Ukraine

International Benchmark

• EBRD and Ukrnafta sign EUR 80 million loan agreement

The European Bank for Reconstruction and Development (EBRD) has announced an €80 million loan to Ukrnafta, Ukraine’s state-owned oil and gas company, for the purchase and installation of small gas cogeneration units with a total capacity of about 100 MW. The initiative aims to address severe energy shortages caused by this year’s heavy attacks on Ukraine’s power sector.

The sovereign-guaranteed EBRD loan will be co-financed by parallel investment grants:

• €9.5 million from the Netherlands;
• €12.5 million from the United States of America, channelled through the EBRD’s Crisis Response Special Fund.

Short- and long-term impact :

• Short term:

These gas-fired power stations will help stabilise the national energy grid, ensuring a reliable supply of electricity and heat for local communities.

• Long-term impact:

These facilities will form part of Ukraine's strategy to increase the share of renewable energies in its energy mix. The gas engines will be able to balance the intermittent nature of renewable energies, strengthening the country's energy transition.

Complementary initiatives:

In addition to energy production, this project includes :

• Training programmes in human resources management and leadership.
• A reintegration programme for ex-combatants, which will support demobilised workers and their families, as part of the EBRD's Gender SMART approach.

EBRD engagement in Ukraine:

Present in Ukraine for more than 30 years, the EBRD has provided more than €5.3 billion to the country since the Russian invasion in 2022, including €1.5 billion in 2024 alone. This loan is part of an ongoing effort to support Ukraine's economic and energy resilience.

Sources: EBRD, Ukrnafta, Ministry of Economy

• France has committed EUR 5.7 million to the Ukraine Energy Support Fund

France has committed EUR 5.7 million to the Ukraine Energy Support Fund (UESF) to help strengthen Ukraine’s energy infrastructure amid the ongoing crisis. The agreement was signed by Artur Lorkowski, Director of the Energy Community Secretariat, and Pierre Heilbron, France’s Special Envoy for Ukraine's Relief and Reconstruction, during the ReBuild Ukraine Exhibition and Conference in Warsaw last month.

Essential support for nuclear energy

The French donation will be allocated towards purchasing equipment to ensure the safety, security, and continued operation of Ukraine’s nuclear power plants, which are critical to the country’s energy stability.

Context and impact of the UESF

Created to provide rapid financial assistance, the UESF aims to repair the energy infrastructure damaged by the Russian strikes. Before the recent attacks, Ukraine had already lost more than 9 GW of energy production capacity, causing frequent power cuts affecting millions of people.

The French contribution is part of this collective effort to help Ukraine overcome its energy challenges. By providing essential material support, it will help to secure the supply of electricity and strengthen the resilience of the Ukrainian energy network in the face of the current crisis.

Source: Ukraine Energy Support Fund

• EBRD and Aon launch new facility to support Ukraine's war risk insurance market 

The European Bank for Reconstruction and Development (EBRD) and leading professional services firm Aon are launching a tailor-made facility to help revitalise the war risk insurance market in Ukraine. The aim of this initiative is to boost the provision of reinsurance capacity to private sector insurers, addressing the ongoing challenges posed by the war.

Key Elements of the Facility:

1. EBRD Guarantee for War-Related Risks: The EBRD will provide a guarantee covering losses on specific war-related risks underwritten by local Ukrainian insurers.
2. Re-engagement of International Reinsurers: The aim of the guarantee is to facilitate the re-engagement of international reinsurers with the Ukrainian market, which has seen a significant reduction in capacity due to the war.
3. Open Platform Design: This initiative is designed as an open platform that can transact with different insurance market participants seeking to benefit from the guarantee.

First players and initial coverage :

Ukrainian insurance companies INGO, Colonnade, and UNIQA will be among the first to drive the expansion of war risk insurance in the local market, enabling broader access for businesses and ensuring the product reaches those most in need, particularly small and medium-sized enterprises (SMEs).

Initially, the scheme will cover:

• inland cargo
• motor vehicle damage
• railway rolling stock

In the future, it may be expanded to other types of property, taking into account market needs.

An adaptable business model:

Due to the short-term nature of most insurance policies, the facility will be able to recycle capital and provide coverage for a multiple of the guarantee amount, depending on the number of policies sold and the frequency of claims.

Based on this approach, it is estimated that the Bank’s guarantee could facilitate insurance cover for up to €1 billion worth of goods and vehicles in transit each year, with a significant economic impact.

This initiative marks an important step towards the economic reconstruction of Ukraine, providing local businesses with the tools to continue operating despite the risks inherent in the conflict.

Sources: EBRD, AON

• Ukraine and the World Bank are implementing a new project THRIVE to strengthen Ukraine’s healthcare system

On 10 December, the Ministry of Finance of Ukraine, the Ministry of Health of Ukraine, and the World Bank signed financial agreements for the new project "Transforming Healthcare by Reform and Investments in Efficiency (THRIVE)". This initiative aims to help the Government of Ukraine increase the efficiency of public spending in the health sector in the face of financial constraints caused by the ongoing war.

Developed through the World Bank's Programme for Results (PforR) financing instrument, the THRIVE project will support the government's efforts to :

•  Prioritise funding under the MGP, a universal health coverage initiative.
• Strengthen the technical and operational capacity of the National Health Service of Ukraine (NHSU) to ensure equitable access to quality healthcare throughout the country.

The THRIVE project will be supported by:

• USD 449 million in loans from the ADVANCE Ukraine Trust Fund, backed by the Government of Japan, and the World Bank.
• USD 5 million in grants from the Ukraine Relief, Recovery, Reconstruction and Reform Trust Fund (URTF).

At the stage of approval, the planned total project volume reaches more than USD 1.2 billion for 2024-2027.

Impact and objectives:

The THRIVE project represents a major step forward in guaranteeing access to quality healthcare for all Ukrainians, even in times of war. It will help to:

• Optimise the resources available to maximise their impact.
• Strengthen accountability and transparency in the management of health funding.
• Improve the efficiency of health services, ensuring that they meet the urgent needs of citizens in a context of prolonged crisis.

By investing in structural reforms and consolidating the Ukrainian healthcare system, the THRIVE project is part of an essential approach to building long-term resilience and ensuring that every citizen has access to the care they need, despite the challenges imposed by the war.

Sources: World Bank, Ministry of Finance of Ukraine

• EBRD reallocates €267 million to support Ukraine's road infrastructure

The European Bank for Reconstruction and Development (EBRD) has announced the reallocation of part of its existing sovereign loan to support Ukraine's infrastructure recovery efforts. A total of €267 million will be directed toward the State Agency for Restoration and Development of Infrastructure of Ukraine, with a focus on essential repairs to the M-06 road, which connects Kyiv to Ukraine’s western border with Slovakia and Hungary.

Project objectives :

This funding will address several priorities:

• Urgent repairs to road infrastructure to restore traffic flow.
• Integration of advanced road safety measures to reduce accidents.
• Climate change mitigation strategies, including sustainable solutions for road management.

The targeted sections cover the Kyiv, Rivne, and Zhytomyr regions, which play a crucial role in maintaining connectivity and trade within the country.

Loan context :

Originally, the €450 million loan was intended to finance upgrades to the road connecting Kyiv to the southern port of Odesa. But Russia’s war on Ukraine has prompted a re-assessment of priorities following the redirection of cargo and passenger flows via land routes connecting Ukraine to the EU, over the country’s western border.

In 2023, the EBRD also redirected the first tranche of the loan toward the rehabilitation of the M-09 road between Lviv and Rava-Ruska, an important link to the Polish border.

Expected impact of project M-06 :

The €267 million allocated to the M-06 project is designed to:

• Strengthen transport links between Ukraine and the EU, improving trade routes vital to the economy.
• Enhance internal connectivity across Ukraine, allowing smoother movement of goods and services.
• Reduce logistical costs for freight traffic, which is crucial for Ukraine’s rebuilding economy.
• Facilitate the export and import of essential goods in line with the EU’s Solidarity Lanes initiative
• Strengthen governance and procurement procedures to ensure transparency and effective implementation of the project.

Support as part of a comprehensive strategy:

This reallocation is part of the EBRD's five-pronged strategic approach to supporting Ukraine's real economy. This strategy covers :

- Critical infrastructure.

- Energy and food security.

- Trade finance.

- Private sector support.

Through this project, the EBRD continues to play a central role in Ukraine's economic reconstruction, ensuring that strategic infrastructure meets immediate needs while supporting long-term development.

Sources: EBRD, State Agency for Restoration and Development of Infrastructure of Ukraine

• FAO launches third grant cycle to support Ukraine's agricultural sector with EU funding

The Food and Agriculture Organization of the United Nations (FAO) launches a new call for applications for the third grant cycle within the investment matching grant programme funded by the European Union (EU) in Ukraine. The programme is designed to support Ukraine's agricultural sector, promoting its competitiveness, sustainability and resilience by tackling both urgent financial challenges and setting the foundation for strategic, long-term and green growth.

Terms and conditions of grants :

Under the terms of the programme, participants are required to make their own investment contribution, which share will depend on the chosen value chain. Grants will be disbursed in Ukrainian hryvnia (UAH) at the United Nations exchange rate within two grant windows:

• up to UAH 416 500 (USD 10 000) for small individual agricultural producers;
• up to UAH 1 041 250 (USD 25 000) for agricultural micro and small enterprises, agricultural cooperatives and associations of GI producers.

Comprehensive support for beneficiaries:

In addition to financial assistance, the programme offers a range of support services including:

• Consultations with experts.
• Technical advice.
• Specific training to enhance producers' skills and optimise their investments.

Impact of the programme since 2023:

Since its launch, the EU-funded programme has already provided significant support to Ukrainian farmers. To date :

• US$2.8 million (€2.67 million) has been allocated to 237 agricultural producers in the Lviv, Zakarpattia, Ivano-Frankivsk and Chernivtsi regions.
• This funding enabled beneficiaries to improve their access to financial and technical resources, promoting investment in :

• Modern tools.
• Agricultural infrastructure.
• Environmentally-friendly technologies, essential for developing sustainable farming practices.

By combining direct financing and technical support, this programme is playing a key role in strengthening Ukraine's agricultural sector. It is helping not only to meet the urgent needs of producers, but also to lay the foundations for more resilient and environmentally-friendly agriculture, which is vital for the country's future.

Source: FAO

• EBRD provides two new loans to JSC Ukrainian Railways (Ukrzaliznytsia)

The European Bank for Reconstruction and Development (EBRD) has opened two credit lines for JSC Ukrainian Railways (UZ):

• €180 million for small-scale power generation
• €300 million for the purchase of electric locomotives

Small-scale electricity generation

The €180 million loan is intended for the installation of small generators at sites across the country aiming to mitigate the widespread electricity shortages Ukraine expects this winter as a result of devastating Russian attacks this year on its power generation system.

The loan will be used to purchase and install equipment for decentralized small gas-powered generation, with a total capacity of up to 270 MW, at existing Ukrainian Railways’ sites across Ukraine. This will help address the energy deficit for the company’s needs and ensure an uninterrupted electricity supply for the population and businesses.

The EBRD loan is accompanied by:

• an investment grant from the United Kingdom of up to £10 million (€12 million)
• an investment grant of up to €56 million from a multilateral or bilateral international donor.

Acquisition of electric locomotives

The EBRD is also providing Ukrainian Railways with a €300 million loan for the purchase of electric locomotives. This new EBRD loan is sovereign-guaranteed and is accompanied by an investment grant of up to $190 million from the United States, administered by the World Bank.

Financing objectives

These investments respond to strategic priorities:

• Ensure stable freight transportation, including agricultural exports and critical imports;
• Provide stable passenger transportation, which is extremely important for the population, the economy, the functioning of the private sector, and humanitarian efforts;
• Reduce greenhouse gas emissions and improve energy efficiency;
• Support demobilized workers through the implementation of a new veterans' reintegration program.

Global impact

These significant financial commitments from the EBRD demonstrate continued support for Ukrainian Railways in the face of ongoing challenges caused by the war. This funding will play a crucial role in strengthening Ukraine's infrastructure, supporting humanitarian efforts, and facilitating long-term recovery and resilience.

Sources: EBRD, Inerfax

Focus on the private sector

• GICAT opens office in Kyiv

The GICAT (French Land and Airland Defense and Security Industries Association) has taken a major step by opening a representation office in Kyiv, led by Thomas Moreau, CEO of Lafayette Risk Intelligence. This initiative, supported by Marc-Henri Figuiér and Théo Geandreau, aims to strengthen ties between French and Ukrainian defense industries.

Main objectives of the office:

• Represent the French defense industry in Ukraine;
• Identify local defense and security needs;
• Facilitate partnerships between French and Ukrainian industrial players;
• Support French companies operating in Ukraine;
• Contribute to the country’s reconstruction.

During the inauguration, a Memorandum of Understanding (MoU) was signed with FEU Defence (Ukrainian Federation of Defence Employers), consolidating a shared vision.

Since July 2023, GICAT has been actively involved in technological and industrial cooperation in Ukraine, aligned with France's commitment since the beginning of the conflict in February 2022. This office embodies a lasting commitment, crucial for addressing the challenges of security and reconstruction in the future.

Source: GICAT

• Kronospan invests EUR 200 million in a new OSB production line

Kronospan, one of Europe's leading producers of wood-based panels and related value-added products, has opened a new OSB production line in Rivne, Ukraine. Investments in the new facilities totalled €200 million.

Ambitious production capacity

The production facility has the capacity to manufacture 700 000 m³ of OSB panels annually, with approximately 60% destined for export to key markets in the European Union and the United States.

A symbolic inauguration

The opening ceremony was attended by Yulia Svyrydenko, Ukraine’s First Vice Prime Minister and Minister of Economy. She emphasized that the project highlighted the resilience of international companies operating in the country and served as a model for growth in the processing sector, which was a key priority for their economic policy.

A long-term strategic commitment

The new production line is part of a larger investment strategy, with Kronospan committing €563 million to the Rivne plant. Over the past two decades, the company has invested nearly €1 billion in Ukraine, reinforcing its role as a major driver of the country's processing industry.

Economic and industrial impact

The commissioning of this OSB line will help to:

• Increase Ukraine's export capacity;
• Create skilled jobs in the region;
• Attract new investment in local industrial infrastructure.

This project demonstrates the confidence of foreign investors in Ukraine's economic potential and contributes to its industrial growth, even in a difficult context.

Sources: Ministry of Economy of Ukraine, Kronospan

• Summa Defence to establish a drone production facility in Finland with Ukrainian partners

The Finnish defense and security technology group Summa Defence Ltd is establishing a drone production facility in Finland in collaboration with its Ukrainian partners.

Strategic objectives

This plant aims to :

• Rapidly increase drone production capacity to meet combat requirements in Ukraine;

• Launch industrial production of UAVs in Finland and Europe.

Large-scale production is scheduled to begin in the first half of 2025.

Creation of Summa Drones Ltd

To manage this project, Summa Defence is creating a dedicated subsidiary, Summa Drones Ltd, which will form a joint venture in Finland with several Ukrainian partners, including Kort, Elf Systems, Skyassist and MPS Development. Summa Drones will hold a majority stake in this collaboration.

In addition to manufacturing aerial drones, this new entity will also produce land and marine drones, strengthening its offering in the drone market.

A vision of growth and innovation

Summa Defence is committed to bringing together key players in the defence and security sectors to build an innovative, forward-looking company. The technological advances resulting from these collaborations will benefit both the civil and defence sectors, contributing to the development of robust and versatile solutions.

Source: Summa Defence

• Ukrainian startup raises €100,000 from Estonian fund Startup Wise Guys to scale drone production

Ukrainian defense technology startup Frontline has received a €100,000 investment from Startup Wise Guys, one of Europe’s leading accelerators. This funding will enable Frontline to:

• Increase drone production in Ukraine;
• Accelerate its research and development activities;
• Attract international partners to expand its reach.

Innovative Solutions for Defense

Specializing in advanced technologies for the defense sector, Frontline offers:

• The Linza and Zoom drones;
• The Burya combat robot systems.

These innovations are already deployed in the field, enhancing the efficiency and safety of military operations while meeting the specific needs of the Ukrainian Armed Forces.

Strategic Support

Frontline’s CEO, Yevhen Tretiak, expressed gratitude to Startup Wise Guys for their support of the company’s mission and products. He stated that this investment will strengthen Frontline’s ability to aid the Ukrainian Armed Forces while propelling Ukrainian defense technologies onto the global stage.

Sources: Frontline, AIN