UNDP Ukraine: without proper investment, Ukraine could lose 18 years of development

Countries and international organisations reaffirmed their support for Ukraine on Tuesday at the Ukraine Recovery Conference in Lugano. With the reconstruction process estimated at $720bn by Ukraine, the country is counting on that support to materialise into aid donations, but also investments that will keep the economy afloat.

The World Bank has projected tha Ukraine’s economy could shrink by 41.1 per cent this year if hostilities drag on. In areas heavily hit by the war, businesses have closed down and millions of jobs have been lost. The UN Development Programme (UNDP) is the agency with the biggest presence in Ukraine and it has been supporting the Ukrainian government to keep essential services going and help reopen businesses.

UNDP’s Ukraine representative, Manal Fouani, who was in Lugano for the talks on the country’s reconstruction, told Geneva Solutions that the conference was a success in rallying support for Ukraine, while warning that the fate of nine in ten Ukrainians depends on the delivery of those promises.

GS News: Achim Steiner has talked about avoiding a “looming development catastrophe” in Ukraine. What is your evaluation of the impact on Ukraine’s development?

Manal Fouani: According to early projections by UNDP, from a macroeconomic perspective, if this war continues, Ukraine could lose close to 18 years of development gains without proper investment. If we do not sustain government functions and ensure that the government keeps on being the lead on addressing the needs and priorities of its people, we’ll face further development catastrophe in the country.

From an impact perspective, we are witnessing one of the largest – if not the largest – and fastest displacement in history since World War II. This has impacted largely the number of businesses that have to flee the country or business owners and the people who were employed and lost their jobs. 

What are the prospects for Ukraine’s population?

Projections done in March by UNDP indicate that if this war continues with the same intensity, and the same levels of destruction and damage and movement of people without support, it could lead to 90 per cent poverty rate, particularly in remote areas where it's not always easy to recover and to bring services to people. On 23 February, Ukraine was doing well in terms of meeting the Sustainable Development Goals, particularly on poverty, with a huge decline below the 2.5 per cent poverty rate just before the war. Of course, these are projections, but if they take you to almost 90 per cent, that's a drastic deterioration of the situation, without support.

Can this be avoided through the aid pledged at today’s conference?

If these commitments that were promised today are delivered, it will improve the situation in the sense that the country, people, governments, institutions and the private sector can work together and alleviate the impact of the war. But that's the conditionality of the situation – if support doesn't come in a timely and efficient manner, not only to the government, but also to the people and businesses will go into a vicious circle of losing all the development gains that they had before. 

Does Ukraine’s economy need to adapt and become a wartime economy?

Ukraine is a very large country and the impact of the war differs from one oblast to another. The businesses that have had to flee certain war affected areas are trying to reopen their businesses elsewhere and the government and UNDP are supporting them by connecting them with other businesses in the host oblasts so that they can further engage in the local economic cycle, but also contribute to the demands of the market. The country has lost a major part of productive facilities because they were shelled. Now, micro and small and medium enterprises are trying to recover from this impact but also shift their activities. They're now looking into producing, for instance, for humanitarian assistance. Some of them I've known to even refocus towards reconstruction and investing in alternative energy sources. 

Millions in aid have been pledged to Ukraine. What mechanisms are in place to avoid misuse of funds?

There is an afternoon meeting today [Tuesday 5 July - ed] that is dedicated to aid coordination and the management of the financial flows for recovery. We're at a stage where different large partners are proposing different solutions. It's critical that we come all together in a cohesive approach to support the government of Ukraine based on also the vision that they have. The Ukrainian Prime Minister presented his vision of the coordination mechanism for the recovery response. In terms of mechanism for channelling the funds themselves, we are yet to learn what the architecture would look like, but what matters is that the centre of gravity should remain in Kyiv with a lot of best practices and international solutions that have been done elsewhere, and could be just adapted to the Ukrainian context. 

I think the level of engagement and commitment from the government side to ensure that there is an adequate monitoring system and transparency in the response tracking is also an impediment. For example in the website of United24 [Ukraine’s recovery plan], you could even track who paid for what and how it was dispersed. And I think this is already a good step forward from the Ukrainian government into transparency and accountability.

What are some crucial elements for a robust anti-corruption mechanism?

For example, watchdogs from civil society could track how the government executive body is performing, connecting to the legislative processes to what is needed for them to better perform their roles and functions, but also to probably legalise a certain system of monitoring by the people and the public. At the international angle of partnerships, best practices from other places could also be applied. We saw the EU proposed a platform for coordination and the World Bank is already working through a trust fund.