Although there remains no end in sight to Russia’s full-scale invasion, discussion over the future postwar recovery and reconstruction of Ukraine has already gained considerable momentum. Since the invasion began on February 24, 2022, a number of international forums and conferences dedicated to reconstruction have been held in Switzerland, London, and elsewhere. Current projections for Ukraine’s recovery anticipate what will be one of the biggest rebuilding initiatives in modern European history, with preliminary forecasts for overall investment volumes already well into the hundreds of billions of dollars.
While the current level of international interest in the reconstruction of Ukraine is clearly encouraging, the success of any future efforts will depend to a large degree on the involvement of effective local partners. Sergii Naumov, who serves as Chairman of the Management Board at Ukraine’s state-owned Oschadbank, is confident his bank is ideally placed to act as a hub between Ukrainian and international partners in the coming drive to rebuild Ukraine.
Looking ahead toward reconstruction efforts, Naumov believes Oschadbank’s presence throughout Ukraine and its history of successful international cooperation will be key assets. “We have a very large existing network in Ukraine and we understand the Ukrainian business environment. Even in wartime conditions, we were able to increase our loan portfolio to SMEs by 90% in 2022,” he says. “We also have extensive experience of working with international partners, including the kinds of institutions that will likely lead the first phase of rebuilding initiatives in Ukraine. This makes Oschadbank ideally suited to serve as a hub for the coming recovery process.”
Oschadbank has a long record of cooperation with international partners on a variety of projects providing financing and grants to Ukrainian businesses. This experience includes a guarantee program together with the European Investment Bank, and a grant program with German state development agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), which was implemented by Oschadbank in cooperation with the German Sparkassenstiftung for International Cooperation and the Entrepreneurship Development Fund. During the first stage of this grant program, Oschadbank issued UAH 164 million in financing to Ukrainian entrepreneurs, with UAH 26 million covered by grants from the German government. The Ukrainian state-owned bank already has an entire department dedicated to managing international cooperation; with interest in reconstruction initiatives mounting, this department is now actively engaged in the task of identifying and engaging potential new partners.
Naumov is also involved in these efforts and has personally attended many of the recent international events addressing the recovery agenda. So far, he confirms that the initial response from potential partners has been strong; in addition to Oschadbank’s existing partnerships, Naumov speaks enthusiastically of developing new dialog with countries including South Korea and Japan. “We will not be able to rebuild Ukraine without international help, but right now there is a lot interest in participating,” he says. “I think there will be very significant volumes available to finance reconstruction efforts.”
Harnessing this interest effectively will not be easy. Naumov recognizes that many of the challenges Ukraine was grappling with prior to Russia’s February 2022 invasion remain as relevant as ever and could serve as obstacles to attracting the kind of investment postwar Ukraine will require. He identifies a number of potential stumbling blocks including issues regarding Ukraine’s tax policy, and acknowledges the need to combat corruption, reform the judiciary, and strengthen the rule of law. If progress in these directions can be achieved, he says it should be possible to attract large numbers of investors.
Naumov argues that the most pressing priority for any recovery agenda should be rebuilding Ukraine’s battered infrastructure and creating logistical foundations capable of fueling sustainable economic growth. He notes the need to integrate Ukraine’s vast rail network with neighboring European transport systems, and says Ukraine must look to develop viable long-term alternative trade routes that will reduce reliance on the country’s Black Sea ports, which have proven so vulnerable to Russian naval blockade over the past one-and-a-half years.
In parallel, Ukraine will embark on a colossal construction initiative to rebuild the vast quantity of apartment blocks, schools, hospitals and other buildings destroyed by the invading Russian army. Naumov notes that reconstruction on such a grand scale will serve as a powerful driver for the wider Ukrainian economy and says he has already spoken with representatives of partner agencies that are ready to supply materials for this unprecedented undertaking.
Beyond the immediate objective of repairing the physical damage caused by Russia’s invasion, Naumov believes the reconstruction process has the potential to reshape the Ukrainian economy in ways that will position the country for years of growth and set the stage for further Euro-Atlantic integration. “We have the chance to change the foundations of the entire Ukrainian economy,” he says. “Ukraine should not simply seek to recover its previous position as an exporter of agricultural and industrial raw materials. Instead, the Ukraine that emerges from this war should be a country focused on manufacturing and the export of value-added goods.”
In addition to manufacturing opportunities, Naumov sees particular investment potential in high tech industries, and argues that investors who hesitate due to security concerns risk missing out on the most attractive returns. “Ukraine has traditionally been strong in the aerospace industry and has a highly competitive IT sector. The war is creating important new expertise in the military tech sector. We should be telling investors that now is the right time to enter Ukraine and gain the benefits from being part of the first wave.”
Naumov’s aim is to convince representatives of international institutions and private sector investors that Oschadbank is a logical partner for anyone looking to be part of Ukraine’s historic reconstruction and ambitious economic transformation. “Our philosophy at the moment is to be more than just a bank in the traditional sense,” he says. “We want to see our role evolve in the coming months in ways that will utilize our key strengths, including our unrivaled knowledge of the Ukrainian business environment and our credibility within the international financial community. Ultimately, we aim to act as a platform bringing together international and Ukrainian partners based on their specific needs and objectives.”
About the author: Sergii Naumov is Chairman of the Oschadbank Management Board.