Business met with the National Council for Recovery of Ukraine from the War

04/ 08/ 2022

On August 4, companies united by the European Business Association had the opportunity to participate in the presentation and discussion of the Plan for the Recovery of Ukraine with representatives of the National Council for the Recovery of Ukraine from the War, chaired by Danylo Hetmantsev. The presented plan consists of sectoral blocks and contains proposals for reforms that will allow to restore and strengthen the state and contribute to the modernization and development of Ukraine in war and post-war times. At the meeting, we also discussed the issues of economic, agrarian, and environmental blocs. Mr. Hetmantsev reported that the implementation of the plan had already partially begun and the document itself would be flexible and could be adapted if necessary in response to a change in the situation. The sources of funding will depend, particularly, on the duration of active hostilities, but in general, it can be both external and internal funds. At the same time, representatives of the National Council consider the sum of 750 billion dollars announced in Lugano for the restoration of Ukraine to be quite realistic, taking into account the 10-year time frame for the plan to be realized. Business also clarified the procedure for institutional support of this process. Accordingly, the National Council develops, finalizes, and approves priority reforms and strategic initiatives for the recovery of Ukraine, but it is an advisory body devoid of executive function. For the further implementation of the plan, the Agency for the Recovery will be established. In addition to the prospects for recovery, business also had many practical questions for representatives of the National Council, on which the work of companies today and in the future depends. Due attention was devoted to the news regarding the Governments plans to introduce an additional 10% import tax to further stabilize the hryvnia and the macro-financial situation. Thus, business traditionally does not support such initiatives, as they will contribute to the further increase in the price of goods, as well as the increase in the number of illegal imports. Already this year, Ukraine expects to attract 30-40 billion dollars to support the budget and priority needs, of which it has already been possible to attract about 13 billion. The economic situation in the country remains tense, even without considering the fact that budget expenditures have been reduced to three categories: provision of the army, social payments, and preparation for winter. Monthly expenses currently amount to about 200 billion hryvnias per month, while revenues are half as much. At the same time, expenses for the 7 months of 2022 are 2/3 higher than for the same period last year. The deficit of the general budget fund is 8 times larger than in the same period last year. For 5 months from the start of the war, budget revenues without external financing cover only 40% of expenses, about 50% are covered by grants and loans, and the rest is also partially covered by deficit monetization. Given this, it is extremely important to involve business in restoration and reconstruction, as well as the development of Ukraines defense complex. Thus, the deployment of public-private partnership programs is the main principle of the development of the defense-industrial complex laid down in the Plan. The role of business in the restoration of activities in the de-occupied territories is also important. For this, a number of grant programs are currently provided for small businesses, particularly, for the agricultural sector. For the period of the war, three priorities in the agrarian sphere have been determined. The first is the development of export logistics. Thanks to the efforts of business, even without ports, it was possible to achieve considerable success and increase the volume of exported agricultural products from 350,000 tons in March to 3 million tons in July. And from August, Black Sea ports will be added to the logistics corridors. The second is crop storage. With the support of FAO, the necessary equipment for grain storage will arrive in Ukraine, which will significantly help in solving the problem of the lack of grain warehouses. The third is lending and access to financing for the agricultural sector, which the Ukrainian side is actively working on together with partners. The post-war development of the agricultural sector involves the development of processing, the growth of added-value production, the development of bioenergy, animal husbandry, horticulture, etc. It is also important to note that the overall motive for the entire Recovery Plan is the formation of the Ukrainian Green Deal. Even in wartime, the state and business will make efforts to ensure the transition of companies to a sustainable development model during the post-war recovery. At the same time, business emphasized the importance of considering the context of martial law and the difficult economic situation, which should be reflected in sufficient terms for the eco-modernization of industry. Mr. Hetmantsev also commented on the topical issue of tax residency, which currently worries many Ukrainians abroad. Thus, Ukraine is currently working with the OECD to implement a pan-European agreement that would make automatic changes to the status of tax residents. There will be an appropriate mechanism developed in a few weeks, after which dialogue with the European Commission on this issue will be started. Another important topic that the government is working on is war risk insurance to attract investments to Ukraine. According to Mr. Hetmantsev, such a mechanism is currently available, but at the same time very expensive, so negotiations are underway with international insurance organizations and financial institutions to reduce the cost of such insurance. We are grateful to Mr. Hetmantsev and other members of the National Council for the Recovery of Ukraine from the War for the dialogue with the business community of the European Business Association!

On August 4, companies united by the European Business Association had the opportunity to participate in the presentation and discussion of the Plan for the Recovery of Ukraine with representatives of the National Council for the Recovery of Ukraine from the War, chaired by Danylo Hetmantsev.

The presented plan consists of sectoral blocks and contains proposals for reforms that will allow to restore and strengthen the state and contribute to the modernization and development of Ukraine in war and post-war times. At the meeting, we also discussed the issues of economic, agrarian, and environmental blocs.

Mr. Hetmantsev reported that the implementation of the plan had already partially begun and the document itself would be flexible and could be adapted if necessary in response to a change in the situation. The sources of funding will depend, particularly, on the duration of active hostilities, but in general, it can be both external and internal funds. At the same time, representatives of the National Council consider the sum of 750 billion dollars announced in Lugano for the restoration of Ukraine to be quite realistic, taking into account the 10-year time frame for the plan to be realized.

Business also clarified the procedure for institutional support of this process. Accordingly, the National Council develops, finalizes, and approves priority reforms and strategic initiatives for the recovery of Ukraine, but it is an advisory body devoid of executive function. For the further implementation of the plan, the Agency for the Recovery will be established.

In addition to the prospects for recovery, business also had many practical questions for representatives of the National Council, on which the work of companies today and in the future depends. Due attention was devoted to the news regarding the Government’s plans to introduce an additional 10% import tax to further stabilize the hryvnia and the macro-financial situation. Thus, business traditionally does not support such initiatives, as they will contribute to the further increase in the price of goods, as well as the increase in the number of illegal imports.

Already this year, Ukraine expects to attract 30-40 billion dollars to support the budget and priority needs, of which it has already been possible to attract about 13 billion. The economic situation in the country remains tense, even without considering the fact that budget expenditures have been reduced to three categories: provision of the army, social payments, and preparation for winter. Monthly expenses currently amount to about 200 billion hryvnias per month, while revenues are half as much. At the same time, expenses for the 7 months of 2022 are 2/3 higher than for the same period last year.

The deficit of the general budget fund is 8 times larger than in the same period last year. For 5 months from the start of the war, budget revenues without external financing cover only 40% of expenses, about 50% are covered by grants and loans, and the rest is also partially covered by deficit monetization.

Given this, it is extremely important to involve business in restoration and reconstruction, as well as the development of Ukraine’s defense complex. Thus, the deployment of public-private partnership programs is the main principle of the development of the defense-industrial complex laid down in the Plan. The role of business in the restoration of activities in the de-occupied territories is also important. For this, a number of grant programs are currently provided for small businesses, particularly, for the agricultural sector.

For the period of the war, three priorities in the agrarian sphere have been determined. The first is the development of export logistics. Thanks to the efforts of business, even without ports, it was possible to achieve considerable success and increase the volume of exported agricultural products from 350,000 tons in March to 3 million tons in July. And from August, Black Sea ports will be added to the logistics corridors. The second is crop storage. With the support of FAO, the necessary equipment for grain storage will arrive in Ukraine, which will significantly help in solving the problem of the lack of grain warehouses. The third is lending and access to financing for the agricultural sector, which the Ukrainian side is actively working on together with partners. The post-war development of the agricultural sector involves the development of processing, the growth of added-value production, the development of bioenergy, animal husbandry, horticulture, etc.

It is also important to note that the overall motive for the entire Recovery Plan is the formation of the Ukrainian Green Deal. Even in wartime, the state and business will make efforts to ensure the transition of companies to a sustainable development model during the post-war recovery. At the same time, business emphasized the importance of considering the context of martial law and the difficult economic situation, which should be reflected in sufficient terms for the eco-modernization of industry.

Mr. Hetmantsev also commented on the topical issue of tax residency, which currently worries many Ukrainians abroad. Thus, Ukraine is currently working with the OECD to implement a pan-European agreement that would make automatic changes to the status of tax residents. There will be an appropriate mechanism developed in a few weeks, after which dialogue with the European Commission on this issue will be started. Another important topic that the government is working on is war risk insurance to attract investments to Ukraine. According to Mr. Hetmantsev, such a mechanism is currently available, but at the same time very expensive, so negotiations are underway with international insurance organizations and financial institutions to reduce the cost of such insurance.

We are grateful to Mr. Hetmantsev and other members of the National Council for the Recovery of Ukraine from the War for the dialogue with the business community of the European Business Association!