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Ⅰ. Introduction
II. Recovery and Reconstruction of Ukraine
III. International Development Cooperation to Support Ukraine
IV. Implications and Policy Recommendations for Korea
Ⅰ. Introduction
The war in Ukraine reached its one-year mark, and the conflict has caused extensive civilian casualties and destruction of infrastructure. As the war grinds on, the situation has only been made worse. And the impact of the war is not limited to Ukraine; Ukraine and its neighboring countries are facing severe humanitarian and refugee crises. According to the UNHCR, about one-third of the Ukrainian population was forced to migrate and the majority of refugees are women and children. As of December 2022, around 7.8 million Ukrainians have moved to neighboring countries and Europe. Combined with the physical damage to the infrastructure, the amount of development finance needed for the reconstruction and recovery of Ukraine has gradually increased to reach billions of dollars. For instance, the World Bank estimated that the cost of Ukraine’s reconstruction and recovery would be around $349 billion.
II. Recovery and Reconstruction of Ukraine
As part of global efforts to support Ukraine’s crisis response and recovery, international donors have provided development cooperation including humanitarian assistance, grants and concessional loans, while providing platforms to discuss Ukraine’s reconstruction and recovery in detail. One of the most high-profile conferences was the Ukraine Recovery Conference held in July 2022 in Lugano, Switzerland. At the conference, the Ukrainian government announced its comprehensive National Recovery Plan detailing a pathway to rebuilding the economy. The Plan identifies the key elements of the country’s vision and principles for recovery, sources of development financing, sectors that require recovery efforts, etc.
The plan has broad implications for international development cooperation. First, the 7 principles identified in the Lugano Declaration for Ukraine’s recovery, i.e. partnership, reform-focused, transparency, accountability and rule of law, democratic participation, multi-stakeholder engagement, gender equality and inclusion, and sustainability, are very much in line with the OECD Development Assistance Committee (DAC)’s development cooperation norms and principles. For instance, the aforementioned principles are well reflected in both the Paris Declaration on Aid Effectiveness (e.g. ownership, alignment, harmonization, mutual accountability) as well as the Busan Partnership for Effective Development Cooperation (e.g. commitment towards human rights, gender equality and sustainability), the two outcome documents of the DAC’s second and fourth high-level forums on aid effectiveness. Second, the recovery will be multi-sectoral, including but not limited to human, social, economic, and environmental development. The Ukrainian government not only seeks to build socio-economic and environmental resilience but also drew up 15 national programs on energy, education, health, infrastructure, culture, etc. It is worth noting that the recovery will be much aligned with the EU’s standards and initiatives. Third, various types of development finance, including Official Development Assistance (ODA) will be needed for both immediate and mid-long-term recovery. By stating that it will insist on grants as the main instrument of international assistance, Ukraine implied a gradual transition from international assistance to domestic resource utilization.
III. International Development Cooperation to Support Ukraine
Many OECD DAC countries, including Korea, have provided ODA elements such as humanitarian assistance, technical assistance and concessional loans to Ukraine. Soon after the war broke out, donors primarily provided humanitarian assistance through bilateral and multilateral channels. The U.S. was the largest donor, providing around 3.7 billion Euros in humanitarian assistance. Korea also provided around $100 million in humanitarian assistance. It is worth noting that DAC member countries are not alone in providing humanitarian aid to Ukraine. In fact, non-DAC member countries, including China, India, and the countries in the Arab world, have also reached out to Ukraine. In addition, neighboring countries and the EU member states have implemented short and mid-term support measures to host Ukrainian refugees on their soil. Some countries have reported costs pertaining to assisting refugees as in-donor refugee costs, which can be counted as ODA.
DAC members also provided other types of development finance, such as grants, concessional loans, loans and multilateral assistance, to Ukraine. Certain donors, notably the U.S., Germany, Canada, and the U.K., have provided millions and billions of dollars of grants.
DAC members altogether have provided and pledged around twice the amount of loans compared to grants. Among the DAC, G7 members including the U.S. and the EU have been the largest providers of development cooperation assistance for Ukraine. Assistance was also provided via multilateral financial institutions. For instance, Switzerland, Austria, and Iceland contributed to the World Bank’s multi-donor trust fund for Ukraine’s recovery.
Donors’ mobilization of development finance for Ukraine could be categorized into the following two types: mobilization of additional development finance budget and re-allocation of the existing development cooperation budget. First, a few countries, most notably the U.S., have acquired additional humanitarian and development assistance budgets for Ukraine through supplementary budget requests. In 2022 alone, the U.S. government requested and received emergency and supplemental funding through congressional approval.
Germany was also reported to have received supplemental funding in April 2022. However, more countries have opted to re-distribute the existing development cooperation budget due to domestic constraints. For instance, some European donors such as the U.K., Sweden, and Norway, have utilized the existing budget as in-donor refugee costs. Furthermore, the need for development finance has risen as the war continues, and thus emerged the discussions on utilizing new and different types of development finance including private sector finance and frozen Russian assets in Europe and the U.S.
IV. Implications and Policy Recommendations for Korea
Ukraine’s recovery and reconstruction will likely be led by traditional donors including the U.S. and the EU and its member states. The G7 members have already mentioned setting up the donor coordination platform, and the principles of Ukraine’s reconstruction are well-related to the DAC norms and principles. Thus, it is plausible that the participation of other DAC member countries, including Korea, will be highly requested. However, the participation of non-DAC donors such as China should not be completely disregarded, as the Ukrainian government is also calling for their support in rebuilding the country.
In addition, as the amount of traditional development finance, i.e. ODA, is limited, private sector engagement will be strongly highlighted. Since private sector engagement is also aligned with Ukraine’s needs, donors will provide support measures, including development cooperation, for their private firms to participate in Ukraine’s recovery process.
Regardless, the provision of grant aid will continue for Ukraine’s capacity building and enhancing development effectiveness. Grant can particularly contribute to building Ukraine’s capacity to coordinate and utilize various development finance assistance flowing into the country. Also, as the history of the Marshall Plan shows, grant aid can play a significant role in reconstruction and act as a catalyst for effective development cooperation in Ukraine’s recovery.
Against this backdrop, it is advised that the Korean government develop a concrete support plan for Ukraine in both the short and mid-long terms. For instance, Korea may consider providing humanitarian and grant aid for emergency relief and post-war reconstruction and shift towards a combination of concessional loans, grants, blended finance, and private sector contribution in the mid-to-long term. In particular, grants can be targeted for capacity building, fostering a better environment for enhanced development effectiveness, and drawing in more private finance. In addition, the Korean government should strengthen partnerships and deepen cooperation with key domestic and international actors. Here, the actors include but are not limited to Ukraine, the key partner country, the U.S. and the EU, major donors to Ukraine, as well as international organizations. Domestically, both public and private actors and stakeholders should be considered. Lastly, Korea should consider utilizing its own development and development cooperation experience and know-how in Ukraine’s post-war reconstruction and recovery.
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