The event featured co-founder of Urban 500 in Kyiv, member of the Supervisory Board of the Regional Research Association Olha Mrinska, PhD at Kentucky University, Docent at the Kyiv School of Economics (KSE) Volodymyr Vakhitov, and was moderated by CASE Ukraine Executive Director Dmytro Boyarchuk.
Keynote points of the discussion and abridged expositions of speaker reports are published below.
Keynote Points:
The rebuilding of Ukrainian cities must be based on the principles of centricity, resilience, viability and circular economic energy independence.
The volume of processed products in Ukraine is small: the aggregate production output in Ukraine (steel, grains, ores, oils, processed products) stood at around USD40 billion last year while the output of a Taiwanese company in the same period made USD57 billion.
Ukraine has to produce what the whole world needs and without which it will be unable to exist – this is how the economic interest in the national defence area can be assured.
The state must adopt framework legislation and regulate less businesses.
The state is a combination of bodies of government at various levels and about coordination of the private sector. Decisions have to be made in interests of the public, which has to integrate ideas and identify initiatives.
The rehabilitation process is a long-term effort that suggests involvement of as much resources as possible, particularly, in territorial communities. There is a need for diversity and various government incentives.
Transcript of discussion (for the full video of discussion please follow the link)
– Which principles should the rebuilding of cities be based on?
Olha Mrinska
The topic of our discussion today is the one of long-term construction and thoughts about sustainable future, about what look our cities should have. First of all, they have to be competitive to match their geographic location. Secondly, the quality of life, the cities that inspire. From here, the three key rebuilding principles are important here.
The first principle is that of centricity, which envisions inclusivity and participatory aspects. Law No 7282 to design comprehensive urban development and recovery plans for cities and towns has been adopted. It is also important, with all new regulatory sped-up processes, not to forget about the prime factor: people. Therefore, public engagement in the making of decisions on urban recovery is important. It is also necessary to engage urban residents from the very beginning. It is rather important to give the individuals currently staying outside Ukraine a chance of initiative.
The second principles is of resilience and viability. All the decisions regarding the building of residential stock and infrastructure need to be security-conscious. There have been multiple discussions about Ukraine having to become a mega-Israel in terms of planning physical things, physical infrastructure and conflict profitability. Matters of ecology and life support of the city are those things that, because of military action, are now in complete disarray. Therefore, when talking about the recovery we must account not only for the need to clear the rubble but also for things that need to be rebuilt from scratch, that will have to integrate climatic, energy etc. factors.
The third principle is the one of circular economic energy independence. Energy independence is at the core of Ukraine’s existence in terms of both security, our economy growth and competitiveness. The circularity of the economy envisions the involvement in product and service-producing networks those things that had been overlooked and discarded before.
-What exactly needs to be rebuilt? What companies or industries? Should we possibly think about changing the economic geography?
Volodymyr Vakhitov
Why, in your view, the United States of America are so nervous about Taiwan’s possible capture by China? Do you know of a Taiwanese Semiconductor Manufacturing Company that produces most semiconductors in the world and is a de facto monopoly in supplies of the most important components for electronic devices. That is, if something happens, economic problems will start everywhere. Taiwan is economically necessary for the whole Western world, and the world is going to defend it.
What does Ukraine produce? From the sectoral perspective, we produce quite a lot of steel, iron and grains. Plus, some processed products. Ukraine’s total output (steel, grains, ores, oils) stands at around USD40 billion. Meanwhile, last-year’s output of the mentioned Taiwanese company, just one company, made USD57 billion! Now, let us wear a logistics hat to see what is more expensive: a ton of grain or a ton of microchips?
Let us have a look of Ukrainian product share in the consumption of various countries. We sell the most of steel to Italy; 11% Italian steel imports come from Ukraine. Talking about grains, the most of it goes to countries in South Africa and Middle East though these countries are too weak to defend Ukraine. We need to produce components needed by companies in the West. E.g., we have a company that makes electronic components for BMW, Audi and Mercedes cars. Suppose it is located somewhere in Europe. If a share of the company were rather high for European employees, it would not be Zelenskiy calling Scholz but BMW president who would address the German parliament directly with a question: ‘What is happening? If war breaks out in Ukraine, our production will stall’.
There is a couple of things we can be proud of, if to a lesser extent. E.g., electronic components for vehicles, audio components, lighting components. A Filmotechnic company is producing screens and specialised cinema equipment in Hollywood. Still, this does not make for a production share substantial enough for Hollywood to feel us as indispensable. That is, Ukraine has to make goods badly needed in western countries. Then the countries will find it feasible to defend us.
The world has been witnessing annexations or conflicts between countries on a rather regular basis yet these seldom see the involvement of big nations. Let us remember the 1990 conflict between Iraq and Kuwait. That time the U.S. intervened because Kuwait was de facto under their flag: there was trade going on across the Gulf and Iraq’s occupation of Kuwait seriously affected the economic power of the U.S.A. Conversely, a situation with no effect on economic interests of big nations seldom gets substantial attention.
Ukraine used to produce neon for microchips. Interestingly, the most of it was originally made in Russia and then processed at plants in Mariupol and Odesa. The most of neon production used for semiconductor manufacturing has been lost now. Still, the production existed not because of being something unique but rather because of being cheap. The countries will simply switch to other suppliers.
In 2007, when at the Kyiv School of Economics, ex-president Leonid Kuchma complained of when he had been offering Western leaders to jointly produce planes the answer was: ‘Probably, just the wing’. He was rather disappointed we were offered an extremely low share in the worldwide labour distribution. But if then Ukraine was to really make plane wings, probably France today would be more willing to send weapons to Ukraine in a more expedient manner. That is, when we think about what exactly to manufacture, from the economic standpoint we have to produce something that is built-in into the value, something that is a key component for value chains in developed economies – even if it is a small but rather valuable, expensive, hard-to-replace component.
Until Russia remains a threat for Ukraine, until russian artillery continues pounding Kharkiv, Mariupol, parts of Donetsk and Luhansk Oblasts, the Ukrainian industry will be moving westward onto the right-bank part of the country. The role of Dnipro-Zaporizhzhya-Rivne vector located just along the Kyiv-Chop route will grow. The evacuation routes have shown we also have Vinnytsia-Khmelnytskyi-Ternopil vector going all the way towards the western border with Romania. This is where industries will eventually move. Before, the industry was predominantly concentrated in the Eastern Ukraine because of ores, fertile black soils and water for hydropower plants. All this is currently destroyed, so there is a chance of building something new. It does not necessarily need to be so heavily tied to natural reserve locations. Some things can be shipped, manufactured and processed on site.
Ukraine is also the world’s leading sunflower oil manufacturer. Sunflowers are known to give good harvests but they deplete the soil. Therefore, it is worth considering if we really want to grow it or should rather opt for something different and more expensive. It can possibly be the cherry juice, which is much more expensive and is in great demand. For this, private property protection should be updated and the fiscal policy revised and improved. That is, all those things the reformers have been talking about for already 30 years have to be introduced before we start building.
– How the transitional urban recovery process can be stimulated technology-wise?
Olha Mrinska
I will be talking about the city as a structure organism rather than looking at it from purely economic point of view. In the past seven to eight years Ukraine made a great leap in certain innovative areas. First of all, in the domain of digitalisation: all the decisions are related to the absolutely phenomenal public procurement reform. Later on, it also touched other areas allowing, e.g., cities and amalgamated communities to save a lot of resources and enjoy a much wider access to companies and individuals able to supply goods and services. Innovations should not be viewed through the prism of chips; innovation can manifest also through processes and other things.
The EU is ready to provide EUR9 billion to Ukraine on a free basis. Many financial institutions – the IMF, the World Bank, the EBRD, the EIB- with certain traditions of working with municipalities have established special funds.
The EBRD designed a large programme titled Green Cities. There are five or six of them in Ukraine, one of them being, unfortunately, Mariupol, one of the most progressive cities with the highest level of implementation of infrastructure and residential stock recovery projects. Many work packages like governmental, transportation, water economy, waste management, housing quality had been already before the hostilities.
Towns like Borodyanka or Chernihiv that were completely destroyed will need to be rebuilt practically from scratch, which means we will be able to integrate new principles. We will have financial resources either mobilised internally or provided by external actors.
We have to be bold. Speaking about decentralisation in relation to solar power or other types of renewables, we can build whole urbanised systems. With a view of possibility of innovation breakthroughs, we need to have a look of the legislation related to the use of new technologies, know how. It is not too friendly with its complicated permit-issuing process but it can be simplified.
On the one hand, we have lots of innovations in the area: e.g., the EBRD is funding a whole climate voucher programme, which involves companies with some breakthrough technologies in the field of waste management or new energy solutions under their belt. Sun blinds of PV panels, a Ukrainian start-up, are already distributed globally. It is necessary to simplify to maximum possible extent the regulatory and the legislative frameworks as well as the court decision adoption framework in order to import best technologies.
The production facilities are now moving from the east to the centre and the west, some of them even beyond the borders of Ukraine. The relocation can lead to an explosion of new ideas and innovative solutions. Our destruction has to give us strength to be creative and bold in our solutions, physical innovations, procedural and administrative matters.
– Who has to implement this? Do we have to hope for the state or need to understand this burden will be on the shoulders of the civic society?
Volodymyr Vakhitov
Talking about who has to set up the legislative field, it still has to be the state. There should be framework legislations to allow adopting standards, terms and conditions and to determine all required things. On the other hand, we are also talking about private initiative.
Late last February Ukraine joined the European power grid. Now we can sell surplus electricity though for this to happen we will need to clear the regulatory field inside the country.
Nearly a half of reactors in the agroindustrial sector were inoperative last year in Ukraine. It was in the interest of one political or economic group. Therefore, a public-private partnership should exist. That is, the government has to provide a common framework without impediments for the business.
Olha Mrinska
The question of ‘Who we are?’ is not that unequivocal. What is the state? The state is a combination of government bodies at various levels. There is the central level: the Verkhovna Rada, the Cabinet of Ministers, also hundreds of local government authorities that have become completely different in the past three or four years. After the decentralisation reform the country witnessed the process of territorial community amalgamation and joining cities. Several hundred of completely self-reliant territorial units that clearly know their needs emerged.
Our political landscape is rather complex; there are also multiple urban development activists who made it to the Kyiv City Council and, as a critical mass, the Verkhovna Rada (Hanna Bondar, Dmytro Hurin). “Us” are the people who vote laws; the people who work at ministries; also communities and local councils that are immediately involved.
We have examples of successful redesign of the urban space with due regard to inclusivity principles. City landscaping with proper regard to climate issues, tree and bed types – hundreds of implemented projects. So, talking about long-term vision, it is about combination of all the factors and specifically, the one of local self-governance through which all of us can participate as elected individuals or concerned and active participants in the process.
– How can we transfer to other urban development principles? When the recovery starts , can it happen that old problems leap to the fore and general developer interests overshadow the desire to make something new, environmentally friendly and comfortable for people?
Volodymyr Vakhitov
The weakening of regulators is rather important here. The president of the Regional Centre of the European Association, while travelling towards Boryspil, expressed his opinion about inefficiencies of urban development in Kyiv: too high residential buildings. If something like this happens, this means plot development permits are hard to get so when someone gets the permit, he develops 30-40-storey buildings. This should not happen.
When we say ‘us’, we mean a community, rights of local residents, the democracy. We need to understand what we are voting for and who we are bringing to local councils. Plot areas are really limited now – this is why monsters like the one on Podil in Kyiv or the one on the seafront in Odesa or similar ones in the downtown of any big Ukrainian city mushroom. It is because of huge limitations, opacity of land plot allocation, the lack of auctions or comprehensible and open general urban development plan in cities. The documents should be publicly accessible. Cities adopt territorial regulations instead that are designed by developers without any public control. It is the communities who have to oversee the matter; otherwise, the opacity will lead to inefficiency.
Olha Mrinska
On how to go away from the city that belongs to developers towards the one owned by citizens: the problem is with instruments and the lack of transparency. As soon as there is political will at the level of city/state and urban development stops being a corrupt activity, the transition will happen.
The short life cycle of developers is another issue faced not only by Ukraine but many other countries too. There are multiple examples in which residential or infrastructure development is only the first step followed by servicing and maintenance as evolutionary processes of facilities’ integration into community life. Development companies can obtain maintenance and related services contracts. When a developer simply comes to build, sell and go on, he will be free from moral anchors tying him to a certain territory. These rules can only be established by the local government. A transition from shark-like rent seeking towards the human-centric model requires maximum transparency.