As part of the implementation of the Ukraine Reconstruction Service, a new project of WEI’s Center for Strategic Studies, we are monitoring the economic and social situation in eight regions of Western Ukraine on an ongoing basis. In particular, we are interested in investment needs, announced tenders for reconstruction and modernization of public and private infrastructure, as well as examples of Polish-Ukrainian economic cooperation. Stay tuned for updates on the reconstruction and modernization of Western Ukraine.
Ukrainian local governments are beginning to work on reconstruction plans for individual regions. Such work began in June this year in Vinnytsia. The plan is intended to ensure that the region is rebuilt not only for the losses caused by the ongoing war, but also to address modernization and development, particularly in the areas of urban planning, development of transportation and energy infrastructure, and overall economic development of the entire region. Unfortunately, for the time being, the reconstruction plans of individual regions, due to the lack of coordination of central and local government activity in the approach to reconstruction, are not consistent with each other and do not take into account national reconstruction priorities. For now, it has not yet been possible to interest local communities and businesses in reconstruction plans.
More European countries, not just Ukraine’s neighbors, are actively beginning to get involved in the process of rebuilding and modernizing Western Ukraine. A Czech-Ukrainian Economic Forum was held in Rivne, pointing to the furniture, construction, energy and food industries as the most promising areas for cooperation between Czech and Ukrainian companies.
Lviv, which is the political and economic center of all of Western Ukraine, is the most important destination for foreign investors. In June, it hosted representatives of Italian construction and development companies interested in investing in the Lviv region. Lviv local authorities are particularly interested in investments in the areas of building materials production, infrastructure development and the ITC sector. There are also about 40 Estonian companies in the region interested in developing their businesses. Turkish companies, too, want to actively invest in the region, which due to its location (not far from the European Union border and relatively far from the front line) is one of the most attractive in Ukraine for them. Most Turkish companies operating in the Lviv region are active in the trade (wholesale and retail) and catering sectors. Construction company Onur Group, which is mainly engaged in the construction of major road infrastructure, has also expressed interest in participating in the reconstruction.
Tobacco giant Philip Morris has also announced its investment. Construction of the new factory in the Lviv region is expected to begin as early as the first quarter of 2024. The factory plans to employ primarily workers from the Kharkov plant, which was closed due to war damage.
Polish furniture company Szynaka Meble, which has so far had its factories located in Belarus, will want to move its production to Ukraine, in the Rivne region. The development of the wood and furniture industry is one of the development priorities for the entire Rivne region, and in early 2023 the Ukrainian Furniture Manufacturers Association established a furniture cluster. Attracting investment in the furniture and timber industry is also being helped by Ukraine’s forestry reform, and the development of public-private partnerships will be the cornerstone of Ukraine’s forestry development.
Authorities in the Volyn region (Lutsk) have begun a major expansion of infrastructure for the export of Ukrainian agricultural crops to European markets. The facilities will be used to transship grain, rapeseed, corn and sunflower onto railroads and export to European Union countries or through them to non-European countries. Once the dry docks are operational, the Volyn region alone will be able to export more than 3 million tons of agricultural crops annually. Before Russia’s full-scale invasion of Ukraine, about 110,000 tons of agricultural crops were exported through the Volyn region, particularly grains, sugar beets and sunflowers, with this figure rising to 1.5 million tons of agricultural products in 2022. The Lviv region, which has the largest rural population of all Ukraine’s regions, is also interested in developing a modern agricultural sector. The authorities of the Lviv region, in cooperation with the EU initiative “Institutional Policy Reform for Smallholder Agriculture” (IPRSA) and the Food and Agriculture Organization of the United Nations (FAO), are planning an extensive campaign to disseminate modern methods of agricultural production, as well as to support the preparation of Ukrainian agriculture’s entry into the EU. Ukraine has one of the largest agricultural production development potentials in the world. According to FAO estimates, it is capable of providing food for 400 million people. The Russian invasion has caused losses in the agricultural sector of more than 30% in 2022, which is already having a significant impact on existing customers of Ukrainian agricultural crops, particularly countries in the Middle East and North Africa.
Bidding procedures for the reconstruction and modernization of public infrastructure are beginning to start in the various regions of western Ukraine (Rivne and Volyn regions). This includes, in particular, road infrastructure and bridges, and the construction of air raid shelters at educational and welfare facilities. Modernization work related to urban infrastructure is also planned by the Ternopil authorities.
Declarations by both local authorities and foreign investors indicating their development plans in Ukraine’s western regions, as well as the relocation of their investments from eastern Ukraine to the west, may clearly indicate that Ukraine’s western and central regions will be a place of rapid economic development and attraction for western investors. The rationale for such plans is the proximity to the European Union border, and thus the distance from the front line and the stable social and political situation, compared to the east of the country. Reconstruction plans, including the announcement of tenders for the modernization of public infrastructure, being prepared by local authorities are still at very preliminary stages, and their intensification will depend on political decisions made in Kiev. Such decisions may not begin to be made until autumn and will be closely linked to the current military and political situation in eastern Ukraine.
We encourage you to read the detailed information and analysis material of the Ukraine Reconstruction Service on the project website odbudowaukrainy.org.pl