Ukraine: Rebuilding in the midst of war

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Despite Russian bombs, the Ukrainian economy keeps going. Kiev and Berlin are now campaigning for reconstruction. A German entrepreneur has already started with it.

Reconstruction in Bucha near Kiev

In the meantime, his people in the building materials factory in the small town of Fastiv, southwest of the capital Kiev, can work during the day again, says Michael Kraus. Due to the Russian attacks on the energy infrastructure since last autumn, the manager of the German building materials company Fixit has had to move the production of mortar and insulating materials to the night shift at times. “Because the electricity supply was too low, we came to an agreement with the energy supplier and the city administration not to purchase or produce any more electricity during the day.”

The 60 employees in production worked from 10 p.m. to 6 a.m. With winter coming to an end, “the energy supply has stabilized to such an extent that we can now produce at least in two shifts when the construction season begins. We hope that we can also switch to 24-hour operation, i.e. can increase,” says the building materials manager in an interview with DW – in the middle of the war between Russia and Ukraine. 

German platform for reconstruction presented

Building materials manager Kraus draws attention to the reconstruction of Ukraine. That is also what German Development Minister Svenja Schulze wants. Together with the Ukrainian Ambassador in Berlin, Oleksii Makeiev, Schulze opened the online site “Platform for the Reconstruction of Ukraine” (www.ukraine-wiederaufbauen.de). 

Aid organizations, companies and cities in Germany that want to help with reconstruction are to network via the website. Because while Russia is continuing to attack Ukraine with rockets and drones, fierce fighting is going on around the city of Bakhmut in eastern Ukraine and the country is waiting for a counter-offensive with Western weapons, far away from the frontline, what has been destroyed is being rebuilt.

Destruction at the front in Avdiivka in eastern Ukraine

“I see that as proof of the adaptability of the market economy. The supermarket shelves are full,” says Reiner Perau from the German-Ukrainian Chamber of Commerce. “There is so much normality within this extraordinary state of war, which of course affects life to varying degrees,” Perau told DW. “But when it comes to areas that have been little affected by the war, the effect is zero. The products reach the supermarkets as normal. The staff is there, the companies work despite the flight of so many people.”

When the power went out as a result of the Russian rocket attacks on substations and power plants, the prices for power generators exploded. Even more so in smaller towns than in the capital Kiev. But shortly afterwards, deliveries of the devices from Poland also increased. “In January we noticed that generators were piling up and prices were falling,” says Perau. Where there is no shooting and bombing, the Ukrainian war economy enables a relatively orderly life and reacts flexibly to the difficult situation. 

Despite the war, exports of IT services are increasing

The Ukrainian economy has collapsed by more than a third in many areas – especially in agriculture, because the important arable land in the south is occupied by the Russians. But at the same time, Ukraine's IT sector was the only area to grow in the middle of the first year of the war.

In the Bakhmut trenches

“25 kilometers from the front line” the work of IT specialists in Ukraine is still difficult, “after that it's business as usual,” Kostyantyn Vasyuk, head of the IT Ukraine Association, told DW. While Russia dropped bombs on Ukraine in the first year of the war, the country's software companies exported 5.8 percent more of their services, mostly to the EU. Ukraine exported IT services worth EUR 6.7 billion. “We have the internet, offices, safe places to work in Ukraine and we manufacture our products there,” says IT expert Vasyuk. 

EU money stabilizes finances

Apparently, the calculations of the international aid workers in Ukraine are now paying off. That's what the economic analyst Ilya Neschodowskyj from the ANTS think tank in Kiev says, which accompanies the country's path towards the EU with analyses. “The support from the international community played an enormous role,” Neschodowskyj told DW. In addition to the International Monetary Fund, the EU Commission alone pledged EUR 17 billion to Ukraine in December, which has been transferred to Kiev since the beginning of the year. “Unprecedented assistance was provided to the Ukrainian budget. They made it possible for state benefits and other payments to be uninterrupted. This also had a positive impact on the currency market.”

The grain agreement between Russia and Ukraine was of great importance for the stability of the hryvnia, the Ukrainian currency. It helped bring more foreign currency into the country. “It was the decisive factor in stabilizing the situation, because before that the trade deficit was very large,” said Neschodowskyj. The decline in oil and gas prices also helped. International aid continues to do a lot. “Foreign exchange is coming into the country in large quantities, which means that the national currency is strengthening.” The postponement of payment terms to international lenders by two years, negotiated by the Ukrainian Ministry of Finance, also helped.

New business area Cyber ​​War

From the German capital of Berlin, the Eastern Europe consultant Robert Kirchner observes that IT specialists in the Ukraine are even developing a new field of business with the war: “Especially the IT sector, i.e. drones, drone defense, cyber warfare – those are them Areas where the Ukrainians can shine with their powerful IT sector,” says Kirchner from the consulting firm Berlin Economics.

Ukrainian drone pilots near the embattled city of Bakhmut in eastern Ukraine

He has been advising Ukraine on behalf of the German government for many years. Military know-how in the IT sector will also be particularly needed in the future in Ukraine itself: “Even after the current hostilities have ended, the security situation will not allow it any other way. Perhaps comparable to Israel, but not in relation to its Arab neighbors, just on Russia.” However, the fact that the German government has now established a reconstruction platform for Ukraine is important. “Only: It must not distract us from what is even more important right now, namely to support Ukraine in the short term so that it wins this war,” said Kirchner after the founding event for the German reconstruction platform. 

The German building materials manager Michael Kraus is already going one step further: His company Fixit is building a second factory in the Ukraine in Lviv (Lemberg) in the west of the country in the middle of the war. Five million euros flowed into the project even before the Russian invasion. The company has now received investment insurance from the German government and is continuing to build with a further seven million euros. At the end of the year, building materials are also to be produced here – for the reconstruction of the war-ravaged Ukraine.