After being here for nearly five months, I must say that Ukraine is an absolutely wonderful country. However, because it’s a former Soviet satellite state, a major issue still exists. Corruption is a big problem at all levels of society, especially in the public procurement and construction sector. Needless to say, this doesn’t bode well for a country that will undergo the largest rebuilding effort on the planet once the war is over.
Beware the Baksheesh
Repairing the destruction caused by Russia could take decades and will likely cost over a trillion dollars. This has builders, government procurement officials and local permitting authorities salivating at the prospect of raking in hundreds of millions of dollars in bribes. Skimming 30% from a construction contract is not unusual in Ukraine so for that reason, total transparency will be absolutely necessary.
Since western governments and donors are already worried about corruption, they are limiting their investment until a secure and transparent method exists to ensure the integrity of the funding process.
Ukraine’s procurement platform PROZORRO allows free and open access to the allocation of money spent on large government infrastructure projects like roads, bridges and railway lines. It’s a good start but unfortunately, PROZORRO only tracks project spending after it has been approved. Pre-approval is a major vector for corruption so the current design effectively bakes in a margin for bribery.
Therefore, we at the Peace Coalition are focusing on transparency during the entire process. From claims to construction, our pilot rebuilding project of Andriivka and Kozarovychi will be closely monitored. To start, we removed local government authorities from the loop by obtaining letters of cooperation and approval, including required permits, from the regional authorities. This pre-approval has assured that we will not be squeezed for illicit cash bribes by potentially corrupt officials in any of the 80 villages in the Dymer and Makarov regions.
Next, we distilled the rebuilding process down to 26 categories. From demolition to plumbing to finishing, we identified five different suppliers for each. Once damage estimates are completed and we’ve determined how many refrigerators or roofing tiles required, we will procure everything in bulk through an open-tender process, encouraging our suppliers to compete and deliver the best products at the best price.
To further ensure transparency, we’ve engaged a former procurement official from Energoatom, the Ukrainian nuclear power company. Mikhail established an open procurement platform of his own design to manage the construction of reactors at the Zaporizhzhia Nuclear Plant, currently illegally occupied by Russia. He did such a great job keeping the process on-time, on-budget and corruption free, that he lost his job since his bosses couldn’t accept their usual bribes.
I claim, you claim, one claim, two claims
It’s not just the suppliers and local officials who need to be monitored, victims of Russian aggression whose homes have been damaged or destroyed also need to be encouraged not to try to game the system. To ensure someone doesn’t double-dip by claiming twice for the same damage, all claimants will sign over their right to claim for property damage to the donors who fund the pilot projects, and share the claim details with the Ukrainian government’s international damage registry.
Digital currency to the rescue
To facilitate the rebuilding process, a great deal of money will need to move into and around Ukraine. Claimants will need to pay builders, service providers will need to deliver what they promise, and taxes need to be paid. To do all this as transparently as possible we propose an innovative new digital currency, the ReBuild Hryvnia, as the means of settling claims and paying suppliers. Claims will be paid to victims in ReBuild Hryvnia, which will be backed by matching donor funds held in a bank outside Ukraine.
Builders and suppliers who agree to an open and auditable process will be eligible to register to accept ReBuild Hryvnia, and exchange them for ‘real’ fiat Hryvnia at approved local banks. There, value added taxes will be collected and transferred to Ukrainian government coffers.
Should anyone attempt to cheat the system, their approval to transact in ReBuild Hryvnia can be suspended or cancelled, denying them the opportunity to profit from the reconstruction of Ukraine.