Federal budget must include bold plan for rebuilding Ukraine worthy of global emulation

Opinion

Hey there, time traveller!
This article was published 30/03/2022 (904 days ago), so information in it may no longer be current.

With a federal budget just a week away, the timing is ideal for Canada to provide in the April 7 budget ambitious funding for Ukraine’s postwar reconstruction.

Canada was the first Western country to recognize Ukraine’s sovereignty, in December 1991. And it is home to one of the largest Ukrainian-heritage populations in the world.

Ukraine has proved to be a bulwark of liberal democracy.

And the country is a good investment.

Prior to Russia’s attack on Ukraine, beginning Feb. 24, Ukraine was expected to post impressive GDP growth of 3.6 per cent this year, just shy of Canada’s forecast 3.9 per cent GDP growth in 2022.

A Ukrainian economic renaissance in recent years has seen privatization of the banking and energy sectors, improvements in farming efficiency, and a reduction in corruption.

Ukraine is one of the world’s biggest exporters of wheat and corn. Its robust manufacturing sector is a leading supplier of parts to European manufacturers, notably automakers.

Ukraine’s economic reforms have triggered an increase in foreign investment, from Nestle S.A., Carlsberg A/S and other multinationals.

And Ukraine’s economic progress comes ahead of the additional strengths it would gain with membership in the European Union (EU), which both Ukraine and the EU seek.

There is urgency to the task of rebuilding Ukraine.

The Middle East, North Africa and Turkey are heavily reliant on Ukraine for food. Some countries look to Ukraine for as much as 70 per cent of their wheat and corn.

Ukraine is also the world’s biggest producer of sunflower oil, a basic ingredient in countless foodstuffs.

Supplies of those essential goods have been sharply reduced by Russian President Vladimir Putin’s destruction of Ukrainian ports, highways and farmland. That has worsened a prewar global food shortage.

Many European manufacturers have been hit by parts shortages due to Russia’s destruction of Ukrainian factories, slowing the pace of the EU’s economic recovery from the pandemic.

Ukrainian factory workers and farmers are in short supply as they are now preoccupied with defending their country.

About two weeks after the Russian attacks on Ukraine began, the Ukrainian government reported that Russian forces had fully or partially destroyed 34 Ukrainian hospitals, about 200 schools, and more than 1,500 residential buildings including large apartment blocks.

With its ground troops and aerial bombardment, Russian forces had also destroyed much of Ukraine’s transportation infrastructure, including roads and bridges.

In the three subsequent weeks of fighting since that assessment, the total amount of damage has obviously escalated.

So has the estimated cost of rebuilding Ukraine, put at $100 billion (U.S.) after the first two weeks of the conflict, and now ranging between $500 billion and $1 trillion.

At least in the short term, it is unrealistic to expect Russia to pay for the damage it has done in Ukraine.

The Russian economy has collapsed. Russia’s GDP is expected to plunge this year by 7 per cent to 15 per cent, depending on the war’s duration. That is the same range that spurred the demise of the Soviet Union in 1991.

Meanwhile, only a portion of Russia’s estimated $630 billion in foreign exchange reserves are held abroad. And only a fraction of that is frozen by Western governments.

Eventually some of those assets should be available for Ukrainian reconstruction.

But for now, they are largely illiquid. Their exact ownership is unclear, or they are in the form of real estate, precious metals and other assets that will take time to convert to cash.

The leading coalition members trying to end Russia’s war in Ukraine — Canada, the EU, the U.S. and the U.K. — have been slow off the mark in planning for Ukraine’s reconstruction.

The time is now to plan Europe’s biggest rebuilding project since the end of the Second World War.

As a multinational project, the Ukraine mission will require tremendous co-ordination among the participants to ensure, among other things, that housing, hospitals, highways, factories and schools are built or rebuilt simultaneously.

The rebuilding cannot be done in phases. New housing is pointless in the absence of proper hospitals. And nothing can be done without a functioning transportation infrastructure.

Uncertainty about the war’s outcome has held up postwar planning. The risk is a free Ukraine that is debilitated.

Conversely, a Ukraine rebuilt to 21st-century standards would be a testament to Putin’s failure in trying to wreck Ukraine rather than see it drawn closer to the West with membership in the EU and NATO.

In a 2018 speech in Washington, D.C., Chrystia Freeland, then Canada’s foreign affairs minister, said that “authoritarianism is on the march — and it is time for liberal democracy to fight back.”

In her budget speech next week, Freeland, now finance minister, can strike back with a bold plan for rebuilding Ukraine that is worthy of emulation by our partners in liberal democracy.

David Olive is a Toronto-based business columnist for the Star. Follow him on Twitter: @TheGrtRecession