Preventing Corruption in the Reconstruction of Ukraine

It is clear Russia’s attempt to break Ukrainians’ will to fight by attacking the nation’s critical infrastructure is failing. No matter how much destruction its daily bombardments wreak on power plants, district heating systems, and the other facilities that support daily life, Ukrainians remain determined to recover every inch of territory the invaders now hold.

Helping to shore up Ukraine’s determination is the commitment its Western partners have made to financing Ukraine’s reconstruction. But as donors pledge their support, concerns are being raised about corruption. It is no secret that at the time Russia attacked, Ukraine was still struggling with the ingrained corruption it inherited from Soviet rule and the post-Soviet oligarchs who grabbed money and power in the first years of independence.

The Ukrainian government must the lead the fight against corruption during reconstruction, and draft legislation now circulating in Kyiv recognizes this. All funds would be channeled through an independent government entity with a 20-person board of directors of which 15 would be drawn from donor organizations and five would be Ukrainian officials. That the majority will be drawn from outside Ukraine is a critical provision, one that should reassure donors that oversight will not be wanting.

A second critical provision is that the entity would have a strong internal audit department reporting directly to the board of directors. The proposed bill provides the department would conduct financial audits, ensure the fund operates within the law, that information the board requested was supplied, and that managers did not act beyond their authorized duties.

As important as these provisions are, they are mainly backwards looking, aimed at identifying where corruption has occurred. More important is preventing it from occurring in the first place.

Ukrainian officials and their partners should thus include strong prevention measures in the final draft. All contractors should have an anticorruption compliance program that has been independently certified to be compliance with the standards for an antibribery management system found in ISO 37001. The legislation should also create a prevention department. One model is that the Millennium Challenge Corporation has. Its unit trains grantees responsible for overseeing construction projects in the creation of a risk register and development of an action plan to reduce if not eliminate corruption in both the award and execution of construction contracts. Regular field visits monitor how well grantees are doing in implementing their action plan.

Current estimates are that rebuilding Ukraine will run upwards of $350 billion, a number sure to grow as Russian bombs continue to fall. That Western nations are prepared to invest such an extraordinary sum in rebuilding a victim of aggression is the most reassuring sign to date that despite economic turmoil, social upheaval, and the election of demagogues, there is indeed a broad and deep global consensus on the value of a liberal, democratic order. Every step possible should be taken to ensure corruption does not undermine it.

3 thoughts on “Preventing Corruption in the Reconstruction of Ukraine

  1. Reassuring donors is one thing but having majority of donors’ representatives in the Board will help prevent corruption is another.

  2. include provisions determining the beneficial ownership of companies that will obtain public contracts to rebuild Ukraine. It would be embarrassing to see Russian companies benefiting from such large revenues after supporting, turning a blind eye, and benefiting from the war waged by their leaders. To imagine, even for a moment, that Russian companies could pocket fortunes after causing so much casualty, destruction and misery would be an unspeakable, immoral, and outrageous outcome.

  3. I agree with Mr Messick but I also think more is needed. I’m hailing from Romania, an EU member state where theoretically one of the most progressive and comprehensive national anticorruption strategies is in place. In practice, however, it is very easy for contractors here to quickly adopt any required policy, register, plan or document and then return to business as usual (i.e. bribing to secure contracts).
    Another widely discussed topic here is that EU funding, which comes with a lot more oversight and risk of being investigated, is accessed much more slowly by Romanian authorities than national funding.
    I am thinking that probably Ukrainian contractors will be in the same situation that the requirements on the ground are completely opposite to the requirements in the law and those from international donors, so that they are forced by circumstances and historical practice to continue being corrupt. And corrupt Ukrainian officials will be tempted to forego ISO-certification or visits from fraud investigators from the West and accept Chinese funding with no questions asked. At least not about corruption.
    So besides the legislation and policies that this article correctly points at, I think a very big carrot and a pointy stick must be added.
    It’s just a thought at this point but maybe the carrot could be structural money instead of project money (because when project funding ends, progress tends to dissipate quickly) and the stick could be something like an extended personal liability for directors and shareholders for any irregularities found by external auditors (a civil liability, without the need for a criminal conviction), and their exclusion from future funding.

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