This blog is an adaptation of the chapter on transparency and accountability from “Toward a Marshall Plan for Ukraine: New Ideas and Recommendations”, by Norman Eisen, Alina Inayeh, Jacob Kirkegaard, Thomas Kleine-Brockhoff, Josh Rudolph, and Bruce Stokes.
The British government is aiming to make June 21, 2023, the day when the international business community decides it is ready to invest in Ukraine, provided that reform conditions continue to be met. The goal of the sixth annual Ukraine Recovery Conference (URC 2023)—co-hosted in London by the United Kingdom and Ukraine—is not to deliver pledges of large financial commitments, but rather to line up the structures, instruments, and strategy needed to attract foreign investment.
This ambition will only be achieved if the major donor countries do more than tell a nice story about Ukraine’s reform journey over the past decade, which has indeed been impressive. To convince global business executives that their money in Ukraine will remain safeguarded from corruption for decades to come, donors should pledge—in a co-chairs’ statement at URC 2023—to take five concrete steps before URC 2024 in Germany: They should prioritize anti-corruption conditionality, use Ukraine’s new transparency tool, form a Ukrainian civil society board to advise donors, preserve decentralization, and create a fusion cell of auditors in Kyiv.
Implementation of these commitments—which are detailed below—could be shepherded by the Multi-agency Donor Coordination Platform that was established by the G7 in December 2022 and is managed by a secretariat of 12 seconded officials working out of a Brussels office hosted by the European Commission. The platform is led by a steering committee co-chaired by a triumvirate of senior EU, US, and Ukrainian officials. The steering committee met via video conference in January and April and plans to convene again virtually in May and in person on the margins of URC in June.
The Multi-agency Donor Coordination Platform has already fulfilled some urgent wartime needs, like closing Ukraine’s 2023 budgetary deficit. But it has not yet harmonized donor approaches to transparency and accountability reforms. This kind of concerted coordination is needed to unlock the robust private sector engagement that will be required for Ukraine’s reconstruction. Businesses need to see donor governments sign up for a multifaceted strategy to ensure that the recovery and reconstruction process will be designed to avoid corruption.
The international private sector is, of course, aware that Ukraine’s generational struggle against oligarchy is ongoing. Credibly telegraphing that the official donor community is organizing to continue supporting that mission is the way to convince the private sector that the policy pieces are in place for Ukraine to be open for clean dealing. Giving businesses confidence that the reform story told by officials at URC 2023 is more than mere talk would require the co-chairs of the conference to announce a handful of actionable donor commitments.
1. Align Donors Around Priority Anti-corruption Reform Conditions
The Multi-agency Donor Coordination Platform lacks the capacity to corral donor countries—each with its own safeguarding procedures and anti-corruption reform initiatives—into agreement on policy reform priorities. Instead, G7 ambassadors to Ukraine, who have strong working relationships with each other, the Ukrainian government, and civil society organizations, recently agreed on ten top judicial and anti-corruption reforms that Ukraine could complete by the conclusion of Japan’s G7 presidency at the end of 2023. The alignment is timely, as Ukraine is already more than two-thirds of the way through completing the seven preconditions for EU accession negotiations. Focused coordination is particularly essential in the area of anti-corruption, given that the process of uprooting oligarchy can be met with fierce internal resistance.
The need for donor alignment around anti-corruption reform priorities will only grow as reconstruction and EU accession advance. The URC 2023 co-chairs could clarify that reconstruction assistance will be tied to Ukraine’s continued success in meeting reform conditions and benchmarks such as the G7’s roadmap. Reconstruction aid should be treated like macro-financial aid (under which the IMF and bilateral donors set reform conditions) rather than security assistance (which is unconditional) so that disbursements will be conditioned upon the delivery of reforms and held up, if needed, to await implementation.
Since 2014, Ukraine’s donors have developed informal approaches to coordinating reform conditions carried out by diplomats and technocrats in G7 ministries and international financial institution (IFI) missions. When this has worked well, donors have awaited the completion of impactful reforms before proceeding to the next step in the lending process (for example, announcing a loan, finalizing the details, disbursing payment). When Ukraine backtracks after receiving funds, the next donor reinforces conditions that put reform back on track.
The Multi-agency Donor Coordination Platform could assume responsibility for this effort and maintain a list of priority next steps for anti-corruption reforms, starting with the top ten selected by the G7 as priorities for 2023. Donors, in preparing to provide major reconstruction funding, can consult this list and see which reforms they should ask Ukraine to complete prior to disbursement. To facilitate this coordination, the platform could convene regular virtual meetings of donor staff responsible for tracking Ukraine’s anti-corruption reforms. This process could be co-chaired by two donor programs that are based in Kyiv and already work well with each other and the G7 ambassadors to Ukraine: the US Agency for International Development’s Support to Anti-Corruption Champion Institutions project and the EU Anti-Corruption Initiative. Any donor gridlock at the working level could be elevated to the G7 ambassadors.
2. Ensure That Donors Use Cutting-Edge Transparency Tools
The Ukrainian digitalization reformers who pioneered the collaboration between government and civil society to build the world’s most transparent public procurement system, ProZorro, are doing the same for reconstruction management. This initiative was launched at URC 2022 in Lugano, Switzerland. Since then, the RISE Ukraine Coalition, a collaboration among leading transparency NGOs, such as the Open Contracting Partnership, Transparency International Ukraine, and the Better Regulation Delivery Office Ukraine, has worked closely with key Ukrainian government institutions, including the Ministry of Infrastructure, the Ministry of Economy, and the National Agency for Corruption Prevention. Ukraine’s cabinet has adopted resolutions instructing ministries to support the development of a digital reconstruction management system as a key milestone for 2023.
RISE Ukraine and the Ministry for Restoration have already built a prototype of the end-to-end digital management system for reconstruction projects that will publicly display the full trail of money and documentation from initial drafting of municipality-level rebuilding plans to final contract implementation. The system, known as Digital Restoration Ecosystem for Accountable Management (DREAM), is running in pilot mode, with some 170 users from 24 regional agencies and 42 municipalities volunteering to upload about 5,000 reconstruction project proposals. The Ukrainian government plans to adopt a law obliging all Ukrainian entities to use DREAM for reconstruction projects.
Importantly, though, Ukraine’s international donors have not yet agreed that they, too, will make participation in DREAM obligatory for Ukrainian reconstruction projects that they fund. Such a step would greatly simplify the process of coordinating reconstruction efforts between Kyiv and donors. Several IFIs have agreed to integrate DREAM to varying degrees into their own data systems, but this will take time. A requirement that all donor projects use DREAM—mirroring the steps the Ukrainian government is taking on its end—would give stakeholders confidence to start building implementation capacity.
The URC 2023 co-chairs could express support for all donor agencies to include in their funding agreements a requirement that the receiving party or implementing partner use DREAM. This places the burden of data input and integration on downstream recipients rather than on donor agencies. Over time, integrating DREAM into donor systems such as the World Bank’s Systematic Tracking of Exchanges in Procurement and the European Bank for Reconstruction and Development’s Client E-Procurement Portal would simplify data collection and approval processes.
3. Form a Ukrainian Civil Society Advisory Board
The initial Ukraine reconstruction conferences in 2022 did not elevate civil society. URC 2023 will focus on the private sector, with a business compact that may provide an informational platform. Ukraine has one of the world’s most vibrant civil societies, which has played an important role in democratization and anti-corruption since before 2014. Failing to give them a central role means losing out on important legitimacy and expertise, while also signaling to governments, including Kyiv, they need not seriously commit to their participation.
The Multi-agency Donor Coordination Platform also has not yet given civil society a seat at the table. Nor does it have sufficient internal capacity to develop options for policies that would address tricky substantive issues. The platform brings together government officials, and they look to the World Bank or other IFIs when they need analysis beyond their own capacity.
URC 2023 could fill this gap by announcing the creation of a board of leading civil society experts to advise the platform. The platform’s steering committee or its secretariat could ask this board to write papers proposing options or solutions for current challenges. The board could address questions such as “Does Ukraine need its own development bank?” or “Which financial disclosure rules exempted under martial law should be reinstated?”
Board members could come from think tanks, watchdogs, universities, and community advocacy organizations, and include members of the RISE Ukraine Coalition. Civil society representatives are not democratically elected, but broad coalitions—such as RISE today and Reanimation Package of Reforms amid the 2014 Revolution of Dignity—embody legitimate movements of Ukrainians building a civic nation.
Ukrainians should comprise most of the board, but a few international issue area or technical experts could join them. The board should be able to partner with additional external experts, any private-sector advisory platform coming out of the business compact, and the fusion cell of Inspector Generals (IGs) discussed below.
An unavoidable challenge of including civil society in high-level structures is that any pluralistic democracy, such as Ukraine’s, gathers different perspectives. There will be competition over who best represents civil society. Board member selection requires transparency and inclusion. To manage this process, facilitate interaction with the steering committee, and administer other engagements with civil society, the platform’s secretariat could designate one of its own officials knowledgeable about Ukrainian civil society as a civil society liaison.
4. Preserve Decentralization and Empower Local Governments
One of Ukraine’s most successful governance reforms since 2014 is “decentralization”. Power and resources shifted away from regional governmental organs that were opaque, clientelist fiefdoms left over from the Soviet era. In their place, communities voluntarily merged small local municipalities into more responsive territorial units capable of transparent and accountable delivery of public services, including education, health, and policing.
Reconstruction must rely on and further endow Ukraine’s successfully decentralized governance units but still allow the central government to guide and support national rebuilding priorities. Ministries in Kyiv can devise national plans, help build local capacity, and provide tools such as standard contracts, but local governments know their communities best and have strong bonds of legitimacy with and accountability to their citizens. Accountable local leaders can best identify the rebuilding projects that their populations demand.
Donors should insist that decentralized governance units plan and largely control reconstruction aid, and they should engage in symbolic diplomacy to bolster that approach. No high-level delegation of Western government officials should meet central government officials in Kyiv without also being seen meeting local officials.
The donor coordination process should also prioritize decentralization. The European Committee of Regions has justifiably recommended that the Multi-agency Donor Coordination Platform integrate the partnership principle and involve the European Alliance of Cities and Regions for the Reconstruction of Ukraine “as a full-fledged partner at all stages of its planning and implementation phases”.
The URC 2023 co-chairs could announce that the first substantive issue that the civil society board will consider is how to empower local governments in the recovery and reconstruction process. The Association of Ukrainian Cities would be a valuable partner in this work, as would the European Committee of Regions and international experts on decentralization. The board should grapple with thorny Ukrainian policy issues, ranging from how to amend the Draft Law 5655 on urban planning reform (a bill driven by construction companies to shift power from local governments to a ministry in Kyiv) to how local and national policies can mitigate the challenges of decentralization (for example, additional complexity, opportunities for corruption, inconsistent governing capacities, and more diffuse oversight).
5. Create a Kyiv-Based Fusion Cell of Auditors
Current oversight of aid to Ukraine is solid. Every major donor agency has an IG or similar office of control, compliance, or investigation. Countries or regions with multiple donor agencies have sound coordination mechanisms (such as an interagency working group in the United States) or shared corruption investigators (such as the European Anti-Fraud Office). These offices tend to have information sharing relationships with each other, sometimes formalized by Memoranda of Understanding (MoUs), and are staffed by professionals who exercise vigilance over aid to Ukraine and who have not yet found any significant cases of it leaking into corruption.
URC 2023 offers a prime opportunity to support confidence that investments in Ukraine will continue to be safeguarded from corruption by announcing the creation of fusion cell of representatives from donor agencies’ IG, auditor, and investigator offices. This fusion cell would formalize and supplement the scattered patchwork of bilateral MoUs, replacing them with a more regular venue for sharing information and collaboration. It would be led by an IG official—a prominent figure trusted by both businesses and taxpayers to keep their money safe—who would report to the Multi-agency Donor Coordination Platform. Representatives of IGs stationed in the fusion cell would continue reporting to their home agencies and facilitate cooperation and joint activity with the other agencies represented in the fusion cell. The fusion cell should be based in Kyiv, potentially on site with the National Anti-Corruption Bureau of Ukraine, facilitating collaboration with Ukrainian investigators whose deep local knowledge would be key to mapping webs of politicians, contractors, and other local actors involved in corruption schemes.
IGs from donor agencies do not yet have permanent personnel in Kyiv, but collaboration with each other and with Ukraine’s specialized anti-corruption agencies and other audit and law enforcement bodies is essential. The fusion cell should also collaborate with Ukrainian civil society and investigative journalists, creating a dedicated liaison and capacity-building programming to help watchdogs channel local knowledge about corruption into more actionable leads than tips from IG hotlines. The Global Magnitsky Act provides a proven model for requiring authorities to seek meaningful input from civil society and supporting programming to build capacity (including NGOs that teach others how to securely submit evidence and build and advocate for cases by providing submission templates, primers, FAQs, training, and other resources).
Although most donors have yet to set up funds and facilities through which reconstruction money will flow, the ability of their representatives to spend time together in Kyiv at this early stage would be invaluable. This is a lesson IGs have learned from overseeing reconstruction assistance within a country. It would be even more important for an international fusion cell of IGs who must cultivate trust over time before sharing with each other sensitive and confidential information about potential corruption in their respective programs (matters that donor agencies prefer to hold close and address quietly on their own).
The co-chairs’ statement at URC 2023 should credibly commit to supporting Ukraine’s continued reform journey by signaling that the major donors will take five concrete steps to build reform coordination structures before URC 2024:
- Reform conditionality: Donors will condition recovery and reconstruction assistance upon Ukraine’s continued success in delivering anti-corruption reforms, such as the top ten 2023 priorities selected by the G7, and the Multi-agency Donor Coordination Platform will start facilitating the process of coordinating reform priorities among donors.
- DREAM: Donors will make participation in Ukraine’s DREAM transparency system obligatory by (i) immediately including in reconstruction funding agreements a requirement that the receiving party or implementing partner use DREAM, and (ii) eventually integrating DREAM into donor agencies’ internal data systems to track procurement information.
- Civil society board: A new board of mostly Ukrainian civil society experts will provide substantive advice to the Multi-agency Donor Coordination Platform, which will establish a civil society liaison office.
- Decentralization: The first substantive issue that the civil society board will consider is how to preserve decentralization and empower local governments in the recovery and reconstruction process.
- Fusion cell: A new Kyiv-based fusion cell of representatives from donor agencies’ IG, auditor, and investigator offices will facilitate information sharing and collaboration.
The reason why Ukraine has a good reform story to tell is that Kyiv and its partners have spent nearly a decade taking difficult steps that often pushed the envelope by creating new tools and institutions that have changed the world of anti-corruption reform.
Capturing that reform story and credibly signaling to the private sector that progress will continues calls for more than just words. Businesses will look through any flowery statements to see whether URC 2023 delivers concrete pledges to truly line up reform fundamentals needed to safely invest in Ukraine.
The views expressed in GMF publications and commentary are the views of the author alone.