Focus: Central Europe firms stake positions in Ukraine reconstruction race

Mcr SA

25/05/2023 07:00

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      Ukraine reconstruction may cost hundreds of billions of
dollars
    

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      Reconstruction phase "already underway" - Czech official
    

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      Rebuilding could boost Polish GDP by 3.8% - Pekao bank 
    

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      Construction market could be one of Europe's largest -
exec
    

  
    By Michael Kahn, Robert Muller and Anna Koper
       PRAGUE/WARSAW, May 25 (Reuters) - Central European
companies are scouting out locations, signing contracts and
launching projects deep in war-torn Ukraine, seeking a foothold
for future reconstruction work that could be worth hundreds of
billions of dollars.  
    While most current projects are focused on essential
infrastructure damaged or destroyed since Russia's February 2022
invasion, company executives and government officials anticipate
a wave of investment once fighting ends.
    "It will be precisely the countries unafraid to go to
Ukraine now that will start from the front positions of the
peloton" when reconstruction begins in earnest, said Tomas
Kopecny, the Czech government envoy for Ukraine reconstruction.
    The Czech government has pledged to spend 500 million crowns
($23.5 million) each year through 2025 to support firms seeking
to work in the country and is helping its companies build
contacts with Ukrainian officials via regional trade missions. 
    "Companies and governments realize that the Ukrainian market
will be a great opportunity for the future," said Kopecny, who
expects revenues earned by Czech companies in Ukraine to
increase several-fold in the coming years. "The reconstruction
of Ukraine, at least its first phase, is already underway."
    Reuters spoke with around a dozen company executives and
government officials who detailed operations and plans in
Ukraine even while the war, which has killed tens of thousands,
caused millions to flee and flattened cities, continues.
    The stakes are high. The cost of recovery is likely to be
$411 billion, or 2.6 times Ukraine's estimated 2022
GDP, according to a joint assessment by Ukraine and the World
Bank.  
    Polish bank Pekao SA has estimated that reconstruction could
boost neighbouring Poland's economy by up to 189 billion zlotys
($45.6 billion), or around 3.8% of GDP.  
    "When the war ends, money will go to Ukraine and it will be
a very large construction market, maybe one of the largest in
Europe," said Leszek Golabiecki, deputy chief executive of
Polish construction firm Unibep.  

    TRADITIONAL ALLIES
    Strong military and political support for Ukraine from the
Czech Republic and Poland, countries dominated by Moscow during
four decades of Communist rule, has helped their firms. So has
their similar culture and experience working in Ukraine.
    Czech environmental services firm Dekonta, which cleaned up
sites after the Soviet military left in 1991, is searching for
locations to build water treatment plants, said supervisory
board member Pavel Mothejl. He recently visited Dnipropetrovsk
region, near the front line in eastern Ukraine. 
    "We would like to do 11 water treatment stations and (are)
preparing decontamination projects for when the war ends," said
Mothejl, whose firm has one project in progress and another in
the pipeline.
    "Wherever you go in the villages there is demand."
    More than 2,300 Polish firms have sought to participate in
reconstruction projects as part of a Polish Investment and Trade
Agency programme, mostly companies in construction and building
materials.
    Poland is also in discussions with representatives from
countries including South Korea, Japan and Great Britain to
partner with Polish companies more familiar with Ukraine, said
the head of the state-funded agency's Kyiv office, Karol Kubica.
    "We are building relationships with local governments
because we want to start the reconstruction from the bottom," he
said. "The challenge is and will be how to safely send employees
to carry out work."
    Foreign firms working in the country must deal with regular
air raid sirens and some employ military consultants. 
    "We have an air raid alert app installed on our mobile
phones," said Jaroslav Camfrla, a project manager for Czech
healthcare company Block CRS, who has visited Ukraine to gauge
demand for its sterile surgery wards and mobile hospital units. 
    Poland's 330-mile (530-km) border with Ukraine could make
the country a natural logistics hub.
    "We expect Polish products to be the first choice and we
also have the advantage of transport costs because we are closer
to Ukraine," said Krzysztof Krempec, president of fire
protection system maker Mercor. It is considering increasing the
capacity of its factory in Lviv, western Ukraine.
    
    CORRUPTION CONCERN
    While many central European firms see a once-in-a-generation
opportunity, progress will depend on the ability of Ukraine's
authorities to demonstrate transparency, said Wieslaw Nowak,
chief executive of Polish construction company ZUE.
    Transparency International's Corruption Perceptions Index
puts Ukraine in 116th place, far below its European Union
neighbours. Ukraine has prioritised efforts to tackle graft as
it seeks accession to the European Union.
    "If there is no transparency of economic processes, fair
tenders, transparent spending and settlement of these funds, no
one will invest in Ukraine," said Nowak. "This is the main
challenge for Ukraine."
  ($1 = 21.2420 Czech crowns; 4.1422 zlotys)

 (Writing by Michael Kahn, Editing by Conor Humphries)
 ((michael.kahn@thomsonreuters.com; +420 234 721 612; Reuters
Messaging: michael.kahn.thomsonreuters.com@reuters.net))