Ukraine hopes to emerge from the war as a cleaner, more modern country, but it needs investment to achieve its goals
While world leaders gathered in the shadow of the O2 centre in London’s Docklands for the Ukrainian Recovery Conference, financiers clustered in fringe meetings to discuss practical, investment-led initiatives which could ultimately save the war-damaged nation’s economy.
Central to president Volodymyr Zelenskyy’s vision for reconstruction are technology and ecology, the latter highlighted by the destruction of the Nova Kakhovka dam, which he called “the largest crime of ecocide”.
Development of dual-use technology, adapted for both civilian and military theatres, together with strengthening cyber security using “experience of all our partners” was prioritised by the president. His main message focused on regenerating the country’s eastern industrial heartland, dominated by a polluting metals industry in the pre-war era. “Ukraine can become one of the key global centres for green metallurgy,” said Mr Zelenskyy over a video link, emphasising the role of “digital transformation” and “social progress through technology” in “dismantling of the old oligarch model of the Soviet Union”.
President Volodymyr Zelenskyy has described the destruction of the Nova Kakhovka dam as “the largest crime of ecocide”. Image: Getty Images
This hybrid IT/cleantech developmental model has received financial backing from political leaders in the US, France, Japan and Baltic countries, as well as the EU. “Ukraine is not just rebuilding, but re-imagining itself,” said European Commission president, Ursula von der Leyen. “They have stunned us with their ingenuity.”
She personally witnessed the rebuilding of a bombed-out school in Irpin, now modernised with solar panels, where the population had suffered from Russian president Vladimir Putin’s “delusional attempts to restore a lost empire”.
Digital and environmental transformation, she told the conference, defines a new set of emerging values in Ukraine: “This dream of a cleaner, more modern Ukraine will be the lasting legacy of this atrocious war.”
High tech identity
This notion of an evolving identity is key to initiatives from Ukraine’s investment firms and start-ups, keen to attract money from international sources as part of the multi-billion dollar rebuild. “We need to be experts in both technology and the mentality of the Ukrainian people,” Dmytro Vartanyan, head of IT portfolio managers Sigma Software Labs, told a fringe event on the eve of the summit, held at the Freshfields law firm. His investments currently favour blockchain, fintech and “deep tech” projects.
This re-awakened high-tech identity has deep roots in Ukraine, according to Roman Nikitov, co-head of venture capital and tech investments at Ukrainian funds group ICU, which started working with Ukrainian technology firms in 2013.
“The parents of today’s start-up crowd were engineers, building rockets, planes and space shuttles in Soviet times,” he said. “Today this has turned into deep tech. There is a strong tradition here,” emphasising that the current investment story is more about creativity and resilience, than low costs and “value for money”.
The flourishing Ukrainian software industry employs more than 300,000 people, outsourcing services for Western big techs, but the challenge remains one of perception in the international community. “Ukraine has never been a favoured spot on the investment map, even in emerging markets. Those who earn enough money, buy their ticket to San Francisco, then either [their business is] killed immediately, or they become unicorns,” he said.
Rather than facing this dichotomy, ICU hopes to supply more of these start-ups with seed capital, so they can sell to local and regional markets, before launching on a global stage.
Reconstruction dividend
More than $26bn has been raised so far by Ukraine-focused fund groups, including BlackRock, for these investment projects, said Andriy Kolodyuk, founder of the Ukrainian Venture Capital and Private Equity Association.
“Today there are 17 funds in the process of being raised, in three years’ time there will be 100,” said Mr Kolodyuk, a media entrepreneur and 20-year veteran of Ukraine’s investment industry, calling for a one per cent allocation from fund management groups to Ukraine-focused companies.
“I don’t like predictions, but nobody will want to miss this $1tn investment opportunity,” he said, highlighting reconstruction dividends in energy, food processing and water supply, with more than 6m Ukrainians left with no access to clean water.
“All of you will have to explain to your children, why you did not invest in Ukraine during the war, but waited until after our victory. My advice to investors is to be like [George] Soros,” he said, highlighting one of the country’s major private equity backers.
“You need to invest now, when Ukraine is still the underdog.”
