Ukraine's construction industry has every chance to become one of the drivers of the country's economic recovery and growth in the post-war period. However, this requires coordinated efforts by the government, business, and international partners.
This is stated in the study "Structural Changes and Challenges in the Construction Industry of Ukraine: Analysis and Forecasts", conducted by the Kyiv School of Economics at the initiative of the European Business Association.
One of the main conclusions is that private investment is needed to rebuild. So far, we know about $500 million in investments in the construction sector-but is it enough?
KSE assessed the pre-war state of the construction industry and the impact of a full-scale invasion on it, determined the level of previous damage to Ukrainian infrastructure and the most needed materials for reconstruction.
According to the World Bank, the total cost of reconstruction and rehabilitation in Ukraine is $486 billion. At the same time, according to Olena Shulyak, chairwoman of the Verkhovna Rada Committee on the Organization of State Power, Local Self-Government, Regional Development and Urban Planning, about $65 billion is needed for construction materials alone to rebuild the part of the infrastructure mentioned in the World Bank reports.
"Yes, the war waged by Russia against our country has resulted in the destruction of more than 200,000 residential buildings, hundreds of schools, healthcare facilities, tens of thousands of kilometers of roads, bridges and other infrastructure facilities. All of this needs to be rebuilt, and it is difficult to overestimate the role of quality building materials in this process" - comments Victoria Kulikova, Head of the EBA Committees Department.
The vast majority of the necessary construction materials can be produced in Ukraine: it will cost the country less than imports, create additional jobs and increase taxes to the state budget. The share of domestic construction materials in total consumption in Ukraine exceeds 90%, and this figure can be maintained with the growth of construction, as evidenced by the meta-analysis of literature and opinions of sector experts in the study. Among the most popular materials for reconstruction are cement, concrete, metal structures, bricks, glass, thermal insulation materials, etc.
"Current investments are crucial, but additional billions are needed to rebuild Ukraine's infrastructure and economy. It should be noted that investments, in particular, will contribute to the development of domestic production capacities, creating new jobs and supporting the economy," said Maksym Nefyodov, Director of Innovative Solutions at KSE Institute.
It will take time and considerable investment to prepare domestic facilities for the production volumes required for the recovery. For example, to cover the demand for cement, clinker kilns need to be built, which can take about 2-3 years.
Experts at the Kyiv School of Economics note that a number of large international companies have already announced their investment projects in Ukraine. The most promising is the Irish construction materials manufacturer CRH, which owns three cement plants in Ukraine under the CEMARK brand and has already invested $80 million in Ukraine during the full-scale invasion. In 2023, the company signed a mandate letter with the EBRD to jointly acquire the assets of Italian Buzzi in Ukraine. The deal is estimated at $100 million. It is currently being reviewed by the Antimonopoly Committee of Ukraine (AMCU).
Kingspan, another Irish building materials company, intends to invest $300 million in the Cirsha (Freedom) project. They expect a production campus to start operating in western Ukraine by 2026.
Ukrainian businesses are also investing in the construction industry. In 2022 , the development company City One Development began construction of a glass plant in Kyiv region. The only similar plant in Ukraine in Lysychansk was destroyed in 2014. Since then, Ukrainian demand has been covered by imports, which, before the full-scale invasion, consisted of 75% Russian and Belarusian products. The declared cost of the City One Development project is 100 million euros, and it should take several years to build. The company later announced its intention to build another similar plant by 2025.
The total investment in the production of remediation materials at these three enterprises is $500 million, but, as the authors of the study note, this may not be enough, as part of this amount still depends on the decision of the AMCU. The final results of the study will be published in July 2024.