In the first part of the interview with Oleksii Kuleba, Deputy Prime Minister for Recovery and Minister for Development of Communities and Territories, we talked about the agency of the Cabinet of Ministers, key pressing challenges facing the ministry, building communication with local authorities and corruption risks of the budget and regional policy. In the second one we have discussed the problems of recovery, construction and infrastructure.
What part of the powers of the Ministry of Reintegration will be transferred to the Ministry for Development? When will the housing program for IDPs start working? Will the infrastructure that was launched by the old team of the ministry be completed? Are there any results of the audit of the Agency for Reconstruction? Will there be new frontline contractors? What will happen to the construction expertise that can always be bought? And the Town Planning Code, which was blocked by the previous team? Is the Deputy Prime Minister going to make the construction market transparent so that Ukraine gets money for reconstruction?
On staff fousing, preserving key infrastructure facilitie and destroying road logistics
- Mr. Kuleba, according to my information, part of the powers of the Ministry of Reintegration, on the basis of which the Ministry of National Unity is being created, has been transferred to you. Which part is that?
- The issue is still under discussion. But our ministry is ready to take on everything relating to hard skills. There are 4.5 million internally displaced persons (IDPs). More than seven million people have gone abroad. We realize that approximately one million IDPs remaining in Ukraine are people who are working and willing to take a mortgage or loan program to get housing. It is very important that we support them, that we give them a tool (mortgage, loan), thanks to which they will get a foothold in the new community and get proper living conditions.
Besides, we are already working on a large housing program for people who have lost their homes as a result of Russian aggression. We are talking about a cross-sectoral project in which the Ministry of Economy and the Ministry of Finance are involved, as well as our team.
- Is this housing for the temporarily displaced?
- Yes. And this is not funded from budgetary resources. We are going to start exclusively with loan money from international development banks. At the first stage, we aim to refine the financial model, to understand how it can work. We also need a clear algorithm of interaction with communities because it is the communities that will implement this program. As of today, we have 15 cities that have been selected based on certain criteria.
- Which cities have been selected and what criteria were used to select them? Is Kyiv included in the program? What is the financial basis of the first stage? How many housing units will be built?
- The main criterion is the number of IDPs in the city. By the way, there are mayors who refused to participate in the program. What is needed from them? Municipalities provide a land plot for construction. In addition, they undertake to bring all the utilities there. This housing belongs to urban communities and is provided primarily for the internally displaced, but in essence, it is staff housing, as it is tied to employment. The rent will be paid by the employer for the employee. And if a person leaves, he or she loses the opportunity to use the apartment. Such housing is not subject to privatization. Thus, a fund of housing for force majeure situations is created. And this is a European practice. Each city has its own fund, so Ukrainians had a place to settle.
- On loans and mortgage. There are two programs — yeVidnovlennia and yeOselia. They have been tested, but there are still problems. In particular, within the framework of yeOselia, it is much more difficult for IDPs to get a mortgage than for those who already have housing and money. Since IDPs simply do not have 25% of the price to pay the first installment. Moreover, it is not only the military who is setting sights on this money from the state budget, but pretty much everyone, but the housing area should not exceed 80 square meters.
- The yeVidnovlennia program has two components. The first is the opportunity to repair damaged housing, based on the calculation of the cost of damages. This is quite a successful program and during its operation more than 77,000 families received compensation, and to be exact, today it is 77,383 families. The secondly is compensation for completely destroyed housing. Based on the parameters of the housing that a person had, the approved coefficient and the market value of housing, the full amount of compensation is calculated. From whom and where the participant of the program will buy housing is the responsibility of the person concerned. The program has so far helped 5,000 families to solve their housing problems.
A couple of days ago, the President of Ukraine announced that another UAH 15 billion next year will be allocated for compensation for housing for IDPs, which is another 10,000 families.
As for the yeOselia program, this falls under the purview of the Ministry of Economy. But I know that it has already been decided to significantly reduce the first installment for IDPs. Another important nuance for people is that the amount we give as compensation for destroyed housing can be taken into account and recalculated for IDPs. That is, a person lost his/her housing, applied for compensation under yeVidnovlennia, received a million hryvnias of compensation, and he/she can immediately use it as the first installment under yeOselia.
- The total amount of the ministry’s expenditures in next year’s budget is UAH 90 billion. Half of it is the funds of the Agency for Reconstruction. Are these all protected budget items? What kind of relations do you have with the Ministry of Finance? Your predecessors had some issues, and at some point, funding for the Ministry for Development was reduced and all the powers to finance projects were transferred to the Ministry of Finance.
- All the main resources — UAH 2.2 trillion — are allocated to the Ministry of Defense. The rest of the ministries have to work in the self-funding mode. Especially since international partners provide great opportunities. These are brutal rules of war, to which, of course, we can turn a blind eye, but I would not recommend it. Therefore, when discussing the budget with members of parliament, I made it abundantly clear that now is not the time for capital investments in infrastructure.
Of course, we must prepare projects for future infrastructure development. But the first thing we must do now is to preserve the infrastructure. Ports, railroads, energy facilities, roads, bridges... are constantly under fire. That’s why all the lines and billions are about preserving what we have. Especially roads. Otherwise, we can undermine the entire military logistics.
- According to the 2025 budget, UAH 12 billion is earmarked for roads. Is this about “preservation” too?
- It takes 52 billion to preserve them. And this is a matter of national security. For example, people, including the military, are already speaking to MPs, and they, in turn, are coming to us to discuss logistics and roads. They ask us to repair them because there are problems. Because we are talking about a whole transportation sector, which is crucial during a great war, when air and sea traffic is closed. So MPs and us must be prepared that there will be more appeals from people. And this will be a problem for everyone.
- But “two weeks before the end of the year, the government plans to spend UAH 1.7 billion on roads, although the budget for 2024 does not include this funding. The last day of treasury payments is December 27, 2024. Obviously, there is no time to hold tenders. So, 1.7 billion will be distributed non-transparently. The money is withdrawn from the program of repayment of debt obligations on loans attracted for the development of the public road network.” How do you comment on this remark by MP Iryna Herashchenko?
- What does “non-transparently” mean? I understand perfectly well where this is going and why political opponents manipulate this topic so easily. The next move will be to accuse the government of not having roads. The government resolution is an opportunity to jump on the last wagon so that it will be a little easier next year. If we don’t build roads, we will lose the industry. In a time of war! Remember 2010–2012, when we could not travel from Kyiv to Lviv, from Lviv to Transcarpathia. And with this approach we will return to it, unfortunately. Therefore, we face a very challenging task — to do what is necessary using what little allocated funds we have. I understand this perfectly well and I take responsibility for it. We will make evacuation routes first of all, and then we will just look at what we have left and decide on the priorities.
- Regarding the pilot restoration projects started by the Agency’s previous team in Tsyrkuny, Trostianets, Posad-Pokrovske, Yahidne, Borodianka and Moshchun. Are you going to see them through?
- Our goal is to complete all projects. The prime minister and I see eye to eye on this matter. It concerns the lives of our people who need to be given this housing. This is a matter of our country’s reputation. So we will find the money to finish it all.
On auditing the Agency for Reconstruction, energy facility protection and changing contractors
- The 2025 budget of the Agency for Reconstruction is UAH 45 billion. Who is auditing the Agency and when will the results be available?
- It is better to talk about this with the head of the Agency, Serhii Sukhomlyn. His team formulates the internal auditing policy.
- I am talking about an external audit. Moreover, according to my information, the former head of the agency, Mustafa Nayem, after his resignation and the wave of accusations that followed it in the media, wrote letters requesting appropriate checks of the agency’s activities from all law enforcement agencies: the State Bureau of Investigation, the Security Service of Ukraine and the National Police. Are you aware of any initiatives on the part of law enforcers?
- I know that the State Audit Service conducted audits on certain types of works, in particular those related to the protection of energy facilities.
- Can you share the preliminary results of the audit?
- I do not have access to it. There is a parliamentary temporary special commission, which deals, among other things, with energy protection issues. I think that the issues will be discussed publicly.
- The Ukrenergo national energy company and the Agency for Reconstruction built the same type of facilities for protection of power facilities, the so-called “frogs.” Evil tongues say that at Ukrenergo one such facility was built for UAH 120 million, while at the Agency the cost was UAH 300–500 million per facility. The only way to prove the opposite is to make the information about these purchases publicly available, but for some reason it is not in the Prozorro system. Maybe you will make it public?
- You have to realize that this information is not available not because it does not exist, but because it is secret. In other words, on the one hand, there is an internally understandable mandatory requirement for transparent processes, but on the other hand, these transparent processes become a weapon in the hands of the enemy. I would now focus on something else. In addition to the protection facilities that are already 95–99% complete, we need to protect other critical infrastructure and energy facilities. There are many of them, and we need to streamline every line of expenditure.
- Still, let’s corroborate theory with practice. What was the difference in the price of “frogs” between Ukrenergo and the Agency for Reconstruction?
- I have not seen the primary documentation of Ukrenergo facilities. I am not the Minister of Energy. I am responsible for completing the protection facilities that the Ministry of Energy ordered from us. We have our documentation. As for the agency, we have all the documentation. I do not know the difference, as I do not see the facilities of the Ministry of Energy.
- So tell me, what’s the Agency’s price?
- It is different.
- Why?
- Because there are different facilities and different projects. The protection was built according to the “design-build” principle. That is, the project was made during construction. That’s why the figures are different, as is georeferencing. In general, there are nuances. But I am definitely not the one to answer questions of this kind.
- Before you assumed office, the ministry had key contractors who definitely earned not 15–30%, but much more. Oleksandr Boiko (Avtomagistral-Pivden), Maksym Shkil (Avtostrada Group), Yurii Shumakher (Rost Group). Are you going to change the lay of the land?
- We are changing our approach. The ministry gathered contractors when we discussed the construction of the second and third levels of power generation. We outlined our position on the need to reduce costs. The contractors met our demands and we signed documents on savings of UAH 18 billion for already approved projects. Estimates will be recalculated. Optimization of processes will continue.
At the same time, we are interested in competition. We analyze who does the work on the second level and how. We see that there are contractors who have done it for, let’s say, less money. We see the technologies used, why and what decisions were made. Mr. Sukhomlyn travels to the sites, that is, we are engaged in constant search for optimal solutions. We did not have design decisions before the war on how to protect transformers with concrete, as you put it, frogs. And, of course, now there are several kinds of solutions. It is important for us to choose the optimal one: the fastest and the cheapest.
I think that no contractor would now say that there is any favoritism, or in general, any share of the game in favor of anyone in principle. On the contrary, there is some criticism from former favorites as to why we built the work in such a way.
On prices for construction materials, purchased expertise and staffing issues
- There is no adequate price for construction materials on the market. Because the state has no methodology for price formation, no methodology for price monitoring, no classifiers. I know that the old team started to deal with these issues, particularly in road construction. What about you?
- The way I see it, we should have clear-cut rules for price formation not only for goods but also for services. And as far as I know this market and process, the biggest problem is the formation of prices for services. As for the formation of prices for goods, there are many different approaches. The policy of our government is healthy protectionism and purchase of Ukrainian goods. Therefore, when we change anything, we will do it first of all based on the priority of the interests of domestic producers. This is an opportunity to make money stay in the country. We must realize that we will face a lot of resistance, a huge lobby of other players who are used to working under different rules. But we have no other way out. This is a war, including an economic war with Chinese producers and their representatives here.
- The designer is the customer of the expertise. That is, there is no additional tender for the purchase of expertise. Everyone has long been accustomed to the fact that expertise can be bought. The head of the agency receives and signs the project, not knowing at all what kind of stuffing it has and who and how much money it will earn. Well, or vice versa, knowing everything. But there is no human resource to double-check everything. And as for the experts who should be blacklisted, everyone has known them for a long time. The agency’s previous team, according to my information, sought to change the order in which projects were passed through the agency....
- The state licenses the entire construction sector, and the ministry forms the state policy. The Agency for Reconstruction implements projects within the framework of this policy. What’s important to me? That we build quickly, properly and transparently. That we build with Ukrainian materials, form construction clusters, which would gradually turn into areas of economic growth. Do they buy expertise? Likely so. That is why it is important for me that the agency has an advisory council of people with reputation (experts, donors, international representatives), who, knowing how the sector works from the inside, would recommend and implement the tools you are talking about. They took a problem, analyzed it, and said, here is what’s in critical condition, let’s replace this with this. Okay, the decision is made.
- The point is, minister, that all of this has long been analyzed. And I’m afraid that the first thing the independent council would recommend would be for you to fire Nataliia Kozlovska, your deputy in charge of the matters in question. Right now, as we speak, someone is signing a sold expertise with the helping hand of your deputy and her monopolist masters. When you get into the subject, please pay special attention to the institution of consulting engineers, which, according to Bill No. 5655, must necessarily be present in a private controlling company. It is in the wording indicated in the certificates (N.b.) of the Guild of Engineers of Technical Supervision of Architectural Objects Construction. And not, for example, project managers certified in Ukraine by the international organization of civil engineers FIDIC. And there are only 37(!) such domestic consulting engineers for the whole country. It is hard to imagine the degree of their demand and, accordingly, their payment. And here’s the icing on the cake: Law No. 5655 has not yet been signed by the President, but the position of a consulting engineer has already been included by the Ministry for Development in the methodological recommendations for the preparation of tenders for the selection of contractors. That is, a project company has the right to participate in a tender only if it has a consulting engineer on its staff. This is a condition for winning the tender.
- I am familiar with the story and I know that the previous team did make gargantuan budget items for consulting engineers. But these are all solvable issues. Let me remind you of another story, which was called the State Architectural and Construction Inspectorate (SACI). For how long were we told that this scheme could not be defeated? How long did it take to defeat it? A year and a half, two years? The State Architecture and Urban Planning Inspectorate (SAUPI) is now showing transparency and quality.
- I’m going to disappoint you a bit. SAUPI started working on September 15, 2021, and Unified State Electronic System in the construction sector (USESCS) was launched 14 months earlier, in July 2020. That is, if transparency is the reason for honesty and absence of corruption, then SACI was also ddemonstrating “good quality” over the last 14 months of its existence. But we know that there was a swath of illegal decisions.
- And yet it is impossible to compare what was and what is now. In other words, I think we need to look at things correctly. Let’s recognize that there are successful cases both in the government, in the media and in any other sphere. Of course, SAUPI is a successful case, which took the third and fourth levels of construction out of the corruption framework. And this benefited not only the developers but also the country. Therefore, based on the general logic, in my understanding, the only way out of all the problems you have listed is the digitalization of all processes. So that we know everyone’s name, who made a decision, at what stage and what kind of a decision it was. This is about personal responsibility.
Such an approach is necessary when forming prices for services and goods, as well as in expertise. But still, I am convinced that these are rather narrow and niche problems. There are much more serious challenges to which we will have to respond.
- Still, how can you digitalize the Consulting Engineers Guild — the bottleneck — that certifies the lucky ones? It’s a self-governing organization. There’s just a monopoly that needs to be broken. Do you plan to somehow change the very possibility of this approach to expertise? Or even create the impossibility of selecting the right experts by providing, for example, at the legislative level, for the random selection of an expert organization when loading a project into USESCS? Well, until the global digitalization of the sphere has taken place and everything has become super-transparent.
- Let me reiterate, I have a completely different approach: when we make the process transparent in an electronic model, it will minimize any corruption risks. That’s it. You see, Inna, you are taking a part of the problem that is undoubtedly important, but which is not key. For example, the key questions are: should the construction market be licensed? For what types of work? How much should a worker be paid? In terms of contracting work, the problem that needs to be tackled first and foremost is the formation of a market for contractors. Real ones. Not those with an authorized capital of one hundred hryvnias and a director who has been in jail for five years. Or with owners that no one will ever see. We will definitely correct this.
The case of the Okhmatdyt children’s hospital is indicative for me. Companies with a maximum authorized capital of UAH 6,000 came to the open tender. All the rest are companies with an even smaller authorized capital. What does that tell you? That at least we do not understand what these companies live on. And, most likely, they are some kind of fake phony companies. We need to raise the bar for both responsibility and the ability of contractors to fulfill the order.
- Corruption and the very possibilities of fraud are laid down in the project and confirmed by expertise, and then the architectural and technical supervision with the help of consulting engineers help to contrive something on the spot. Well, if you have a different opinion, then give your full picture. So that everyone could read the words of the deputy prime minister and say: the man knows the whole background and understands exactly what to do about it.
- What is to be done? Make the market operate legally. But in order for people to receive an official salary, it is necessary to change the codes and approaches to the formation of services in the ministry. Because now there are coefficients that simply will not allow to distribute this salary. Therefore, it is more profitable to pay salaries in envelopes. And how is it formed? The answer is through goods.
When you walk into a construction site, you have only two components. Goods and people. If you need to pay a worker 30 grand, and you can only officially spend 3,000, you can only take the lacking part from goods. There is nothing else. These are two interrelated and most important processes. Designing, expertise, technical supervision and so on — this is, of course, a very, I repeat, very, important segment of the project, but they only accompany the construction process. The construction process is the main one. All the volumes are there.
- The Law “On Regulation of Urban Planning” provides for full openness and publicity of construction projects and estimate documentation as early as December 2020. Unfortunately, the Cabinet of Ministers, abusing its authority, made this information non-public by approving the relevant Procedure. That is, all the information needed by the public for quality control is already available electronically in the state system for more than four years but is hidden. Will you open the projects?
- Would you please listen to me: the main pain of the construction industry is that there is a misalignment between the type of work, the product, the buying of the product and the people. That’s why there can be mismatches. So we will certainly open up projects. But after we finish the war.
- The president did not sign the corrupt bill No. 5655 on urban planning, which was lobbied aggressively by Kubrakov’s team and the current head of the relevant committee, Olena Shuliak. But 5655 has made a mess of everything. The experiment (the similar decree No. 5655 on the implementation of experimental projects in the field of urban planning), the bill on the restoration and so on. What is your plan?
- Urban Planning Code. However, I would say that for me the main up-to-date document, which is important for the formation of urban policy today, is the Urban Planning Cadastre.
- But the ministry with the Urban Planning Cadastre took the path of experimentation rather than systemic legislation. Local authorities can upload information to the cadastre only in accordance with the law, not the Cabinet of Ministers’ resolution. Will you force them to do it?
- The experiment is one of the technical steps. We now have a tool that we can use only during martial law. Moreover, we are sure that the bulk of local governments are absolutely conscious communities that realize that they themselves are interested in it. UAH 45 million has been allocated for the cadastre, but it is not even about finances. If we embark on the legislative path straight away, we will lose more time. And the experiment will give us an opportunity to fully test the mechanism.
- To summarize, just the other day you got your first deputy. Why Alyona Shkrum? And what duties is she going to have?
- In fact, our two parts of the conversation are both about how we can fit into the EU system as much as possible. The Ministry for Development is one of the few ministries that has plucked up the courage for pre-screening. We are talking about transportation and logistics, which is a key area for the state today. Alyona Shkrum will take charge of international relations, European integration and international investments. We are talking about all the agreements and international projects that will be realized by international partners, including those within the Ukraine Facility, already in 2025–2026. She is a professional.
In other words, our ministry not only has, as you say, large money flows but a fairly large and important amount of work for the country as a whole. And we intend to cope with it.
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