Ukraine's infrastructure sector is experiencing heightened activity driven by urgent reconstruction needs and modernization efforts following the impact of the war with Kinstellar Partner Oleg Matiusha expressing cautious optimism over the significant opportunities awaiting investors as recovery efforts accelerate.
CEELM: Please walk us through the mandates that have kept your practice busy of late.
Matiusha: Within the past year or so, it has become clear that one of the firm’s most active practices in Ukraine has been infrastructure, in addition to energy and defense. Given the country's significant need for modernization and infrastructure upgrades, we've actively supported primarily private stakeholders and, occasionally, public sector players, focusing on regions and sectors most affected by the war or in urgent need of modernization.
Recently, most of our assignments involved donor organizations and private investors exploring transport sector projects including the likes of passenger and cargo carriages, prospective public-private partnerships, restructuring initiatives, warehouse developments, road construction projects, and port concessions. For example, this included us advising Qatari, Korean, European, American, and Japanese clients on ongoing and potential infrastructure projects in transport, agricultural, and social infrastructure projects.
We've also been active in advising on projects related to essential infrastructure such as water treatment facilities, sewage systems, and industrial parks. At any given time, our team advises on multiple such projects simultaneously.
Notably, numerous projects have been initiated by local municipalities and state authorities across various regions in the country to attract investors. For example, we have seen increased interest from Korean investors exploring potential projects in western Ukraine, where we anticipate substantial activity. Additionally, due to the ongoing situation, our role extends to assisting clients with matters involving force majeure, international sanctions compliance, wartime legal risks, and war insurance, ensuring they can maintain the progress of their infrastructure initiatives.
CEELM: What are the main drivers for that pipeline of work?
Matiusha: Undoubtedly, the primary driver is the urgent need to recover and modernize transport, logistics, energy infrastructure, and road networks, which have significantly suffered from the war. Reconstruction efforts in these critical sectors are, therefore, essential.
Additionally, the government's commitment to rebuilding and modernizing infrastructure as part of Ukraine's path toward EU integration is an important driver. This commitment aims to improve the agricultural and processing industries and boost agricultural exports, stimulating new infrastructure projects in the transportation and energy sectors.
A concrete example of government-driven incentives is a recently enacted program supporting investors and developers in the area of industrial parks. It offers tax incentives and compensations for investments in the construction of engineering networks – such as electricity, transportation, and access roads. Investors developing such infrastructure independently receive significant compensation from the government, and these incentives often drive new projects. Additionally, just before the war, a law was enacted supporting substantial domestic and foreign investments, focusing, among others, on infrastructure projects through tax benefits, administrative support, land allocation, etc.
Furthermore, numerous international financial and technical assistance programs support Ukraine's government, and these projects play a crucial role in rebuilding and modernizing our country's critical infrastructure.
CEELM: What would you say is the outlook for the next 12 months?
Matiusha: I'd describe my outlook as cautiously optimistic. Recent developments on the peace track could potentially lead to a cessation of military activities. Once a peace deal is reached, it will likely trigger significant infrastructure projects. These would be procured by the government through traditional methods and PPPs, involving assistance from the World Bank, IFC, EBRD, EIB, KOICA, KIND, and other international organizations, thereby engaging both private and public funds. According to available information from international organizations, Ukraine's infrastructure recovery is estimated to require investments exceeding USD 520 billion over the next decade.
Considering Ukraine's size and the immense demand for modernization, there are substantial opportunities for foreign investors, creating expectations for increased post-war recovery activity. Already, we observe clients studying the market closely and positioning themselves strategically to leverage recovery opportunities once able to.
