Institution building for better reconstruction

The Russian attacks on Ukraine have necessitated reconstruction of infrastructure in many parts of the country, even as the war is still ongoing. In January 2023, the Ukrainian government established the State Agency for Restoration and Infrastructure Development of Ukraine (the Agency for Restoration, or Agency) under the Ministry of Communities, Territories and Infrastructure Development of Ukraine (the Ministry for Restoration, or the Ministry). The Agency constitutes a merger of the previous State Road Agency (Ukravtodor) and the State Agency for Infrastructure Projects (Ukrinfraproyekt) under new leadership. It is responsible for rebuilding critical infrastructure and housing that has been destroyed or damaged across Ukraine, and is the primary implementer of state strategies and priorities. In this role, the Agency is also the technical administrator of the Digital Restoration Ecosystem for Accountable Management (DREAM), which covers projects related to the reconstruction of physical assets and infrastructure regardless of funding sources or responsible entities.1fccca777add

Large infrastructure projects attract corruption – even more so during emergencies. How to prevent the intentional waste and/or misallocation of scarce resources to benefit old and new corrupt networks is a much-discussed topic, not only in Ukraine but also in the international community supporting it.39c5e7164075

Since Ukraine regained its independence in 1991, it has been plagued by pervasive corruption. Following the 2014 Revolution of Dignity, Ukraine launched a comprehensive institutional reform project that included the creation of four new anti-corruption bodies in 2015: the National Anti-Corruption Bureau (NABU), which investigates high-level corruption cases; the Specialized Anti-Corruption Prosecutor’s Office (SAPO), an independent unit within the Prosecutor General’s Office that oversees NABU’s investigations and prosecutes its cases; the National Agency for Prevention of Corruption (NACP), which administers the asset declaration system and participates in anti-corruption policymaking; and the Asset Recovery and Management Agency (ARMA), which focuses on recovery of stolen assets. This was complemented by the establishment in 2019 of the High Anti-Corruption Court (HACC) to hear high-level corruption cases.b237b406a9ce These bodies work in tandem with two organisations who are more broadly responsible for financial audit and control: the Accounting Chamber (a supreme audit authority whose independent status is defined in the Constitution) and the State Audit Service (an executive branch body reporting to the Minister of Finance).

This study was led by the overall question of how and to what degree – in the context of resource constraints, the historical baggage of its predecessors, and an ongoing war – the newly created Agency for Restoration has related to existing anti-corruption institutions and been immersed in the evolving public integrity ecosystem. Based on interviews conducted with 14 key stakeholders3741d7efe616 between June and August 2023 and the review of policy documents, this U4 Brief provides an overview of the structure of the newly established Agency, the emerging anti-corruption framework within it, and its collaboration with the anti-corruption agencies NACP and NABU and civil society. We have been impressed by the speed with which policies have been developed in 2023. This is the main reason why this Brief can only provide a snapshot – not an assessment – of the Agency and pinpoint some overarching challenges regarding human resources and the relationship between the central executive authority and its legally independent regional branches.

Key actors in the Ukrainian anti-corruption field

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The Agency for Restoration

The Agency for Restoration comprises 24 legally independent regional branches for each of Ukraine’s regions, called ‘Services for Infrastructure Restoration and Development’ (‘Services’) and eight subordinate enterprises and institutionseb046159f537 employing about 21,000 people in total.ef6e7e966dc3 Each Service employs approximately 80 people, while 150 staff work at the central executive authority in Kyiv.

The Agency’s operations are overseen and coordinated by the Cabinet of Ministers of Ukraine through the Vice Prime Minister for the Restoration of Ukraine – the Minister for Communities, Territories and Infrastructure Development of Ukraine.

With the merger of the State Road Agency (Ukravtodor) and the State Agency for Infrastructure Projects (Ukrinfraproyekt), a new leadership was appointed, consisting of two external members, Agency Head Mustafa Nayyem and Deputy Head Valeriia Ivanova, as well as managers of the original entities: First Deputy Head Andrii Ivko; Deputy Head Ievhen Kuzkin; and the Deputy Head of Digital Development, Digital Transformation and Digitalization, Roman Komendant. It is not by coincidence that the external members have a background in investigative journalism and corruption prevention.

The new leadership is tasked with the challenge of undertaking substantial restoration projects amidst an ongoing war, while integrating two existing agencies with a questionable history of alleged bribery, misuse of funds, and non-transparent procurement practices.f1a8b7d6d090 After the detection of an extensive criminal scheme of the misuse of loans from the European Bank for Development (EBRD), the State Road Agency (Ukravtodor) had to put an anti-corruption programme in place in 2021.8c2bf5b99fa3

At the time of drafting this paper in autumn 2023, both the Accounting Chamber and the State Audit Service were conducting an audit of the Agency’s past activities (meant to be those of Ukravtodor), which commenced almost simultaneously. The Agency’s leadership is hopeful of being able to capitalise on the outcomes of these two procedures, in order to identify gaps and take them into account when adapting future policies.

Mainstreaming anti-corruption efforts within the Agency for Restoration

The Agency’s anti-corruption measures are delineated from the national anti-corruption policy and in response to risks assessed within the organisation. In March 2023, the Cabinet of Ministers of Ukraine approved the State Anti-Corruption Programme for 2023–2025. This includes specific steps for the Agency, such as the adoption of its own anti-corruption programme. In June 2023, the NACP launched a monitoring system for the State Anti-Corruption Programme’s implementation, with its reporting being publicly accessible. By November 2023, the Agency had partially completed two out of seven measures of the State Anti-Corruption Programme for 2023–2025 (see next section).

In addition to the commitments under the State Anti-Corruption Programme, the Agency – with the help of an anti-corruption working group – developed its own anti-corruption programme to assess and mitigate corruption risks in its operations and structural units. In July 2023, the Agency for Restoration, by its Order No. H-307, approved its Anti-Corruption Programme for 2023–2025e5fd1f2711bd and its accompanying annexes.2a4b699f06b5

The so-called Sector of Corruption Prevention and Detection, a division of the Agency, is empowered to: monitor and evaluate the implementation of the anti-corruption programme; coordinate the structural units of the Agency during the implementation; conduct checks on the organisation of work to prevent and detect corruption in enterprises, institutions, and organisations within the management scope of the Agency; develop measures to identify conflicts of interest and their resolution, and then inform the Head of the Agency and the NACP of the findings; and verify the submission of declarations by personnel of the Agency and notify the NACP about cases of non-submission or untimely submission.

With Ukravtodor’s integration into the Agency, the anti-corruption programmes previously implemented by its territorial divisions have become outdated and are no longer relevant. As a result, in recent months the Services have developed new risk registers and endorsed new anti-corruption programmes. As of October 2023, the Services are using a standardised template. This approach enables the unification of the regional units’ activities and a more coherent implementation of anti-corruption procedures.

Each legal entity has a designated anti-corruption officer (ACO) who reports to the Head of the Sector. In the past, this function has been largely underused. To develop a Professional Development Strategy for the ACOs, the Ministry assessed the level of professional knowledge and functions of the ACOs and the state of the anti-corruption organisation’s work in 2023. The results served as the basis for determining a new training and development plan for the Ministry’s ACOs, including those of the Agency and in the Services.3d6dcaa078e7

The Agency for Restoration’s collaboration with anti-corruption agencies and non-governmental organisations

The National Agency for Corruption Prevention

The NACP has a mandate to develop anti-corruption policies and manage and verify asset declarations. As mentioned above, the NACP launched an information-analysis monitoring system for, among other actions, tracking the progress of each specific measure within the State Anti-Corruption Programme. The monitoring of the implementation is carried out by an authorised analyst from the NACP who reviews the reports provided by the Agency, examines other information related to the status of the programme’s measures, and conducts a comprehensive analysis of the reports.

The National Anti-Corruption Bureau

In March 2023, two months after the establishment of the Agency, a memorandum of understanding (MoU) was signed by its head Mustafa Nayyem, and the director of the National Anti-Corruption Bureau (NABU), Semen Kryvonos. Whereas the document largely reiterates authority already vested with the NABU by law, the gesture was aimed at demonstrating commitment on the part of the new leadership of both agencies to zero tolerance for corruption when it comes to recovery and reconstruction. In particular, the MoU focuses on:

• Coordination and cooperation in the field of preventing and countering corruption
• Development of internal control mechanisms to prevent bribery and other corruption offences in the Agency
• Ensuring unhindered access to the Agency’s building for NABU officers and familiarisation with documents and other material carriers of information for the prevention and investigation of offences brought under the jurisdiction of the Bureau by law enforcement agencies46332a4ea8b0

At the time of the interviews for this paper, the interaction between the Agency and NABU reportedly took place at the level of the authorities’ leadership, including the exchange of necessary information to prevent and counteract corrupt practices. The prevailing attitude expressed by all stakeholders is that such interactions would be necessary only if things were to go wrong at the Agency’s level, leading to criminal proceedings where the Agency would be expected to cooperate with law enforcement agencies such as NABU, State Bureau of Investigations (SBI), and possibly SAPO.

The commitment became reality in November 2023, when Andriy Odarchenko, a Member of Parliament and a member of the parliamentary Anti-Corruption Committee, unsuccessfully tried to bribe Mustafa Nayyem, the head of the Agency, with Bitcoin (approximate value US$50,000). In exchange for the bribe, Odarchenko requested rehabilitation funding for an infrastructure project under his control. He was arrested by NABU following the transfer of the initial tranche of the bribe, equivalent to US$10,000, to the whistleblower’s crypto wallet.b9651f8c28b0

Civil society organisations

In March 2023, the Agency also signed an MoU with the RISE Ukraine Coalition, bringing together over 40 Ukrainian and international organisations to promote principles of integrity, sustainability, and effectiveness in Ukraine’s recovery process. RISE Ukraine members have successful experience in implementing reforms and launching state electronic systems, including Prozorro and Prozorro. Sale, as well as expertise in infrastructure project development. The document envisages joint development and implementation of the Electronic Reconstruction Management System (ERMS) as a key digital tool for project management and control. In particular, the parties agreed to develop an industry-specific Reconstruction Management System in the field of infrastructure, which is one of the important components of ERMS to be incorporated into the recently launched DREAM platform. “Regular meetings are held to integrate the Agency’s needs into the DREAM system. They also agreed to collaborate on the development and implementation of anti-corruption policies and ensuring access to open data. As part of further cooperation with the Coalition, regular meetings will be held to discuss mechanisms for working with local communities and implementing anti-corruption safeguards in procurement and project management”.ba82ad9e87cc

In July 2023, the Agency’s Transparency and Accountability Council was established by the Agency’s Order No. N-152 dated 10 April 2023. The main tasks of the Council include: conducting a systematic analysis of the activities of the Agency, in particular prevention and detection of corruption, the effectiveness of the implementation of the anti-corruption programme, and measures taken to ensure transparency and accountability of the Agency’s activities; promoting cooperation between the Agency and CSOs and other institutions regarding issues related to the Agency’s activities in the field of corruption prevention; and providing recommendations and facilitating the implementation of measures by the Agency to mitigate corruption risks in its activities.

The Council consists of representatives of acclaimed CSOs that receive funding from international donors to counter corruption, including “Anti-Corruption Action Center”, “StateWatch”, “Anti-Corruption Headquarters”, “Institute of Legislative Ideas”, and representatives of the RISE Ukraine Coalition. During the first meeting, Council members discussed the Agency’s Anti-Corruption Programme, as well as the anti-corruption programmes in the regional Services, and identified priority areas for minimising corruption risks. The advisory body members are meant to assist in the development of internal policies to expedite the implementation of the Anti-Corruption Programme.

At a second meeting in October 2023, the Council members discussed organisational matters related to: (1) the Council’s focus areas, (2) civil society involvement in the recruitment of the Services’ heads, and (3) the procedure for monitoring and analysing media reports. By the end of 2023, Council members had started conducting integrity checks of the candidates for the position of head of the Services.

A common challenge: Recruiting skilled professionals with integrity

New and old institutions face resource constraints and a certain level of competition over anti-corruption expert staff. Even before the war, the anti-corruption agencies encountered considerable challenges, not least in recruiting senior leadership and expert staff with impeccable integrity and technical skills, given an exceedingly low salary scale. The war has led to a reduction in capacity within the anti-corruption institutions, as some staff have left the country and some have moved to other positions, where their experience and integrity are particularly needed. Increased donor activity is likely to ‘draw brains’ from the very institutions their programmes are meant to support. The broader CSO landscape already grapples with retaining experienced professionals due to intense competition. Inadequate human resources within NABU raises concerns about its capacity to tackle the mounting workload. A recent increase in the number of its detectives is a step towards addressing this concern, although corresponding reinforcement within SAP and HACC is crucial for seamless collaboration.

The Agency is faced with a similar challenge to recruit skilled professionals capable of implementing its policies with integrity. The management of the Agency appoints and dismisses the heads of its Regional Services. According to Article 36 of the Law of Ukraine “On Local Self-Government Bodies”, this process requires prior agreement with the head of the local state administration. Some observers have been critical of the Agency’s current status as a regular central executive body does not offer sufficient means to adequately regulate the challenges faced by the Agency, and see a need to enact a dedicated law for this entity to oversee the restoration efforts.085418822231

Given the low salary range compared to the private sector, there are challenges in attracting qualified professionals willing to work for the Agency. Despite its sometimes questionable institutional heritage, it is crucial for the Agency to retain former Ukravtodor staff – especially those with strong technical, project management, and leadership experience – but also ensure their alignment and commitment to institutional integrity.

Considerations for the future

What is happening in Ukraine right now to ensure that reconstruction is not captured by corrupt interests is highly innovative and dynamic. Under the pressure and constraints of an ongoing war and eager to work towards EU accession, the Ukrainian government has undertaken rapid efforts in 2023 to mainstream anti-corruption efforts into its reconstruction framework.

The new leadership of the Agency is challenged to simultaneously lead a merger and prepare for massive reconstruction efforts while safeguarding against corruption. It has initiated strategic relationships with the main anti-corruption bodies, NACP and NABU, and draws on civil society and other national and international experts, especially regarding the development of anti-corruption safeguards and oversight.

The current operational autonomy granted to the regional branches, as they continue enjoying the status of separate legal entities (enabling them to act as a contractual party in procurements), might ensure better transactional and project management flexibility while concurrently raising concerns regarding accountability and corruption. Most staff of the regional branches are not subject to the asset declaration regime. This underscores the need for a balance between decentralisation and oversight.

Boguslavets et al9accd0a953ec and others recommend that the legal framework and operation of the Agency; its mandate in the recovery of Ukraine; its special procedures for competitive selection; and the basic requirements for the interaction with local state authorities, local governments, and their subordinated enterprises are to be regulated by law.

Just as important will be the continued collaboration with, support of, scrutiny by, and critical advice from the anti-corruption institutions and civil society organisations, to ensure that the Agency can deliver on its restoration mandate effectively.