Today, we welcome Pavlo Kukhta, Ukrainian Economist and Special Advisor on Reconstruction. Additionally, Mariah Yager from SMA joined me as cohost of the conversation.
We brought in Pavlo to discuss the current state of conflict reconstruction, the strategy for post-conflict reconstruction, and how to overcome challenges like balancing government oversight with designing a system that removes major corruption while managing Ukraine's transition into the EU.
I set up this interview because I know that many diplomats, aid workers, and servicemembers are focused on helping Ukraine now and after the conflict.
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One CA is a product of the civil affairs association
and brings in people who are current or former military, diplomats, development officers, and field agents to discuss their experiences on the ground with a partner nation's people and leadership.
We aim to inspire anyone interested in working in the "last three feet" of U.S. foreign relations.
To contact the show, email us at CApodcasting@gmail.com
or look us up on the Civil Affairs Association website at www civilaffairsassoc.org
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Pavlo's info: https://ua.linkedin.com/in/pavlo-kukhta-93190091
SMA version of the interview: https://nsiteam.com/smaspeakerseries_20june2024/
Special Thanks to Jamming Edward for the music sample. Retrieved from: https://youtu.be/lRboIm0tlqE?si=be0Mai-k4EsIQr3h
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Transcript
00:00:07 Inroduction
Welcome to the 1CA Podcast. This is your host, Jack Gaines. 1CA is a product of the Civil Affairs Association and brings in people who are current or former military, diplomats, development officers, and field agents to discuss their experiences on ground with the partner nation's people and leadership. Our goal is to inspire anyone interested in working the last three feet of foreign relations. To contact the show, email us at capodcasting at gmail dot com. or look us up on the Civil Affairs Association website at www .civilaffairsassos .org. I'll have those in the show notes. Today we welcome Pavlo Kufta, Ukrainian economist and special advisor on reconstruction, and Mariah Yeager from SMA to co -host the conversation.
00:00:52 JACK GAINES
We brought in Pavlo to discuss the current state of conflict reconstruction and the strategy for post -conflict reconstruction, as well as how to overcome the challenges of balancing government oversight with designing a system that removes major corruption while managing Ukraine's transition into the EU. I set up this interview because I know there are a lot of diplomats, aid workers, and service members focused on helping Ukraine now and after the conflict. So let's get started. I think it's critical that people are looking forward to the future of Ukraine, the vision of where it's going and how it could be. And your work has been seminal in going around the international community, talking to leaders, talking to people about how important it is to support Ukraine in its current fight, but also to look at the future and how Ukraine can be a partner in the international community and how they can help support making that happen.
00:01:48 PAVLO KUFTA
Oh, and by the way, I have to give a warning to you guys. If I drop out suddenly, this means there is a blackout. Because periodically electricity goes out, unfortunately, these days in Ukraine. So I will be back with you in a minute or two. I just simply need to shift to my mobile. Actually, that's kind of my main job these days. I'm working with a whole bunch of companies, mostly European, mostly from Central Europe, on getting them into the reconstruction effort. Right now, a lot of it is focused on energy. We spend about a third of our time here without electricity. I mean, I have a generator in my house. I'm also installing battery systems now. With all that, I should be going more or less independently. Most of Ukrainians actually live in multi -apartment buildings. Millions of families suffer from that, and into the winter it will be even tougher. And here I actually have to thank the American public for their help, because it's actually USAID spearheading the provision of gas generation. the small steel power plant running a natural gas to Ukraine for the winter to actually make it through. Because the blackouts will be with us for a year or two now, but one thing is to periodically have electricity, another is freeze to death in the winter. We really need that equipment here that aid is quite appreciated. It's life -saving.
00:03:17 JACK GAINES
Now, you're private industry, but you're also the senior advisor to the Minister of Finance on... Ukraine Reconstruction, right?
00:03:25 PAVLO KUFTA
Reconstruction. We're actually now out. You've heard about the old team.
00:03:30 JACK GAINES
Yeah, Mr. Mustafa, right? Mustafa is the head of the agency, and Mr. Alexander Kubrick,
00:03:36 PAVLO KUFTA
who was an advisor, he was the deputy prime minister for Reconstruction. Now the team for the Reconstruction is not in limbo, but it's hanging up in the air. We don't know who will be appointed, how will the system work now?
00:03:51 JACK GAINES
Well, like most cabinets in war, people rotate in and out because of stress, because of politics, family, everything else. Well, there's politics in every country, right? Yeah. Because as a private citizen working in a private industry, you're able to continue focusing even as the reshuffles occur.
00:04:09 PAVLO KUFTA
I've been working on that simply as a voice in Ukraine, respected and heard as one of the top economists in the nation, as someone who has close relationships to literally everyone in the government. These are my former colleagues for many years. Some of them I've known for more than a decade we've worked together. So I'm working with everyone, and reconstruction has been my priority since a short stunt at the front lines.
00:04:57 JACK GAINES
We all have skills that we have to go forward with. Right, but your work in economics is much larger.
00:05:04 PAVLO KUFTA
The magnitude is totally different. So since then, I've been engaged mostly in the efforts for reconstruction of Ukraine. I've produced some internal reports to the government and how to help construction so that it is most conducive to private sector. Because my firm opinion is that the key to get Western multinationals,
00:05:27 PAVLO KUFTA
because that is the type of economic agent. or let's say stakeholders that we lack in Ukraine. I mean, there are many multinationals here. They're working here, they're present in the market, but compared to the more successful economies of Eastern Europe who are in the EU, the share of international companies, multinationals present there is much larger. And consequently, the structure of the economy is much different, much less resource -based. more complex, more production -oriented, more knowledge -based. So that is what we want to do, right? We will not be rebuilding this old Soviet industry that has been destroyed by the war. It's useless. Just to illustrate, so these blackouts, why are they happening? Because the Russians have done a concentrated, unfortunately quite successful, assault and sprained on Ukrainian energy system. But what they have destroyed, they have destroyed all power. That's the bulk of the assets that they have wiped out. They've also damaged heavily old hydroelectric dams, but the main problem comes from these full power plants. These were old Soviet assets, essentially in our conditions in Europe destined for being thrown out. We're switching to gas. Europe is switching to green renewables. That's what happened to them anyway. So what the Russians have done is in a very destructive and catastrophic fashion, but they've... If destruction, that would have happened anyway. Because the coal power plants are out. We're not going to lose. But the question is what to build instead. Because depending on the success on that endeavor, that is actually, you know, the definition of victory here for me. Because victory is not just getting Russians out or getting to some stable peace. Victory is throwing them out, drawing the iron curtain behind them. and then rebuilding Ukraine in a way that would clearly make it as successful as its EU natives. Because that way, we will firmly get this territory and this nation into the West, integrate them in such a way where it will become fixed. In the same way as Poland has become fixed as part of the Western alliance, in the same way as Slovakia has become fixed as part of the Western alliance. Even Hungary, with all these political issues around it, political conflicts. still is firmly fixed in NATO, EU, Western political structures, and ultimately it's not about anywhere. And that is actually the goal, which I believe it's not just about restoring justice, it's not just about stopping bloody war, it's also about finally closing that tissue between the two worlds, between the West and the authoritarian Asia that Russia essentially represents. Because if Ukraine is no more in some kind of gray zone where we don't know what it is, the two sides can fight for it. Or at least Russia can pretend it's fighting the West over Ukraine, right? While the West was not really fighting and then had to come in to help Ukraine. So we close that picture. Once that picture is closed, once it's clear to everybody where the border between the two civilization and the border should run on the eastern border of Ukraine.
00:08:38 JACK GAINES
Okay. Have you been working with Parliament on building up better foreign investment laws to protect companies coming in with the government of Ukraine as well as going out into the international community and recruiting foreign investment?
00:08:54 PAVLO KUFTA
Actually, that's kind of what my career was mostly about. It's not about fighting groups or some kind of social justice. It's about an old Soviet corrupt model of the economy where essentially, Whoever is in power, whoever has begun, exploits everyone else, extracts resources from them. Versus the modern, liberal, normal market economy, where people earn money meritocratically, right? Whose ideas is better, who work more devoted wins, resources. And that's how it worked. And that's at the core of this question of Ukraine. Because you hear a lot of talks about Ukrainian corruption. Mostly these go nowhere. either descriptions of some corrupt officials, but this doesn't really tell you the nature of what we're dealing with. And we're dealing with this old legacy, because that is how the Soviet system essentially comes. You had the party and their apparatus, kind of keeping everyone else enslaved and then exploiting them. That's international, that's what Soviet Union was. Since that system did not really collapse, rather there was a kind of gradual transition. The former communists declared themselves now to be nationalists and pretended they are pro -independent Ukraine. Well, really, they are the former party bosses. Unlike to the West, unlike in Poland, where the system crashed and the new people came and the old guys were kicked out, and Ukraine did not happen. And that's why Ukraine went on this different path, much less successful. Because then no really quick and sharp reforms were possible. Well, there was a lot of shock here, but there was no therapy. because there were no real market reform. Instead, there was this mishmash of gradual introduction of market mechanisms into the Soviet system, which allowed to generate future profits, which created dollar guards, which created all kinds of injustices, instead of a normal market economy where you compete in whoever is better with. So that legacy is the problem, and that's what we're trying to get rid. And it's a fight right now. These days, it's a fight. I believe to win it, what we need is a proper... integration into the eu so it's kind of a carrot stick where the country has to change its system in exchange for money but not just giveaways for it to grow just hand something into the budget and you know they pay pensions with it no what we're talking about is an exchange okay you change your environment we give you structural funds to build up infrastructure to attract investment So the reforms create a better environment for the actors which we bring in to then change our economy, kick out the oligarchs. And then in a proper market time, really corruption, it doesn't disappear, right? Then you need a strong state, good institutions to fight it.
00:11:44 MARIAH YEAGER
Thank you. What is the scope for greater political decentralization as a route to limiting corruption?
00:11:52 PAVLO KUFTA
So decentralization has been ongoing in Ukraine. It's been a tool used pretty heavily over Europe. So all European countries were pretty centralized, unlike the U .S. Federal nations, all European countries used to be very centralized at some point. Then they realized that it's very inefficient. And they've started descent. It makes the system more efficient because it introduces competition on the level of local authorities. The decision -making is much closer to people, so it's much more effective and more efficient. It's simply a better system. It's not necessarily a tool for fighting. Because what happens is corruption from the center and it moves to the big cities or towns, local buildings. Not necessarily better. I mean, the examples are everywhere, including the states. We all know, like, towns captured by corrupt officials who then start rigging local election systems. perpetuating themselves in power, even in very developed countries. So these things can happen in any of this environment. So no, decentralization, I would say it's just simply a necessary reform for a modern way of life, because our modern societies are way too complex to be governed for one capital city. And that's why, you know, when people start talking about using some kind of strategist model, free construction of Ukraine, right? Let the state control everything and it will run everything. They don't know what they're talking about because that is exactly the way to create new oligarchy, new corruption, and to fail miserably. We need to keep it as a free market competition, as many Western companies and businesses as we can get, as much Western funding, Wester