Ukraine is set to receive preferential loans totalling $2.1 billion from the Republic of Korea over the next five years for its reconstruction efforts, courtesy of the Economic Development and Cooperation Fund (EDCF). The framework agreement for this project, endorsed by the Cabinet of Ministers on April 2, marks a significant milestone. Ukraine’s Vice Prime Minister and Minister of Economy Yulia Svyrydenko stated, ‘We’ve taken yet another stride towards finalising all necessary internal procedures, paving the way for the practical implementation of agreements with our Korean partners.’
Under this arrangement, Ukraine, or any resident of Ukraine with a state guarantee, will have access to these advantageous loans from the EDCF. The allocated funds will be directed towards equipment procurement and various restoration projects. The governments of Ukraine and the Republic of Korea will collaborate to identify suitable candidate projects. The specifics, including the amount and terms of these loans, will be meticulously outlined in distinct credit agreements signed between the EDCF and the borrowing entity.
One Team Korea in action
During his trip to Ukraine in July 2023, President Yun Sok Yol of the Republic of Korea introduced the Peace and Solidarity Initiative for Ukraine. This comprehensive effort encompasses financial support, non-lethal aid, and humanitarian assistance, as well as active involvement in the country’s post-war reconstruction.
Fast forward to September 15, 2023, when an official delegation from One Team Korea arrived in Kyiv. The delegation, led by Minister Won Hee Ryun of Korea’s Ministry of Land Resources, Infrastructure, and Transport, consisted of 18 representatives from both public and private sectors. While in Kyiv, a significant ceremony took place to sign loan agreements from the Economic Development and Cooperation Fund. This event was attended by Ukraine’s president, Volodymyr Zelenskyy and Won Hee Ryun. Additionally, discussions led to agreements on the initiation of six pilot projects aimed at revitalising Ukraine. These projects will focus on crucial areas such as urban development, water purification, and the reconstruction and enhancement of transportation infrastructure.
Several of these initiatives are already in progress. KIND (Korean Infrastructure and City Development Corporation) is presently working on a new master plan and transportation model for the Kyiv region. In 2024, they will kick off a crucial project focused on water drainage and wastewater treatment in Bucha, with potential expansion to cover the entire northwestern region down the line.
Another key player, K-Water, is the pioneering Korean state enterprise that actively participates in Ukraine’s reconstruction endeavours. Collaborating with the Korea International Cooperation Agency (KOICA), K-Water is concentrating on rehabilitating the Kozarovytska Dam, which suffered damage during the initial stages of the full-scale invasion. The dam’s urgent reconstruction is essential to safeguard the settlements lining the banks of the Irpin River below the Kyiv reservoir from potential flooding. Moreover, K-Water is in the process of crafting a “smart city” master plan for Uman. This comprehensive blueprint includes the introduction of innovative mobility solutions, the establishment of public disaster response systems, and the generation of electricity through renewable energy sources.
In addition to these endeavours, K-Water intends to collaborate closely on technical fronts with water resource management in the city of Horodok, located in the Lviv Oblast. Moreover, K-Water plans to take part in the reconstruction of the Kahovska Dam and the updating of outdated hydroelectric power station facilities. The Russians destroyed these facilities in 2023, yet due to the ongoing war, progress on this project has been delayed.
On another front, the Korea Airports Corporation (KAC) and Hyundai E&C have entered into a memorandum of understanding with Ukraine’s biggest international airport, Boryspil. This agreement involves assessing the airport’s current condition and identifying opportunities for joint restoration and modernisation projects.
It also encompasses the expansion and renovation of the terminal and runway at Kyiv International Airport, totalling approximately $983 million. Furthermore, Hyundai E&C, in collaboration with Holtec International—an atomic energy company—aims to develop Small Modular Reactor (SMR) projects for the restoration of Ukraine’s energy infrastructure.
POSCO International plans to establish a steel module production plant to aid in restoring residential and social infrastructure in the Mykolaiv Oblast. The adoption of modular construction methods could potentially slash construction timelines by up to 60%. Looking ahead, POSCO International has its sights set on broadening collaboration in three key areas: agribusiness, particularly focusing on processing; metallurgy employing eco-friendly technologies; and construction, encompassing a comprehensive production cycle of materials within Ukraine. The company has been actively engaged in Ukraine’s agribusiness sector and, prior to the conflict, made investments in a grain terminal situated at the port of Mykolaiv. Hence, its involvement in the reconstruction efforts and expansion of operations stands on a logical and pragmatic foundation.
Focus on the future
Reconstruction projects offer tangible business prospects: currently, the Ukrainian government, alongside the World Bank, the European Commission, and the UN, is evaluating the cost of reconstruction and post-war recovery at around $486 billion. This includes allocations for housing reconstruction (17% of the total), transportation infrastructure (15%), trade and industry (14%), agriculture (12%), energy (10%), and explosive hazard management (7%). South Korea boasts significant potential and cutting-edge solutions across these sectors. This presents numerous promising investment opportunities for Korean companies, and for Ukraine, it signifies not just a chance to rebuild what was lost but also to make substantial technological strides forward.
The reconstruction of Ukraine promises mutually beneficial cooperation for both countries in the long run. This understanding is shared at both governmental and business levels. In February 2024, the Republic of Korea became a member of the Multidonor Coordination Platform (MDCP), launched by the G7 and other agencies in 2023. This platform coordinates immediate financial support for Ukraine and plans for future reconstruction requirements. Through its participation in the MDCP, Seoul gains direct involvement in discussions among major donor states concerning Ukraine’s reconstruction journey, thereby broadening avenues for Korean companies.
Korean companies are actively gearing up to establish themselves in Ukraine and neighbouring European countries, particularly Poland, in anticipation of the impending major reconstruction phase. They are tackling legal matters for their future operations and delving into the legislation surrounding the establishment of branches or subsidiaries. Recently, there has been a surge in demand in South Korea for legal consultations regarding business operations in Ukraine. Korean legal firms are proactively seeking out professionals and forging relationships with Ukrainian partners.
Concurrently, there is a noticeable trend of expanding presence in Eastern and Central European countries. Despite the ongoing conflict in Ukraine, Korean investment banking firms, commercial entities, and state creditors are aiming to involve Korean businesses in post-war reconstruction projects within Ukraine, whether independently or in collaboration with European counterparts.
The reconstruction projects in Ukraine are presently a top priority for Seoul in its collaboration with Kyiv. However, looking ahead, the evolution of these relations may take on a broader European context. A key aspect of this is the involvement of Korean companies in lithium extraction in Ukraine, followed by the production of lithium-ion batteries for electric vehicles. Such a move would assist European markets in lessening their reliance on China, a goal actively pursued by the EU. This represents just one avenue that could unveil shared European prospects for Ukrainian-Korean cooperation.
War and the path to transformation
At the same time, it must be acknowledged that the ongoing hostilities complicate the execution of current projects for developing master plans and preparatory work, which Korean companies have initiated, and indefinitely delay plans for post-war reconstruction. As highlighted by our Korean counterparts, the issue of physical security stands as a significant deterrent for attracting Korean companies to engage in reconstruction endeavours: “In Korea, there exists a lack of understanding about what Ukraine truly looks like. There’s a perception that a country at war is completely devastated with nothing remaining. The perception of war varies greatly among Koreans, Ukrainians, and the rest of the world. Ukraine, as a country in conflict, exhibits much more resilience and strength than is commonly perceived beyond its borders. When we were organizing a visit to Ukraine, many members of the delegation expressed fear and even faced objections from their families. This aligns with the general perception of war, but the reality on the ground is different, and it’s essential to alter these perspectives.”
At the same time, it must be acknowledged that the ongoing war complicates the execution of current projects for developing master plans and preparatory work, which Korean companies have initiated, and indefinitely delay plans for post-war reconstruction. As highlighted by Ukraine’s Korean counterparts, the issue of physical security stands as a significant deterrent for attracting Korean companies to engage in reconstruction endeavours: “In Korea, there is a lack of understanding about what Ukraine truly looks like. There’s a perception that a country at war is completely devastated with nothing remaining. The perception of war varies greatly among Koreans, Ukrainians, and the rest of the world. Ukraine, as a country in conflict, exhibits much more resilience and strength than is commonly perceived beyond its borders. When we were organising a visit to Ukraine, many members of the delegation expressed fear and even faced objections from their families. This aligns with the general perception of war, but the reality on the ground is different, and it’s essential to alter these perspectives.”
Furthermore, numerous Korean companies recognise that they presently lack the knowledge required to enter the Ukrainian reconstruction market from the outset. In such a scenario, the role of local government bodies becomes crucial—their capacity to craft an investment proposition and their willingness to ease its execution. As an illustration, representatives of Korean businesses highlighted the Lviv region, where they intend to carry out projects for industrial parks and smart cities.
Helping Ukraine achieve the “miracle on Dnipro” stands as an ambitious goal for South Korean businesses. This sentiment was echoed repeatedly during meetings when experts from the Foreign Policy Council Ukrainian Prism visited Seoul in late December 2023. There was a time when, with the backing of Western allies, the Republic of Korea not only withstood and emerged from the wreckage after a devastating war but also ascended to become one of the most developed countries globally—forging its unique path to success, often termed the “miracle on the Han River” (named after the river that, like the Dnipro in Kyiv, flows through the capital Seoul). Thus, in addition to the desire to impart their own experiences of reconstruction and recovery, Koreans also carry a sense of a particular debt and responsibility to the global community.
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The material was prepared for the New Global Partnerships—Expert Diplomacy and Advocacy project with the support of the International Renaissance Foundation. It presents the authors’ position and does not necessarily reflect the position of the International Renaissance Foundation.
