Mr Putin's invasion in Ukraine has imparted a considerable shock to the world economy. At the end of 2020, inflation in the OECD countries stood at 1.2%. By the end of the first quarter of 2023, it had risen to 8.8%. Over the same period, global policy rates rose from –0.5%, 0.2% and 0.1% in the Euro Area, USA and UK respectively to stand at 3.25%, 5.0% and 4.5% by April 2023. Accordingly, in February 2022 the National Institute of Economic and Social Research had forecast world GDP to grow at 4.2% and 3.5% in 2022 and 2023 but by February 2023 this had been heavily revised down to 2.3% and 2.8%, respectively.1 The sharp increase in energy and food costs since the Russian invasion of Ukraine has not only threatened price stability but has also asked serious questions of the monetary and fiscal frameworks which coped so well with stabilising the global economy over the previous quarter of a century. Many had argued that this period of extraordinary monetary policy, while helpful in avoiding an extended depression after the global financial crisis, had been extended too long and expanded too far. The consequence of this was an unnecessarily large amount of quantitative easing, burgeoning public debt, and an increase in the fraction of unproductive firms, as well as the mispricing of risk in financial markets. If not a secular stagnation, by which I mean a period of slow structural growth that has required historically low interest rates to prevent deflation, the period seems to have had many of the characteristics of a liquidity trap, with firms hoarding cash rather than investing. It would be ironic indeed if an act of international aggression were to be provide the impetus to correct a misalignment in the stance of monetary policy.

#### **Context**

The invasion of Ukraine came at a precarious moment for a global economy still trying to recover from the impact of the COVID pandemic. Output had barely reached its pre-COVID peak in most OECD2 economies when Russia's tanks crossed Ukraine's border. Across the world, the fiscal response to COVID, in terms of additional expenditure and foregone revenue, amounted to some 18% of advanced economies' GDP in 2020 prices, as well as another 10% of GDP in terms of equity loans or guarantees [**1**]. While many maintained that the COVID shock was primarily one to the supply-side, with real markets in dysfunction and workers withdrawn from the labour force, there were also impacts on the demand-side. These were manifest most obviously with a radical increase in the savings rate, with some of this rise forced and some precautionary. As the pandemic receded, the world entered into a period of readjustment from around 2021. Such a world was not business as usual, or even coming close to it, not least as a result of significant supply chain disruptions, with China maintaining a strict COVID regime with manufacturing and with global shipping still facing disruptions. Monetary policies had been accommodative over the COVID period with the period of abnormally low rates extended further and fresh bouts of central bank balance sheet operations re-ignited. In the UK, for example, the quantum of QE3 rose from £495bn to £895bn at a peak at over 35% of GDP [**2**].

It was into this fertile mix of loose monetary and fiscal policy that the impact of war was unleashed in February 2022. The immediate impact was that energy and food prices practically doubled [**3**]. As a result of the increase in the cost base for consumption and for production, economic policy makers were presented with the problem of stabilising inflation and providing support for those households that would find it difficult to bear the impact on their disposable income. In ordinary times alone, this would have been pretty difficult. But simultaneously engineering an emergence from the expansionary policy stance amplified the nature of the problem. The initial position meant that the impact of the negative supply shock was exacerbated and that countries had levels of public debt, at 100% of GDP or more, far above notions of peace-time normality. In the language of the post-financial crisis, fiscal space was limited and monetary policy had a considerable distance to travel.

The emerging prospect of a prolonged war of attrition in Ukraine has further exposed some of the limitations of the economic settlement that was established following the end of the Cold War in 1991. The acceleration in de-industrialisation in the West since the 1990s has contributed both to a reduction in global inequality, but an increase, or at least an entrenchment, of domestic inequalities that have probably promoted a move towards populist movements. But a war asks directly whether some of the peace dividend that allowed defence expenditure to fall may now need to be claimed back. OECD defence expenditure had fallen from 3.5% of GDP in 1988 to 2.4% of GDP in 2020 [**4**]. Furthermore, would the discovery that Ukraine accounted for some \$27bn of global food exports, accounting for significant fractions of sunflower oil, wheat, corn, rapeseed and barley exports, bring forward the move to onshoring? And if the calls for greater economic resilience in the light of COVID were also to be addressed, there would have to be an extended period over which public and private investment would build up domestic supply networks and inventories. Each of these responses will tend to put upward pressure on domestic absorption around the world, and accordingly on domestic interest rate. And so, I focus the rest of this essay on why we may observe that it was the invasion in Ukraine that finally led to the reversal of global rates back to historical norms.

#### **The Case for Normalisation**

Policy rates hovering around zero were a rare phenomenon prior to the global financial crisis. In the immediate aftermath of World War I and World War II, there were periods when policy rates supported the creation of fiscal space and fiscal consolidation [**5**]. In more normal times, the monetary authorities were typically handed an exchange rate target and, latterly, an inflation target by their governments that was thought both to be reasonably consistent with price stability and yet not likely to induce too many costly deflations. Typically, a target of around 2% for the CPI was settled upon. This was coupled with a natural rate, which ensured that the market was cleared for savings and investment or at least directed path towards market clearing, which was generally of around 2–3%. Together, this meant that policy rates were expected to lie in the region of 4–5%.

In the face of economic shocks, monetary policy decisions set a temporary rate that offsets the shock or accelerates the economy's adjustment to the new economic circumstances. Let us suppose, for example, that a greater degree of economic uncertainty drives down investment demand. Monetary policymakers might seek to offset this uncertainty shock by reducing the policy rate so as to provide a lower hurdle for investors to surmount, and thus promote demand and offset the shock. The policy function in normal times, when monetary policy was actively trying to offset shocks and stabilise the economy efficiently, involved changing the policy rate by more than any change in actual or expected inflation, so that the temporary deviation in the real interest rate brought forward or delayed demand in such a manner as to bring inflation under control at the policy horizon.

In a nice, compact world with small shocks, we have a good idea of what the central bank may do, as its policy rate will follow inflationary pressure in a uniform manner. But with a sufficiently large negative shock to overall activity, the policy rate might have to fall to zero and then find itself in a bind. Indeed, hypothetically the central bank might prefer even lower rates but this may not be possible. Because, as policy rates tend to zero, cash will give a similar rate of return to bank deposits, which are linked to policy rates, which will prevent or limit the extent to which central banks can affect even lower policy rates. In principle, people would rather hold cash than see their bank balance diminish through negative interest rates. This observation implies that the policy function with respect to inflation is not linear and at, or close to, zero may become horizontal, with policy facing little room for manoeuvre in response to a large enough or sustained negative shock. In such a scenario, we have a world in which monetary policy is 'passive'. By this, it is meant that policy rates move by less than any change in inflation and cannot by itself get the economy back to the 'normal' equilibrium.

Such a situation leaves monetary policy authorities with a choice over affecting longer-term rates by making signals about the future stance of policy or influencing premia by exchanging central bank liabilities for assets held by the private sector. There are two separate interpretations of this situation. One is that it allows activism by other means by determining longer term interest rates promoting. The other is that there has been an acceptance of 'passive' monetary policy, which allows fiscal policy to take the strain. And yet after the financial crisis fiscal policy was, at least in terms of the normal perception of the acceptable level of public debt to GDP, already exhausted, so activism by other means was the prescription if it could be found. The weight of controlling nominal demand was placed on central banks who embarked on policies that expanded their balance sheets. While it seems to have prevented a prolonged depression, most advanced economies have subsequently been in the doldrums with stagnation in the growth of real incomes per hour worked. I maintain these two outcomes are unlikely to be independent. But could the change in the forces acting on the global economy in light of COVID and the war, allow monetary policy to escape the bind?

#### **The War and Easy Money**

There has been much written on how to escape from a growth or liquidity trap or what popularly came to be known as a secular stagnation. Some have argued that such a trap was highly unlikely and should not have been too much of a concern in the design of monetary policy operating procedures [**6**], particularly if central banks had credibility because it would always be expected that the inflation target would be achieved and so rates would be expected to return to normal. And since the 1970s the discussion of the liquidity trap had increasingly fallen out of focus as the problem was rather how to bring down inflation and attain price stability, by reducing demand, rather than how to boost demand. But the theoretical possibility remained. In light of Japan's experience since the 1990s, a number of exit strategies have been offered. Harking back to the original problem of money and bonds being perfect substitute at zero interest rates, Buiter and Panigirtzoglou [**7**] suggested placing a negative (Gesell) tax on base money – currency and reserves – as a way of discouraging holding. Svensson [**8**] suggested engineering a large exchange rate depreciation in order to bring about a temporary inflation and a loosening of monetary conditions. Many have argued for the deployment of a temporary expansion in fiscal policy, mostly through expenditure rather than tax cuts, in order to stimulate demand, starting of course with Keynes himself. But do note that attempting to stoke aggregate demand will tend to be most effective when public spending on goods and services or on investment does not offer a good substitute for private sector demand and so adds to demand, ideally by nurturing supply [**9**].

Could we have escaped with better management of expectations? That is to lower real rates by creating inflationary expectations. A famous strategy developed by Eggertsson and Woodford suggested exploitation of the expectations channel with the central bank proving a credible commitment to create a boom [**10**]. It is difficult though to conceive of a way that an institution, in this case a central bank, committed to or designed for achieving price stability, might reasonably expect to commit to a boom. A variant of this idea was, however, adopted by the Federal Reserve in 2020 with the inflation averaging regime. I shall return to this regime later, but the idea here is that following a deflationary shock inflation may fall below target for some time but if the long run average inflation target is credible households and firms will start to expect higher than average inflation for a short period which will perforce ease monetary conditions by lowering the real interest rates and so stimulate demand. Others have focussed on the inherent instability of models that rely so heavily on forward-looking expectations and argued that a liquidity trap was always beckoning, and that the way out was to build confidence by raising interest rates and signalling a return to normality [**11, 12**]. A natural consequence of this form of reasoning was the deployment of various forms of forward guidance which attempted to provide statements as to when interest rates would return to normal, either in terms of a commitment to a time in the future or a particular state of nature. But these forms of verbal guidance have not been judged to have been a great success and I have previously suggested that longer term expectations of policy rates responded more to the actual duration of policy rates at zero rather than any specific statements [**13**]. It seems more that the market learned more from actually observing that rates would not change rather than being told they would not change. Indeed, Woodford and Xie suggest that 'default expectations are best shaped by systematic action in accordance with a relatively simple rule, since they are learned by induction from past experience' [**14**].

In all this discussion, over the past 15 years, escape velocity from the zero lower bound looked very hard to achieve. The US tried both to tune down quantitative easing in 2013 but quickly retreated in the face of a 'taper tantrum'. The Federal Reserve tried to engineer a lift off in rates from late 2015. In a similar vein, the Bank of England started to raise rates in late 2017. But both attempts were stymied by COVID. The irony is that just as it seemed that the US only completed its recovery to full employment in 1942 in the two years from 1940 to 1942, when fiscal policies became instrumental during wartime and mobilisation, a return to normal levels of interest rates seems to have been prompted by a war started in 2022 [**15**], prompting a large inflation shock and a fillip to public indebtedness. Therefore, it might be that it is a more or less standard response to a large inflationary shock and the build-up of inflationary momentum that allows us to leave the low interest regime once and for all.

#### **The Natural Rate of Interest**

There has, of course, been a secular decline in the global real rate since the 1990s and that has increased that likelihood of central banks being caught in a low interest rate trap. The standard explanation for this decline is that households in the rapidly industrialising countries have had a lower rate of time preference and so built-up the stock of globally available savings rapidly. The market for global savings therefore cleared at successively lower rates of interest rates as this stock of savings was built up. The rate at which savings and investment schedules clears is the natural rate of interest and has accordingly drifted downwards over time. And it is deviations from the natural rate that determine the traction of monetary policy.

The increase in global supply capacity without a parallel increase in overall spending tended to reduce progressively the rate at which savings and investment cleared. An impetus to this trend was provided by the financial crisis, which by lowering the quantum of financial intermediation, acted to lower further the natural rate and thus led to both an extended period over which policy rates hovered around zero and prompted extensive purchases of government bonds that acted to lower interest rates at term.

In light of the invasion of Ukraine, there are now a number of factors that are acting both to limit the growth in potential supply and also push up expenditures, which may support a re-establishment of normal policy rates. Higher energy prices will tend to constrain potential growth, as will the fragmentation of trade, which may ultimately lead to the formation of new trading blocs. As the newly industrialised economies reach the productivity frontier, we can also expect their growth rates to fall to advanced country levels. At the same time, the war and COVID have revealed a need for more public expenditure. For example, world military expenditure rose by 3.7% in real terms in 2022, to reach a record high of some \$2.2 trillion [**16**]. These pressures, particularly if they are significant and aggressive, will tend to raise the natural rate of interest. And this about turn may not yet have been fully factored in by financial markets [**17**], which often adjust more slowly to changing secular trends than one might think optimal.

To illustrate, **Figure 17.1** shows how the natural rate is determined at the intersection of global potential output and clearing in the goods market (IS curve) [**18**]. Positive global growth with

**Figure 17.1: Lower natural rate of interest**

**Figure 17.2: Higher natural rate of interest**

a stable schedule for clearing expenditures on goods will tend to push down the natural rate. In principle, this could lead to fall in the natural rate to a negative level from **A** to **B**. We could choose to characterise the period since the global financial crisis as having obtained that state, particularly if the IS curve has also shifted down (not shown). The war, though, may not only have reversed this step, but provided some impetus for the situation to reverse with the natural rate eventually rising to **C**, as shown in **Figure 17.2**, which will result if the newly industrialised countries start consuming rather than saving. The secular forces that have driven down the natural rate may be about to reverse.

#### **The Monetary Policy Stance**

The final part of the jigsaw is the monetary policy stance as we have come out of the COVID cloud. The global monetary support for fiscal policies during COVID was understandable at the time and with hindsight. The absence of a clear exit strategy for reversing emergency support arguably allowed the support to stay in place for too long and caused us to forget that prior to COVID we had sought to normalise rates. The deployment of average inflation targeting and increasing reliance on flexible inflation targeting, along with peripheral monetary issues such as climate change, employment and financial regulation, meant that both the Federal Reserve and the Bank of England may have moved some distance from simple inflation targeting. The European Central Bank has confronted complex control problems as the member countries do not constitute an optimal currency area, which has arguably led to some sluggishness in policy.

In its August 2020 statement on monetary policy the Federal Reserve stated that:

In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore, judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time…the Committee seeks over time to mitigate shortfalls of employment…The Committee intends to … undertake roughly every 5 years a thorough public review of its monetary policy strategy, tools, and communication practices [**19**].

And this statement might be interpreted as involving both an occasional shift in the medium-term inflation target and the adoption of a supplementary target to support employment, which would imply trade-offs in the face of negative supply shocks and possibly a lower aversion to inflation by the central bank. The Bank of England, on the other hand, has had a clear secondary remit to support the economic policy of the government, including objectives for employment and growth [**20**]. This remit states:

[T]he objectives of the Bank of England shall be:

a. to maintain price stability;

and b. subject to that, to support the economic policy of Her Majesty's Government, including its objectives for growth and employment.

**Figure 17.3: The monetary policy trade-off**

Which allows it to pick the horizon over which inflation is brought back to target following a significant overshoot or undershoot. In this case, the deployment of that path has not been credibly communicated.

How does all this translate into an inflation response when there has been a supply shock? Well, **Figure 17.3** traces a linearised Phillips curve showing how short run supply responds to demand and higher inflation. But also two monetary policy reaction lines: MPRH when the policy maker has a high level of distaste for inflation, a so-called hawk, and MPRD when the policy maker is more willing to accept a higher level of inflation temporarily, a so-called dove. We can thus immediately note in **Figure 17.4** that upon a negative supply shock, inflation will rise to **A** or **B**, depending on the inflation credentials of the central bank. In other words what we see in terms of inflation

**Figure 17.4: The negative supply shock**

incorporates not only the supply shock but also the assumed policy response. It cannot be stated strongly enough that observed inflation always is a result of shocks and responses, actual or expected. Furthermore, if there are supply chain issues or a break in trade, for example, as a result of Brexit, this Phillips curve may steepen. And in this case, as drawn in **Figure 17.5**, **A2 > A > B2 > B**. Finally, as shown in **Figure 17.6**, in the case of the Federal Reserve, which may temporarily increase its implied inflation target or in the case where it is expected that the central may raise its target, in this case I have suggested that even the MPRH curve may shift up and drive inflation up even further with **A3 > A2** . In the UK, the government had stated a wish to halve inflation in 2023, which may have inadvertently introduced a temporary inflation target for 2023 of 5% and played a role in more persistent inflation. My basic point here is that although

#### **Figure 17.5: The negative supply shock and steeper Phillips curve**

**Figure 17.6: The negative supply shock, steeper Phillips curve and shifting target**

we are right to assign much or the greater part of the inflation shock to the one-off increase in energy and food prices, these interact with the actual or perceived stance of monetary policy to create the actual inflation dynamics we observe. The impact of the war on inflation has thus been amplified by the initial conditions of monetary policy and now produced the long heralded policy normalisation.

### **Conclusion**

One of the consequences of the invasion of Ukraine is that, over a decade after we entered the period of ultra-low or unconventional monetary policies, the combined shock to the fiscal positions and to inflation have finally jolted policy rates back into historically recognisable territory [**13**]. The good news story would involve a more secure deposit base, under these higher short term interest rates, with incentives to save and financial intermediation operating to locate higher real returns [**21**], as inflation returns to levels associated with price stability over the next 18 months. The bad news story would be one where the overall deflationary impetus, as we moved from the low interest rate regime back to the normal one, has simply been too large and rates have to correct downwards back towards zero as recessionary forces build up. To the extent that inflation has been more elevated than it might have been, this has increased the possibility of the second and much worse outcome. And to that is at least in part due to some slippage in the actual or at least perceived commitment to price stability [**22**]. It is important that central banks are not given too many objectives which will require trade-offs against the attainment of price stability when we have a limited number of independent instruments. And that some earlier attention to the exit strategy from extraordinary monetary policies was outlined, particularly following their re-ignition during the COVID cloud. While it is not impossible that we may get dragged back into the liquidity trap, at least for the moment we are out. And that is one monetary benefit from the war.

#### **Acknowledgements**

This essay has benefitted from comments and conversations with Tim Besley, Luisa Corrado, Mick Cox, Paul Fisher, Stephen Millard, Paul Mortimer-Lee, Dmytro Natalukha, Adrian Pabst, Nicholas Reed Langen, Silvana Tenreyro and the comments from an anonymous referee. It has been prepared for LSE Public Policy Review: Special issue 'Russia's War in Ukraine and the Future of the Global Order'. Any opinions expressed are mine alone.

#### **Notes**

1 Source: National Institute World Economic Outlook May 2023, Series B. No 10 and the IMF World Economic Outlook, April 2023.

2 The OECD (Organisation for Economic Co-operation and Development) is a grouping of advanced economies that come together to work on common economic and social problems.

3 Quantitative Easing (QE) is the attempt to influence long term bond prices by swapping financial market holdings of government issued debt for newly issued central bank reserves. Although first implemented in Japan in the 1990s, it became a widespread and persistent policy tool in Western economies following the collapse of Lehman Brothers bank in 2009.

#### **References**

## **18. Reconstructing and Reforming Ukraine**

Erik Berglöf and Vladyslav Rashkovan

Helping Ukraine to reconstruct and reform its economy is arguably the most important project for Europe this century. It will require extraordinary collaboration from within and outside of the country. We establish a set of principles that should guide these efforts, based on international and Ukraine's own experience. This experience also suggests key building blocks of a reform and reconstruction architecture that can help ensure that these principles are successfully applied. We assess the current institutional arrangements in this light and suggest adjustments that will increase the likelihood of success. The core of the argument is that the unfathomable choices involved in reconstruction and reform, including the use of donor resources, must be made by the Ukrainian people and its elected representatives, and the outcome must be owned by them.

Reconstructing Ukraine will possibly be the most important political project for Europe this century. It will require extraordinary collaboration from within and outside of the country. The complexity of the tasks and amounts of funds involved (World Bank estimates suggest that Ukrainian reconstruction will cost US\$411bn, which corresponds to 2.5 times the country's estimated GDP) go far beyond the capacity of existing international financial institutions and the amount of concessional development assistance available globally [**1**]. There are many past national reconstructions that provide invaluable guidance, but we must ensure to draw the right lessons from history.

The project is not only important for Europe, but also for the world. It could become an example of how the world can come together to reconstruct a country ravaged by war. Divisions over the responsibility for the damage done to Ukraine and to its people should not be allowed to interfere with the ambition to help the country to reconstruct and reform itself. Of course, there are other places in the world that should also receive such help, but Ukraine offers a unique opportunity to test the modern international system, and to learn for other efforts in the future. We must seek to achieve the broadest possible coalition behind this project.

An instinctive response would be to call for a Marshall Plan 2.0 [**2, 3**]. This mostly successful scheme, which saw the USA fund much of the reconstruction of Europe after World War II, may be an effective slogan for galvanising support, but this does not mean it is the right model for Ukraine. The Marshall Plan provided macroeconomic support to the physical rebuilding of countries with essentially sound institutions. In contrast, Ukraine requires root-and-branch reform of its entire economy.

Few potential contributors would be convinced to provide unconditional aid to post-war Ukraine, with any international funding likely resting on its commitment to reform. Making and guaranteeing such commitments should be the lead principle for those designing the reconstruction and reform architecture.

While the Marshall Plan may not be the perfect model for Ukraine, neither were the post-war occupation administrations in Germany and Japan. No one is seriously arguing a wholesale adoption of this approach, but many suggestions have elements of imposing institutions from the outside [**2**]. History is littered with failed attempts to change institutions from the outside [**4**]. Not even in completely failed states do we now believe in this approach [**5**]. And Ukraine is not a failed state. While it has some institutional fragilities, many parts – such as the central bank, the public procurement system ProZorro, and the gas monopoly Naftogaz – have been profoundly transformed and are functioning well. Ukrainian civil society is extremely well developed and responsive, as demonstrated in the war.

What must remain a focal point for Ukraine's builders is that reconstruction and reform remain entwined. They must be implemented under an integrated institutional architecture, one which unifies the domestic and foreign efforts to repair and reconstruct the country. The design and implementation of this framework must grow out of a process that is owned by the people to whom it will apply, given that it first requires making decisions about priorities and choices that no outsider could or should decide on. Second, the government must be able to take responsibility for any design flaws in the architecture, or any unintended consequences of the institutions created or modified to achieve reconstruction and reform.

The likelihood of success of the reform and of reconstruction efforts will be greatly enhanced by the EU accession process. The "EU dream" is a strong political anchor in Ukraine. The cumulative experience of Central and Eastern Europe and, more recently, Southeast Europe provides important guidance on the sequencing and complementarities of the different elements of accession. A hallmark of the accession process has been that while the EU framework creates a clear sense of direction, and sets out reasonably well-defined targets as well as incentives to reach them, the decisions how and when to achieve those targets are left to the countries.

This chapter establishes some basic principles for the combined reconstruction and reform effort and discusses the experiences from some previous reconstruction projects. It then proceeds to identify some elements of a viable reform architecture and a structure for donor coordination. The chapter also briefly looks at how the EU can enhance the effectiveness of its support. Finally, conclusions are drawn for the Ukrainian reform and reconstruction process.

### **Principles of Reconstruction and Reform**

Principles for reconstruction and reform in Ukraine have been discussed in multiple papers, including Gorodnichenko et al [**3**], German Marshall Fund [**6**] and Ukrainian Recovery Council [**7**]. These analyses highlight the importance of partnership, coordination, transparency, rule of law, democratic participation, multi-stakeholder engagement, inclusion, sustainability, alignment of goals, and accountability. Such principles apply to all cases of post-war and post-natural-disaster reconstruction [**8**] and link up with the Busan Principles of Aid Effectiveness [**9**].

The overriding principle for any reconstruction and reform is Ukrainian ownership. Only Ukraine can determine its future and define a vision of the post-war country it wants to build. For investment decisions to be undertaken efficiently and for reforms to stick, they must be viewed as legitimate by the citizenry. Aid will be dispensed most effectively when it is seen as consistent with Ukraine's own interests. Ownership should rest on broad domestic support achieved through inclusive and transparent consultations with local authorities, civil society, and business, while Ukrainian civil society offers interesting models for the involvement of citizenry (e.g., Center for Economic Strategy [**10**]).

A second important principle is that reconstruction and reforms that are designed to enhance both efficiency and growth must go hand in hand. Even while addressing urgent tasks of rebuilding, the government and donors should work to advance Ukraine's structural reform agenda. Reconstruction is an opportunity for Ukraine to leapfrog generations of technologies and should facilitate significant economic and institutional modernisation. The goal should be a post-war Ukraine that is structurally transformed to be more green, more inclusive, and more dynamic.

Institutional reform should be guided by and be consistent with European Union values, given that EU membership is the economic and political endpoint for Ukraine. The EU integration process provides an anchor for Ukraine's efforts to become a modern, democratic, prosperous country by aligning its incentives with those of Europe and ensuring sustained external support. Consequently, it serves as an important guide for the decision-makers and reduces the need for other conditionality. However, the EU path is also beholden to internal EU politics, which must not become an obstacle to reconstruction.

The EU accession process is associated with significant transfers of funds. First, there are pre-accession funds, and then all the resources available to members. These funds are particularly large for poorer members, and they can be used to leverage other funding from bilateral and multilateral financial institutions. Yet the most important financial flows – both portfolio and direct investments – will come from the private sector as risk premiums decrease. Improving the investment climate then becomes essential to attract private and institutional capital.

EU funds mostly come in the form of grants, but most other flows will use various financial instruments, including debt, guarantees, and equity, received from bilateral and multilateral donors and international organisations. It is important that in the end, a significant component of the money transfers are grants – a country devastated by war is unlikely to be able to service and repay additional debt, at least in the short term. Excessive reliance on loans will raise the risk of a debt solvency and will potentially distort investment decisions. The aim must be to design grant structures that are helpful and come with proper governance without undermining the ownership and incentives of Ukrainian decision-makers.

While providing grants has many advantages, the amounts needed to build the new Ukraine will far exceed available concessional resources globally, so solutions will have to be found to combine these grants with other financial instruments. Debt has the distinct advantage in that it is disciplines the contracting parties while equity confers the risk on its owners – and both can potentially be traded. The problems associated with debt can be resolved through later restructurings or debt extensions; debt can also be linked to economic performance or to the delivery of important public goods, such as climate change mitigation or nature conservation and biodiversity.

Moreover, reconstruction cannot rely on the funds of governments and international organisations alone. The participation of private capital, for example, in the form of inward foreign direct investment and public-private partnerships, is essential. Such partnerships will convey not only money but also technologies and managerial expertise. Private flows will be particularly vulnerable to any remaining threats of war actions and are unlikely to come in large sums until a lasting peace has been achieved, but some foreign investors are continuing to commit capital at present, mainly in the parts of Ukraine less affected by the war.

The first stages in reconstruction are planning and institutionbuilding, which can take place even under the threat of missiles and drones. Critical structural reforms also should not wait for the end of the war. Even while the war continues, Ukraine can strengthen market mechanisms, promote competitive market structures, and foster market development. The major players can start now to put in place the prerequisites for a comprehensive reconstruction. Some measures, for example, investing in a more decentralised energy infrastructure based on renewables, can also help to reduce the country's short-term vulnerability to military threats.

#### **International Reconstruction Experiences**

There have been previous national reconstruction efforts that were initiated or at least partially engineered by outsiders. At a very superficial level, two distinct approaches can be identified. First, there is the radical US approach, perhaps best symbolised by the efforts after World War II in Germany and Japan, but also in Iraq and Afghanistan. Within this approach, there is an emphasis on building institutions for democracy, rule of law, and human rights from scratch. Second, there is the more gradual European approach, which focuses on long-term change that build on existing institutions, often relying on the outside anchor of membership in the European Union.

The Marshall Plan contained elements of both, using massive transfers of financial resources for the post-war rebuilding of Europe. To administer the Marshall Plan, the US government created a self-standing agency, the Economic Cooperation Administration (ECA), with a hierarchical structure that clearly delineated responsibility and authority. The ECA administrator was the ultimate decision maker, situated at the top of a welldefined chain of command. It had a 600-employee regional office in Paris and missions of American government officials to advise and observe in each country receiving aid.

This structure contrasted with other post-World War II efforts to rebuild Europe – for example, the UN Relief and Rehabilitation Administration (UNRRA) where a lack of personnel and leadership as well as uncertain budgets plagued the program. UNRRA controlled resources unilaterally, and it often ignored local input. Gradually, UNRRA ramped up coordination with other organisations providing relief, and so became more effective.

The Marshall Plan's top-down, army-style organisation, differs from those used for subsequent US reconstruction efforts, and for reconstruction efforts more broadly. Some of these efforts, as detailed below, have been effective and efficient, leading to a swift and genuine recovery from disaster. Others have been bedeviled by poor organisation and consequently, insurmountable challenges.

In Iraq there was no single administrator with the power to resolve interdepartmental disputes, despite the efficacy of the ECA in Europe. Consequently, reconstruction was plagued by poor planning, weak oversight, poor coordination (if not rivalries) across agencies, weak security, poor involvement of locals, low capacity to absorb aid, and understaffing. Similar problems afflicted the recovery of Puerto Rico after Hurricane Maria in 2017. Four years after the hurricane, Puerto Rico still lacked electricity and many homes and buildings still had only temporary roof covers in place. As of the summer 2021, only US\$18.6 billion of an allocated US\$64 billion had been spent. Among the reasons for this were red tape (specifically, extensive bureaucracy at the Federal Emergency Mitigation Agency (FEMA) responsible for reconstruction), a debt overhang that discouraged new investment, the non-transparent use of funds, and the fact that Puerto Rico's government had little engagement with or influence in the process.

Pakistan's experience of reconstruction after the 2005 earthquake is more positive [**11**]. The scale of the natural disaster was such that line ministries and local authorities lacked the capacity to effectively organise a comprehensive reconstruction effort. That effort required extensive coordination and a considerable degree of centralisation if it was to deliver the key objectives of mobilising funding and external aid, building back better (especially in terms of seismic safety), achieving a rapid recovery, allocating funding efficiently, enhancing sustainability, and achieving inclusivity. The government therefore established a special authority: the Earthquake Reconstruction and Rehabilitation Agency (ERRA). This new body had several desirable features. First, it was headed by the prime minister, which provided strong political backing and a clear sense of ownership. ERRA had the necessary centralisation to achieve uniform policies and standards, and a sustained flow of funding. At the same time, it involved the international community in a variety of roles (providing technical expertise, oversight, etc.).

Second, the government developed a plan for reconstruction to be undertaken quickly (ERRA itself was launched only three weeks after the earthquake). This was instrumental in securing external funding and laying the groundwork by, for example, providing early and credible damage assessment. ERRA developed a set of sectoral policies and priorities to concentrate resources on key programs. Early planning at the national level was instrumental in achieving a holistic approach and the prioritisation necessary for cluster projects and sustainable recovery.

Third, although a centralised agency oversaw and coordinated aid, implementation was decentralised, employing the subsidiarity principle. Local authorities could approve and implement projects up to a specified price tag. Larger projects involved regional governments, while the largest projects were determined by the central authorities. This tiered approach enhanced ownership by, inter alia, local governments and improved information sharing and coordination. To ensure that funds were not diverted, project results were reported to the relevant steering committees, and funding was provided in tranches. ERRA's organisational structure emphasised horizontal linkages to provide forums for dialogue between stakeholders.

Fourth, to ensure sustained support of donors, ERRA allocated projects (or sectors) to specific donors. This attached donors to specific responsibilities and provided an opportunity for donors to report achievements to their stakeholders. ERRA ran monthly meetings of donors to cultivate relationships and prevent donor fatigue. Overall, ERRA attracted US\$2.5 billion in grants and US\$4 billion in loans. Although Saudi Arabia, the United States, China, Iran, the United Arab Emirates, and development banks accounted for the bulk of these funds, ERRA established a dedicated window to coordinate funding from smaller donors. This approach provided a single interlocutor for potential donors, lightening the burden of attracting and managing aid.

Fifth, ERRA had a strong legal mandate and sunset provisions. The former was necessary to overcome inertia and bureaucratic bottlenecks, while the latter were needed to ensure that ERRA did not turn into a new bureaucracy, substituting for line ministries and other authorities. ERRA also provided much needed data gathering and data processing to evaluate progress and to strengthen accountability. Importantly, ERRA only financed construction of seismically safe houses, consistent with the 'build back better' principle.

The reconstruction of Sri Lanka after the 2004 tsunami provides similar lessons. Sri Lanka established a dedicated reconstruction agency with a clear structure. Its Taskforce for Rebuilding the Nation (TRN) was composed of high-level officials and businessmen; it was structured to minimise red tape and ramp up quickly. Sri Lanka pursued policies consistent with the 'build back better' principle: new houses were built according to higher standards; new regulations on construction, fishing and tourism in coastal areas were introduced; and education programs were developed on what to do in the event of disasters. However, a lack of a well-planned land-use policy and of construction guidance resulted in a somewhat chaotic process of land allocation and a varying quality of construction, while over-reliance on local governments created disparities between regions. Further, the reconstruction agency was dismantled too early, which prevented institutionalisation of its experience and knowledge transfer.

Finally, Indonesia's recovery from the 2004 earthquake and tsunami was highly effective, thanks to the Agency for Rehabilitation and Reconstruction of Aceh and Nias (BRR), which was established in early 2005. The BRR operated for four years, with a mandate directly from the constitution of Indonesia to restore livelihoods and strengthen communities in Aceh and Nias. It designed and oversaw a coordinated, community-driven reconstruction and development program that was implemented according to the highest professional standards. This temporary but powerful agency was given full authority to manage all aspects of the tsunami recovery in Aceh on behalf of the central government, which allowed for a much smoother coordination process, devoid of any potential inter-ministry politics and bureaucracy. A coordinated approach to planning, fundraising and implementation ensured that the reconstruction program was effective, duplication was minimised, and donor funds were used optimally.

#### **Ukrainian Reconstruction and Reform Architecture**

Ukraine needs both reconstruction and root-and-branch reform, building on the achievements of previous efforts, but also recognising the failures and the remaining challenges. Fundamental choices about what and how to rebuild and reform, and in what order, will have to come out of an inclusive domestic political process in which all domestic stakeholders are adequately represented and where decisions are owned by the Ukrainian population. The country needs an integrated architecture for both reconstruction and reform firmly rooted in the democratically elected institutions.

Yet to succeed, a reconstruction effort will require external support of extraordinary magnitude. Contributors will need to be reassured that the resources they provide will be used in an efficient, effective, and transparent way and, in the case of loans, that they will be repaid. This will have to be achieved under time pressure, as the expectations of citizens will be high after the sacrifices incurred. "Donor fatigue" is also likely to set in as the memories of the war fade away among external contributors.

Any reconstruction and reform architecture must balance these two objectives. This is not an unusual ambition for any rebuilding program, but what makes the Ukrainian situation stand out is the scale of the challenge and its geopolitical significance. The process has necessarily begun in the middle of a war and – once outright hostilities have ceased sufficiently to scale up reconstruction – may have to accommodate the risk of future military disruptions and sabotage. The challenge to create a sense of local ownership with an ongoing war, and while more than 15 million citizens are displaced internally or abroad, should not be underestimated.

So far, the Ukrainian population has demonstrated remarkable resilience and ingenuity, and civil society has responded in extraordinary ways. Every effort must be made to reach out to the dispersed community of organisations to canvas and to consult on ideas and concrete proposals. The hope for Ukraine is that the groundswell of community activity and acts of solidarity can, in due course, be channeled into the restructuring of the war-wrecked Ukrainian economy and reforming its economic and political system.

Like any country trying to reform with external support, there is a historic context of previous reform attempts and already entrenched interests. The war experience has provided a jolt to established patterns and has shifted relative positions of stakeholders, but preexisting obstacles to reform are unlikely to have gone away completely, and new special interests will emerge from the war experience and in the reconstruction effort. Sustaining the reform momentum will require maintaining the broad support internally, and also externally. Designing a robust reform architecture will be critical.

After the 2014 Maidan Revolution, Ukraine had an interesting experiment in how to build a domestic reform architecture. A gathering of more than 200 Ukrainians representing different parts of society met for three days in July 2014 at a time when the country did not have a democratically legitimate legislator and found itself thrust into a war with Russia. Among other elements, the group came in behind a proposal for a coordination body generated by reformers inside the government. This was later supported by the country leadership, which established a National Reform Council (NRC). This was staffed by a hundred reform-oriented civil servants in different ministries trained under the EU-financed Ukraine Reforms Architecture (URA) program implemented by the EBRD.

The NRC built up a dialogue platform that included representatives from all relevant stakeholders: economic officers of the President's administration; economic fields ministers (economy, finance, infrastructure, agriculture); the National Bank governor; members of the economic committees and heads of the coalition parties of the Parliament (opposition party leaders didn't participate); representatives of the key business associations; and representatives of the civil society. Considerable donor resources for technical assistance were channeled to support a Secretariat that was supported by at least one or two people of its project implementation unit in each of the line ministries.

The NRC was envisaged to become a platform to present and to discuss the key reforms Ukraine needed with the main stakeholders. As a result of the dialogue, there was a general agreement to support the reform through different implementation stages. They agreed on the concept of the reform, turned it into legislation approved by the Parliament, supported the rollout and created the feedback loop to evaluate its results.

Indeed, the NRC was important in 2014–2016. All the major reforms within the financial and fiscal sectors, energy sector, public procurement, health, and educational reform, etc. were discussed at the NRC meetings every three weeks. Part of the meetings were televised. The responsible minister was tasked with presenting his or her vision, and the measures planned to achieve the goals were set out. From 2017 onwards, the Council was less useful – the country had run out of steam for reform.

In April 2022, just two months after the full-scale invasion, the Ukrainian government created a similar institution – the National Recovery Council (also NRC). Unfortunately, the new institution never became operational as initial management was weak and got dragged into political infighting. These initial mistakes do not mean that the idea of a National Recovery Council was wrong. Times are different today and the magnitude and urgency of action even greater, but the experience of the National Reform Council should become an important element of a new state-of-the-art inclusive reconstruction and reform architecture that also integrates experiences from other parts of the world.

#### **Donor Coordination**

The massive external flows necessary to build the new Ukraine will require massive coordination. Several proposals have suggested the creation of a new agency within the EU for this purpose. The magnitude and complexity of administering EU support to the Ukrainian reconstruction and reform effort might require the creation of a new agency inside the EU, but this must not be confused with the arrangements needed to coordinate all of the country's external donors and lenders. Accumulated post-WWII development experience, manifested in the Busan Principles for aid effectiveness, emphatically states that donor coordination will only work when owned by the recipient country. Thinking has recently coalesced around 'country platforms', which would bring together all major stakeholders to ensure that financing and associated conditionality are internally consistent and in line with the government policies [**12, 13**].

Country platforms were originally conceived by a G20 appointed group as tools for the coordination of international financial institutions, linking them in an overarching system to increase their efficiency and effectiveness [**12**]. But regardless of the strength of any overarching system, it is in the individual recipient country where the system will be ultimately tested. The parties to a country platform would agree to meet certain common core standards (for a set of potential common standards, see the Eminent Persons Group (EPG) Report [**12**]) to help coordinate efforts and facilitate collaboration, but also to reduce the scope for corruption and other governance problems.

In a first effort to coordinate outside stakeholders for the reconstruction of Ukraine, the leaders of the key International Financial Institutions (IFIs) – the International Monetary Fund (IMF), the World Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB) – and the European Commission established a temporary coordination mechanism during the 2022 IMF-WBG Spring meetings in Washington D.C. The country representatives of these organisations have been organising EU-IFI coordination meetings to discuss Ukrainian short-term financing needs, the first important stage for the reconstruction. While these meetings have been instrumental for sharing information and coordinating operations, they never envisaged more strategic discussions.

On this front, the first major strategic coordination platform for Ukraine was created at the end of 2022 when the G7 established a multi-agency Donor Coordination Platform. This platform aimed to support Ukraine's immediate financing needs, and its future economic recovery and reconstruction. The platform has a Secretariat with two seats: in Brussels, within the European Commission, and in Ukraine – within the Government. Since being established, it has worked with Ukrainian authorities to define, prioritise, and sequence strategic needs. It envisages the coordination of international efforts to support a sustainable, resilient, inclusive, and green economic recovery which enhances strong democratic institutions, rule of law, and anti-corruption measures.

During the G7 Leaders' Summit in Hiroshima, Japan in April 2023, the Development Finance Institutions (DFIs) of the G7 countries and the EBRD agreed to establish the Ukraine Investment Platform. This platform focuses on the private sector and aims to strengthen cooperation and promote information exchange on the question of co-financing. It will also consider the needs of neighboring countries affected by the war. The parties, in close consultation with respective governments, will address the lack of financial capacity, especially in the private sector, and contribute to the recovery of the economy, industry and infrastructure, and to the reconstruction of people's lives.

Another EU coordination mechanism (the European Development Finance Institutions coordination group (EDFI)) has also been established to coordinate a further part of international aid to Ukraine. EDFI brings together European DFIs that foster private sector finance in countries outside the EU. This group has been a good mechanism of coordination, but with limited impact on recovery and reconstruction: many of the institutions have not previously been active in Ukraine, while their financial firepower is limited. Instead, EDFI members are likely to focus on technical assistance to existing clients, disbursing grants, restructuring portfolios, and offering forbearance, rather than providing strategic guidelines for the post-war reconstruction.

During the Ukraine Recovery Conference in London in June 2023, the EBRD, members of EDFI and other G7 Development Finance Institutions (DFIs) signed a Memorandum of Understanding (MoU) that provides a framework for collaboration and co-investments in Ukraine, with a primary focus on the private sector. With the addition of new participants, the total number of signatories now stands at 19. This welcome development should help promote coordination among official financiers.

The question is though whether any of these arrangements fully respect the leading principle for the governance of country platforms, i.e., genuine country ownership. For this to be achieved, the arrangements must be integrated into domestic economic decision-making and subordinated to the overall priorities of the government and to the democratic governance of the country. A good example for the country platform to follow is the Egypt's Nexus of Water Food and Energy (NWFE) platform, in which the Egyptian government displays a pipeline of renewables projects, mainly solar and wind, and its program for phasing out fossil fuel assets. The participating international financial institutions, which include EBRD, EIB and Asian Infrastructure Investment Bank (AIIB), and national development finance institutions, such as Kreditanstalt fur Wiederaufbau (KfW), are then invited to collaborate in the financing of these projects.

Access to grants and other forms of concessional finance will be an essential feature of the Ukrainian reconstruction effort. The NWFE platform has attracted concessional resources from the US, for the retraining and potential early retirement of workers connected to fossil assets; and from Germany, in the form of performance-linked debt related to fulfillment of climate policy commitments [**14**]. Interestingly, the platform has also helped to bring in equity capital in the form of foreign direct investment in the production of intermediate goods for renewables. Attracting parts of the renewables value chain should also be an important objective for the design of the reconstruction effort in Ukraine.

The country platform concept is now also being used by the G7 in the form of so-called JET-P (Just Economic Transformation Platforms) to implement climate policies in collaboration with individual countries in the emerging and developing world. The first one was a collaboration between the UK and the US in South Africa from 2021. Early lessons from this exercise illustrates several important challenges facing Ukrainian reconstruction, e.g., differing perceptions of what "just" means, what "transformation" trajectory is most desirable, and the lack of follow-through on international promises. The South African example is now being followed with collaborations in Vietnam and Indonesia, and a further platform is being considered in India. There should be rich opportunities to learn lessons for Ukrainian reconstruction and reform from these experiments in donor coordination on climate policy.

#### **Implementation**

To manage the herculean task of implementing the reconstruction, the proper institutional arrangements must be prepared. Ukraine needs to put in place the organisational structures, policies and procedures to plan, manage and implement recovery. One model is that suggested by Eichengreen and Rashkovan, who propose creating a specialised, self-standing agency led by the European Commission, but with majority of its staff in Ukraine, and with management representation from each non-European G7 country [**15**]. According to their view, such an agency should have clear lines of command and independence in operations, oversight by donors, and civil society should be provided by a supervisory board and by the publication of detailed information on reconstruction initiatives and projects. The agency should communicate regularly with donors, local governments, Non-Governmental Organisations (NGOs), businesses and other stakeholders to ensure that the reconstruction takes into account the interests of multiple stakeholders.

While we support Eichengreen and Rashkovan's overarching principles and broad objectives, and agree that IFIs and foreign donors have an important role to play in the implementation of the reconstruction and reform program, they cannot replace domestic institutions. Rather, the reconstruction effort should be used to strengthen existing institutions and to stimulate the creation of the new ones. The Ukrainian government (in a broad sense at all levels) should therefore also build an implementation framework that will formulate and implement policies, and will understand how the recovery will be managed and governed.

Ukraine has already taken the first steps. In December 2022, the Parliament created a Ministry for Restoration – a government body responsible for policies in the field of physical infrastructural recovery, and for setting policies for the restoration process. A new Vice Prime Minister leads this ministry. In January 2023, the Government also created the State Agency for Restoration (Restoration Agency), which will be responsible for the effective and transparent implementation of the country's rapid recovery and post-war reconstruction projects.

The Restoration Agency is a merger of the State Road Agency (Ukravtodor) and the State Agency for Infrastructure Projects (Ukrinfraproyekt). While the latter had delivered several largescale construction projects that involved both budgetary and external financing, its expertise was mostly lost after the Euro2012 football tournament. The Restoration Agency has inherited a strong capacity in road construction, built by Ukravtodor in partnership with international financial institutions over the past three years. Building on this capacity should help the agency gain credibility among key stakeholders.

An important question for the Restoration Agency to address during the Ukrainian reconstruction is how to reinforce the decentralisation of decision-making initiated in earlier Ukrainian reform efforts after the Revolution of Dignity? Local authorities have been merged and given stronger mandates, but the war will limit options to finance themselves. One way to strengthen their ability to raise resources would be to pool their funding efforts, e.g., the Swedish KommunInvest model or the Bulgarian version implemented together with the EBRD to support municipalities in infrastructure development.

But "to make reconstruction happen", the implementation engine of the Ministry for Restoration and Restoration Agency must learn from the good and bad lessons available from the experience of similar agencies created to tackle post-war or post-natural disasters recoveries: (ECA, BRR, ERRA, CNO, CERA, GREPOC, GSDMA, ONEMI, FAAARO, FEMA, etc.) and to avoid the mistakes in principles and design [**16, 17**]. One important lesson is the necessity of creating a separate project implementation unit (PiU) that can help foreign experts to support reconstruction. The PiU of the National Reform Council had an important role in the implementation of reforms.

Finally, a designated national development bank could help to raise financing for the efforts of the Restoration Agency, serving as a credible co-financing partner for multilateral and bilateral institutions. The German development finance institution, KfW, originally established to promote Germany's reconstruction after WWII, is an interesting model. Alternatively, the government could establish a dedicated development bank owned by the multilateral and bilateral development banks involved in the reconstruction: EBRD, EIB, KfW, IFC and Ukraine. Such an institution could be focused solely on the reconstruction of Ukraine (just as EBRD was originally set up to support the market transition of the region), and would benefit from the capital, technologies, project expertise and governance of the European institutions, but would not be overburdened with its bureaucracy and geopolitical limitations.

#### **Lessons for Ukraine**

Starting from a set of principles for reconstruction and reform, we examined previous international experiences and some of Ukraine's own attempts to establish a reform architecture, including the most recent changes in the ministerial set-up and the establishment of a reconstruction agency. In this final section, we summarise the conclusions for Ukraine's reconstruction and reform efforts and point to potential improvements to better meet the objectives of the government.

The EU accession process and the conditionality involved in financing the restructuring effort will point the way, but the Ukrainian people must do the hard work of rebuilding trust in the political system and cleaning out the oligarchic structures in the economy. Evidence from previous enlargements of the European Union suggests that bureaucratic independence and judicial capacity are at the core of the institutional reforms supported by the accession process. Building these elements must also be central to Ukraine's reconstruction and reform architecture.

The discussion so far suggests that the reconstruction architecture should be designed along the following lines:

• The reconstruction architecture should be based on a country platform, along the principles outlined in the EPG Report – the core principle being the strong ownership by the Ukrainian government. It should generate the vision, strategy and priority list of projects based on its superior local knowledge. Reconstruction will require an all-government approach with the newly formed the Ministry for Communities, Territories and Infrastructure Development of Ukraine (Ministry for Restoration) as the natural hub for internal coordination in Ukraine (a merger of two previous ministries [**18**]).

on reconstruction projects to ensure accountability and learning, working with internationally recognised accounting firms with offices in Ukraine.

working closely with the European Commission. It would be natural for such a fund to also have representation for the intended recipient.

With all these elements, the reconstruction and reform of Ukraine could become an important "proof of concept" for similar efforts in other parts of the world. The staff involved could be used to transfer experience and work with representatives of recipient countries to adjust the model to fit local conditions and the regional context. The lessons could be applied not only to post-conflict situations but also to other states with deep fragilities, and to achieve broader development objectives in emerging and developing economies more generally.

#### **References**

https://uploads-ssl.webflow.com/621f88db25fbf24758792dd8/62c1 66751fcf41105380a733\_NRC%20Ukraine%27s%20Recovery%20 Plan%20blueprint\_ENG.pdf.

## **Annex A: Ukraine's Timeline: From Independence to War**

#### **1990s**

#### **2000s**

*July 2001*: China and Russia sign twenty-year *Treaty of Friendship*.

*September 2001*: Putin becomes first foreign leader to contact President Bush following 9/11 attack, declaring to 'the American people that we are with you'.

#### **Early 2010s**

#### **Seizure of Crimea and after**

*28 February 2014*: Russian troops without insignia begin seizing strategic points throughout Crimea, following several days of organised pro-Russian demonstrations.

*May 2014*: Petro Poroshenko is elected president of Ukraine.

in the presidential election, promising to tackle corruption and end the conflict in eastern Ukraine.

#### **Russian Invasion and War**

## **Annex B: The Geography of War**

**Figure A.1: Assessed control of terrain in Ukraine and main Russian manoeuvre axes as of 8 August, 2023, 3pm ET**

*Source*: Map courtesy of the Institute for the Study of War and AEI's Critical Threats Project. Available from: https://www .understandingwar.org/sites/default/files/DraftUkraineCOTAugust %208%2C2023.png.

#### LSE Public Policy Review Series

#### **Ukraine:** Russia's War and the Future of the Global Order **Edited by** Michael Cox

The full-scale invasion of Ukraine by Russia in 2022 has not only caused immense suffering inside the country, and among its people, it has shifted the political landscape in Russia for the worse, altered the strategic map of Europe, and created division and economic pain in the rest of the world.

**Ukraine:**

Russia's War and the

Future of the Global Order

Michael Cox

Michael Cox

Russia's War and the Future

LSE Public Policy Review Series

**UKRAINE**

of the Global Order

**Editor**

In this volume, a group of internationally acclaimed academics – many originally from Ukraine or Russia – examine the deep causes of Putin's war, the role played by other actors such as China and the United States, the severe consequences for the many millions of Ukrainians displaced from their home and country, the impact on the West and the Global South and the challenges confronting Ukraine when the war fi nally comes to an end.

Part of the LSE Public Policy Review Series, Ukraine: Russia's War and the Future of the Global Order offers a rigorous intellectual response to this extreme humanitarian crisis and considers the implications for the future of Ukraine and the transformed global order.


**MALARIA PARASITES**

Edited by **Omolade O. Okwa**

http://dx.doi.org/10.5772/1477 Edited by Omolade O. Okwa

#### **Contributors**

Guido Favia, Elke Bergmann-Leitner, Hiroko Asahi, Rajeev K. Tyagi, Tejram Sahu, Neeraj Kumar Garg, Punit Prabha, Rick Paul, Anavaj Sakuntabhai, Cheikh Loucoubar, Jean-François Bureau, Alison Machado, Laura Grange, Catherine Braun-Breton, Valerie Choumet, Alfonso Marzal, Adeola Orogade, Alyssa Barry, James Beeson, John Reeder, Freya Fowkes, Alicia Arnott, Philippe Grellier, John Chukwuka Igweh, Omolade Olayinka Okwa, Fourie Joubert, Sam Muchina Kinyanjui

#### **© The Editor(s) and the Author(s) 2012**

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Violations are liable to prosecution under the governing Copyright Law.

Individual chapters of this publication are distributed under the terms of the Creative Commons Attribution 3.0 Unported License which permits commercial use, distribution and reproduction of the individual chapters, provided the original author(s) and source publication are appropriately acknowledged. If so indicated, certain images may not be included under the Creative Commons license. In such cases users will need to obtain permission from the license holder to reproduce the material. More details and guidelines concerning content reuse and adaptation can be foundat http://www.intechopen.com/copyright-policy.html.

#### **Notice**

Statements and opinions expressed in the chapters are these of the individual contributors and not necessarily those of the editors or publisher. No responsibility is accepted for the accuracy of information contained in the published chapters. The publisher assumes no responsibility for any damage or injury to persons or property arising out of the use of any materials, instructions, methods or ideas contained in the book.

First published in Croatia, 2012 by INTECH d.o.o. eBook (PDF) Published by IN TECH d.o.o. Place and year of publication of eBook (PDF): Rijeka, 2019. IntechOpen is the global imprint of IN TECH d.o.o. Printed in Croatia

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4.1.1. CGM Sensor

There are a number of companies that manufacture and distribute commercial CGMs, being Dexcom [59], Medtronic [60] and Abbot [61], the most active in the field. Their most relevant and latest CGMs are compared in Table 1 together with some popular sensor-integrated insulin pump systems that are connected to specific CGM systems (e.g., MiniMed 670G). Additional systems and their main characteristics can be found in [62].

**Table 1.** Comparison of the characteristics of the most popular CGMs.

Among the analyzed CGMs, Abbott's Freestyle Libre was chosen. Although its reading range is limited (up to 10 cm) due to the use of Near Field Communication (NFC), the sensor lasts longer than others provided by Dexcom or Medtronic (14 days versus roughly a week), it is cheaper than other solutions (e.g., a kit with one reader and sensors currently costs e 169.69), finger-pricking is not necessary on a daily basis to calibrate the sensor and it is more accurate than other systems (i.e., it has a lower Mean Absolute Relative Difference (MARD)).

Note that it would be possible to make use of the second generation of Abbot's CGM (Freestyle Libre 2), which provides better MARD, but it was not available for purchase at the beginning of the work related to this article and, in practice, it is essentially the same device.

Abbott's Freestyle Libre sensor is placed on an arm by using a single-use applicator (in Figure 2, on the left). On the right of Figure 2 it is shown the sensor adhered to the optimum location, in the back of the upper arm. After activating the sensor, it takes roughly one hour before the first readings are available. Then, according to Abbot, the sensor will collect data during a maximum of 14 days (in practice, it has been observed that the sensor keeps on collecting data during almost one day more). In addition, note that each Freestyle Libre sensor also has a commercial expiration date that limits its usage time interval.

(**A**) (**B**) **Figure 2.** Abbott's Freestyle Libre sensor and applicator (**A**), and adhered sensor (**B**).

To collect readings from the sensor, the user just has to scan it with Abbot's reader or with an NFC-enabled smartphone that runs Abbot's LibreLink app. The sensor collects readings automatically every 15 min. It is necessary to scan the sensor at least once every 8 h, since the sensor stores up to 8 h of readings. Readings are stored in the internal memory of the sensor, whose structure was previously reverse engineered (at least in part) by open-source initiatives like LibreMonitor [63] or LimiTTer [64]. The most relevant parts of the sensor internal memory are illustrated in Figure 3. As it can be observed, the memory is structured into 344 bytes that are divided into a header, a footer and the main memory fields, which are the following:

**Figure 3.** Structure of the internal memory (in byte) of Abbot's Freestyle Libre sensor.

### 4.1.2. Decentralized Storage

In order to store the collected data, the proposed system makes use of the decentralized database OrbitDB [65], which runs over InterPlanetary File System (IPFS) [66]. Specifically, OrbitDB uses IPFS for storing data and for synchronizing multiple peer databases.

OrbitDB nodes can fetch content if there are connected peers in the swarm that share the database. Obviously, in order to replicate a database, at least one node must be connected to the swarm. Nodes can use the REST API to create/open a database and then add data to them. In the system implemented for this article the database was defined as an eventlog, which creates an append-only log. Fetching and synchronizing data are automatically orchestrated by OrbitDB, so this functionality does not need to be implemented by the REST API.

During the experiments presented in this article OrbitDB nodes were running on a fog gateway and in a virtual machine on a remote cloud on the Internet. In this latter case, the virtual machine make use of two AMD Opteron 3.1 Ghz cores and 8 GB of RAM.


*Article* **Clinical Efficacy of Polycaprolactone** β**-Calcium Triphosphate Composite for Osteoconduction in Rabbit Bone Defect Model**

**Chiu-Ming Chen 1 , Shen-Mao Chen 1 , Shiou-Fu Lin 2 , Huang-Chien Liang 3 and Chia-Chun Wu 1,\***

**Abstract:** The combination of β-tricalcium phosphate (β-TCP) with polycaprolactone (PCL) has been considered a promising strategy for designing scaffolds for bone grafting. This study incorporated PCL with commercially available β-TCP (OsteoceraTM) to fabricate an injectable bone substitute and evaluate the effect of PCL on compressive strength and setting time of the hydraulic cement. The mechanical testing was compliant with the ASTM D695 and ASTM C191-13 standards. Results showed that PCL-TCP composite presented a well-defined architecture with uniform pore distribution and a significant increase in compressive strength compared with β-TCP alone. Eighteen rabbits, each with two surgically created bone defects, were treated using the PCL-TCP composites. The composite materials were resorbed and replaced by newly formed bone tissue. Both PCL-TCP and β-TCP demonstrated equivalent clinical effects on osteoconduction property in terms of the percentage of newly formed bone area measured by histomorphometric analysis. PCL-TCP was proven to be as effective as the commercially available β-TCP scaffold (OsteoceraTM).

**Keywords:** β-tricalcium phosphate; biocomposites; osteoconduction; polycaprolactone

## **1. Introduction**

Repair of large bone defects remains an unmet clinical need in modern orthopedics. These defects have resulted in poor quality of life for aging populations and have become a growing socioeconomic concern around the world [1]. Bone regeneration occurs with a balance of signaling events in osteoblasts, bone-forming cells and osteoclasts to restore bone structure and function [2]. Natural bone is made of inorganic and organic components such as extracellular matrix (ECM) and calcium phosphate ceramics [3]. To address the continuous resorption of bone because of age or disease, use of biomaterials that are compatible with bone and are inert to the immune system has been developed.

Biomaterials such as polymers, metals and ceramics used in clinical applications of orthopedics and dentistry procedures have been known to contain several disadvantages. Synthetic and biodegradable polymers with tunable properties used as bone scaffolds have been reported to raise the risk of immunogenicity and toxicity [4,5]. Metals such as titanium (Ti), magnesium and stainless steel possess great mechanical strength and excellent fatigue resistance. However, they can have poor integration properties with surrounding tissues and may release metal ions [6,7]. Currently, use of calcium phosphate-based biomaterials is considered as the gold standard [8].

Depending on osteoinduction, an ability to induce osteoblastic differentiation and osteoconduction, different types of calcium phosphate were developed. Based on the Ca/P atomic ratios of 1.5 to 2, calcium phosphates such as hydroxyapatite, tricalcium phosphate and Whitlockite are widely used. Further, a variety of applications of these materials are in

**Citation:** Chen, C.-M.; Chen, S.-M.; Lin, S.-F.; Liang, H.-C.; Wu, C.-C. Clinical Efficacy of Polycaprolactone β-Calcium Triphosphate Composite for Osteoconduction in Rabbit Bone Defect Model. *Polymers* **2021**, *13*, 2552. https://doi.org/10.3390/ polym13152552

Academic Editor: Yu-Wei Cheng

Received: 8 June 2021 Accepted: 29 July 2021 Published: 31 July 2021

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use to enhance bioactivity as coatings, to fill and heal bone defects as cements and to control the porosity and biocompatibility as scaffolds [9]. β-phase form of tricalcium phosphate (β-TCP; Ca3(PO4)2) has been extensively investigated and widely used clinically because of its similar chemical composition to the apatite naturally present in bone tissue [10]. Although β-TCP demonstrates various favorable characteristics for its clinical use, it is difficult to deliver to the target site and hard to compact adequately. To overcome the difficulty in shaping the material, a combination of different biomaterials has become a major area of research. Several polymers such as poly(L-lactic acid), PCL, poly(lactide-co-glycolide) and poly(3-hydroxybutyrate) have been reported for their potential to improve the handling properties of β-TCP [11–14].

PCL is a semicrystalline linear aliphatic polyester with a high degree of crystallinity and hydrophobicity, and it has been widely studied in tissue engineering due to its high level of biocompatibility and biodegradability [15]. It has already been approved for use, along with a range of medical and drug delivery devices. In this study, we evaluated the use of 25% PCL as an additive to improve the mechanical and osteoconductive properties of the β-TCP in terms of physicochemical analysis; static compression test, in vivo study and bone histomorphometric were performed. The formulated combination of ceramic scaffold PCL–TCP is considered a promising strategy for designing useful scaffolds for bone grafting in clinical practice.

#### **2. Materials and Methods**

#### *2.1. Preparation of PCL–TCP Composites*

The PCL–TCP composites were prepared from the combination of PCL (inherent viscosity: 1.0–1.3 dL/g, Sigma-Aldrich, St. Louis, MO, USA) and β-TCP (0.25–0.5 mm, Wiltrom Co. Ltd, Hsinchu County, Taiwan) with a biocomposite weight proportion of 1:3. PCL was stirred vigorously in dichloromethane (CH2Cl2, Sigma-Aldrich, St. Louis, MO, USA) for 2 h, followed by mixing with TCP for 2 min. Sodium chloride particles (Sigma-Aldrich, St. Louis, MO, USA) were then incorporated into the suspension. The ratio of TCP/PCL/sodium chloride was 3/1/17. Finally, the dispersion was cast into a Ti mold and air-dried for 24 h to allow the solvent to evaporate. Subsequently, the TCP/PCL/sodium chloride powders were immersed in deionized water for 6 h, and the water was changed approximately every 2 h at room temperature in order to leach the salt out. The PCL–TCP powder was dried for 24 h in an oven at 30 ◦C.

#### *2.2. Physicochemical Analysis*

The physicochemical properties of the scaffolds were evaluated based on the porosity, swells, flow rate and pore size analysis. SEM (SEM, JEOL 5565, Tokyo, Japan) was used to examine the microstructure of PCL–TCP powder. Pore size distribution and porosity were determined by analyzing the SEM images using the ImageJ software (NIH, Bethesda, MD, USA). Ten fields were randomly selected for each SEM image. In total, five replicates were conducted.

#### *2.3. Setting Time and Static Compression Test*

PCL–TCP was heated to 70 °C in a water bath. The setting time of PCL–TCP was then measured by Vicat Needle (HCH-122, Hsinchu County, Taiwan) on a Material Test Equipment (Instron®ElectroPuls™ E10000, Norwood, MA, USA) at 37 ◦C. The mean setting time was recorded from three individual batches.

Compression test was performed to examine the compressive strength (MPa) in response to an applied compression load using a universal testing system (Instron®ElectroPuls™ E10000, Norwood, MA, USA). A constant extension of 1.3 ± 0.3 mm/min was applied up to a strain value of 0.1 mm/min. The resulting force displacement response was recorded continuously.

#### *2.4. Surgical Procedures and Implantation*

Eighteen New Zealand rabbits (BioLASCO Taiwan Co., Ltd., Taipei, Taiwan) with a weight of at least 2.8 kg were used in this study. The investigation was approved by Institutional Animal Care and Use Committee (IACUC) of MASTER LABORATORY Co., Ltd. (IACUC approval number: MS20161101). All experimental procedures were conducted in accordance with National Institutes of Health Guidelines. The rabbits were divided into three groups according to the implantation time (Table 1). The rabbits were anesthetized by intramuscular injection of a mixture of 0.5 mL/kg Zoletil (Virbac, France) and 0.5 mL/kg Rompun (BAYER KOREA LTD., Seoul, KOREA) and 2% Xylocaine (Recipharm Monts, Monts, France) subcutaneously. Both hind legs of each rabbit were shaved and a 2.5 cm skin incision was made (Figure 1A,B). The skin was then retracted laterally to allow lateral arthrotomy on the stifle joints (Figure 1C). A surgical drill bit and a stopper set were used to create a bony defect of 5 mm in diameter and 10 mm in depth in the femur at the midpoint of the lateral condyle from the lateral fabella to the anterior portion of lateral trochlea (Figure 1D,E). The target sites were then filled with appropriate bone substitute cylindrical filaments, followed (Figure 1F,G) by endodermis and muscle tissue being stitched using absorbable suture and skin stitches with nylon suture (Figure 1H). The PCL-TCP bone substitutes were prepared by a heating device and injected into the irregular bone damaged during the surgery to facilitate the process. All rabbits were monitored before the designated implantation observation time at 4, 12 and 24 weeks when the left and right femora were collected. Tissues were placed in 10% formalin until further analyses.

**Table 1.** Grouping, treatment details and implantation time of each rabbit.

**Figure 1.** Surgical procedure for creating lateral femur lesion site and implantation. Both hind legs of each rabbit were shaved and a 2.5 cm skin incision was made (**A**,**B**). The skin was then retracted laterally to allow lateral arthrotomy on the stifle joints (**C**). A surgical drill bit and a stopper set were used to create a bony defect of 5 mm in diameter and 10 mm in depth in the femur at the midpoint of the lateral condyle from the lateral fabella to the anterior portion of lateral trochlea (**D**,**E**). The target sites were then filled with appropriate bone substitute cylindrical filaments, followed (**F**,**G**) by endodermis and muscle tissue being stitched using absorbable suture and skin stitches with nylon suture (**H**).

#### *2.5. Radiological and Histomorphometric Analyses*

The X-ray of the femoral condyles obtained at the designated implantation time were taken using the Siemens Arcadis Varic C-arm system (SOMA TECH INTL, Bloomfield, CT, USA). The femurs for undecalcified sectioning were dehydrated and embedded in polymethyl methacrylate (PMMA) (Merck, Germany). A section cut was made in the sagittal plane of the target region and surrounding bone with 5–10 mm thickness and 5 mm from the top of the defect at the lateral condyle for each specimen. Sections with a final thickness of 5 µm were obtained and stained with Masson–Goldner trichrome for histomorphometric analyses. The sections were examined under a light microscope (Olympus BX43) to identify the newly formed bone and the implant. Area measurements were made using the "Tile Overlapping Image" function in Media Cybernetics' Image Pro Plus (IPP) program (Image Pro Plus, Media Cybernetics, Inc., Rockville, MD, USA).

## *2.6. Statistical Analysis*

Data are presented as mean ± standard deviation. Statistical differences were determined by one-way analysis of variance with Tukey's HSD post hoc tests to compare the mean changes between difference composite scaffolds. *p*-values of <0.05 were considered statistically significant.

## **3. Results**

#### *3.1. Morphology and Mechanical Analysis*

The physicochemical characterization of the β-TCP (OsteoceraTM) and PCL–TCP focused on the pore size, porosity, compressive strength and the material setting time. Results showed that the designed scaffolds presented a well-defined architecture with uniform pore distribution. The pore size of the PCL–TCP scaffolds was 235.28 ± 113.50 µm, which was smaller than the β-TCP (463 ± 88.75 µm, *p* < 0.001), while the porosity percentage was 43.00 ± 15.98% and 83.05 ± 1.52%, respectively (*p* < 0.001) (Table 2). A significant increase in the compression load of PCLTCP was observed at a strain of 0.1 (PCL–TCP: 15.10 ± 0.53 MPa vs β-TCP: 0.85 ± 0.19 MPa, *p* < 0.001). PCLTCP was further tested for a maximum setting time of 85 s, and the final curing time was recorded as 72.6 ± 8.5 s (Table 2 and Figure 2B). Figure 2A showed SEM images (top and cross section views) of PCL–TCP scaffolds with a uniform pore distribution.

**Table 2.** The physicochemical characterization of the composite scaffolds.

**Figure 2.** Physicochemical characterization of PCLTCP composite. (**A**) SEM images of: (**a**) top and (**b**) cross section view of PCL-TCP scaffolds. (**B**) Stress–strain curve obtained by static compression test.

#### *3.2. Clinical Observation and Gross Bone Morphology*

All animals were carefully monitored throughout the study period with body weights taken daily. The average body weight increases were 249.5 ± 53.8 g, 490.2 ± 74.8 g and 608.3 ± 45.3 g in groups A, B and C, respectively. There were no differences in intragroup body weight, suggesting that different treatments did not affect the growth of the animals. All surgical wounds were closed and healed with no signs of infections at the time of the final evaluation. There were no complications observed throughout the study period. The appearances of the femurs obtained from all eighteen rabbits are shown in Figure 3. All implant sites were successfully healed without any abnormalities.

**Figure 3.** Gross bone morphology at 4-, 12- and 24-weeks post-implantation with PCL–TCP. The femurs with appropriate treatments of all 18 rabbits at designated implantation observation time points are shown. Yellow arrows indicate the implant sites.

## *3.3. Radiographic Analyses*

X-ray images were taken to examine bone regeneration at different implantation time points (Figure 4). Cylindrical filaments of PCLTCP and β-TCP were clearly seen at the implant sites at 4 weeks post-implantation, while part of the boundaries between implant and surrounding bones were indistinct in β-TCP (2/4 specimen) but not in PCLTCP filled implant sites at 12 weeks. We observed smeared and less distinguishable boundaries in all the implant sites from PCL–TCP and β-TCP at 24 weeks post-implantation, indicating bone graft degradation of PCL–TCP and β-TCP after 24 weeks. The injury in the control group remained throughout the study period.

**Figure 4.** Radiographic images at 4- 12-, and 24-weeks post-implantation with PCLTCP. X-ray was taken from all the femurs with appropriate treatment of eighteen rabbits at designated implantation observation time points.

#### *3.4. Histomorphometric Examinations*

The clinical effectiveness of PCLTCP and β-TCP were harvested at each implant site for histomorphometric evaluations (Figure 5 and Table 3). The results showed that PCLTCP possessed the same biological affinity as β-TCP without adverse effects one month after rabbit femur condyle implantation. The newly formed bone area (NFBA) of the PCLTCP was significantly increased at 24 weeks compared to 4 weeks (*p* < 0.001). However, no statistical significance in percentage of NFBA between the PCLTCP and β-TCP was observed at 4 (*p* = 0.219), 12 (*p* = 0.139) and 24 weeks (*p* = 0.331). The boundary of the implants showed no surrounding soft tissue. The growth of newly formed bone was

observed inside the materials. After three to six months, bone cavities were filled with new bone tissue and then reconstructed into secondary bone structure with a cancellous-like bone structure. Data suggested that the composite materials were resorbed and replaced by newly formed bone tissue. Both PCL-TCP and β-TCP demonstrated equivalent effects on biological affinity and osteoconduction property at 4-, 12- and 24-weeks post-implantation.

**Figure 5.** Representative photomicrographs from PCL–TCP implants at (**A**) 4, (**B**) 12 and (**C**) 24 weeks post-implantation. The treatments in each implantation observation time group are labelled as (**a**) empty, (**b**) PCL–TCP and (**c**) β-TCP (OC). NB represents newly formed bone. (Scale bar = 200 µm in 40×, 50 µm in 100×, 20 µm in 200×).

**Table 3.** Summary of histomorphometric analysis. Values are presented as mean ± standard deviation.

Asterisks (\*) indicate significance (*p* < 0.05) compared with Group A.

#### **4. Discussion**

The aim of our study was to fabricate an injectable and mechanically strong bone substitute that can be better applied to irregular bone defects during surgery. We have successfully demonstrated the injectability of PCL–TCP composite material, and characterized the mechanical properties of a PCL–TCP composite and its osteoconduction property following the implantation in rabbit bone injury model. The fabricated PCL–TCP provides higher compressive strength and better shaping characteristics than β-TCP, and enhances new bone growth from residual bone into the cancellous bone-like structure. The newly formed bone that connects both ends of the injury could compensate for the loss of mechanical strength due to degradation of β-TCP scaffolds [16]. The void left by β-TCP dissolution additionally increases the available surface area. Physiologically, β-TCP degrades quickly through both osteoclastic resorption and material dissolution [10,17], hence promoting the bone regeneration process [18]. Although spontaneous bone regeneration has been reported in rabbit bone defect model [19], a superior new bone formation was observed in the groups treated with filling composites compared to the control group.

The mechanical property and setting time of the hardened materials are also important indexes for bone repair in clinical practice, as setting time gives an advantage for the surgical operation with more time. Huang et al. incorporated different concentrations of β-TCP into PCL, with the aim of developing injectable and highly flexural strength materials [20]. They have shown that PCL containing a higher ratio of β-TCP resulted in declining mechanical strength but longer setting time. Ramay et al. combined β-TCP and hydroxyl apatite (HA) to fabricate a biodegradable nanocomposite porous scaffold that contained a compressive strength of 9.8 ± 0.3 MPa and stiffness of 1.72 ± 0.02 kN/m [21]. Recently, a composite of poly (propylene fumarate) (PPF) and β-TCP as a potential bone repair material with a maximum compressive strength of 133 ± 6 MPa and curing temperature of 54.7 ± 1.69 ◦C was also developed [22]. In yet another study, a composite of hydroxyapatite and β-TCP was mixed with polycaprolactone (PCL) to improve mechanical properties [23]. PCL-based β-TCP has been reported to have high mechanical strength and low degradation rate, which is considered a promising strategy for long-term hard tissue engineering [24].

The quality of bone integration is related to pore size and porosity as a function of structural permeability and biomechanics [25]. β-TCP is more hydrophilic than PCL by acting as a conductor to facilitate water diffusion [26]. The pore size and porosity percentage determine the solvent convective flow and describe the capacity of composites for bone substitution in terms of solutes and nutrient transportation [27]. The reported minimum pore size for a bone substitute is 100 µm [28]; however, the recommended pore size for great osteogenesis is over 300 µm [29,30]. Although PCL–TCP used in our study had a relatively small pore size and porosity, our data demonstrated equivalent effectiveness on osteoconduction property compared to the commercially available β-TCP scaffold (OsteoceraTM). Results implied the potential of 25% PCL with heterogeneous pore size β-TCP scaffolds for rapid bone ingrowth.

The primary limitation in this study was the sample size of animals and the assessment of the PCLTCP degradation. The remaining implants of PCLTCP were 36% while β-TCP showed 23% left after 24 weeks implantation in rabbit femur. Previous in vivo study demonstrated 33% degradation of PCL-based β-TCP scaffold from 6 to 9 months after implantation in canine mandible [31]. More investigation is necessary for long-term observation of degradation of scaffolds and associated inflammatory response. Even with these limitations, the findings showed favorable and acceptable potential for further clinical implementation on patients using PCL–TCP scaffolds.

#### **5. Conclusions**

This study aimed to develop an injectable and mechanically strong bone substitute, and investigate the efficacy of PCL–TCP scaffolds for bone regeneration in rabbit defect model. Results were compared against β-TCP (OsteoceraTM), a commercially available

composite, which is commonly used in the clinical setting. PCL–TCP was proven to be as effective as the commercially available β-TCP scaffold in terms of the percentage of NFBA measured by histomorphometric analysis. The incorporation of 25% PCL with β-TCP leads to a relatively smaller pore size and porosity in scaffolds and higher compression load with good shaping characteristics, which also contributes to the clinical effectiveness of the in vivo model. Future work should further explore the bio-affinity, adaptability and the rate of desired degradation of PCL–TCP composite.

**Author Contributions:** C.-C.W. and H.-C.L. conceived and designed the experiments. S.-M.C., H.-C.L. performed the experiments. C.-C.W. and S.-F.L. analyzed the data. C.-M.C. and S.-M.C. contributed materials/analysis tools. C.-C.W. and C.-M.C. wrote the paper. C.-C.W., C.-M.C. and S.-F.L. revised the manuscript critically for important intellectual content. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** The data presented in this study are available on request from the corresponding author.

**Conflicts of Interest:** The authors declare no conflict of interest.

#### **References**