Competitors during the 27th Ukrainian Firefighting Championship in Kharkiv, Ukraine. Photo by Vyacheslav Madiyevskyy/Barcroft Media/Getty Images.
4. Instruments to Support Local Development
To minimize regional disparities, the central government and national parliament have amended the institutional and financial framework for the use of central subsidies to support local development. Parliament approved the ‘State Strategy for Regional Development to 2020’ (SSRD-2020) in 2014, and the law ‘On Fundamental Principles of the State Regional Policy’ in 2015. The SSRD-2020 seeks to ensure the territorial integrity of the state, promote sustainable economic development, foster the competitiveness of the country’s regional economies, and stimulate inter-regional cooperation. One of the SSRD-2020’s key features is that it applies standards and methods of planning and budgeting consistent with those used in the EU.
Specifically, the SSRD-2020 aims to improve multi-level institutional coordination around infrastructure and economic development. It imposes horizontal coordination mechanisms for state bodies involved in public investment decisions. It also mandates vertical coordination between central and subnational institutions involved in developing and supporting regional development projects. Horizontal coordination is guided by the Ministry of the Development of Communities and Territories, which is responsible for engaging other bodies of the executive branch in reforms. Vertical coordination involves ensuring that each regional development strategy is formulated according to the priorities set by the SSRD-2020, and that each local infrastructure plan corresponds to the relevant oblast’s strategic goals.44
One of the SSRD-2020’s key features is that it applies standards and methods of planning and budgeting consistent with those used in the EU.
New regional development agencies and centres for development of local self-government have been established in each oblast, in cooperation with the U-LEAD international technical and financial assistance programme. These new entities help municipal bodies to design development plans, within the institutional framework of the SSRD-2020.
Furthermore, the central government has increased financial support for regional and local development. According to official records, Ukraine invested UAH 19.4 billion in such development in 2018, up from UAH 0.5 billion in 2013.45 This increase is noteworthy even after factoring in the devaluation of the hryvnya that happened in the meantime.
Apart from financing – in the form of subsidies paid until 2020 – for institutional and social infrastructure in newly established ATCs, the central government has transformed the role of the previously established State Fund for Regional Development (SFRD). In order to support medium-term regional development projects aligned with the SSRD-2020, as well as to minimize cronyism and corruption in project selection, central government budgets have to commit at least 1 per cent of central revenues to the SFRD each year, with the fund co-financing projects on a competitive basis.
The SFRD’s mechanism for spending this money is more transparent than it used to be prior to 2014. Every year, the SFRD apportions funding, calculated according to a published formula, to the different regions to support their projects. SFRD rules require that eligible projects undergo an approval process to ensure alignment both with the development strategy of the region concerned and with the aims of the SSRD-2020.
Not only regions, but also ATCs, are eligible to apply to the SFRD for funding. As an additional incentive to design meaningful projects, ATCs’ local self-government bodies are allowed to develop projects themselves. Since February 2018, ATCs have also had the right to take ownership of previously state-owned agricultural land in their territory; however, this has generated considerable controversy.46
A critique of the new central financial support for regional and local development is, however, that it is often used to solve urgent municipal problems rather than fundamentally improve the ATCs’ capacity to generate sustainable tax revenues. Moreover, the distribution of funds below the central level seems, so far, to be insufficiently transparent, competitive or rational.47 In 2019, the Ministry of Regional Development (since renamed the Ministry of the Development of Communities and Territories) pointed out that some regional authorities had subsidized projects not aligned with their regional development strategies.
Moreover, 63 per cent of the projects supported by the SFRD are for individual ATCs.48 Too few projects support inter-municipal or inter-regional cooperation. This hinders the pooling of resources among different communities, and prevents local self-government bodies from making full use of their new powers. Together, the issues outlined above potentially bring the SFRD’s design and rationale into question. In early 2019, the then Ministry of Regional Development stated that it was ready to improve the legal framework for regional development, through a new State Strategy for Regional Development to 2027 (SSRD-2027). The central government expects that by the end of 2019 all oblasts will have approved their strategies for regional development for 2021–27, and that most oblasts will have created action plans for the implementation of these initiatives.
44 OECD (2018), ‘Maintaining the Momentum of Decentralisation in Ukraine’, www.oecd.org/countries/ukraine/maintaining-the-momentum-
of-decentralisation-in-ukraine-9789264301436-en.htm (accessed 5 Aug. 2019).
45 Decentralization (2019), Monitorynh protsesu decentralizatsii vlady ta reformuvannya mistsevoho samovryaduvannya stanom na 10 serpnya 2019 [Monitoring of the process of the decentralization of power and reform of local self-governance as of 10 August 2019], https://storage.decentralization.gov.ua/uploads/library/file/443/10.08.2019.pdf (accessed 15 Aug. 2019).
46 Serhienko, O. and Tkachuk, A. (2018), ‘ZEMLYU – HROMADAM!? Chy vsyu i navishcho?’ [THE LAND TO THE COMMUNITIES!? Should we give them all of it and for what purpose?], Civil Society Institute, 9 July 2018, https://www.csi.org.ua/articles/zemlyu-gromadam-chy-vsyu-i-navishho/ (accessed 5 Aug. 2019).
47 Tkachuk, A. (2017), ‘Pro detsentralizatsiyu, uspikhy, ryzyky i rol’ parlamentu’ [On Decentralization, Successes, Challenges, and the Role of Parliament], Dzerkalo tyzhnya, 13 January 2017, https://dt.ua/internal/pro-decentralizaciyu-uspihi-riziki-i-rol-parlamentu-_.html (accessed 5 Aug. 2019).
48 Decentralization (2019), ‘Stratehii rehional’noho rozvytku 2021–2027: Shcho mayut’ zrobyty rehiony v tsyomu rotsi, shchob vyity na yakisno novyi riven’ stratehichnoho planuvannya’ [Regional development strategies for 2021–2027: What regions should do in order to improve their level of strategic planning], 5 February 2019, https://decentralization.gov.ua/news/10591 (accessed 5 Aug. 2019).