Ukraine’s most underreported reform – New Eastern Europe
Published on Thursday, 13 April 2017 10:06 Category: Articles and Commentary Written by Yuriy Hanushchak, Oleksii Sydorchuk and Andreas Umland
Ukraines decentralisation was one of the first, fastest and most comprehensive reforms initiated by the initial post-EuroMaidan government in March 2014, and its then vice-prime minister and today head of government Volodymyr Groysman. While amounting to a deep transformation of state-society relations in Ukraine, the underlying ideas and first successes of this large restructuring of Ukraines governmental system have so far been hardly noted outside Ukraine. Contrary to widespread Western belief, neither the concept nor the initiation of decentralisation had much to do, as some believe, with Ukraines Association Agreement with the EU signed in July 2014, or with the Minsk Agreements signed in September 2014 and February 2015. Now entering its third year, the ongoing reorganisation of Ukraines local public administration, instead, had already been hotly discussed, meticulously planned and unsuccessfully attempted for many years before the 2013-2014 Revolution of Dignity.
Thus, in 2005, following the Orange Revolution, a law on a new administrative and territorial set-up of Ukraine had been drafted. In 2009, Ukraines government approved the Concept for Local Self-Government Reform. Yet, when Viktor Yanukovych took over as president a year later, the imminent re-organisation of Ukraines regional governmental system came to a halt. These and other earlier developments, nevertheless, prepared Ukrainian society and politics to move ahead quickly once Yanukovych was out. Only little more than one month after the victory of the Revolution of Dignity on February 21st 2014, the new government of Arseniy Yatsenyuk adopted a modified Concept for the Reform of Local Self-Government and Territorial Set-Up of Power that kick-started the decentralisation reform.
The many years of discussion and eventual start of implementation of decentralisation reforms in April 2014 were primarily motivated by the excessive concentration of powers and resources in the centre. When Ukraine became independent in 1991, it inherited from the Tsarist as well as Soviet systems of rule an allocation of almost all prerogatives in the capital. Until today, features of the previous over-centralised and semi-colonial governmental system can be found in many officially state-socialist and post-socialist countries across the globe. Arguably, decentralisation is therefore no less important for post-Soviet countries to overcome their Tsarist, Leninist and Stalinist legacies than liberalisation, decolonisation, democratisation, privatisation and Europeanisation (i.e. the adoption of the EUs acquis communitaire).
The overconcentration of competencies in the capital does not only lead to a number of political, administrative, economic, legal, cultural, behavioural and even mental pathologies in the post-Soviet world. It is, above all, the main reason for the low quality of public services throughout Ukraine, including such fields as primary as well as secondary education, healthcare, road construction or social support. It is also one of the causes for the slow economic development of many Ukrainian regions, during the last 25 years. Ukraines local authorities often lacked and are partly still lacking sufficient funds, powers and skills to address even the most basic infrastructural needs of their communities. Ordinary citizens had and often still have little opportunity to influence decisions affecting their most urgent immediately local matters. Since 2014, the government has thus adopted a whole battery of parallel measures to change previous centre-periphery relations. These multiple re-directions and novel regulations, taken together, amount to a comprehensive decentralisation reform.
First, local authorities are now receiving far larger revenues through redistribution of tax income from the central state budget to municipal and communal accounts. For instance, during 2015, the monetary volume of local budgets increased by 42 per cent compared to 2014 from 70.2 billion hryvnas (around 2.5 billion euros) to 99.8 billion hryvnas (around 3.5 billion euros). In 2016, the local communities revenues increased additionally by 49 per cent reaching 146.6 billion hryvnas (five billion euros). In fact, they earned 16 per cent more than had been initially projected for that year. This unexpected rise of local revenues, especially via personal income tax (PIT), was the result not only of inflation, but also of new taxation formulae that motivated businesses to pay their taxes properly and to get away from handing out salaries in envelopes. In addition, a new model of competitive distribution of inter-budget transfers is aimed at fostering both the support of weaker regions and economic rivalry among local communities.
Second, in order to increase the institutional and financial capacity of local authorities, the government initiated a process of voluntary unification of small counties into administratively more potent and larger political subunits called amalgamated territorial communities (ATCs). That was a highly necessary step to get away from the large number of over 11,000 Ukrainian primary level counties. For instance, before the reform, 6,000 local communities had fewer than 3,000 residents. Within 5,419 budgets of local self-government, subsidies from the centre exceeded 70 per cent. 483 territorial communities were at 90 per cent or more maintained via support from central state budget funds.
No wonder that this part of the decentralisation reform, once unification became possible, quickly got off the ground. Already by the end of 2016, the so far entirely voluntary amalgamation process had rendered impressive results: 15 per cent of the previously existing local counties had on their own initiative and without any pressure, though with some financial incentive, from above fused into 367 amalgamated territorial communities (ATCs). Apart from new competencies, the new ATCs received additional tax revenues and direct state subsidies for developing infrastructure, improving healthcare, and implementing educational projects. Due to their new revenues, those 159 amalgamated communities that had been created during 2015 increased, as Ukraines Ministry for Regional Development proudly reported, their budgets more than six-fold, during the first nine months of 2016 when compared to the analogical period of 2015. The new entities received various types of revenues, especially PIT, and additional competencies to direct their expenditures.
Some rapid physical developments in the first amalgamated territorial communities represent the, so far, most visible results of the decentralisation. The officials of the new ATCs used much of the additional resources they now had at their disposal for infrastructural projects in order show their communities inhabitants quickly the benefits of their novel political functions and administrative prerogatives. For instance, in 2016, more than twice more road surface was laid, in Ukraine, than during the two previous years (though this was also a result of the general economic recovery that had begun in mid-2016). The central government provides financial assistance to amalgamated communities in the form of state subsidies which amounted to approx. one billion hryvnas (35 million euros) in 2016 and will be around 1.5 billion hryvnas in 2017. The ATCs have been using the additional funds for the reconstruction and repair of educational and healthcare facilities as well as for other public works.
Another aim of decentralizing and bundling decision-making has been to enable ATCs to attract larger investment projects. So far, these have, however, been rare, and reflect the generally low amounts of FDI that Ukraine is receiving. That has, perhaps, less to do with Ukraine governmental structure than with the countrys poisoned international image as an allegedly war-torn and still super-corrupt country features that are certainly present, yet often overdrawn in international press reports.
A recent amendment to the law on the amalgamation of communities allows now so far non-amalgamated counties to join already amalgamated communes via a simplified annexation procedure. It is, therefore, expected that by the middle of 2017, the number of ATCs will grow to more than 60 per cent of their envisaged final number for the whole of Ukraine. If that indeed happens, it will signal that this critical component of the decentralisation reform will become irreversible. Over the next two years, the government also expects to enlarge the sub-regional territorial units, the so-called rayons (districts), that Ukraine inherited from the Soviet administrative system. Together with further progress in the amalgamation of communities, the reorganisation of the rayons would largely finalise the territorial reform as a key component of the decentralisation drive, until the end of 2018.
Other aspects of the reform package, however, remain frustratingly incomplete, as the parliament has so far failed to adopt a critical constitutional amendment. The modification of Ukraines basic law is necessary to complement and support the already enacted changes in ordinary legislation and ongoing changes in the local communities everyday life. While originally not connected to the resolution of the armed conflict in the Donets Basin (Donbas), the constitutional changes related to decentralisation were, in 2015, bundled together with one of Ukraines political commitments, under the Minsk process. The latter concerns the provision of a highly controversial special status for the Donbas territories currently controlled by Russia and its proxies, in eastern Ukraine. Against the background of Moscows demonstrative and continuous violation of the Minsk Agreements since 2014, a large majority of MPs in Ukraines parliament, the Verkhovna Rada, so far refuses to support the comprehensive constitutional reform package. That is insofar regrettable as this legal bundle also includes several decentralisation clauses, unrelated to the Minsk process.
In fact, a final vote on these constitutional changes may, in view of Ukraines growing frustration about Russias continuously aggressive behaviour during the last three years, never happen. Allowing for an unclear specificity in the conduct of local government in several regions of Lugansk and Donetsk region, as prescribed in the draft amendments, is by many politicians considered as illogical, unjust and subversive. It creates the possibility for a transfer of more power to separatist-held Donbas areas than to the communities in the Ukraine-controlled part of the region. The Minsk Agreements provisions to allow the currently occupied territories to appoint their own armed local militias, city procurators and other such organs not subordinated to central government were forced upon Ukraine, in February 2015, at gun-point. These special regulations are now being more and more outspokenly rejected by many of Ukrainian societys crucial stakeholders, including political parties, leading intellectuals, and economic actors.
The constitutional bill also ran into opposition from some parliamentarians because of a clause that introduces, into Ukraines administrative system, a new organ the so-called prefects. These are president-appointed regional public officials who will be monitoring the legality of the local authorities decisions and who can suspend them and refer them to the courts. The authors of the draft amendment argue that appointment of such prefects is necessary for preserving state control over newly empowered local governments, which could abuse their novel competences. Critics, on the other hand, fear that through the prefects, the president may unduly enhance his political influence over local authorities and undermine genuine communal self-government. Such worries so far rather hypothetical could be taken care of in the future should lawmakers were to design a transparent system of selection of prefects by open competition allowing them to be independent from the president. As the exact competences of the president, government, prefects and parliament are, in the draft for the amended constitution, more clearly delineated than in the current basic law, abuses of power would probably altogether decline rather than increase.
Despite the only partial and, so far, largely voluntary implementation of the reform package, many Ukrainians have already started to note implications of decentralisation. According to a November 2016 poll by the Kyiv International Institute of Sociology, for instance, 46 per cent Ukrainians saw positive changes from the use of new funds obtained by local authorities, while 43 per cent saw no change, and five per cent saw changes for the worse. Twenty-five per cent pointed to improvement of public services in their communities compared to 58 per cent who didnt notice any changes and eight per cent who felt there had been deterioration of public services. While a clear majority of Ukrainians of 64 per cent support decentralisation and empowerment of local authorities, 61 per cent are still not satisfied with the slow pace of the reform.
In early 2017, Ukraines decentralisation reform has entered a critical phase marked by a recent adoption of several new laws aimed at fostering amalgamation of communities. This encouraging legislative success offers hope that the already impressive practical progress will continue. To date, decentralisation has already improved the financial well-being of many local communities in different regions in Ukraine and laid the foundation for a better quality of life for Ukrainians living outside the richer metropoles like Kyiv, Odesa and Kharkiv. While the idea of rapid decentralisation does not enjoy unconditional support from all parliamentary parties, the numerous stakeholders of the ongoing reform among public officials, elected mayors and new councillors, as well as the population at large, bode relatively well for the future of local administration reform. In addition, various Western states and international organisations, above all the EU, are resolutely supporting Ukraines decentralisation via a broad variety of instruments and with funding amounting altogether to approximately EUR200 million. If the accelerating changes take root at the local level, decentralisation will contribute to changing post-Soviet Ukrainian state-society relations, at its core.
Yuriy Hanushchak is Director of the Institute for Territorial Development at Kyiv, and an expert for Ukraines NGO umbrella association Reanimation Package of Reforms.
Oleksii Sydorchuk is a political analyst at the Ilko Kucheriv Democratic Initiatives Foundation, a Ukrainian non-governmental think-tank, at Kyiv.
Andreas Umland is a research fellow at the Institute for Euro-Atlantic Cooperation in Kyiv, and editor of the book series Soviet and Post-Soviet Politics and Society.
The authors are grateful to Dominik Papenheim (U-LEAD project), from the EU Delegation at Kyiv, for some useful advice on an earlier draft of this article.
View original post here:
Ukraine's most underreported reform - New Eastern Europe
- Ukraine-Russia war latest: Zelensky says Kyiv ready for peace talks anywhere except Russia and Belarus - The Independent - October 28th, 2025 [October 28th, 2025]
- Zelenskyy says Ukraine ready for peace talks anywhere besides Russia and Belarus Europe live - The Guardian - October 28th, 2025 [October 28th, 2025]
- Ukraine live: Trump warns Putin we have a nuclear submarine off your shore after cruise missile test - The Independent - October 28th, 2025 [October 28th, 2025]
- Trump says Putin should end the Ukraine war, not test missiles - Reuters - October 28th, 2025 [October 28th, 2025]
- China is watching: Finland warns defeating Russias invasion of Ukraine key to stability in Indo-Pacific - The Guardian - October 28th, 2025 [October 28th, 2025]
- OPINION | ART HOBSON: Intensified arming of Ukraine will endanger the world - Northwest Arkansas Democrat-Gazette - October 28th, 2025 [October 28th, 2025]
- Ukraine war briefing: Russia claims test of nuclear-powered missile condemned as flying Chornobyl - The Guardian - October 28th, 2025 [October 28th, 2025]
- Ukraine will work on ceasefire plan within next 10 days, Volodymyr Zelenskyy says - Sky News - October 28th, 2025 [October 28th, 2025]
- Ukraine Obliterates Russian Fuel Hub With Precision Drone Strike in Occupied Luhansk, Video - UNITED24 Media - October 28th, 2025 [October 28th, 2025]
- Ukraine: another week of diplomatic wrangling leaves Kyiv short of defensive options - The Conversation - October 28th, 2025 [October 28th, 2025]
- Push for Ukraine ceasefire collapses - The Week - October 28th, 2025 [October 28th, 2025]
- Kremlin Warns West Over Dramatic Escalation Moment In Ukraine War - The Organization for World Peace - October 28th, 2025 [October 28th, 2025]
- In war-torn Ukraine, a mission of healing amid missiles and blackouts - Dallas News - October 28th, 2025 [October 28th, 2025]
- Trump urges Putin to end war in Ukraine instead of testing missiles - Euronews.com - October 28th, 2025 [October 28th, 2025]
- Russia using drones with cameras to hunt civilians across Ukraine, inquiry warns - The Independent - October 28th, 2025 [October 28th, 2025]
- Letter: Can Trump extend streak and end Ukraine war? - Honolulu Star-Advertiser - October 28th, 2025 [October 28th, 2025]
- EU poised to agree on using frozen Russian assets to help Ukraine in war - Al Jazeera - October 26th, 2025 [October 26th, 2025]
- Trump's U-turns on Russia and Ukraine, and the significance of new sanctions: ANALYSIS - ABC News - Breaking News, Latest News and Videos - October 26th, 2025 [October 26th, 2025]
- Ukraine war: Trump hopes China will help bring end to Russia war - BBC - October 26th, 2025 [October 26th, 2025]
- Donald Tusk: Ukraine is ready to fight on for three more years - The Times - October 26th, 2025 [October 26th, 2025]
- Zelenskyy said Ukraine prepared to fight for three more years Polish PM - - October 26th, 2025 [October 26th, 2025]
- Ukraine ready to fight for the next three years, says Polands PM Tusk - The Independent - October 26th, 2025 [October 26th, 2025]
- Polish PM says Ukraine ready to keep fighting for at least another two or three years - TVP World - October 26th, 2025 [October 26th, 2025]
- Ukraine war briefing: US reportedly mulling further sanctions on Russia that could hit banking sector - The Guardian - October 26th, 2025 [October 26th, 2025]
- US could hit Russia with more sanctions over Ukraine war, but also wants Europe to increase pressure - Reuters - October 26th, 2025 [October 26th, 2025]
- Ukraine war live: Trump says no Putin meeting until peace deal is within reach - The Independent - October 26th, 2025 [October 26th, 2025]
- How the U.S.'s new sanctions on Russia could impact the war in Ukraine - NPR - October 26th, 2025 [October 26th, 2025]
- At least four killed in Russian strikes overnight on Ukraine - The Guardian - October 26th, 2025 [October 26th, 2025]
- Slovakia will not be part of EU scheme for Ukraine's military needs, PM Fico says - Reuters - October 26th, 2025 [October 26th, 2025]
- Polish prime minister says Ukraine ready to fight Russia for 'two to three more years' - Anadolu Ajans - October 26th, 2025 [October 26th, 2025]
- Russia Unleashed More Than 5,000 Suicide Drones on Ukraine in September - The National Interest - October 26th, 2025 [October 26th, 2025]
- Serbian foreign minister proposes hosting Ukraine-Russia peace negotiations amid ongoing conflict - Fox News - October 26th, 2025 [October 26th, 2025]
- Trump says he will not meet with Putin until he thinks there is a deal on Ukraine - Reuters - October 26th, 2025 [October 26th, 2025]
- Ukraine ready to fight for the next three years, says Polands PM Tusk - Yahoo News New Zealand - October 26th, 2025 [October 26th, 2025]
- How Ukraine and Russia are playing out a deadly cat and mouse drone war from underground bunkers - The Independent - October 26th, 2025 [October 26th, 2025]
- AI drones in Ukraine this is where we're at - The Kyiv Independent - October 26th, 2025 [October 26th, 2025]
- The wild card' weapon that will decide Ukraine's fate - but could spark WW3... - The US Sun - October 26th, 2025 [October 26th, 2025]
- What is the reparations loan for Ukraine and why is the EU stuck with the plan? - Euronews.com - October 26th, 2025 [October 26th, 2025]
- US reportedly readies new sanctions as Russia stalls on Ukraine peace talks - The Kyiv Independent - October 26th, 2025 [October 26th, 2025]
- MrBeast Just Flew Three Lions Out of Ukraine. Heres Why - UNITED24 Media - October 26th, 2025 [October 26th, 2025]
- Europes Persistence in Supporting Ukraine Is Bearing Fruit - The New York Times - October 24th, 2025 [October 24th, 2025]
- Why Trump Reached a Breaking Point With Putin Over Russia-Ukraine War - WSJ - The Wall Street Journal - October 24th, 2025 [October 24th, 2025]
- Kyiv's allies say frozen Russian assets should be quickly used to aid Ukraine - Reuters - October 24th, 2025 [October 24th, 2025]
- US sanctions on Russia over Ukraine add pressure on Putin to end war - CNN - October 24th, 2025 [October 24th, 2025]
- Russian Envoy Says US, Russia, And Ukraine Are Close To A 'Diplomatic Solution' To War In Ukraine - Radio Free Europe/Radio Liberty - October 24th, 2025 [October 24th, 2025]
- Ukraine picked the Gripen. Heres why and where there may be challenges - Breaking Defense - October 24th, 2025 [October 24th, 2025]
- Ukraine allies determined to to go further than ever to pressure Putin - Al Jazeera - October 24th, 2025 [October 24th, 2025]
- Russias human safari in southern Ukraine is a warning to the world - Atlantic Council - October 24th, 2025 [October 24th, 2025]
- A youth orchestra in Ukraine creates an overture with the sounds of war - NPR - October 24th, 2025 [October 24th, 2025]
- Ukraine war briefing: Zelenskyy urges US to expand Russia oil sanctions - The Guardian - October 24th, 2025 [October 24th, 2025]
- Rand Paul: Trump could see all hell break loose with further involvement in Ukraine, Venezuela - The Hill - October 24th, 2025 [October 24th, 2025]
- EU leaders delay decision on using frozen Russian funds to aid Ukraine - Al Jazeera - October 24th, 2025 [October 24th, 2025]
- Sanctions alone won't force Putin to end Ukraine war - Sky News - October 24th, 2025 [October 24th, 2025]
- Rosenberg: Trump abandons carrot and wields stick over Putin in Ukraine talks - BBC - October 24th, 2025 [October 24th, 2025]
- At least three killed in hand grenade attack at northern Ukraine train station - Euronews.com - October 24th, 2025 [October 24th, 2025]
- Opinion | How to arm Ukraine and disarm Hamas - The Washington Post - October 24th, 2025 [October 24th, 2025]
- From illusion to real peace: Trumps test in Gaza and Ukraine - Al Jazeera - October 24th, 2025 [October 24th, 2025]
- Putin envoy Dmitriev says US, Ukraine and Russia close to 'diplomatic solution' on war - Reuters - October 24th, 2025 [October 24th, 2025]
- The Ark Review: Ukraine-Set Doc Puts a Hopeful Spin on a Young Familys Wartime Pivot - The Hollywood Reporter - October 24th, 2025 [October 24th, 2025]
- Whats Next for US-Russia Relations and the War in Ukraine? - Chicago Council on Global Affairs - October 24th, 2025 [October 24th, 2025]
- Sen. Paul says Trump's base is irritated by continued involvement in Ukraine, Venezuela - The National Desk - October 24th, 2025 [October 24th, 2025]
- Ukraine will have to find a way to produce air defences, Zelenskiy says - Reuters - October 24th, 2025 [October 24th, 2025]
- What a Soaring Ruble Says About the Russia-Ukraine War, and How to Trade It Now - Yahoo Finance - October 24th, 2025 [October 24th, 2025]
- Ukraine Has 49 New M1A1 Abrams Tanks and America Isnt Happy One Bit - National Security Journal - October 24th, 2025 [October 24th, 2025]
- North Korea to build museum glorifying its troops fighting against Ukraine - politico.eu - October 24th, 2025 [October 24th, 2025]
- US imposes sanctions on Russian oil over Putins refusal to end war in Ukraine - The Guardian - October 23rd, 2025 [October 23rd, 2025]
- Ukraine war latest: Trump declares 'it was time' as US hits Russia's biggest oil firms with sanctions - Sky News - October 23rd, 2025 [October 23rd, 2025]
- How Europe Is Trying to Turn Frozen Russian Assets Into Cash for Ukraine - The New York Times - October 23rd, 2025 [October 23rd, 2025]
- What Are Gripen Fighter Jets and Why Does Ukraine Want Them From Sweden? - The New York Times - October 23rd, 2025 [October 23rd, 2025]
- Ukraine unveils upgraded sea drone it says can strike anywhere in the Black Sea - AP News - October 23rd, 2025 [October 23rd, 2025]
- Why planned Trump-Putin talks collapsed, and what it means for Ukraine - Al Jazeera - October 23rd, 2025 [October 23rd, 2025]
- As the US flip-flops on the path to peace, Europes coalition of the willing rallies round Ukraine - The Guardian - October 23rd, 2025 [October 23rd, 2025]
- Russia unleashes fresh wave of deadly strikes on Ukraine after Trump's summit with Putin called off - CBS News - October 23rd, 2025 [October 23rd, 2025]
- Mixed Signals from Washington Cost Lives in Ukraine - The Bulwark - October 23rd, 2025 [October 23rd, 2025]
- EU split over whether to let Ukraine use 140B loan to buy US weapons - politico.eu - October 23rd, 2025 [October 23rd, 2025]
- Ukraine moves to buy scores of Saab Gripen fighters from Sweden - Breaking Defense - October 23rd, 2025 [October 23rd, 2025]
- Swarms of Russian drones plunge parts of Ukraine into darkness, as Zelensky turns to Europe again - CNN - October 23rd, 2025 [October 23rd, 2025]
- Huge Gripen Fighter Order Letter Of Intent Signed By Ukraine - The War Zone - October 23rd, 2025 [October 23rd, 2025]
- Trump drops Ukraine missile restrictions (or not) and hits 'dishonest' Putin with oil sanctions - Euractiv - October 23rd, 2025 [October 23rd, 2025]
- What are the Gripen fighter jets Ukraine wants to buy from Sweden? - Reuters - October 23rd, 2025 [October 23rd, 2025]