Achievements and Prospects of Ukraine’s Decentralization Reforms Since 2014

By October 2019, it has, however, become apparent that these worries are unjustified. If one believes recent public announcements by Ukraine’s new president, government and dominant parliamentary faction, the local governance reform started in 2014 will continue with adequate speed and depth. At the same time, the currently escalating conflict around the future modus of local self-government in Kyiv raises concerns. Conflicts such as these gain additional importance in view of the nation-wide regional and local elections that are due in October 2020.

One of the leading Ukrainian experts and major initiators of the decentralization reform, Anatoliy Tkachuk, in a recent interview for Dzerkalo tyzhnia warns that it is vital for Ukraine to follow the right sequence of different stages in the implementation of the decentralization agenda.[1] Tkachuk argues that, under the current circumstances, it would be dangerous to empower regional authorities via introduction of executive committees appointed by regional councils. Instead, this part of the overall decentralisation reform should be the final one. Currently, the amalgamation and empowerment of municipalities should continue to have priority. Other innovations within the overall decentralization reform such as the unification of the old rayons into larger subregional administrative units and the creation of the new office of presidential prefects come second. In a third stage, regional councils should gain constitutional rights to establish their own executive committees, according to Tkachuk’s vision of how to continue the reform.

Below, we briefly summarize some major achievements of, continuing challenges for, and future tasks within Ukraine’s ongoing decentralization drive. We have dealt in more detail with these and other dimensions of the current reset of Ukraine’s administrative structure, in recent papers for the Ukraine Forum of Chatham House (London),[2] Kennan Institute of the Wilson Center (Washington, DC),[3] and house journal of the International Institute for Strategic Studies (London).[4] We point out a limited window of opportunity for the completion of the first phase of the local governance reform in late 2020. 

Challenges and Success until 2019

Although international technical and financial assistance has been important for influencing policy outcomes,[5] the success or failure of reforms such as decentralization has remained ultimately determined by domestic factors. That said, since the Euromaidan revolution of 2013–14, various national and multinational foreign donors, among them the EU and US, have consolidated their actions in Ukraine via such programs as ULEAD, PULSE and DOBRE, which has increased the impact of their interventions. Among other international organizations, the Council of Europe shares its legal expertise via the ‘Decentralization and Local Government Reform in Ukraine’ project. Well-coordinated policy advice, technical assistance and financial support from abroad have helped to prevent Ukraine’s government and parliament from downgrading or neglecting decentralization.

The principal challenge for Ukraine’s decentralization has been the gap between the reformers’ ambitious agenda and the limited institutional capacity available for making and implementing political decisions as well as new laws within the initially envisaged timeframe of 2014–17.[6] Post-Euromaidan policymakers demonstrated considerable organizational acumen and a clear will to embark on reform, despite enormous external security threats and related internal challenges to Ukraine’s territorial integrity. Yet continuing resistance from some parts of the elite, especially in parliament, impeded efforts to embed decentralization in the constitution, and thereby to fully establish a new administrative structure and territorial division of Ukraine. While reform has brought some notable changes at the local level, it has not yet led to a corresponding legal reconstitution of the Ukrainian state.[7]

Decentralization’s main achievement so far has been a territorial consolidation of municipalities and an accompanying empowerment of local self-government. In late 2014 and early 2015, fiscal decentralization was introduced and the fusion of small local municipalities into bigger and more self-sustaining ‘amalgamated territorial communities’ (ATCs) began. These new entities have gained considerable tax-raising powers and also benefit from newly introduced direct transfers from the central state budget. Following the example of Baltic and Scandinavian countries, ATCs receive 60 per cent of personal income tax collected. This has generated a new social contract between local companies, citizens and self-government bodies, and has incentivized the latter to preserve and extend their tax bases – i.e., to retain and attract businesses.[8] The ATCs are also taking on additional responsibilities for delivering public services and fostering infrastructural development.[9] While doing this, ATCs can cooperate with each other within a newly introduced legal framework for inter-municipal cooperation.

An essential feature of decentralization to date is that it has taken place on a voluntary basis thereby contributing to the development of local democracy. The largely grassroots approach to the design and creation of ATCs, and to the oblast-level development of ‘perspective plans’[10] means that, since the start of communities’ amalgamation in 2015, many Ukrainians have gained valuable experience in organizing collective action and resources. They have conducted robust debates on local issues, and have taken responsibility for joint decision-making. Once new ATCs are established, local elections are held for more powerful bodies of municipal self-government responsible for distributing public funds, and for performing many regulatory functions previously carried out by regional and upper subregional state bodies. Thus, over the past five years, the decentralization drive has changed provincial Ukraine from the bottom up. 

Tasks in 2019-2020

In early 2019, the central government in Kyiv announced the start of a second phase of decentralization.[11] This new action plan aims to complete the main parts of the reform agenda in 2019–21. One of the principal objectives is to increase the pace of amalgamation, so that the second phase of communities’ amalgamation can be already completed before the regularly scheduled nationwide local elections in the autumn of 2020. The new phase of decentralization also sets the goals of radically decreasing the number of rayons and introducing executive committees for self-government bodies in districts (rayons) and regions (oblasts). Such a completion of the reform of Ukraine’s territorial structure, at the two subregional (i.e. rayon and local) levels, is vital for ensuring good governance and the administrative cohesion of the state, especially when its territorial integrity keeps being challenged from abroad. However, this ambitious agenda will be difficult to realize, and to be completed ahead of the October 2020 local elections. It is thus still an open question whether a full reconstitution of centre–periphery relations can be already achieved by the end of next year.

Getting this second phase of reform on track has been complicated by the political calendar in 2019, which saw three rounds of nationwide voting in the presidential and parliamentary elections, as well as a subsequent rotation of personnel in the legislature, executive branch and parts of the judiciary. Thus, for example, the Draft Law ‘On the Basics of the Administrative-Territorial Structure of Ukraine’, formulated by the then Ministry of Regional Development, was not considered by the Supreme Council before the snap parliamentary elections in July 2019. This Draft Law represents a legal framework for redesigning rayons, in line with criteria applied in the EU. It proposes the transformation of the existing 490 rayons, which have an average population of approximately 25,000, into around 100 new ones, each with around 150,000 residents, without the need for a time-consuming constitutional amendment.

Already today, local communities’ amalgamation has shifted a considerable share of responsibilities from the rayons to municipalities. Under Ukraine’s current constitution, directly elected upper subregional councils of the current rayons are responsible for representing the joint interests of localities within each such district. However, amalgamation often results in the establishment of relatively large and powerful ATCs that do not need administrative support from councils or executives (i.e. the heads of upper subregional state administrations) at the rayon level any more. Thus, most rayons have already devolved extensive responsibilities and financial resources to the ATCs.

The prime motivation for the envisaged far-reaching consolidation of the rayons into merely 100 such districts is to increase the effectiveness and reduce the expenditures of public administrations. To be sure, these aims may not be as easy to achieve as some reformers assume.[12] Also, the draft laws clarifying the new responsibilities of upper subregional executive committees and councils are still being prepared. It is currently thus too early to say what exact functions will be allocated to the new amalgamated rayons. It is still necessary to identify the functions of the future institutions as it is to determine their territorial design. In spite of these and some other still open questions, the fusion of the districts is a logical continuation of the amalgamation of the communities, and should make Ukraine more compatible with the administrative structures of many EU member states.

Finally, the central government is seeking to change the institutional framework for rayons and oblasts, by allowing directly elected councils (i.e. the self-governmental bodies that already exist) to create their own executive committees and by formally enshrining this new arrangement in the Ukrainian constitution. Thus, the councils would no longer delegate implementation of decisions to state administrations at the oblast and rayon levels. Prefects, rather than the current heads of regional administrations, would carry out certain control functions of the centre. As a result, the rights and responsibilities of regional executives and self-government bodies would no longer conflict with one another. In this context, it will be vital to ensure that state supervision over the legality of the decisions of the bodies of local self-government will not interfere with regional and subregional self-government.

Some Policy Recommendations

In view of these and other challenges, we recommend the following policies for Ukrainian and foreign actors with regard to Ukraine’s further decentralization:

• Western governments, international organizations and private donors should support Ukraine’s second phase of decentralization (2019–21) as resolutely as they have supported its first.
• Ukraine should decouple the constitutional changes necessary for decentralization from the requirements and implementation of the Minsk Agreements, and adopt the necessary constitutional and other legal changes to proceed with the reforms as soon as possible.
• While involuntary amalgamation may ultimately be unavoidable to ensure the completion of decentralization, local communities should be involved as much as possible in the planning and conduct of the administrative merger process.
• Parliament should specify the future functions of self-government at the oblast and rayon levels in advance of reforming Ukraine’s territorial-administrative structure.
• State officials of the old rayons who cannot be reappointed in the enlarged districts’ administrations should be encouraged, incentivized and supported to find new employment in ATCs and other local government bodies. International donors should continue to provide support for the retraining of former rayons staff.
• The powers and responsibilities of proposed regional prefects should be clearly defined. Whatever final system of central state supervision of local self-governance is established, it should not have extrajudicial powers to intervene directly into municipal affairs, but should instead take on an advisory function for ATCs.

Acknowledgments

We are grateful for substantive critique of, and useful additions to, an earlier draft of this paper by Igor Dunayev (Kharkiv), Georg Milbradt (Dresden) and William Tompson (Paris), as well as three anonymous reviewers from Chatham House. We also benefited from the discussion of Ukraine’s changing territorial design with Kimitaka Matsuzato (Tokyo), Andreas von Schumann (Kyiv), Tony Levitas (Providence) and Benedikt Herrmann (Kyiv), as well as numerous Ukrainian experts on decentralization. Any errors or imprecisions that the paper may still contain, however, remain the responsibility of the authors.

Andreas Umland’s work for this paper benefited from the support of ‘Accommodation of Regional Diversity in Ukraine (ARDU): A research project funded by the Research Council of Norway (NORRUSS Plus Programme)’. See blogg.hioa.no/ardu/category/about-the-project/.