Rivo Noorkõiv: “Ukraine Needs a More Clear Vision of what Decentralization Reform Can Give”

The goal of decentralization is not in reform itself but in the development of people’s welfare. We talk to the Estonian expert in administrative reform Rivo Noorkõiv to understand how to reach this goal.

Eero Vabamägi / Postimees

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Since 2014 in Ukraine has been taking place a process of decentralization – transferring of powers and finances from state authorities as close as possible to the people – to local self-government bodies. To date have been created 1029 amalgamated communities that housing 11,7 mln people. Till the end of the year, it’s planned to unite all other amalgamated communities, and also to make eligible amendments to the Constitution which are currently under discussion.

In late February VoxUkraine had a meeting with Rivo Noorkõiv, the expert in administrative reform and the consultant of the Ukrainian government, to discuss the key principles of the self-government, the criteria that define of the reform’s success, the ways to reduce the resistance from the public servants and the residents, and how to develop trust for self-government, taking Estonia as an example.

– Tell about your experience of implementing decentralization in Estonia?

– I was a member of the state commission that developed a conception and legislative acts of administrative reform in Estonia. In June 2016 the Parliament accepted the Administrative Reform Act. Also, were created regional commissions that were monitoring for the process of its implementation and for everything that was going on in reality. I had been a consultant “in the fields” for 2 years, had visited every district of Estonia. My mission was to grant help to the local self-government bodies during the process of association of administrative units.

I think that this is a good experience in a way that I was an independent consultant albeit I was working for the government. I recommend finding such people in Ukraine who will be independent and help the local self-government bodies to make changes due to the process of association. And the state should finance these consultants.

In Estonia, the government sought to create an atmosphere of trusting cooperation with the local self-government bodies, so the local authorities wouldn’t feel abandoned in the process of preparation and implementation of reforms. The government supported the local authorities by creating various informative materials, submitting analytical pieces and providing training. All these have been done to make it clear to districts that the goal is not the reform itself but to increase people’s welfare.

Considering the scale of Estonia, how big was the enlargement of territorial units?

– When at the beginning of the 1990s’ we started this discussion we had 256 cities and townships. Since the restoration of independence in the course of voluntary association the number of the local government has gradually decreased but this process hasn’t been systematic. As of 2015, the number of local municipalities decreased to 213 units. Then, after the adoption of the Administrative Reform Act in 2016, began a voluntary coercive association.

The Administrative Reform Act defined the minimum population in the territory of the local self-government body in the amount of 5000 people and recommended number – 11000 people. The Reform also provided possibilities for exceptions. Today we have the median number of 7739 people in the local self-government, the median area of the self-government is 512 km2. Before the administrative reform, there had been 213 cities and townships in Estonia, now – 79.

– How easy was this process?

– The reform was implemented on a step-by-step basis. The first step was to clarify the boundaries of townships and cities by association. The Act created the general framework for reform. The essence of the changes undertaken within the framework of the reform was determined by the local self-government bodies independently to carry out, based on the statutory population figures, logical territorial associations, discuss all aspects of local life and to propose a solution together with the necessary investments. All these moments were reflected in the requisite agreements on the association that have been signed by the local councils of the all merged territorial units for 4 years. That’s to say, after the voluntary phase, all those who hadn’t united have been pushed to enlargement.

– We have the same situation now when everyone is promised to associate in the nearest future.

– The practice in Estonia is different from the Ukrainian one. Our Administrative Reform Act from the beginning stipulated that the reform would be implemented through voluntary and, in case of necessity, governmentally initiated association. So at the first phase of reform, the local self-government bodies have been granted a great deal of freedom to choose partners for the association so they would be appropriate for local people. The voluntary phase of reform had lasted for six months until 01.01.2017.

An association phase initiated by the government took place from 01.01 until 15.07.2017 when the government proposed to unite the self-government bodies that didn’t meet the minimum population criteria (5000) and that didn’t apply for the association. There were 26 such bodies. They had to inform their opinion on the association proposed by the government not later than May 15.

If after the voluntary phase of the reform in Estonia there have been 102 local self-government bodies, after the end of the phase that was initiated by the government their number has been 79. The implementation of all generated changes was made on the day of the announcement of the results of the local elections in autumn 2017. The changes in the goals and objectives, and also the organization of the local self-government bodies, came into force on January 1, 2018, when the newly created local authorities began its work.

It’s important to note that one-time compensation has been paid to the heads of local and township authorities, to township leaders and mayors whose powers ended before expiry. If on the day of the announcement of the local election results to the bodies of new self-government the person has worked at the position of the township leader, mayor or chairman of the assembly less than a year he has received a payment of six-fold of his average salary for the last 2 year as a one-time compensation. Due to the compensation people have received certain guarantees. This was an incentive for self-government leaders not to resist to the reform. In addition, this compensation has allowed them to acquire new skills and to find a job elsewhere. They could remain at the state service.

In addition, each self-government body that associated voluntary has been paid financial aid from a budget calculatingly 100 euros for each resident of the united self-government but not less than 300 thousand euros; the upper limit of this aid was 800 thousand euros for one self-government body.

– This is very interesting. We don’t have anything like this but we have preconditions at the level of the conflict of officials.

– As I have already mentioned, all of the self-government entities have entered into association agreement. This agreement determined what would be the new self-government. For example, the agreement determined the name of the new self-government, as well as everything related to legislative acts, structure and staff of the institutions, development of services, the number of members of self-government councils, development plans and investments. Summarizing, we can say that the agreement determined the framework of the self-government’s future actions.

– Is this something like a strategic development plan?

– Yes, the association agreement is aimed at the future but at the same time preserves continuity and inheritance. With that, local communities receive the confidence in the future steps, as some of the fears that accompany any reforms are removed. In this regard, the discussion in Ukraine can be more active so in the process of association, the answers about the future of the newly created community will be clear.

– In your opinion, what is missing most for the reform’s success in Ukraine?

– From my point of view, Ukraine needs a clearer vision of what you want to achieve from this reform. It’s important to actively involve people in this process and, using the simplest language, to explain to them what will change as a result of this reform and how it will affect the ordinary life. One of the main issues is to ensure the quality and accessibility to the service.

– Have residents of Estonia understood why do they need this reform?

– The communication process wasn’t easy, there were many arguments pro et contra this reform. It’s important that there have been public political debates. And local communities have also actively participated in these discussions. Public sentiments due to the reform have been measured by surveys. Before the beginning of the reform in 2016 a number of its supporters and opponents was approximately the same – about 30% of the population.

The supporters of the reform were, above all, young people, with higher education, more affluent, the entrepreneurs especially supported the reform.

– How did you resolve the moment in the context of who wants to unite with whom?

– When the process started there had been locally discussions about it. It’s clear that people were more favourable for those neighbours with whom they have already had positive cooperation previously. But there was also a danger that some new self-governments would be organized without using the logic “local centre – surrounding territory”. Topics related to identity have also become important. The Act stated that people should be asked formally with what self-government they would like to unite with. During the reform, there have been cases when local self-governments divided – one part united with one self-government and the second part – with another one.

– Can reform be considered (almost) finished in Estonia?

– To some extent yes, the administrative boundaries have been set in a year. In connection with this reform, we also have to talk about democracy locally. In the case of enlargement of the local self-government, we have to change existing governance models and to update organizational culture. It all takes time. In addition, the distribution of responsibilities between the government and the local self-government bodies and the funding needed to accomplish the tasks are still relevant. The balance is important here so on the one hand locally there will be initiative and the ability to solve tasks, and on the other hand, there will be the development of different regions in the country as even as possible. After usage of the grants-in-aid that are granted by the government, the local self-government bodies should receive more rights in resolving issues and the funds should be channelled into their income base and into the equalization fund. It’s also necessary to increase the motivation of the local governments to develop business environments locally.

– What positive results are already seen in Estonia?

– It’s too early to evaluate the results of the reform because only 2 years have passed. However, some positives are already visible. The first thing that I see is officials become more competent. Previously there has been a lack of professionals in some fields of work in small communities, often everyone hasn’t had full loads. Now in institutions employees work full time and since many self-governments have been hired on a competitive basis, local officials have become more professional.

In the current situation, there are more opportunities for the specialization of officials in their fields of activity and for the establishment of full-fledged services to fulfil those duties that previously had been performed in a limited amount or hadn’t been performed at all. For example, previously the large local self-government hadn’t had a child protection specialist or he has to work on the payroll of 0.2. Now in the enlarge self-government, there is a full-time job for such specialist and, in addition, such specialist can be professionally improved.

The analysis shows that in comparison to the situation before the reform the number of local governments has decreased by 9%. However, management has become more flexible. The quality of many services has also been improved because previously in some cases they prefer to pay for help instead of providing services. A lot of new IT solutions have emerged that help to save time and money.

– Yes, we know about IT success in Estonia and it very inspires us. However, here we need to use calculating approach.

– Yes, there is some danger, not everything should be on the internet. The widespread use of the internet means that it must be accessible to all population groups. However, it is known that for the older generation it is difficult to get used to such innovations – people are used to talking to officials live although many actions could be done through the internet from a home at a convenient time.

– Has the business activity of the self-governments become more effective?

– The volume of budgets of the local self-governments has grown which gives more financial flexibility in comparison with the previous situation. Financial management has also improved. The analysis shows that many accounting activities have been transferred to online and the need for human resources has decreased. Increasing financial resources allows focusing on investments. The projects that previously have been implemented for several years now can be completed in a shorter time.

– What are the failures of the reform in Estonia? Or what didn’t work out as you planned?

– Despite the reform, all local governments are different. Some local self-governments have failed to provide a unification logic so the ordinary routes of people’s movements do not coincide with local government centres that have been planned by the reform. So in some cases, some adjustment of the administrative boundaries is needed. It also takes a lot of time to form an identity of self-government. It’s necessary to learn cooperation and to build trust, and not to act out of habit in the “we and they” paradigm.

– Does it mean that self-governments can be reformatted?

– Yes, they can be, if the residents of self-government wish that. For example, some regions still want to unite with other self-government. It’s possible that voluntary associations will continue in the future.

– Our reform project now proposes to establish an institute of prefects while in the proposed format of the legislative draft the dualism of power remains unchanged. This issue is not fully resolved. Who in Estonia is monitoring self-governments so they won’t go beyond their powers?

– Local governments are autonomous in Estonia. In 1995 our Parliament approved the European Charter of Local Self-Government. The government commission and the delegation of the Union of Cities and Townships that brings together country’s local governments are held annual negotiations. The government is managed by the Minister of Public Administration. During these negotiations, the issues of financial, economic and tax policy, education and work with youth, the labour market, the social and health sectors as well as transport and roads are discussed. Other topics are also discussed.

Therefore, it’s important to have a coherent movement of the political process in accordance with the multilevel governance model. This approach requires trust and not constant suspicions. It’s important to avoid overloading of the legal field with prohibitions and orders. I believe that control mechanisms are not as necessary as cooperation mechanisms.

– On VoxUkraine we have written a lot about the importance of incentives for the development of local leadership. There is a gap between local politicians and politicians in the upper echelon of power, there are no theoretical elevators, the ways from the mayor to the president, there are no mechanisms for a transition from local power to national. Has there been a burst of activity in Estonia, more specific political environment because decentralization provides the impetus for this?

– After the reform, the ability of the local governments to develop local life has improved. The scale effect has led to the more value of the decisions that have been made. This doesn’t mean that the decisions of little self-governments would be less significant. In the new self-governments, there are more opportunities for shaping the future, and therefore they are more responsible for decision making and for the outcomes of these decisions.

We had another great discussion about whether the member of Parliament can simultaneously be a member of the local government’s council. Now we are allowed to be deputies in both bodies.

– Is there no conflict in this?

– This issue is discussed all the time but we have some experience that proves the opposite. For members of Parliament, it is helpful to understand what is going out on the local level, it’s giving them a better picture of what is happening in reality. From this point of view, I think that this alignment works well. Although one of the potential risks is that if you are a member of the Parliament you have a certain opportunity to give preference to certain self-government. One way or another much depends on the culture of management and ethical views of people that are accepted in society. All this must be tried, time will put everything in its place. There are no major conflicts for today.

– In Ukraine, only 44% of territories have been united so far, and others will be encouraged for the association this year. But financing is an important issue here. If communities are too small or they don’t have businesses to fill the budget they do not get from the association all these advantages and bonuses, especially in comparison to those communities that have united at early phases of the reform. How has self-government been equalized in Estonia?

– The revenues of self-governments in Estonia are formed from taxes, subsidies, sales of services and other income. The one and only task of the tax revenues that are allocated from the state budget (income tax and land tax), as well as the equalization and support fund, is to provide local government with sufficient funds to deal with local life issues independently. More than half of the total income of the self-governments is the personal income tax paid by the local residents.

Almost half of the cities and townships expenditures are related to the provisions of educational services (kindergartens, schools), about one-third of the expenditures are road support and services related to leisure. The principle of subsidiarity, decentralization and autonomy of local self-government are impossible without the ability to form their own income independently.

The equalization and support fund has been created for equalization of fiscal opportunities of cities and townships. The most of its fund goes to the support of general education. In addition, local government may apply for a project support from different sources.

– How decentralization can contribute to a more even distribution of the population in the country?

– That’s a very good question. We have talked a lot about regional policy. Despite the small size of the country, the differences in the level of development of the regions in Estonia are very large.

For example, 45% of the population and more than 60% of gross domestic income are concentrated in the capital region. The main issue for politicians is where to channel money – to the places, where grows a strong and viable community, or to the places, where nothing grows and we need to figure out what we can do there. At the same time, every resident has a constitutional right to enjoy public goods, no matter in which corner of the country he lives. Therefore, the issue of regional development can’t be considered solely from the point of view of the market economy, in the framework of the regional police it is necessary to support regions where market barriers exist. Currently, so-called minimum requirements for the services that must be provided for several areas of activity have been agreed.

For example, now Estonia has very interesting public transport strategy, it is free in the counties. One purpose of this was to compensate the travel from the residence to the workplace because workplaces are usually concentrated in the county centers. The reform with the introduction of free travel has started in Tallinn where everyone who has a registration of resident of the city can use public transport for free.

– But this is expansive for the state!

– Of course, this is not cheap but that was the decision of the politicians. Urbanization and weakening of the outlying regions put a problem of ensuring the quality and accessibility of services to the residents of low-populated territories and the need for active influence on regional development.

– What criteria will show if the reform in Ukraine is progressing successfully?

– For measuring results, you can observe, for example, the share of local governments in the expenditures of the management sector. In Estonia, this figure is less than 25%, the average figure in the EU with its 28 members is 33%. Good indicators are the share of tax revenues in the total budget of the self-government, the ratio of the number of self-government employees to the number of civil servants. However, the most important is measuring the satisfaction of the population with the local self-government work.

In Estonia, a new electronic system for monitoring services in every county using more than 300 indicators is being developed. This will be a system of informing the population and at the same time a scientifically grounded instrument for officials to make administrative decisions.

– Is that mean the most open budgets and access to information will be available in one user-friendly interface?

– Yes, the idea is that the residents check these indicators, compare them with neighbour’s indicators and ask local officials and politicians why do they have such situation. It’s important to raise the involvement of residents so they will be interested in what is going on in their self-government – why do we have this situation, where is the taxpayers’ money going. If information is not available then you can’t discuss at this level.

– I was impressed by what you said about human capital. The problem of the more fortunate Ukrainian communities is often that they have received a lot of resources at once that it seems that they don’t fully understand how to manage this money effectively. The quality of management can’t be dramatically increased in principle. The idea that everyone can be quickly pumped on the trainings is also misleading. And if it was an issue of corruption schemes than they conditionally will divide just new volumes.

– The quality of management grows on the way to achieving results. The key is to have an educated staff, money is only a mean. Extremely large sums can be spent foolishly. So taking care for the development of the human capital must become a routine task. 

In Estonia, special programs for the development of self-government leaders have been created. These programs include trainings for management, decision-making, service design, and also for teamwork skills, process analysis, and feedback. Another important way of learning is the so-called rotation during which they study and temporarily work in others self-governments, gaining necessary skills and new experience. This practice has intensified during and after the reform.

Unfortunately, work in a local self-government body is not the most attractive choice because in business the income is higher. However, in principle the understanding of the importance of local governments grows. Inspire hope that according to the Eurobarometer’s data local government is the second institution (right after the country’s police) in terms of public trust which means that local government system works.

There is such an expression – “to believe means to see”. And during the implementation of the reform, the local training has been practising in places with good results. Citizens of Ukraine need more confidence that they can make their state better.

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