Before 2014, Ukraine had the “winner-takes-all” highly centralized political system with dualism of executive branch and unclear division of responsibilities at the local level. The decentralization reform ongoing since 2014 is aimed at reducing the significance of the national government and shifting responsibility for everyday issues to locally elected officials. This should induce more responsible behaviour not only of local officials but also of citizens and thus foster democratic development in Ukraine. However, without solving the problems embedded into the Constitution, the political system reform will be incomplete.
During the 23 years of its existence, Ukrainian Constitution has seen three major changes of distribution of powers between the President and the Parliament. Initially adopted in 1996 with almost unrestricted power of the president, in 2004 the Constitution was amended to shift most of the powers to the parliament. These changes were cancelled by the Constitutional Court in 2010 upon request of the then-president Yanukovych, and revived again in 2014, after the Revolution of Dignity .
Currently the parliament is the main source of power in the country: it appoints the Prime Minister and almost all members of the Cabinet and approves candidates for positions of ministers of foreign affairs and defense submitted by the President; it provides its consent for a number of other appointments (prosecutor general, head of the security service, head of the National Bank and others). However, to exercise this power, the parliament needs to have at least 226 votes. Before 2019, no single party had this number of votes, so they had to form coalitions. Parliamentary negotiations slowed down adoption of legislation – both progressive and harmful one.
Broad powers of the parliament raise the importance of electoral system design. For most of the time, Ukraine has had a mixed system whereby half of the parliament is elected by party lists and another half – in single-mandate districts (although Ukraine experimented with both completely proportional and completely majoritarian systems).
With parties centered on their leaders rather than a set of ideas, both components of the current electoral system have serious flaws:
- Party leaders can trade places on party lists – either for money or for loyalty.
- In single-mandate districts candidates with the most money have the highest chances to win (although the last elections showed that there can be exceptions to this rule).
- In single-mandate districts many votes are lost, so the winners can actually be minority candidates.
The “open list” system adopted in July 2019 should deal with these flaws – increase representativeness, create incentives for formation of ideological parties and allow local leaders to enter national politics under the brands of some political parties. However, the new Electoral Code has not been signed by the president yet. And if signed, the system will be enacted only at the end of 2024, so the next parliamentary elections will be held by the current system.
Dualism of executive power
The president appoints heads of local administrations, candidates for which are submitted by the Cabinet of Ministers. Heads of local administrations are responsible to both the President and the Cabinet. This dualism embedded in the Constitution is a prerequisite for a conflict between the President and the Prime Minister. It deprives the Cabinet of full control over the executive branch and thus undermines its ability to pursue its policies. The 2015 draft changes to the Constitution which were a part of the decentralization reform would not have resolved this problem. However they were not voted by the parliament due to the clause on special status of the Donbas included into them.
The decentralization reform implemented since 2014 is perhaps the most important one. It is also quite popular among voters. Prior to the reform there were four administrative levels in Ukraine – village/town/city district – raion or city – oblast – state. Villages often were too small to provide their people with quality public services. The decentralization reform aims at formation of Amalhalated Territorial Communities (ATCs) which will have sufficient budget for this. ATC target population minimum is 10 000. As of August 2019, ATCs covered 40% of Ukrainian territory with almost 30% of population. 4330 smaller communities merged into ATCs and 6331 communities remain outside of reform yet.
To encourage voluntary merger of communities, the newly formed ATCs are provided with fiscal incentives – 60% of personal income tax and 10% of profit tax remaining in a community, as well as provision of subsidies and subventions from central budget for infrastructure development. ATCs are allowed to establish property and land tax rates within defined limits. Simultaneously local governments were empowered with more responsibilities for the everyday lives of their communities – i.e. they can decide on the distribution of medical and educational subventions, infrastructure financing etc. An important element to this was Ministry of Justice delegating a number of registration services to local authorities and private notaries. Thus currently ATCs can compete on the quality of services provided to their people and on the investment climate they create.
Although generally decentralization has been a success with ATCs and cities as primary winners , the progress was bumpy. Some oblast and especially raion officials sabotaged the formation of communities. Some newly formed communities are still too small to provide a decent level of public services. Thus, although average ATC population is 10.7 thousand people, 37% of communities are smaller than 5 thousand people. These communities would have to merge with other communities.
An important incentive for decentralization has been the government decision to allow ATCs to get state-owned land around them into their communal property. This land can become an important source of revenues. Sometimes ATCs have to sue the state land management agency to get this land. Nevertheless, as of August 2019 646 ATCs have received 1.5 million ha of agricultural land.
The final steps of the decentralization reform should be to:
- Mandatory merge ATCs that did not voluntarily merge before the deadline which has to be defined.
- Resolve the issue of raions – one needs to decide whether raion level of the government remains. If yes, then its powers and responsibilities have to be redefined, if not – then raions should be liquidated by law .
- To clearly distribute the responsibilities on the local level – i.e. between local branches of the central government and local elected officials.
According to the logic of the reform, at some point the Constitution should be amended to reflect the new reality and to notch up the new distribution of powers between the centre and the regions. If the parliament starts working on such Constitutional amendments, it should also use this opportunity to eliminate the powers of the president to interfere with government policies. As Roger Myerson notes, the president who would agree to reduce his powers would serve his people best.
Decentralization has two important political implications. First, it allows growth of ‘grassroot’ political leaders. In Ukraine, a traditional way into politics has been either through joining a party list and thus being ‘pulled’ by a party leader or through ‘bribing’ voters of a certain district – either directly or indirectly, i.e. with provision of some public goods. With the decentralization reform, local politicians have incentives to provide good services to people of respective communities in order to be elected to the higher level.
Second, with increased responsibilities of local governments for most aspects of everyday life voters have no one to blame for poor public services than their local government and ultimately themselves for making a bad choice. This should encourage responsible voting.
Certainly, these changes would not happen overnight. However, the incentives have been set right, and the reform should continue.
 The former minister of regional development suggested to reduce the number of raions from 465 to 102 leaving them with functions of coordination of local offices of central government bodies.
The author doesn`t work for, consult to, own shares in or receive funding from any company or organization that would benefit from this article, and have no relevant affiliations