EECMD Roundtable on Decentralisation in Ukraine and Lviv Oblast

Analytical Note EECMD Roundtable on Decentralisation in Ukraine and Lviv Oblast Lviv, 24 November 2018

The Analytical Note has been prepared by: Dr. Maryan Lopata and Dr. Yevhen Laniuk, Center of Innovation Research

The Eastern European Centre for Multiparty Democracy (EECMD) is a democracy assistance organization that promotes the deepening of democracy through interparty dialogue and capacity strengthening of political parties. Based in Georgia and Ukraine, EECMD is affiliated with the Netherlands Institute for Multiparty Democracy (NIMD), the organisation which works with over 200 political parties in more than 20 countries in Africa, Asia, Eastern Europe, Latin America, the Middle East and South Caucasus. Together with the political parties and the local implementing partners, EECMD contributes to inclusive and stable political systems in these countries. Furthermore, EECMD assists political parties to become more responsive and policyfocused. Special attention is paid to empowering members of marginalized groups. To foster the democratic culture in a country, EECMD also provides political education programs that focus on democratic values, knowledge and skills.

All views expressed in this analytical note are those of the authors and do not necessarily represent the views of the EECMD

Contents Introduction..........................................................................................................................................4 List of participants .............................................................................................................................4 Summary of the discussion ............................................................................................................5 Conclusion .......................................................................................................................................... 12 Final recommendations put forward by the experts ....................................................... 13

EECMD Roundtable on Decentralisation in Ukraine and Lviv Oblast Lviv, 24 November 2018 Analytical Note Introduction One of the most important outcomes of the Revolution of Dignity, which took place in Ukraine in 2013-2014, has been launching of a number of pressing reforms in Ukraine. The reform of local selfgovernment and territorial organization of government, or the decentralization, has been announced by the new Ukrainian authorities as the key reform aimed at increasing capabilities and improving the standard of living of local communities. The essence of this reform can be briefly outlined as consisting of three key elements. Firstly, this is the transfer of political power to the lowest possible level of government. Secondly, this is the transfer of resources according to the transferred powers. Thirdly, this is the transfer of responsibility and the establishment of state control over the activities of local government bodies.

In 2017, adhering to its mission of contributing to the establishment of inclusive and wellfunctioning democracies in the region, the Eastern European Centre for Multiparty Democracy came with an initiative of carrying out round-table discussions on the strategy and progress of decentralisation in Ukraine and Lviv and Odesa regions. Representatives of the regional think-tanks, local authorities, civic activists, policy analysts and practitioners with an expertise in the issues of decentralisation were invited to take part. The main objectives set for the roundtables were to analyse and discuss the progress and peculiarities of the decentralization reform in Lviv and Odesa regions, outline the key problems of the multidimensional process, as well as come up with specific recommendation for its improvement.

The present analytical note is a summary of arguments and propositions put forward by the experts during the roundtable in Lviv, which took place at the EECMD Lviv office on 24 November 2017.

List of participants Taras Baranetsky, Centre of Development of Local Government in Lviv Oblast; Oleksandra Cholovska, Lviv Regulatory Hub;

4

Maryana Dzherelenko, European Educational and Cultural Centre; Maria Dziupyn, Information and Legal Centre “Our Right”; Zoriana Filipovs, Lviv Oblast Centre of Initiatives; Roman Gladiy, All-Ukrainian Association of Village Councils, Lviv Regional Office; Taras Khavunka, Lviv Regulatory Hub; Ivan Kul’chytsky, Centre of Development of Local Government in Lviv Oblast; Iryna Kuropas, Agency of Local Economic Development of the Yavoriv Region; Petro Kuzyk, Eastern European Centre for Multiparty Democracy; Maryan Lopata, Centre of Innovative Research; Yevhen Laniuk, Centre of Innovative Research; Oleksiy Rogovyk, Anticorruption Forum of Lviv Oblast; Natalia Fediuk, Centre of Development of Local Government in Lviv Oblast; Petro Zhuk, Institute of Regional Research of National Academy of Sciences of Ukraine.

Summary of the discussion Four questions were put up to the discussion: 1. What are the gains and disadvantages of the ongoing process of transferring of powers from the central government to local self-government bodies that is taking place today in Ukraine in general and in the Western region and Lviv oblast in particular?

2. What financial, administrative and legal powers and instruments remain to be delegated to the local administrations and self-government bodies, should the reform of local government successfully continue?

3. What effects will the decentralization reform have on political parties and Ukrainian political system in general? In particular: how will the process of decentralization affect the electoral bases and strategies of political parties; and will the respective adaptation of the Ukrainian electoral system take place?

5

4. How should the local political agents (local authorities, regional branches of political parties, civic organizations and activists) act in order for the decentralization reform to fulfil its goals? What are the specific features of the Lviv Oblast in this regard?

1) What are the gains and disadvantages of the ongoing process of transferring of powers from the central government to local self-government bodies that is taking place today in Ukraine in general and in the Western region and Lviv oblast in particular?

In the process of decentralization, the transfer of powers and responsibilities to the grassroots level is not always accompanied by the transfer of resources. In the opinion of some experts, what is often taking place in reality is financial centralization. For instance, several recently adopted laws, especially “On the Privatization of State Property”, “On State Property Management” and “On Civil Service”, just contrary to the goals of the decentralization process, actually prompt an increasing of the role of the state bodies in the use of property of local communities. The share of the local budgets in the country’s consolidated budget throughout the years of Ukrainian independence has been steadily decreasing: in 1993 the local budgets received 48% of the income, in 2001 - 32%, in 2010 - 26%, and in 2016 - less than 20%. This testifies to the intrinsic central government’s attempt to drop the obligations off its shoulders without providing the local communities with the corresponding financial support.

Today, the state’s subsidies and grants make up more than half (~ 55%) of local budget resources. With the exception of income tax on individuals, which was transferred to the local level, the local budgets did not possess any significant sources of income.

Due to the lack of financial decentralization, one should expect significant problems with the realization of powers transfer to the grassroots level. According to one participant a similar type of decentralization took place in Russia, where the state gave powers to the local communities, but did not provide them with adequate sources of income. As a result, the central government gained a wide range of leverage over them, including fines and criminal prosecution. In comparison, the feature of Ukraine is in the weakness of state institutions and lack of control.

The attending experts came to a conclusion that a significant challenge of the current decentralization process, however, consists not so much in the deficiency of local control over the financial resources as in the lack of clear mechanisms of the transfer of powers to the local level. This applies not only to the social sphere (health, education, culture and sports), but also the law enforcement agencies and emergency infrastructure. Without the transfer of powers the transfer of control over the resources cannot efficiently take place. Subsequently, without these two components of

6

decentralisation, the elected leaders of the united territorial communities1 cannot be endowed with the respective responsibilities.

Several experts suggested that the policy of “stretched hand” in the relations between the local communities and the state is being formed in Ukraine. This is so because some communities will not be able to exercise their powers without state subsidies, and the local oligarchic business groups are not interested in making communities financially independent, but rather in making them politically controlled.

Another opinion, voiced by many experts, was that that the decentralization is progressing too slowly. The proportion of 26% of the united communities does not represent a satisfactory indicator for the third year of the reform. Budgetary difficulties can further slow the process of formation of the united territorial communities in the future. According to one participant, the main reason for such a slow pace of the decentralisation reform is a draft of amendments to the Constitution, which would guarantee the principle of voluntariness for the integration of the local communities. If decentralization takes place solely on a voluntary basis, it can be delayed for years and even decades. It is necessary to eliminate this principle to speed up the process of formation of the new expanded territorial communities. In that case, the state government would have more opportunities for an effective management of the reform.

The participants of the roundtable agreed that the mechanisms of formation and functioning of the new territorial communities are often ill-conceived. In particular, this concerns the size of the communities. As one expert has pointed out, the leaders of the communities, formed out of districts (“raiony”), often admit that they cannot effectively manage such large areas. The situation is especially difficult when rural elders are in opposition to the community heads. In order to transfer the powers and resources to a community, the state should determine if it is a capable unit. It is decided on the basis of the Prospective Plan of formation of the territorial communities, prepared by the oblast state administrations (this plan is a guideline: community formation takes place on a voluntary basis, but if communities are formed in a different format, the state is obliged to explain its advantages and disadvantages to the people). In contemporary Ukraine the state automatically transfers powers to every newly created community. As a result, this leads to the evolvement of very small communities, which cannot effectively manage the new powers or resources. One third out of 159 communities, which were formed in the first year of the reform, comprised of just two village councils. They joined together but failed to modernise (except that they received funds for recruiting a larger managerial staff). The reform seems to follow the scheme: first establishment of the new communities, and then determining

The term “united territorial community” refers to the expanded municipalities, created as the result of integration of several smaller territories in the process of the current administrative and self-governance reform.

1

7

which of them are capable only afterwards. Voluntariness and efficiency may not always go hand-inhand. Furthermore, at this expert emphasized, the Prospective Plans contain discrepancies themselves, often disregarding historical traditions and existing infrastructure and communication settlements.

One of the experts claimed that a significant disadvantage of the present reform is its disregard of the role of business. The intrinsic logic of the reform follows the “government–public” axis, while an effective functioning of any community rests on three major elements: government, the public and business. It is impossible to come up with a strategic development of a community without the local business being treated as an equal participant in the decentralization process. The reform’s mechanisms should be adjusted so as to take into consideration the interests and capabilities of the entrepreneurs.

Another problem that was raised during the discussions was that the local communities often lack some basic information on which managerial decisions can be based. This includes, for instance, information about the conditions of their own lands and local infrastructure.

Also, the participants agreed with a suggestion that a lack of mechanisms of cooperation between the communities represents a significant disadvantage of the decentralization in its present form. The state and the public sector are quite active in promoting the decentralization, however the idea of cooperation, including an exchange of experience, ideas and projects between the communities, has been underestimated and neglected.

2) What financial, administrative and legal powers and instruments remain to be delegated to the local administrations and self-government bodies, should the reform of local government successfully continue?

According to several participants, in the initial phase of the reform the state has delegated too many powers to the local governments in the field of education, healthcare, culture and sports. As regards culture, for example, the state will soon be able to interfere in the cultural development of the society only within the scope of powers of the organisations under its direct control and with the financial support from its budget. In the opinion of these experts, if we leave these areas solely to the local communities without providing them with sufficient resources, one should expect their gradual deterioration. Thus, the decentralization seems to be especially badly planned in such spheres as culture and sports.

It has been agreed during the discussion that in order to at least partly solve such problems and endow the communities with more resources, it is necessary to amend fiscal legislation in the sphere of interbudgetary relations. The decentralization often results in an imbalance of the new communities’ capabilities: there are communities that are getting richer, but there are such that lack any significant sources of financial resources for stable functioning. The state must ensure the process of the communities’ budgetary levelling. In addition, the management of cultivated land outside settlements, 8

which is currently controlled by the regional State Committee for Land Resources, should be transferred to the communities. This determines the need for a transfer of the right to adopting of city-planning documentation to the united territorial communities, so that they can legitimize construction in these areas.

3) What effects will the decentralization reform have on political parties and Ukrainian political system in general? In particular: how will the process of decentralization affect the electoral bases and strategies of political parties; and will the respective adaptation of the Ukrainian electoral system take place?

One of the issues raised during the discussions was a lack of changes to the electoral legislation in the context of decentralisation. Due to this circumstance, elections currently cannot take place in the already formed new territorial communities (for example, in such communities as Slavuta in Khmelnytsky oblast).

Another point made by several experts was a dubious impact of decentralization on the quality of public administration due to its slow pace. In fact, so far in Ukraine there has been no meaningful discussion on the question of how the final structure of the state government should look like as the result of the reform. It is not clear what institutions and with what exact scope of functions will it represent at the level of districts. In the Draft Law on Amendments to the Constitution (concerning government decentralization), the list of the powers assigned to the state representatives (“prefects”) includes a prerogative which is formulated as “other powers” and “implementation of other state programs”.

The participants of the discussion mentioned that the reform is unevenly implemented on different territories. There are the regions, where the powers have been almost completely transferred from state administrations to the united territorial communities, while in other areas the maintenance of state power still lies primarily on the shoulders of district state administrations. It creates a dual, complicated and non-transparent system of public administration. According to the decree of the Verkhovna Rada about the amendments to the Constitution in the sphere of decentralization, local district administrations should be liquidated by March 2018. However, the institute of prefects, which is assigned for replacing them, has not yet been established. Today, this step represents a certain risk, because it may significantly weaken the structure of state government and potentially lead to local separatism.

According to some participants, the decentralization can lead to evolving of a subnational (regional) party system in Ukraine, where the electoral support of a significant number of political parties is limited to small regions. Although Ukrainian electoral legislation does not permit the formation of regional parties, specific features of elections to local bodies favouring such development 9

should be taken into account. In the opinion of these experts elections in rural communities should be based on the majority voting system (about 75% of newly created communities are rural). The issue of anti-state activities of regional parties has to be under control of the Security Service of Ukraine and the Ministry of Justice, which may prohibit and dissolve a certain party at any moment.

The issue of potential amendments to the electoral law was discussed in this regard as well.

According to one expert, it is necessary to expand the circle of subjects of nominations in the local elections – from self-nominees and members of political parties to candidates nominated by local initiative groups. In fact, in some cases one can notice even greater centralization of national political parties due to the decentralization processes, as these parties are now keen on achieving greater representation in the newly formed local territorial communities. Furthermore, the issue of approval of candidates for the position of community heads moves from local to regional and even central party level.

Several experts drew attention to the problem of potential risks to the unitary form of government and even provoking of separatist reactions as a result of decentralisation. According to these experts, the decentralization reform creates opportunities for development of subnational and regional political parties. The emergence of such parties in fact follows the trend of contemporary party politics in the Western Europe. The examples can be found in several European countries, including Spain, which is de jure a unitary country, but in which regional decentralization in Catalonia has caused the strongest political crisis in its newest history. In Ukraine the transfer of powers from the central government to local self-government bodies can potentially lead to the establishment and strengthening of the political projects with separatist orientations. These may include the local and regional parties in the communities where ethnic minorities form the majority.

During the discussion of this issue it was emphasized that the link between decentralization and evoking of the ethnic and regional separatisms is, nevertheless, quite weak. An example of Poland was evoked, where the reform of self-government has been a great success and is sometimes called the most successful reform since the fall of the Communist regime. The experts pointed out three main preconditions of potential regional separatism in Ukraine: 1) weakness of state institutions amid political and economic turmoil in the country; 2) economic disproportions between the centre and the periphery; and 3) external influence coming from neighbouring countries (granting of foreign citizenship en-masse to the Ukrainian residents in several border areas, formation of organizations and paramilitary groups, cultural expansion etc.). It was emphasised that neither of these risks is directly linked to decentralization. The risk of growing of the ethno-regional separatism is rather more associated with a possible failure of economic reforms and reforms of law-enforcement and anticorruption agencies.

10

In the opinion of several experts, the greatest political challenge of decentralization can be the separatism of the so-called “local principalities” in the united territorial communities. If the reform will not be accompanied by an effective reform of the judiciary, it may lead to the domination in the communities of political forces controlled by local corrupt elites possessing significant financial and administrative resources. Such groups could strive to turn a community into their “feudal patrimony”, controlling its leadership, business and the police.

4) How should the local political agents (local authorities, regional branches of political parties, civic organizations and activists) act in order for the decentralization reform to fulfill its goals? What are the specific features of the Lviv Oblast in this regard?

The participants of the roundtable agreed that while a number of decentralization issues can be solved only at the level of state institutions and local authorities, there are problems that require attention from the civil society sector. One such problem is passivity and conservatism of the local communities, the absence of active personnel, the lack of strategic thinking and desire to develop the community. The leaders of the communities are not preoccupied with the long-term development and the strategic prospects, but are mostly engaged in solving the immediate day-to-day problems.

Another problem raised during the discussion was a sabotage of the decentralization policies by some government officials. An expert informed the meeting about a situation in the Radekhivskyi district of the Lviv oblast, where creation of a new territorial community was deliberately blocked on some formal grounds by district administration.

Yet another problem voiced at the roundtable was the need for a flexible approach on the side of authorities as well as political and civic organisations in the process of implementation of the reform.

Thus, in the opinion of one expert, different approaches need to be used regarding dissimilar communities. The settlements located close to the large cities (including Lviv) and possess a profitable infrastructure and high income are unwilling to unite with their more remote neighbours. Such communities have to be motivated by other incentives than formation of self-sustaining local communities. At the same time a big problem is the lack of knowledge about the mechanisms of cooperation with the Lviv agglomeration among leaders of local communities in the Lviv oblast.

In the rural areas, on the other hand, poor Internet access and low digital skills of staff and activists in the local communities is hinders the progress of decentralisation. Since the start of the reform implementation, the information flow and efforts of its application have been aimed exclusively at decision-makers – community heads and partly also local deputies. The ordinary people are deprived of an access to even basic information about the reform. As one of the participants mentioned, in Yavoriv district of Lviv oblast residents of a village were unaware of the reform altogether. Under such conditions it is virtually impossible to prepare a qualified personnel for the bodies of self-government in such communities.

11

Leaders and community members in Lviv oblast are insignificantly informed about the resources and grants offered by institutions of civil society engaged in the decentralization as well as donors. The participants agreed that significant efforts should be given to an elementary education of the local community representatives. This task should be performed also by the public sector, which should intensify its educational work in the communities. Such educational work needs to be conducted regularly and preferably in the form of demonstration of the successful cases of decentralisation.

The influence of the churches on the community life must also be considered and used to the advantage of the process of reform, because the church has a significantly higher credit of trust than state institutions, especially in such regions as Lviv oblast. The church can contribute to a greater community involvement in the project management and give support to the volunteer movements, although some priests use their influence for political purposes (campaigning for specific candidates).

Conclusion During the discussion of a number pressing issues associated with decentralisation in Ukraine and the Western region the participants of the roundtable in Lviv came to several important conclusions.

The transfer of authorities is not followed by the transfer of resources. On the contrary, financial centralization in some instances can be said to be taking place. The reform can thus be considered as the state’s attempt of getting rid of some obligations without giving the local communities enough financial support for fulfilling them. Furthermore, too many powers have been delegated to the grassroots level at the initial stage of the reform, which may lead to a poor realization of administrative functions by the local self-government.

The decentralisation reform lacks transparent and effective mechanisms of transfer of responsibilities, especially in the social sphere (health, education, culture and sports). One should expect gradual deterioration of these social services locally if the state fails to provide the communities with satisfactory resources to support them. A way to curing the situation is amending of the fiscal legislation, especially in the sphere of interbudgetary relations. The state must ensure the process of the budget levelling among the communities.

The principle of voluntariness in the establishing of the new united communities slows down the reform, which can be delayed for years and even decades. The exclusion of this principle from the Constitution would give the state more instruments for implementing the reform.

Another problem is the lack of information about the local infrastructure, on which managerial decision can be based. The implementation of the reform disregards the interests and opportunities that would potentially be created by the local businesses. The implementation of the reform should be based on the cooperation of three major agents: government, civil society and business.

12

Amendments to the electoral legislation is another pressing issue particularly for the large urban settlements. Because of the existing flaws in this legislation the elections of the self-government bodies and heads of the already formed communities cannot take place.

The reform is implemented unevenly on different territories. There are regions, where the transfer of powers from state administrations to the united territorial communities have been actually completed, while in other areas the maintenance of state power still lies primarily in the hands of district state administrations. It creates a complex dual and non-transparent system of public administration.

The decentralization favours subnational and regional political parties. In some regions of Ukraine the transfer of powers from the state to the local self-government bodies can potentially trigger the establishment of the local political parties of anti-state orientation. This is also followed by a risk of separatism of the so-called “local principalities�, or local oligarchs, who seek obtaining an unchecked power within the territories under their control.

Another issue, especially in the rural areas, is insufficient Internet access and low digital skills of staff and ordinary people, which deprives them of an access to information and opportunities associated with the decentralisation reform. The Church, which enjoys a high popular support in the Western region of Ukraine, should be more actively involved the process of implementation of the reform.

Final recommendations put forward by the experts 1) The legislation regarding the decentralization reform and mechanisms of its implementation need to be more clearly defined with an adequate informing of the local community leaders; 2) There have to be found ways of motivating the members of the territorial communities to take a more active part in their development; 3) There is a necessity to improve communication between united territorial communities and regional and central authorities; 4) Partnership of three major players (government, civil society and business) within the new communities has to be initiated, as the success of the implementation of the decentralisation reform significantly depends on the cooperation among them.

The Analytical Note has been prepared by: Dr. Maryan Lopata and Dr. Yevhen Laniuk, Center of Innovation Research

13