DONETSK REGION DEVELOPMENT STRATEGY UNTIL 2020

DONETSK REGION

DEVELOPMENT STRATEGY

UNTIL 2020

KRAMATORSK 2016

1 The Donetsk Region Development Strategy for the period until 2020 (Revised in 2016) was drafted by the Working Groups, established at the Donetsk Regional State Admin- istration, under the project «Restoration of Governance and Reconciliation in Conflict Affected Communities of Ukraine” of the UN Development Program in Ukraine. Fund- ing is provided by the Swiss Federation and the Government of Sweden. The views ex- pressed in this publication are those of the authors only and do not necessarily reflect the views of UNDP in Ukraine, Swiss Confederation and the Government of Sweden.

2 Contents INTRODUCTION...... 4 1. Brief description of the region...... 5 2. Socio-economic development trends of the region ...... 17 3. Identification of issues and comparative advantages...... 22 4. Strategic objectives and development priorities of the region until 2020...... 26 5. Operational objectives and tasks that are required to achieve strategic objectives ...... 27 6. Mechanism and stages of updating and implementation of the Strategy...... 31 7. Monitoring and Strategy progress evaluation...... 34 8. Compliance of strategic/operational objectives of the Donetsk Region Development Strategy until 2020 with the strategic/operational objectives of the State Regional Development Strategy until 2020...... 35 Appendices...... 37

3 INTRODUCTION

iven the rapid changes of geopolitical realities and carrying out the Anti-Terror- Gist Operations (ATO) in the Donetsk region, finding ways to reform the regional economic systems, determining the prospects of diversification of the regional econ- omy, improving quality of social services, reforming local governance, and building a secure society are of particular relevance for the economy and society. Successful resolution of these issues will help improve prospects for job creation, the level and dynamics of wages, revenues of local budgets, and ultimately the promotion of the socio-economic stability in the region. The Donetsk Region Development Strategy for the period until 2020 (new revision dated 2016) (hereinafter – ‘the Strategy’) was developed under the Law of Ukraine, «On Stimulation of Regional Development», “On Principles of State Regional Policy”, in compliance with the State Regional Development Strategy of Ukraine for the pe- riod until 2020, approved by Decree № 385 of Cabinet of Ministers of Ukraine dated August 6, 2014 as well as the implementation experience of the Donetsk Region De- velopment Strategy for the period until 2020 (dated 12.05.2015, №195/16r). The need for a new revision of the Strategy is due to the changing socio-econom- ic situation both in the region and in the country in general. Requirements of the respective development procedures of regional strategies and action plans for their implementation, as well as progress monitoring and evaluation of these regional strategies and action plans approved by Decree № 932 of Cabinet of Ministers of Ukraine dated November 11, 2015; by Law of Ukraine № 156-VIII «On Principles of State Regional Policy» dated February 5, 2015, Decree № 856 of Cabinet of Ministers of Ukraine dated October 21, 2015 «On Approval of the procedure and methods of monitoring and evaluation of the implementation of the state regional policy» and Decree № 821 of Cabinet of Ministers of Ukraine «Certain issues of implementation in 2015-2017 of the National Strategy of Regional Development for the period until 2020» dated October 7, 2015. The Strategy takes into account the provisions of the National Strategy of Region- al Development for the period until 2020, suggestions and recommendations on the Strategy that have been provided by the Institute of Industrial Economics of NAS of Ukraine, the summary report, «Ukraine. Recovery and Peacebuilding Assessment: Analysis of Crisis Impact and Needs in the Eastern Ukraine» from the European Un- ion, the UN and the World Bank Group, documents of the UNDP project «Restoration of social services and establishing of peace in the Donetsk and Lugansk regions»; the analytical report «Assessment of local authorities’ capabilities” from the Institute of Economics and Forecasting of NAS of Ukraine. The Strategy was prepared by the Working Groups that included department representatives of the Donetsk Regional State Administration, local authorities, as well as experts, representatives of NGOs and economic entities under analytical and statistical support of structural units of the Donetsk Regional State Administration, and consultative and methodological support groups composed of the UNDP’s inter- national and national experts. The strategy was publicly discussed in the cities of Bakhmut, Pokrovsk, Mariupol and Kramatorsk.

4 1. Brief description of the region he Donetsk region is an administra- Donetsk basin name. 1842 - beginning Ttive unit of Ukraine, whose area (26 of the coal mining at Alexander mine. 517.5 sq. km) comprises 4,4% of the total 1869 - beginning of construction of steel- territory of Ukraine. The administrative works by John Hughes, construction of center is the city of Donetsk. On 13 June Kursk-Kharkiv-Azov railroad. January 2014, the Donetsk regional state admin- 1918 - proclamation of the Donetsk- istration temporarily moved to Mari- Kryvyi Rih Republic. 1919 - formation of upol, and on October 13, 2014 – to Kram- Donetsk province. 1925 - division of the atorsk due to the beginning of hostilities province into Stalin, Mariupol, Artemi- in the East of Ukraine and Anti-Terrorist vsk and Starobelsk districts. July 2, 1932 Operations (ATO). - formation of the Donetsk region. Start- ing the three-component governance Historical milestones of the region: model (center, region, district). XI B.C. - State of Cimmerian nomadic tribes. VII-II B.C. - State of Scythian no- Soils: The various forms of relief led madic tribes. II B.C. - Alan union of Sar- to the formation of different kinds of matian tribes. II-IV century - emergence soil. The black soils were formed on the of the Huns in the Azov region. III-X loess rock. Meadow, swamp-meadow century - formation of the Turkic tribes soils were formed in floodplains and of Pechenegs. IV-VII century - union of gullies. Saline soils and salt marshes are Bulgarian tribes in the Azov region. V-XI typical along the river valleys of Mokri century - settlements of Slavic Northern- Yaly, Vovcha, Bakhmutka on the Azov er tribes in the Azov region. VII-X cen- Seaside, sand and loam soils are typi- tury - formation of the Khazar Khanate. cal on the Azov spits and on the banks 1050-1240 - Torque and Polovtsy tribes of the Siverskiy Donets. The area map spreading in the Wild Field area. XIV shows 60 kinds of soils in total. century - formation of the Don Cossacks community on the banks of Khoper and Mineral resources: Geologically, Don. XIII – XV century - coexistence of the Donetsk region is located in the Slavic and Asian cultures as a part of the south-eastern edge of the Eastern Eu- Golden Horde. XV century - formation of ropean platform - one of the largest Zaporozhe and Don Cossacks. Strength- and relatively stable earth’s crust ar- ening of the Moscow state. XVI-XVIII eas. The base platform consists of Ar- century - emergence of Kalmius and Sa- chean and Proterozoic schists, gneisses mara Palanka of Zaporozhye Cossacks. and granites. The sedimentary cover is 1697 - formation of Bakhmut settlement composed of Paleozoic, Mesozoic and for organizing of salt mining. 1741-1767 Cenozoic sediments, reaching the thick- – handing over of land to the east of the ness of 3-5 km. There are numerous salt Don to Kalmius Cossacks. 1765 - elimina- domes with deposits of oil, gas and salt tion by Catherine II of Zaporizhzhya Sich in the Dnieper-Donets Basin of the East- and formation of Sloboda-Ukrainian ern European platform, covering the provinces. 1775 - formation of the Azov north of Donetsk region. The powerful province. 1783 - formation of Ekaterino- coal deposits in the central and eastern slav governorship including Bakhmut, parts of the region and the surfacing in- Donetsk and Mariupol provinces. 1822 trusive shield formations in the south- - creation of settlements by German col- ern and western regions are charac- onists in the Azov region. 1827 - creation teristic to the geological structure. The of the first geological map of the region mineral resources consist of fuel and by E. Kovalevsky, first account of the energy resources (coal, coalbed meth-

5 ane, free gas), nonmetallic minerals are few lakes in the region, there are (construction, mining, chemical, non- small lakes in the valley of the Sivers- metallic metallurgical), metallic miner- kiy Donets, as well as Slovyansk salty als, groundwater, etc. The richness of lakes. The Siverskiy Donets River is the deposits of minerals in the area are de- main source of drinking water. The termined, above all, by the Donetsk coal main industries that are actively using basin, one of the largest coal deposits in the pool water resources are the coal Europe. Rock salt, gypsum, cement raw industry, utilities, steel works. materials, fluxing limestone and dolo- mite, granite, refractory and high-melt- Geographical location: The area is ing clay deposits etc. are also of impor- located in the Southeast of Ukraine with- tance. The deposits of iron ore, fluorite, in the Donetsk ridge, Azov Upland and, alkaline kaolin, basalt, rock phosphate, partly, Dnieper lowland. It borders on vermiculite, aluminum materials, mer- Zaporizhia and Dnipropetrovsk in the cury, graphite, and rare earth elements west, on Kharkov in the north-west, on have been explored and are current- the Lugansk region of Ukraine and the ly under exploration. Deposits of gold, Rostov region of the Russian Federation copper, lead have also been discovered. in the north-east and east. The region is The kimberlite pipes with small dia- bounded by the Sea of Azov and has ac- mond fragments have been discovered cess to the Mediterranean basin in the in the northern Azov crystalline massif. south. Oil and gas fields have been discovered The region is 240 km long from north in the northern and southern parts of to south, 170 km long from west to east. the region, a free gas deposit is under The area covers the western part of the exploration. In addition, the area coal Donetsk ridge and the eastern half of deposits contain 118 billion m3 of meth- Azov Upland. The watersheds of rivers ane which is a valuable energy resource. basins of the Black and Azov Seas are lo- Also, deposits of chalk, construction and cated in the region. glass sand, quartzite, granite etc. are The highest point in the region is mined. There are four types of coal in 344 m. It is located near the village the region: gas and long-flame coke, an- of Ridkodub, Shakhtarsk district (the thracite and semi anthracite. village ended up in the combat zone and dropped out of the Ukrainian gov- Water resources: The region’s area ernment control in January-February is distributed over the following riv- 2015 during hostilities in the East of er basins: Don - 30.2%, the Dnieper - Ukraine). The lowest elevation (- 0.4 28.5% Azov - 41,3%. The areas occupied m) is the water level in the Sea of Azov. by water bodies cover 42 300 hectares The extreme northern point of the re- (about 2% of the region area). There gion is the elevation of 195m in Kras- are 2,336 water bodies with a volume nolimansk region, the southern - Bilo- of 1.169 billion cubic meters, includ- saraiska Kosa village, Pershotravneve ing 130 reservoirs with a total water District, the western - near the village volume of 866.3 million m3 and 2206 of Komyshuvaha, Velyka Novosilka lakes with a volume of 294.9 million m3 district, the eastern - near the village in the region. The region has 246 riv- of Verkhniy Kut, Shakhtarsk district. ers that are over 10 km long, which is The geographic center of the region is above 1% of the total number of rivers located in the village of Pisky, Yasyno- in Ukraine. Most of the rivers in the re- vatsk district. gion are classified as ‘dirty,’ and ‘very Climate: The area is characterized as dirty.’ The water in almost all rivers a temperate, continental climate with has a high concentration of salt. There insufficient moisture. Its territory is -un

6 der the influence of the Atlantic Ocean mirovich-Danchenko in Velyky and continental spaces of the Asian con- Novosilky district; tinent. Significant influence comes from • 1 site of monumental art of nation- the cold arctic and warm, moist Mediter- al importance - the monument to ranean air. The top rains fall in the up- Artem in Slovyansk district. land in the western part of the Donetsk As of January 1, 2016, the Nature Re- ridge, the lowest - in coastal areas. Up serve Fund of the Donetsk region is com- to 50% of annual rains fall in summer. posed of 117 areas and facilities with The total annual rainfall is 400-540mm. total area of ​​109,600 ha (actual area – January is the coldest month, July is the 92,900 ha), including those of national warmest. The average temperatures in importance - 21 (total area of ​​69,400 ha), January are -5 to -8 ° C, and 21-23 °C in local importance - 96 (40,200 ha). The July - 21-23. The sharp temperature fluc- ratio of the ​​natural reserve fund area to tuations are typical, especially in winter the area of the Donetsk region is 3.5%. and autumn. The difference between There are 42 areas of natural pre- average temperatures in winter and serve with a total area of ​​30,700 ha in summer is 28-30°C. East winds which the territory temporarily out of the are low in moisture are predominant in Ukrainian Government control. The winter and spring. Summer is dominat- number of natural preserve facilities in ed by western, north-western and east- the territory controlled by the Ukraini- ern winds. The former two bring rain, an Government is 84 with an actual area the latter - dry winds. The region has a of ​​approximately 80,200 ha. The natural relatively homogeneous climate regime. reserve fund of the region also includes: Mariupol has a higher temperature, due national parks: «Holy Mountain», re- to the influence of the Azov Sea. gional landscape parks «Kleban Byk», «Kramatorsk» and «Slovyansk resort», Recreation resources and nature 39 wildlife reserves, 28 natural monu- reserve fund: The Donetsk region has ments, and 10 nature reserves. significant natural, historical and cul- The mild climate of the Azov seaside, tural resources, all prerequisites for the peloid, mineral, radon and table water development of recreational sector. As sources are among the recreational re- of January 1, 2016 the region houses 13 sources of the region. Five towns are monuments of national importance, of classified as resorts, namely Slovyansk, which 9 are archeological sites, 3 – his- Svyatogirsk, Yalta, Melekine and Urzuf torical sites, andone monumental art villages (Pershotravneve district) in the site. territory controlled by the Ukrainian The following is located in the territo- Government. ry controlled by the Ukrainian Govern- Due to the unique climate and natu- ment: ral medicinal resources of «Slovyansk • 6 archaeological sites: Svyatogirsk resort»,Slovyansk has a strong image Slavic settlement in Slovyansk of one of the most famous and oldest district; Teplynske settlement in host-spring resorts in Ukraine, which Slovyansk district; Tsaryn settle- has been operating for over 185 years. ment in Slovyansk district; Sydor- The resort is located in a large conifer- ov settlement in Slovyansk district; ous-deciduous park on the salt lakes, Burial mound grave near Granitne Ripne and Slipne where natural healing village, Telmanovo district; Burial factors - climate, mixed forest, sulfide mound grave near Fedorivka vil- silt mud, highly mineralized brine, and lage, Telmanovo district; a range of mineral waters are used for • 1 historic site of nation- treatment and rehabilitation. al importance - Manor of Ne- The unique natural healing proper-

7 ties of the salt mine in Soledar town are man hands. Thousands of pilgrims come widely known, and home to the «Salt there on major holidays every year. Symphony» spa resort. Holy Assumption Cave Monastery of Administration structure. The ad- Svyatogirsk is located on the slopes of ministrative-territorial system of the scenic cretaceous mountains looming Donetsk region includes 52 cities, with over the river which have long been 28 of them of regional significance, 24 called sacred. The centuries-old histo- cities of district level, 21 urban districts, ry of the cave monastery has produced 18 districts, 131 settlements, 253 village many saints and a unique historical and councils and 1,118 rural settlements. For architectural complex that combines the administrative-territorial map, see natural elements and the work of hu- Figure 1.

8 Fig.1. Administrative-territorial map of the Donetsk Region 1

1 The boundaries of the area, which are temporarily out of Ukrainian Government control, in accordance with the lists of residential centres where the state authorities temporarily do not exercise powers, have been mapped in accordance with Decree № 1085-r (updated) of Cabinet of Ministers of Ukraine dated November 7, 2014.

9 The decentralization processes: the community areas of the Donetsk In the Donetsk region, there are region» dated September 8, 2015) 273 councils, including 214 councils envisages unification of 273 councils which have been involved in the into 38 united territorial communities. decentralization process and initiated The final decision was made about the the procedures of unification or public unification of 10 communities in 2015. hearings, in the territory controlled The first local elections took place in by the Ukrainian Government. The 3 communities on October 25, 2015, long-term action plan for forming the another 7 communities are awaiting community areas of the Donetsk region the decision of the Central Election (Decree № 1029-r of the Cabinet of Commission. For the map of community Ministers of Ukraine «On approval of formation in the Donetsk region, see the long-term action plan for forming Figure 2.

Fig. 2. Map of Donetsk region community formation 2

2 Under Decree № 1029-r of the Cabinet of Ministers of Ukraine “On approval of the long term action plan for forming the community areas of the Donetsk region” dated 8 September 2015.

10 Territorial and administrative structure of Donetsk region

Name of district or The code of the regionally important administrative Name of territorial cities that include Name of center of a community the territorial community territorial administrative community community under center administrative the KOATUU center

Svitlodarsk 1420910600 Svitlodarsk Bakhmut district Siversk 1420910400 Siversk - "- Velyka Novosilka 1421255100 Velyka Novosilka Velyka Novosilka district

Kostyantynopil 1421282701 Kostyantynopil - "- Komar 1421282401 Komar - "- Volodarsk 1421755100 Nikolske Volodarsk district Myrne 1421556600 Myrne Volnovask district Hlibodarivka 1421588001 Hlibodarivka - "- Volnovakha 1421510100 Volnovakha - "- Oktyabrsk 1422087701 Shakhove Dobropillya district Maryinka 1423310100 Maryinka Maryinka district Kurakhove 1423310600 Kurakhove - "- Olexandrivka 1420355100 Oleksandrivka Oleksandrivka district

Mangush 1423955100 Mangush Pershotravneve district Cherkaske 1424256500 Cherkaske Slovyansk district Andriivka 1424280501 Andriivka - "- Ocheretyne 1425555900 Ocheretyne Yasynuvata district Soledar 1410370300 Soledar Bakhmut Chasiv Yar 1410370600 Chasiv Yar - "- Artemivsk 1410300000 Bakhmut - "- Vuhledar 1414800000 Vuhledar Vuhledar Toretsk 1411200000 Toretsk Toretsk Dymytrovsk 1411300000 Myrnohrad Myrnohrad Novodonetske 1411545600 Novodonetske Dobropillya Bilozersk 1411570500 Bilozersk - "- Dobropillya 1411500000 Dobropillya - "- Bilytske 1411570300 Bilytske - "- Druzhkivka 1411700000 Druzhkivka Druzhkivka Kramatorsk 1412900000 Kramatorsk Kramatorsk Lyman 1413300000 Lyman Lyman Krasnoarmiysk 1413200000 Pokrovsk Pokrovsk Konstantinivka 1412600000 Kostyantynivka Kostyantynivka Mariupol 1412300000 Mariupol Mariupol Selydove 1413800000 Selydove Selydove Mykolaivka 1414170300 Mykolaivka Slovyansk Sloviansk 1414100000 Sloviansk - "- Svyatogirsk 1414170500 Svyatogirsk - "- Novogrodivka 1413600000 Novogrodivka Novogrodivka

11 Economy: The current economic The following metallurgical enter- development of the Donetsk region is prises are operated in the territory un- supported by enterprises of different der Ukrainian Government control: PJSC industries. Fig. 3 shows the map of the “Ilyich Mariupol Iron and Steel Works”, Donetsk region with industrial zoning PJSC “Azovstal Steel Works”, coke pro- (agriculture, industry). duction PJSC “Azovstal Steel Works”, JSC In 2015, coal mining companies in “Avdiyivka Coke Plant”. The main en- the region produced 14,399 thousand terprises of non-ferrous metallurgy are tons of coal, 8,186.4 thousand tons of JSC “Artemivskiy Non-Ferrous Plant”, JV coking coal, and 6,212.5 thousand tons “Svynets”, LLC “Megateks” PJSC “Zinc”. of thermal coal. The following enter- The enterprises of the chemical in- prises are located and operating in the dustry produce a wide range of prod- territory controlled by the Ukrainian ucts: fertilizers, ammonia, polystyrene, Government: SE “Krasnoarmiyskvugil- acid, household chemical goods, phar- lya”, SE “Selydivvuhillya” SE “Dzerzhyn- maceuticals etc. skvuhillya”, Pivdennodonbaska Mine № The leading machine-building en- 3, SE “Donetsk Coal Energy Company”, terprises located and operating in the SE MO “Pivdennodonbasske №1”, SE VC Ukrainian Government controlled ter- “Krasnolymanska”, JSC MO “Pokrovske”, ritory include: PJSC “Novokramatorsk ALC “Bilozerska Mine”, LLC “DTEK Do- Machine-building Factory”, JSC “Ener- bropillyavuhillya”, ALC “LE Matrona of goMashSpetsstal”, JSC “Starokramatorsk Moscow Mine”, LLC “Krasnolymanske”. Machine-building Factory”, JSC “Kram- The power generation industry is atorsk Heavy Machine-Building Plant”, represented by a comprehensive sys- PJSC “Azovmash”, JSC “Artemivskiy Ma- tem of power generating distributing chine Works Vistek”, PJSC “Druzhkivs- companies. There are 5 thermal power kiy Engineering Plant”, JSC “Greta”, LLC plants in the region: Slovyanska TPP of “PA Slovyanskiy Plant of High Voltage PJSC “Donbasenergo” with an installed Insulators” and JSC “Betonmash”. capacity of 880 MW, TPP Starobeshivs- The food industry specializes in the ka of PJSC “Donbasenergo” - 2000 MW production of meat, dairy, bakery, flour, (Noviy Svit settlement of urban type, cereals, confectionery, pasta, oil, fish, Starobeshivskiy district, is temporarily fruit and vegetables, liquor, wine, beer out of the Ukrainian Government con- and soft drinks. trol), Zuyivska TPP “Skhidenergo Ltd.”- Production of non-food products 1270 MW (Zugres is temporarily out of for the population in the region in- the Ukrainian Government control), cludes refrigerators, gas stoves, washing Kurakhivska TPP “Shidenergo Ltd.”- machines, kitchen utensils, textiles, gar- 1517 MW, TPP Vuglegirska of PJSC “Cen- ments and knitwear, shoes etc. trenergo” - 3600 MW (Svitlodarsk).

12 Fig. 3. Map of Donetsk area by industries (agriculture and industry)3

3 Built according to the Department of Economics of Donetsk Regional State Administration

13 Agriculture: the Donetsk region has in the region has always been, Donetsk approximately 1.4 million hectares of Railway. The operational length of rail- designated agricultural land, of which way tracks is 2.8 thousand km, or 13% of 1.3 million hectares is at the disposal of all Ukrainian railways. The structure of agricultural enterprises and households the State Enterprise “Donetsk Railway,” (within Ukrainian Government-con- whose headquarters was in Donetsk city trolled territory). Arable lands com- included four railway directorates: Kras- prise 82% of agriclutrally designated nolyman, Yasynuvata, Debaltsevo and land, with hayfields and pastures cov- Lugansk. In early 2015, the hostilities in ering almost 16%. In general, this land the area reduced the railways under the has a high level of natural fertility and- Ukrainian Government control to only creates favorable conditions for the Krasnolyman directorate, which made development of livestock and crops. “Donetsk Railway” a regional branch of Agricultural products are produced by JSC “Ukrzaliznytsia” in early 2016. roughly 1,400 agricultural enterprises of various ownership and management, The sea trading port of Mariupol is accounting about 3% of the gross agri- one of the three largest ports in Ukraine, cultural product in Ukraine. The rich, in addition to having some of the most ‘black earth’ soils of the Donetsk region powerful equipment among the Azov ensure excellent conditions for the pro- Sea ports. The total area - 75.5 ha, the duction of a wide range of agricultural length of the mooring line - 4,2 km. products. The main agricultural crops Depth at berths allow to take in ships are winter wheat, sunflower seeds, veg- with a draft of 8.0 meters and a length of etables, fruits and berries. In 2015, of 240.0 m. The port waterfront length is: the total cultivated area (updated sown cargo berths - 3663.2 m, auxiliary berths area) for all categories of business with- - 225.7 m. The length of protective struc- in territory controlled by the Ukraini- tures – 3730.27 m, technical condition is an Government, (according to govern- satisfactory. ment statistics) the share of cereals was 55.8% industrial crops, 34% vegetables, The port is equipped with a mod- melons and potatoes - 5.3%, and forage ern reloading plant and accompanying crops - 4.9% in Donetsk region. The yield equipment to support the processing of of grain crops in all categories of busi- metal, sulfur, coal, metallurgical coke, ness within the territory controlled by clay, chemical fertilizers, petroleum the Government of Ukraine, (according products, containers, equipment and to government statistics) totaled 28.5 dt/ etc. The port of Mariupol is Ukraine’s ha (post processing), sunflower - 16.7 dt/ largest specialized coal transfer com- ha, potatoes – 111.3 dt/ha of vegetables plex, which allows the processing of up (open and under glass soil) - 144.1 dt/ha to 5 million tons of coal annually. The in the Donetsk region in 2015. Pig breed- share of export goods in the total volume ing, dairy and beef cattle breeding, poul- of cargo is 55.4%, transit - 0.1%, imports try and sheep breeding are also highly - 15.5%, and domestic goods - 29.0%. The developed. Annually, the region produc- transportation system ranked seventh in es 130-150 thousand tons of meat in live terms of freight ability and ninth in pas- weight, 230-250 thousand tons of milk, senger transport operations of Ukraine 700 million eggs and 70 tons of wool. before the beginning of hostilities in eastern Ukraine and Anti-Terrorist Op- Transportation infrastructure of erations (ATO). the Donetsk region includes the follow- ing means of transport: rail, road, sea and As of January 1, 2016, the Donetsk air. The largest transportation company region has a route network of intrar-

14 egional public bus lines, consisting of Given the lack of possibility to oper- 528 routes, of which 192 are long-dis- ate lines located in the territory outside tance and 336 (internal district, 175, of the Ukrainian Government control, inter-district and 161 suburban. The the road office in the Donetsk region, transport network is served by 189 car- in consultation with the regional Traffic riers of different ownership. There are Police Department of the Interior Min- currently ​​1,196 buses, of which 417 sup- istry of Ukraine has established routes port intercity bus service and 779 sub- for transit vehicles to bypass the terri- urban. The existing public roads length tory outside of the Ukrainian Govern- is 8,075.7 km (5,660.5 km of them - in the ment control, north to south. The pro- territory controlled by the Ukrainian posed route is a temporary alternative Government), including those of inter- to the national highway N-20 Slavyansk national importance - 326.0 km (209.7 - Donetsk - Mariupol. The first route is km of them - in the territory controlled along the public roads of state and local by the Ukrainian Government); of na- significance, and is designed for light ve- tional importance - 338.5 km (195.5 km hicles and passenger traffic. The second of them - in the territory controlled by route is established along the roads of the Ukrainian Government); of region- national importance whose properties al importance - 1,184.1 km (including meet the requirements for heavy traffic 696.9 km - in the territory controlled and large vehicles. by the Ukrainian Government); of local importance - 6,227.1 km (4,558.4 km of The checkpoint “International Prokof- them - in the territory controlled by the iev Donetsk Airport” has been almost Ukrainian Government). A temporary completely destroyed due to active fight- loss of control over a part of the coun- ing in the airport area. The airport lies try has significantly limited the transit within the territory currently out of the opportunities for the Donetsk region. Ukrainian Government’s control. The Two transit corridors “Europe-Asia” International Mariupol Airport is con- (Krakovets - Lviv - Rivne - Zhytomyr - trolled by the armed forces of Ukraine, Kyiv - Poltava - Kharkiv - Debaltseve but does not support civil aviation - Izvaryne) and “CHES” (Rene - Ismael - flights due to the military and political Odessa - Mykolaiv - Kherson - Melitopol situation in the area. . The Kramatorsk - Berdyansk - Mariupol - Novoazovsk), Airport has also been damaged by war- European routes E50, E48, E40, interna- fare, but could improve the region tran- tional highways M03 and M04, national sit capacity provided its infrastructure highways N15, N20, N21 have been total- is restored and developed. ly or partially lost.

15 Fig. 4. Donetsk Region transit map4

4 Built according to the Office of Economic and Transport Provision of the Donetsk Regional State Administration

16 2. Socio-economic development trends of the region review the socio-economic develop- ucts, other non-metallic mineral prod- A ment trends of the Donetsk region ucts - by 34.8%, the mining industry and over the last two years (2014-2015) is development of quarries by42.3%, the indeed appropriate due to its proximity textile industry, production of clothing, to the ATO, and the resulting significant leather, leather goods and other materi- structural changes in the regional econ- als by 43.7%, the manufacture of chem- omy, the land area, as well as the gen- icals and chemical products - by 2.1 eral population and industrial sector. times, production of food, beverages and These factors make it extremely difficult tobacco – by 2,4 times in 2015 compared to accureately compare development to 2014. The production of raw coal in trends before and after 2014 because 2015 halved and amounted to 13.1 mil- the time series are broken. Accordingly, lion tons. The volume of coal (including socio-economic development trends of the shipment of raw coal and enrich- the region are reviewed outside the ATO ment products) amounted to 10.2 mil- area. lion tons, which is 1.9 times less in 2015 Industry: The manufacturing output compared to 2014. In 2015 the smelting in the Donetsk region dropped by 34.6% of pig iron dropped to 8.6 million tons, in 2015 compared to 2014. Specifically, which is a decrease of 14.5% when com- reductions in the production, transmis- pared to 2014. Annual steel production sion and distribution of electricity, gas, amounted to 8.0 million tons, which is steam and conditioned air dropped by 17.9% less than in 2014. Production of 11.0%, the manufacture of metallurgi- finished steel amounted to 4.1 million cal coke and refined petroleum prod- tons in 2015 which is a 23.4% decrease ucts fell by 15.1%, the metallurgy and compared to 2014. Production of elec- production of finished metal products - tricity in 2015 amounted to 21.7 billion by 26.4%, in engineering - by 33.8%, the KW/hours, which is a decrease of 4.6% manufacture of rubber and plastic prod- compared to 2014.

The structure of the industry of the Donetsk region (in %) Types of industry 2014 2015 Industry 100 100 Mining and quarrying 15.7 15.8 Processing 64.8 65.1 including: Metallurgy 38.4 43.9 Engineering 5.3 4.4 Food Industry 9.2 5.5 Coke and refined petroleum products 5.8 7.6 Manufacture of chemicals and chemical products 2.1 0.9 Other 4.0 2.8 Electricity, gas, steam and conditioned air 18.4 18.3

Water supply, sewerage, waste management 1.1 0.8

For the share of some regions of Ukraine in the total output of industrial production in 2015 see Fig. A in the appendices.

17 Agriculture: The volume of agricul- exports to Turkey ranked third, with tural production dropped by 34.7% in the supplies accounting for 13% of the 2015 compared to 2014. The gross yield total. Compared with 2014, the exports of grain and leguminous crops amount- to Turkey dropped by 45.1%. Foreign ex- ed to 1.5 million tons which is a 35.0% de- change earnings from exports of goods crease in 2015. Gross sunflower produc- to Asia dropped by 3.3 times during this tion dropped by 28.6% to 528.3 thousand period. In 2015, exports of goods to the tons. Potato yield is 397.7 thousand tons, countries in the America dropped by which is almost 49% less than a year ago. 2.6 times from 2014, and 4.6 times to Gross vegetables dropped by 2.3 times, African. Foreign exchange earnings de- to 208.0 thousand tons. In 2015, the yield rived from the export of ferrous met- in fruits and berries dropped to 104.9 als accounted for 73.7% of total exports thousand tons, which is almost 15% less and dropped by 2.2 times. The exports than in 2014. In 2015, meat production of engineering products went down by amounted to 131.5 thousand tons, which 47.8%, in addition to export products of is 13.4% less than in 2014. Milk produc- ferrous metals - by 3.0 times, chemical tion in 2015 dropped by 19.5%, amount- products – by 3.3 times, finished food ing to 227.9 thousand tons. In 2015, products – by 10 times. In 2015, exports egg production was 629,400,000 pieces, of services amounted to US $377.4 mil- which is 2.6 times less than in 2014. As lion, accounting for only 79.6% of the of January 1, 2016, the livestock produc- totals exported in 2014. Imports totaled tion was 72.2 thousand heads, which is US $210.2 million, accounting for 59.6% 23.7% less year on year, including the of the volume in 2014, comprising4.1% cow production decrease by 24.0% to of the total volume of imports. Howev- 37.6 thousand heads. The pig produc- er, the balance for the year was positive, tion dropped by 7.1% to 445 thousand amounting to US $167.3 million. For a heads. As of January 1, 2016, poultry geographic structure of the Donetsk re- production was 3.7 million heads, which gion exports in 2015 see Figure 5. is 35.4% less year on year. The downturn is observed in the fol- Foreign trade: In 2015, the enterpris- lowing: the volume of industrial produc- es of the region exported products to tion - by 34.6%; the volume of agricul- 100 countries vs. 125 countries in 2014. tural production - by 34.7%; the number In 2015, the majority of exports were to of small enterprises - by 11.6%, sales of Italy for $810.6 million, accounting for products - by 9.5%, the number of em- 21.9% of the total exports volume. The ployees at small enterprises – by 3.5%; total exports to the European market the number of self-employed entrepre- dropped by 37.1%. Exports to Russia, the neurs who paid taxes, i.e. actually oper- second largest recipient of Ukrainian ated - by 55.5%; the amount of capital in- goods dropped by 45.4%, accounting for vestments - by 58.9%; the accumulated 16.5 % of all Ukrainian exports. In 2015, direct foreign investment - by 28.3%.

18 Fig. 5. Geography of the Donetsk region exports in 2015 (%) Construction: In 2015, construction natural gas - by 3.6 times, over this pe- enterprises performed work using their riod. In December 2015, prices for fuel own resources for the amount of UAH and lubricants were higher by 15.4% 2.3 billion in the region. The volume year on year. The local transit services of construction output dropped by 2.4 went up by 26.5% year on year. times from the previous year. Labor market: In 2015, the unem- Inflation:In 2015, the average annual ployment rate among the working-age inflation rate was 46.1%, while the year population in the Donetsk Region, based before it was 43.3%. Prices for fish and on ILO methodology, amounted to 14.2%, fish products went up by 2.1%, fruits – compared to the average in Ukraine of also by 2.1%, sugar - by 3.5%, milk - by 9.5%.In 2014 these numbers composed 4.3%, oil - by 4.7%, vegetables - by 9.1%, 11.4% and 9.7% respectively. In 2015, eggs - by 18.3%. During 2015, the pric- 72,000 people had the status of ‘unem- es for dairy products went up by 16.1%, ployed’ on the registered labor market milk - by 17.3%, meat and meat products in the region, 17,600 persons or 24.5% - by 30.2%, oil - by 33.2%, bread - by 38.3 of citizens, were employed. As of late %, rice - by 48.5%, fish and fish products 2015, the number of registered unem- - also by 48.5%, pasta - by 1.5 times, vege- ployed was 21,200 persons where 60.7% tables and sugar - by 1.6 times, sunflow- were women, and 39.8% - young people er oil and eggs – by 1,7 times, fruits – by under the age of 35. In 2015, 27,200 va- 1.8 times, tea – by 2 times. By the end of cancies were registered, a reduction of 2015, the price for pharmaceutical prod- one half compared to 2014. As of Janu- ucts went up by 1.6 times year on year. ary 1, 2016, 355 vacancies were regis- Utility prices (tariffs): In December tered which was almost three times less 2015, the utility prices (tariffs) for hous- in the previous year. The registered un- ing, water, electricity, gas and other fuels employment rate per (one) job vacancy were higher than in December 2014, by went up from 25 to 60 people by the end 2.1 times on average. In particular, elec- of the year. The average unemployment tricity went up by 1.7 times, water rised benefit amounted to UAH 1,362 inDe- by 1.7 times, sewerage - by 1.8 times, hot cember 2015, which is 2.6% less than in water and heating - by 2.7 times, and December 2014.

19 Wages: In 2015, the average salary domicile, the population of the Donetsk of staff members of enterprises, insti- region was 4.3 million persons, or 10,0% tutions and organizations (employing of the total population of Ukraine, as 10+ persons) amounted to UAH 4,980, of December 1, 2016. In 2014-2015, the 29,1% more than in 2014. The Donetsk population dropped by 78,700 persons, Region ranks second in Ukraine in terms including by 58,800 persons due to nat- of salary, after Kyiv. In 2015, real wages ural causes and 19,900 persons due to dropped by 10.4% in the region (across migration. The demographic crisis was Ukraine – by 20.2%). The average num- further aggravated, seeing the death ber of staff employees amounted to rate exceeded the birth rate by 2.4 and 472,200 persons, 48.8% of them women. 2 times in 2015 and 2014, respectively. Moreover, the average wages of men 2015 saw a steady increase in the num- went up by 1.7 times more than those of ber of internally displaced persons reg- women. In 2015, wage obligations went istered in the region controlled by the up by 0.9% amounting to UAH 360.6 Ukrainian Government. As of January 1, million as of January 1, 2016, which is 2016, 655,900 persons (552,800 families) equivalent to 13,4 % of the labor com- who moved to the temporarily occupied pensation fund in December 2016. Eco- territory of Ukraine and areas of ATO nomically active enterprises account for were registered in the region, including: 91.3% of obligations. 118,000 persons of working age; 62,100 children, 27,200 persons with disabil- Population: According to the esti- ities, and 448,600 pensioners. For dy- mates based on the available adminis- namics of the number of IDPs registered trative data from the state, including reg- in the Donetsk region see Figure 6. istration of birth, death, and change of

20 Fig. 6. Dynamics of internal displacement registered in the Donetsk region

According to the statistics for the re- in urban centers - 2.1 times, gion territory controlled by the Ukraini- in districts - 1.5 times, an Government, the difference between • by local budget expenditures per the most affluent and most troubled cit- capita to maintain the health care ies (districts) was as follows: network: • by the volume of industrial output –– in urban centers - 32.7 times; per capita: –– in districts - 2.5 times, –– in urban centers - 91.7 times; • by costs per one student in second- –– in districts - 64.5 times; ary schools: • by capital investment per capita: –– in urban centers - 1.7 times, –– in urban centers - 58.6 times; –– in districts - 1.6 times, –– in districts - 28.7 times; • by local budget expenses per one • by revenues of general fund of lo- child in pre-school institutions: cal budgets without transfers per –– in urban centers - 2.4 times, capita: –– in districts - 1.9 times. –– in urban centers - 4.2 times, Four cities (of regional significance) –– in districts - 3.8 times, and 10 districts (15 towns and 12 dis- • by wage obligations per full-time tricts located in the region are controlled employee: by the Ukrainian Government) are sub- –– in urban centers - 46.6 times; sidized (received the base subsidy from –– in districts - 29.1 times; the state budget for the purpose of fiscal • by the average monthly wage: equalization).

21 The crime rate per 10,000 persons is coal mining - 65.20 million m3 (7.7%), 164.9 criminal offenses (in the area of metallurgy - 644.8 million m3 (76%), the region controlled by the Ukrainian utilities - 89.7 million m3 (10,6%). Government), with the average across Additionally, there exists a possible Ukraine - 127.3 offenses. risk to the safety of water treatment fa- Environment protection the Donetsk cilities of both the utility sector, and all region is the top Ukrainian air polluter companies in the region that discharge (22.0% of total emissions). The region is return water to the Siversky Donets riv- the top Ukrainian environmental pol- er-which is a major source of drinking luter, composing 22.0% of total emis- water, is an environmental and epide- sions. It ranks second in Ukraine in miological threat to the entire Donetsk terms of dumping polluted wastewaters region. There is a high concentration of into surface water bodies (32.1% of to- industrial mining, processing, chemical tal discharge), and also ranks second in and other industrial facilities that op- Ukraine in terms of accumulated waste erate disposal sites in the region. They (7.4% of total). The total discharge of have been used for a long time and are wastewaters to water bodies in the unsafe due to the difficult economic sit- Donetsk region was 843.4 million m3 uation of the industrial enterprises. in 2015, including “contaminated wa- ter” - 263.7 million m3 (31%). The water For types of Donetsk region infra- bodies of the Donetsk region are charac- structure destroyed by the warfare see terized by process water discharge from Figure C and Table A in the appendices.

3. Identification of issues and comparative advantages he current issues of the Donetsk re- tunities) and barriers (weaknesses and Tgion were identified using compar- threats), which was the basis for the ative advantages (strengths and oppor- SWOT-analysis

22 Comparative advantages and barriers for the Donetsk region development

STRENGTHS WEAKNESSES

S1. Favorable economic and geograph- W1. Extensive mining of mineral resources and export of ical position and the availability of ac- raw materials. cess to the Mediterranean basin for W2. Ukraine’s highest biosphere load. the development of cross-border and W3. High degree of dependence on a single source of water interregional cooperation. supply - the Siversky Donets river, and the integrated sys- S2. Significant explored deposits of tem of transportation - Siversky Donets - Donbass channel. minerals. Dependence of the drinking water quality on the economic S3. 92% of land resources are black activities in the Kharkiv region. earth soils. W4. Presence of degraded unproductive lands. S4. Multi-sectoral economy structure. W5. Presence of dangerous and hazardous productions, S5. Availability of local energy facilities. accumulation of toxic industrial waste. S6. Availability of significant employ- W6. Deteriorating of engineering and geological state of the ment potential. area due to mine closures. S7. Presence of powerful higher edu- W7. Physically and intellectually obsolete main production cation and research institutions. facilities, high energy intensity of gross regional product. S8. Significant natural recreation, his- W8. A significant depreciation of the existing industrial and torical and cultural potential. social infrastructure of the region, as well as destruction S9. Experience of local businessmen and damage of a significant number of production facilities, in difficult socio-economic conditions. housing and social services resulting from the ATO. S10. Initiation of decentralization W9. Mono-functionality of most little towns in the region process: three united municipalities and their significant dependence of the large job-supplying established (Lymanska, Oktyabrske, enterprises, and, as a result, signs of the depressed state of Cherkaske). areas where the main job suppliers were closed. S11. Background for further develop- W10. The uneven development of small and medium enter- ment of sociological services (introduc- prises in the territorial and industry contexts. tion of state social standards, mecha- W11. High labor migration, outflow of intellectual resources nism of social order, establishing of outside of the region. social service quality monitoring and W12. High degree of internal regional disproportions in the control system). economic development of the territories. S12. Availability of industrial areas W13. Low level of confidence from public, business repre- (Brownfield) and facilities for small and sentatives, public organizations to authorities resulting in medium businesses that result from the low level of public-private partnership. closing and reduced production of ex- W14. Low institutional capability to provide the population isting enterprises in the period of ATO. with quality public and social services, including vulnerable persons and IDPs (inflexible system, lack of activity coordi- nation, poor operational response). W15. Different access opportunities of the urban and rural residents to public and social service institutions due to the monopoly of the state and municipal institutions/depart- ments of social services.

23 OPPORTUNITIES THREATS O1. Ending the ATO and restoring of the territorial integrity of the T1. Continued uncertainty region. and ATO in the region, O2. Restoring economic relations (internal and external). which jeopardizes safety O3. Ability to enter new markets: the Persian Gulf region, North, West, in the society. Central, South Africa. T2. Reducing the O4. Development of the internal market in the region by intensifying investment attractiveness entrepreneurship and international support. of the region and the O5. Decentralization of management and transfer of authority from outflow of investors. the state authorities to local governments. T3. Increased O6. Deregulation in small and medium-sized businesses, including paternalistic sentiment approving laws on simplified taxation system, on permitting system, and reducing business on microcredit; easing of regulatory policy at the national level. activities. O7. Changing the regional economy structure. Contributions to the T4. Spread of shadow region economy of small and medium businesses (and individual economy entrepreneurs) and large enterprises are comparable and differ across T5. Aggravation of Ukraine within 10-15%. criminal situation in the O8. Demonopolization of the economy through introduction of region. electronic public procurement of goods and services. T6. Threat of sanitary O9. Upgrading the Donetsk region energy sector through epidemiological, implementation of modern coal mining and gasification technology ecological and man-made in unfavorable conditions, and using the mine space for accumulation disasters. and cogeneration of electricity at peak loads. T7. Possible deterioration O10. Adaptation of the active workforce. Employment opportunities of the world market of for the unemployed and giving public orders to enterprises of building ferrous metals. materials, metallurgical and machine-building located in the region, as T8. Lack of funding a result of construction of fortification structures and checkpoints on and suspension of a the borders with Russian Federation, equipping border and customs range of research and facilities. development projects, O11. Development of cooperation during the modernization of poor material base of the regional economy and small farming business in rural areas. scientific, research, and Formation of large cluster cooperative systems of the farming type. educational institutions. O12. Attracting international assistance (soft loans, grants, T9. Deficiency of consultancy, budget support, educational and cultural programs). interaction mechanisms O14. Intensifying institutional changes in Ukraine’s security sector, of law enforcement increasing responsibility levels in all areas of the security sector. agencies of Ukraine O15. Attraction of the state financial support for development of local with citizens and united communities and for building their infrastructure. of mechanisms for O16. Raising public activity, growing leaders’ resolve to unite regulating their communities. accountability to citizens.

The current development issue identification exercise for the Donetsk region was used to construct the below SWOT-analysis matrix, which aided in the development strategic objectives that will help implement the strategic vision of the Donetsk re- gion development until 2020.

24 25 4. Strategic objectives and development priorities of the region until 2020

Strategic vision of the Donetsk re- favorable environment for entrepreneur- Сgion development until 2020. The ship development, diversified, open and Donetsk region is a peaceful and integral competitive economy based on innova- part of Ukraine with a developed civil so- tive educational services and European ciety based on the principles of mutual values and standards; the region where understanding and respect for different united communities are capable of pro- opinions; the region which aims to build a viding quality services to all residents.

Strategic objective “Economic de- Strategic objective “Human devel- velopment and boosting employment” opment, provision of quality social has the following priorities: building a fa- services and addressing IDP issues” vorable environment for entrepreneuri- has the following priorities: creating a al development, a diversified, open and new system of providing social servic- competitive economy based on innova- es, utilizing an accessible, comprehen- tive educational services, based on Euro- sive, multidisciplinary and adaptive ap- pean values ​​and standards, as well as the proach to the needs of those affected by restored and upgraded infrastructure. the ATO operations, and the correspond- Strategic objective “Increasing ca- ing socio-economic issues. pability of local governance” has the following priorities: increasing the ca- Strategic objective “Building a safe pacity of regional, district and local society” contains the following priori- authorities to plan and deliver quality ties: improving the safety of citizens and public services to all residents (includ- their access to justice, promoting recon- ing vulnerable groups and IDPs) on a ciliation and improving the level of safe- democratic and transparent basis in the ty in the community, integration of IDPs process of implementation of changes to host communities under the decentralization reform.

26 5. Objectives and tasks that are required to achieve strategic goals Breakdown of strategic objectives, isolation of operational objectives and tasks, expected results Operational Main expected Tasks Main indicators objectives results 1. Development of economy and boosting employment 1.1 Improve 1.1.1. Restore infrastructure facilities Implementation of Growth rate of indus- efficiency of (bridges, roads, railways, etc.) affected by infrastructure pro- trial product sales,% critical infra- the conflict. jects. Growth rate of agri- structure in 1.1.2. Ensure efficient functioning of hous- cultural production,% the region Improving trans- ing and utilities infrastructure and uninter- port links in the Investments in the rupted supply of electricity, gas and water area. economy of the re- to social, education and healthcare facili- gion, million USD ties. Improving efficien- cy of housing and Unemployment rate,% 1.1.3. Introduce modern systems of urban utilities services. and intercity transit to improve the afforda- Number of farms, ag- bility and efficiency of transit services. Save Promote develop- ricultural, industrial urban electric transport and develop elec- ment of Apartment and service coopera- tric transport. Building Co-Own- tives, units. ers Associations. 1.1.4. Promote development of maritime Length of restored transport and maritime infrastructure. Creating a new automobile and rail- brand of the roads, km. 1.2 Create 1.2.1. Create entrepreneurship infrastructure, Donetsk region. favorable simplify and increase transparency of admin- Number of restored business envi- istrative procedures, particularly, in depressed Obtaining available bridges, each. ronment areas (including in small towns). financial resources, Coverage of central- compensation of 1.2.2 Create a positive image of the region to in- ized water supply, %. interest on loans by vestors, carry out rebranding to strengthen inter- small and medium Availability of water regional and international relations and attrac- business. supply for general tion of investments. housing space in ur- ban areas, %. 1.3 Promote 1.3.1. Coordinate and promote implementa- structural tion of regional initiatives in terms of social Number of small en- changes in the responsibility of business. terprises per 10,000, economy units 1.3.2. Conduct energy audits and measures to reduce energy consumption in office Number of medi- buildings and public infrastructure facili- um enterprises per ties. 10,000, units 1.3.3. Encourage investment in housing Number of capitally and utilities, IT, power saving, recycling of repaired and thermal- secondary resources, industrial waste and ly modernized sec- household waste through mechanisms of ondary schools, units state-private partnership. 1.3.4. Help the region enterprises enter the markets of the European Union, Asia and other international markets (including product certification, implementation of standards, spread and exchange of infor- mation). 1.3.5. Expand capability of employment centers in the region to monitor the state of the labor market, to support training and professional re-training of the population. 1.3.6 Create a regional system of advisory services for the development and support of farmers, agricultural production and ser- vice cooperatives

27 Operational Main expected Tasks Main indicators objectives results 2.Increasing capability of local governance 2.1. Create 2.1.1. Encourage and support partici- Completion of in- Ratio of planned/actual transparent pation of citizens in decision-making tegration of local united communities, %. management through community councils, public con- communities. system sultations, and empower citizens, espe- cially vulnerable groups, to participate in Ratio of approved de- public life. Operation of trans- velopment strategies of parent manage- local communities for 2.1.2. Improve accountability and trans- ment system. the period until 2020 to parency of local governments by amend- the actual number of ing the organizational structure and in- united communities, %. ternal processes, development of human resource capability and introducing ethi- cal standards and compulsory transpar- Efficient use of Volumes of attracted ency. joint ownership financial assistance to property of territo- improve capability of rial communities local government, mil- of villages, towns 2.2 Promote 2.2.1. Provide assistance and support to lion USD and cities that are decentraliza- the integration process of local commu- managed by the tion processes nities by facilitating the process of rec- regional council. onciliation between communities, and of Number of new, recon- institutional and organizational strength- Approval of devel- structed and modern- ening. opment strategies ized centers for provi- of the newly creat- sion of administrative 2.2.2. Implement sectoral decentraliza- ed local communi- services, units tion reforms through establishing shar- ties for the period ing of responsibilities, resources and in- until 2020. stitutional mechanisms to provide servic- Number of public es under decentralization - by providing Attracting financial meetings to improve technical support and training programs and technical assis- capability of local gov- to employees that will be maintained by tance from the state ernment, units state and international partners. and international partners. 2.2.3. Support implementation of the planned decentralization reforms at re- Creating, recon- gional and district levels by establishing struction and mod- the prefect agency and executive/admin- ernization of exist- istrative bodies of the district councils. ing administrative service centers

2.3 Enhance 2.3.1. Coordinate and support develop- capability ment of local strategies of economic and through pro- social development for newly established viding quality communities from a gender perspective, public ser- the problems of conflict and participa- vices tory approach to planning. 2.3.2. Improve capability and capacity of the new communities to improve man- agement and provision of quality public services through recovery and develop- ment of infrastructure for provision of services at the regional, district and local levels

28 Operational Main expected Tasks Main indicators objectives results 3.Human development, provision of quality social services and addressing IDP issues 3.1. Organization 3.1.1 Facilitate searching and attracting financial and Increased internation- Amount of attracted and provision by other resources from various sources to provide the al financial and techni- funds from the State local executive au- necessary social services at the community level. cal assistance, financial Fund for Regional thorities of quality assistance from gov- Development, million social services ac- 3.1.2 Develop competence of local authorities in terms ernment partners. UAH. cording to specific of their role in the organization and provision of so- needs of commu- cial services at the capable community level (enhanc- Functioning day care Amount of interna- nities (decentrali- ing awareness, training). facilities for vulnerable zation) tional financial and users of social servic- technical assistance, 3.1.3 Create institutions /social services to provide so- es in the newly estab- million USD cial services according to the needs of a particular com- lished communities. munity. 3.2. Transition 3.3.1. Create a register of social service providers, use Creating a register of Number of day care from the pro- the mechanism of social order to engage providers of social service provid- facilities for vulnerable vision of social different ownership and management type to the pro- ers. users of social services services at the vision of social services through the budget finance at in the newly estab- institutions to the community level. Addressing the lack of lished communities, their provision in social housing of IDPs, units. the community, at orphans and children home, in families deprived of parental (deinstitutionali- Number of IDPs, ATO care. zation) veterans and their families, orphans and 3.3 Development 3.3.1. Створити реєстр надавачів соціальних Functioning of the psy- children deprived of a competitive послуг, застосувати механізм соціального chological, social and of parental care who market for social замовлення для залучення до надання physical rehabilitation service providers received social hous- соціальних послуг за бюджетні кошти на рівні for the population af- of different own- ing, hostel, persons громади надавачів різної форми власності та fected by the ATO. ership and man- господарювання. agement types, as Development of the in- Number of people who well as expanding have received psy- the list of so- stitutions of the health system, including cre- chological, social and cial services (di- physical rehabilitation versification) ation of regional diag- nostic centers. services because of the ATO. 3.4. Develop and 3.4.1 Provide social housing and social hostels to IDPs, Development of infra- implement meas- orphans, and children deprived of parental care. structure in secondary Number of consulta- ures of social 3.4.2 Develop and implement regional policy of job schools, including cre- tions with public, units support for IDPs creation for IDPs, specifically for women and other ating a network of hub and population marginalized groups. schools. affected by the Number of commen- conflict 3.4.3 Create a system of psychological, social and phys- dations from citizens ical rehabilitation for the population affected by the Conducting art festi- for providing quality conflict. Support the ATO participants and their fam- vals and tourist confer- social services, units ilies. ences. 3.5. Develop 3.5.1. Develop health system infrastructure. Number of base hospi- health, education, 3.5.2. Develop educational and scientific infrastruc- Creation of mod- tals, units culture and sport ture. ern sports facilities in systems 3.5.3. Introduce innovative educational programs in compliance with the Number of regional secondary schools and build the system of “education requirements of sports diagnostics centers, for life”. federations and mod- units 3.5.4. Develop youth sports: create affordable sports ern sports grounds Number of facilities facilities for physical training and sports, support with artificial turf. equipped with diag- activities of agencies, institutions, and organizations nostic instruments of sports sector, build awareness to promote healthy Increasing the number providing secondary lifestyle and physical culture and sport, provide mor- of specialized medical al and material incentives to athletes and their coach- participants, winners, care to the population, es to excel in all-Ukrainian and international compe- prize holders in the units titions. Olympic Games, 3.5.5. Promote conservation and develop the histori- Paralympic Games, World and European Number of hub cal, cultural and spiritual heritage, create conditions schools, units for patriotic education of the population. championships and Number of art festi- 3.5.6. Develop a network of physical health “Sport for other major interna- vals and other events all”. tional competitions. of regional impor- 3.5.7. Provide financial support for youth sports tance, units schools, which are subordinated to local departments of all-Ukrainian physical culture and sports societies Number of partici- pants, athletes- win- ners and prize holders of international com- petitions, persons

29 Operational Tasks Main expected Main indica- objectives results tors 4. Building a safer society 4.1. Imple- 4.1.1 Facilitate the work of law enforcement and justice to support Functioning of In- Roadside lighting ment the rule formation of a safe society by clarifying the rights and obligations tegrated Analytical of the streets, of law, increase of citizens. Service Center of the roads and paved opportunities 4.1.2 Support law enforcement and justice agencies to promptly National Police in the squares, lx. to access justice respond to incidents of corruption, organized crime to ensure pro- Donetsk region. and protection tection of human rights. Number of in- of human rights 4.1.3 Raise the level of preparedness of departments of regional stalled video and local authorities in terms of emergency response and develop observation their emergency response infrastructure. Functioning of the cameras, units ProZorro electronic system. Number of implemented 4.2 Restore and 4.2.1 Strengthen the capability to respond to emergency environ- environmental strengthen the mental situations and recover capability in terms of fighting the Functioning of the projects and environment illegal use of natural resources and environmental crimes. e-government system. activities in the protection man- 4.2.2 Support educational and informational activities to raise area of chemical agement system awareness of population, inform about the environmental risks, contamina- to prevent envi- ensure provision of explanatory work with management and ad- Implementation of tion, units ronmental risks ministration of hazardous enterprises with involvement of RSA environmental pro- and promote and the media. jects and activities in Number of cre- environmental 4.2.3 Provide respiratory protection for unemployed population the area of chemical ated security recovery. living in the urban centers assigned to civil defense groups, in contamination. centers, units the possible chemical contamination area (in the ATO conditions) and in the forecasted area of chemical contamination (in peace- MPE (maximum ful conditions). Functioning of “Se- permissible 4.2.4 Set existing civil protection structures ready to be used as curity Centers” in the emissions), MPD designed. territory of united (maximum 4.2.5 Eliminate environmental threats, including those resulting communities. permissible dis- from the ATO. charges), MPC (maximum per- Upgrading sewage missible concen- treatment plants to tration). 4.3 Strengthen 4.3.1 Develop information and communication infrastructure. improve the environ- regional and 4.3.2 Promote competition and high professional standards in the me- mental situation. Number of up- local media of dia. Carry out measures to improve the reporting skills of the media. graded sewage various own- 4.3.3 Ensure population awareness of the EU integration advantages. treatment plants ership types to 4.3.4 Implement analytical content. Reducing the impact to improve the ensure citizens’ 4.3.5 Conduct extensive PR campaigns for activities related to address- of environmental environmental access to di- ing important social issues. verse and im- threats resulting from situation, units 4.3.6 Create a positive reputation of actively patriotic citizen through the ATO. partial sources cultural events aimed at patriotic education. of information Number of 4.3.7 Raise population awareness of handling explosive remnants. events to in- Improving technical crease aware- support of fire and ness of handling rescue units. explosive rem- nants, units

Reducing crime rate 4.4. Create a 4.4.1 Ensure availability of regulatory amounts of material re- and number of crimi- modern system serve at all levels (except the state level). nal offenses. of emergency 4.4.2 Improve the emergency response system by depositing warning, mon- logistical means into the regional reserve to prevent and miti- itoring, and gate consequences of emergencies and ensure life support for response the affected groups of population in accordance with the ap- proved nomenclature. 4.4.3 Promote provision of fire and emergency rescue units with all required machines and equipment, their timely up- grade, availability of the standard number of fire and res- cue units in the residential centers of the region. 4.4.4 Promote provision of modern equipment and special clothing for demining units and of advanced training for State emergency service engineers and the Armed Forces of Ukraine.

30 6. Mechanism and stages of updating and implementation of the Strategy

31 The mechanism of updating and im- Stage D: is a phase to implement the plementation of the Strategy includes strategy, to develop an action plan for five stages – А, В, С, D, Е. implementing the Donetsk Region De- velopment Strategy for the period until Stage А: is a theoretical/analytical 2020 and to use other strategy imple- phase, which involves theoretical and mentation instruments. feasibility studies, analysis of regulatory The strategy implementation tools support of the strategic regional devel- are the following: the regional develop- opment status and trends of socio-eco- ment program (Table B, Appendix), pro- nomic development of the region. jects to be financed by the State Regional Development Fund or through technical Stage В: is an analytical phase, which assistance, action plans that support im- involves building of a SWOT-analysis plementation of the Donetsk Region De- matrix, identification of issues and com- velopment Strategy until 2020. parative advantages of the region as the basis for transition to the next stage. Stage E: is a phase to monitor perfor- mance of the Strategy, which, according Stage C: is a phase to developing a to the laws of Ukraine, is to be held an- strategic vision and development priori- nually and implies a review and eval- ties, goals and tasks, which identify stra- uation of the Strategy implementation tegic objectives and their breakdown progress, determining efficiency of its (identification of development objec- implementation and adjusting the strat- tives and tasks of the region). It is used egy, as required. to clarify the possible development sce- For participation of cities and dis- narios and to estimate the projected per- tricts of the Donetsk region in the pro- formance of the region for the period ject activities in 2015 see Fig. D and E in until 2020 under the subject scenarios. the Appendix

32 Main actors of the Strategy implementation Participation in Actors Participation Participation in monitoring in implementation funding and evaluation

Regional, district As partners of imple- Co-financing of Directly for project administrations menting project ideas implementing pro- ideas with joint and local self-gov- or beneficiaries of the ject ideas financing ernment results

Co-financing pro- As partners of imple- ject ideas in which Directly for project Ministries, state menting projects for ministries, state in- ideas with joint institutions relevant sectors stitutions are specif- financing ically interested projects and Provision of (interna- Directly for project programs Co-financing pro- tional) technical assis- ideas with joint of technical ject ideas tance (if required) financing assistance

Participants in the projects with a private Financial contribu- Directly for project Private investors component as benefi- tions to the pro- ideas with joint and companies ciaries or implement- ject ideas with a pri- financing ing partners of project vate component ideas

Co-financing of As partners or benefi- Providing Regional, implementing pro- ciaries of project ideas information for district and local ject ideas from in which they are di- monitoring and stakeholders which they directly rectly interested follow-up benefit

Managing Preparation projects in areas of reports and Specialized NGO where they can Mainly due to fund- input resources associations and show raising activities for monitoring institutions relevant knowledge / appropriate project recommendations ideas

Professional knowl- Universities, Providing practical Co-financing pro- edge, data and sta- institutes, knowledge (know- ject ideas in which tistical reports for educational how), technical assis- they are interested monitoring in the institutions tance appropriate areas «Launching projects» A key actor in fund- Regional (developing project Monitoring imple- raising for the im- Development descriptions, issuing mentation of pro- plementation of the Agency invitations to bid, lob- ject ideas Strategy bying, supervision)

33 7. Monitoring and Strategy progress evaluation

he Strategy progress is determined tification of macro indices of economic Tby monitoring and evaluating the and social development of Ukraine and progress of individual action plans. Ex- by averaging the changeable subject. perience shows that in most cases the implementation of the Strategy may oc- The regional development strategy cur not only as planned in the (baseline) and action plans implementation pro- scenario. gress are monitored and evaluated ac- cording to the CMU Decree № 856 dated 1. Baseline implementation scenar- October 21, 2015, “On Approval of Pro- io of the strategic vision for the Donetsk cedure and Methods of monitoring and region development is the development evaluation of the state regional policy of the region which is controlled by the implementation progress”. It includes Government of Ukraine, in compliance annual reporting on action plan pro- with the socio-economic development gress monitoring results for the subject trends. period and the report on implementa- tion progress of the regional develop- 2. Optimistic (traditional) imple- ment strategy and action plan for its mentation scenario of the strategic implementation. The monitoring report vision of the Donetsk region develop- envisages evaluation of meeting the ob- ment is development subject to return jectives of regional development strate- of all territories of the Donetsk region gies by comparing actual performance under the control of the Government of indicators with the forecasted value for Ukraine. the period.

3. Pessimistic (realistic) implemen- The unified system of indicators for tation scenario of the strategic vision the National Regional Development of the Donetsk region development is Strategy for the period until 2020, the re- development under conditions of con- gional development strategies and their flict aggravation, intensification -of mi implementation plans includes many gration and further destruction of infra- indicators, but the main ones that were structure.. used for forecasting are as follows:

The projected progress (optimis- index of regional gross domestic prod- tic and pessimistic scenarios) of the uct, consumer price index in an average Donetsk Region Development Strategy year, producer price index of industri- for the period until 2020 was determined al products, average nominal monthly in accordance with the CMU Decree № wage, adjusted for the consumer price 558 dated August 5, 2015 “On approval index, unemployment rate for persons of the Forecasted economic and social aged 15-70 under the methodology of the development of Ukraine for 2016 and of International Labour Organisation, pro- the main macro indices of economic and ductivity of labor, exports of goods and social development of Ukraine for 2017- services and imports of goods and servic- 2019”. The projections of the baseline es etc.. scenario were built based on the quan-

34 Projected implementation indices of the Donetsk Region Development Strategy for the period until 2020 2017 2020 Indices as a percentage of previous year Base Optimistic Pessimistic Base Optimistic Pessimistic Gross domestic regional product 102.3 103.5 101.0 103.5 104.0 103.0

Average consumer price index for the year 116.3 115.4 117.2 106.3 105.5 107.0 PPI for industrial products 109.8 108.5 111.1 105.0 104.7 105.3

Average monthly nominal wages adjusted for CPI 102.2 103.7 100.7 105.1 106.5 103.2

Unemployment rate of the population aged 15-70 according to the 12.0 11.3 12.7 8.4 7.7 9.0 methodology of ILO Productivity of labor 101.0 101.8 100.1 102.8 103.4 102.0 Exports of goods and 104.7 105.2 104.1 106.2 106.5 105.9 services Imports of goods and 104.2 104.5 103.9 105.0 105.1 104.8 services

8. Compliance of strategic/operational objectives of the Donetsk Region Development Strategy until 2020 with the strategic/operational objectives of the State Regional Development Strategy until 2020

Consistency of strategic objectives of the Donetsk Region Development Strategy until 2020 with the strategic objectives of the State Regional Develop- ment Strategy until 2020

Strategic goals of Strategic development objectives of State Donetsk region until 2020 Regional Development Strategy Economic Building the Human Building a 2020 development capability of local development, safer society and boosting municipality provision of quality employment social services and addressing IDP issues 1. Improving the competitiveness of the regions ++ ++ + ++

2. The territorial socio-economic integration and spatial development + + ++ ++ 3. Effective Public Management regional development ++ ++ + +

“++” marks the full harmonization of strategic/operational objectives of the State Regional Development Strategy for the period until 2020 with strategic/operational objectives of the Donetsk region until 2020

35 ing and emergency response system. response emergency and ing

+ + + + + + + + - Development of modern warning, monitor warning, modern of Development ++ ++ ++ ++

tion

- informa of sources impartial and diverse to

ferent ownership to ensure citizens' access access citizens' ensure to ownership ferent + + + + + + ++ ++ ++ ++ ++ ++

- dif of media local and regional Strengthen

environment

ronmental risks and achieve restoration of of restoration achieve and risks ronmental

-

vironmental management to prevent envi prevent to management vironmental + + + + + + ++ ++ ++ ++ ++ ++

- en of system the strengthen and Restore

to justice and human rights human and justice to

Implement the rule of law, increase access access increase law, of rule the Implement + + + + + + + ++ ++ ++ ++ ++

flict affected population population affected flict

- con the and IDPs for support social of ures

+ + + + + + + - Development and implementation of meas of implementation and Development ++ ++ ++ ++ ++ Diversification

+ + + + + + ++ ++ ++ ++ ++ ++ De-institutionalization

+ + + + ++ ++ ++ ++ ++ ++ ++ ++ Decentralization

+ + +

++ ++ ++ ++ ++ ++ ++ ++ ++ quality public services public quality

Increasing capacity through provision of of provision through capacity Increasing + + + + + + ++ ++ ++ ++ ++ ++

Promoting decentralization process decentralization Promoting + + + + + ++ ++ ++ ++ ++ ++ ++ Creating a transparent management system management transparent a Creating

+ +

++ ++ ++ ++ ++ ++ ++ ++ ++ ++

of population of environment, ensuring patriotic education education patriotic ensuring environment,

+

++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ Development of educational and cultural cultural and educational of Development omy

Operational objectives of Donetsk Region Development Strategy objectives of Donetsk Region Development Operational

-

Promotion of structural changes in the econ the in changes structural of Promotion + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++

Creating a favorable business environment business favorable a Creating + + + ++ ++ ++ ++ ++ ++ ++ ++ ++

ture in the region the in ture

- Improving efficiency of critical infrastruc critical of efficiency Improving + + + + + + ++ ++ ++ ++ ++ ++ with operational objectives of National Regional Development Strategy for the period until 2020 objectives of National Regional Development Strategy with operational Development Strategy Compliance of operational objectives in the Donetsk Region Development Strategy for the period until 2020 objectives in the Donetsk Region Development Strategy Compliance of operational Operational objectives of National Regional 1.1. Enhance the role and functionality of cities in future regional development regional and functionality of cities in future 1.1. Enhance the role 1.2. Create conditions for promoting positive urban development processes development and for rural other areas, in development regional efficient use of internal factors 1.3. More 2.1. Meet objectives and implement measures to of address the Donetsk pressing and issues Lugansk Sevastopol regions, the Autonomous Republic of Crimea development of disparities that hamper the regional growth 2.2. Prevent and 2.3. Provide comfortable and safe living environment for people, regardless of place of residence cooperation interregional 2.4. Develop 3.1. Decentralize power, reform local governance and administrative-territorial structure regional and national at development regional of planning strategic Improve 3.2. levels governance development quality of regional 3.3. Improve 3.4. Strengthen inter-sectoral coordination in the planning and implementation policy of state regional development 3.5. Institutional support for regional

36 . Appendices

Fig. A. Shares of individual regions of Ukraine in the total industrial output in 2015

Fig. B. Types of infrastructure in the Donetsk region destroyed as a result of carrying out ATO (as of May 16, 2016)

37 Fig. C. Participation of Donetsk region cities in the project activities 2015

38 Fig. D. Participation of Donetsk region districts in the project activities 2015

39

Table A. Destroyed and damaged infrastructure facilities in the Donetsk region as of May 1, 2016 Total number ** Restored *Remain of destroyed facilities destroyed and and damaged Facility damaged Amount Amount facilities Number (million Number (million UAH) UAH) Residential buildings 8792 1452 35.1 7340 1890.2 Power supply facilities 213 213 256.5 - - Heat supply facilities 23 23 2.8 - - Water supply facilities 21 20 120.5 1 0.98 Gas supply facilities 100 54 10.4 46 20.3 Drainage facilities 14 14 36.7 - - Healthcare facilities 48 23 15.2 25 26.6 Secondary schools 108 69 27.8 39 57.7

Pre-school education facilities 74 51 14.0 23 17.7 Vocational schools 20 10 3.0 10 20.0

Universities 11 9 0.5 2 1.2 Physical education and sport 8 5 0.1 3 13.5 facilities Cultural facilities 42 22 1.7 20 21.2 Objects of road transport 48 32 44.6 16 1257.0 infrastructure Industrial facilities 51 19 48.2 32 82.0 Shopping facilities 64 23 0.4 41 2.3 Other facilities 100 24 6.8 76 56.02 TOTAL 9737 2063 624.3 7674 3466.7 * Territory controlled by Ukrainian authorities ** Construction to recover most of facilities was carried out in 2015

40 Table B. List of existing regional programs in the Donetsk region № Regional program title Deadline Structures in charge (№ and date of the document which approved the of progress control program)

The program of economic and social development of 1 the Donetsk region in 2016 2016 Department of Decree of the Head of State Administration, Leader of the Economics RSA Regional State Administration dated 01.04.2016 № 249 Department The program of scientific and technological of investment 2 development of the Donetsk region through 2020 2002-2020 and innovation The decision of the Regional Council dated 22.03.2002 № development and 3/25-656 external relations RSA Program for construction (purchase) of affordable 3 housing in Donetsk Region in 2011-2017 2011-2017 Department of The decision of the Regional Council dated 29.03.2011 № Economics RSA 6/3-50 Program «Education in the Donetsk region” for 2012- 4 2016» 2012-2016 Department of The decision of the Regional Council dated 29.03.2012 № Education RSA 6/10-253 The regional target program of development of physical culture and sports in the Donetsk region for Office of Physical 5 2012-2016 2012-2016 Culture and Sports The decision of the Regional Council dated 26.09.2012 № State Administration 6/15-348 The regional program of fighting against TB in 6 Donetsk oblast for 2012-2016 2012-2016 Department of Health The decision of the Regional Council dated 07.11.2012 № RSA 6/16-394 The development program for regional landscape parks in the Donetsk region until 2015 and the Department of 7 forecast till 2020 2013-2020 Environment and The decision of the Regional Council dated 24.12.2012 № Natural Resources RSA 6/17-425 Donetsk region Employment Program until 2017 Donetsk Regional 8 The decision of the Regional Council dated 04.04.2013 № 2013-2017 Employment Center 6 / 20-490 Regional comprehensive program «Youth and Family 9 of the Donetsk region” for 2013-2017» 2013-2017 Department of Family The decision of the Regional Council dated 30.05.2013 № and Youth RSA 6/21-510 Regional program «Providing housing for orphans and 10 children deprived of parental care for 2013-2017» 2013-2017 Service for Children RSA The decision of the Regional Council dated 04.07.2013 № 6/22-537 A comprehensive program «Rehabilitation and rest for 11 children in the Donetsk region in 2013-2017» 2013-2017 Department of Family The decision of the Regional Council of 29.08.2013 № and Youth RSA 6/23-562 Department of Housing Search and organizing burials of victims of war and State Administration, political repressions in the Donetsk region in 2013- Regional Commission 12 2017 2013-2017 for perpetuating the The decision of the Regional Council dated 29.08.2013 № memory of victims 6/23-563 of war and political repression Program for ensuring minimum security for ​​ population and region areas against technogenic and Office of Civil 13 natural emergencies for 2014-2017 2014-2017 Protection and Defense The decision of the Regional Council dated 14.11.2013 № Mobilization of RSA 6 /25-620

41 № Regional program title Deadline Structures in charge (№ and date of the document which approved the of progress control program)

Regional program of development of small and medium enterprises in the Donetsk region in 2015- Department of 14 2016 2015-2016 Economics RSA Order of the Head of the Regional State Administration, Head of Civil - Military Administration 11.06.2015 № 270 Regional program of integration, social adaptation and protection of internally displaced persons in 2015- The Department of 15 2016 2015-2016 Social Welfare RSA Order of the Head of the Regional State Administration, Head of Civil - Military Administration 24.09.2015 № 498 Management of Regional program to prevent and combat corruption interaction with 16 in 2016-2017 2016-2017 law enforcement, Order of the Head of the Regional State Administration, prevention and Head of Civil - Military Administration 19.02.2016 № 112 detection of corruption RSA Regional program for health, social security, adaptation, psychological rehabilitation, vocational 17 training (retraining) for ATO participants in 2016-2017 2016-2017 The Department of Order of the Head of the Regional State Administration, Social Welfare RSA Head of the Civil – Military Administration dated 07.04.2016 № 266

42 43 44