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he governance system at the local The first relates to fiscal decentralization, level in Ukraine for many years according to which the local authorities re- has had built-in conflict as it does ceived more taxes, but with more responsibil- not clearly define the responsi- ities. The second refers to the administrative bilities of elected local authori- issues of decentralization, including the or- Fiscal Tties and the local administrations, which are ganization of amalgamated territorial com- a part of the executive branch of power. The munities. The latter, however, is not possible local government entities traditionally had lit- without the former. Through decentralization, tle impact on their financing – both in regard local entities receive powers to carry out gov- to revenue and expenditures. Such a situation ernance, healthcare, education, regional de- Decentralization failed to create any real incentives for local velopment, roads maintenance, etc. Overall, authorities to be efficient and improve their the decentralization reform is listed among performance. one of the biggest successes of Ukraine’s re- forms in the last four years.

THE BACKGROUND OF THE REFORM 1 in Ukraine: Between 1991 and 2014 , the Ukrainian government did little towards strengthen- ing the regions. Most decisions were taken THE DECENTRALIZATION at the central level, whereas local governments Is It Run REFORM LAUNCHED were fiscally dependent on the central budget. IN 2014 AIMS Moreover, local government entities were (and still are) represented by local self-gov- AT INCREASING ernance with little powers2, while their exec- THE FINANCIAL utive branches (local administrations) are de facto the territorial subdivisions of the central Smoothly? 3 AUTONOMY OF LOCAL government . GOVERNMENT About 60% of local revenues were received ENTITIES PROVIDING in the form of central fiscal transfers, while the share of tax revenues declined from 62% MORE FINANCING, in 2001 to 30% in 20154. Moreover, tax rev-

AS WELL AS MORE 1 Ukraine gained its independence in 1991. POWERS 2 Local self-governance is conducted either directly, by local communities, or indirectly, by elected local councils (village, town, city, rayon, and oblast coun- TO THE LOCAL LEVEL cils), which are formed primarily by elected local dep- uties and mayors. See http://zakon0.rada.gov.ua/laws/ show/280/97-%D0%B2%D1%80. The decentralization reform launched in 2014 3 The heads of local administrations are appointed by the on the submission of the Cab- aims at increasing the financial autonomy inet of Ministers. See http://zakon2.rada.gov.ua/laws/ of local government entities providing more show/586-14. financing, as well as more powers to the local 4 Such changes were partially explained by legal level. In Ukraine, decentralization in no way amendments, but also by low efficiency of local taxes. For details see OECD (2018) Maintaining the Momen- OLEKSANDRA means federalization. By now, it basically tum of Decentralization in Ukraine, OECD Multi-level BETLIY combined two major pillars. Governance Studies. 126 (DE)CENTRALIZATION UNDER EXAMINATION OLEKSANDRA BETLIY 127

enues were primarily comprised of shared • creation of appropriate material, financial, THE AMALGAMATED TERRITORIAL taxes (personal income tax, excise, and en- and organizational conditions to ensure COMMUNITIES AS A CORNER STONE vironmental tax). Own local tax revenues the implementation of own and delegated FOR FISCAL STRENGTHENING are generated by use charges, administra- AFTER functions by local self-government bodies. One of the key steps within the decentral- tive fees, revenues from assets, land tax, THE EUROMAIDAN ization reform are the voluntary municipal and property tax, among others. The decentralization is to be based mergers, which started in 2015. The forma- REVOLUTION IN 2014, on the trans­fer of powers (responsibilities) tion of capable basic level of local self-gov- As the administrative territorial reform was from the center to the lowest possible local ernment was based on the Law on “Voluntary not introduced during the years of independ- THE NEW GOVERNMENT level, the respective shift of financing re- Amalgamation of Territorial Communities”7. ence, in 2014, Ukraine was comprised of 24 IDENTIFIED sources, and supervision of local government It is aimed at the concentration of human oblasts and Autonomous Republic of , entities by the central government. capital, infrastructure, and land resource which were at the time divided into 490 ray- DECENTRALIZATION at a local level, which would strengthen ons (districts). More than 11,000 communities AS ONE OF ITS TOP According to the Concept of the Reform communities. The capable community will (villages and towns) existed, while only about of Local Self-Government and the Territo- then be able to provide quality public ser- 1,000 local government entities received di- PRIORITIES rial Organization of Power, the decentraliza- vices (including education and healthcare) rect central fiscal transfers as the rest did tion was planned to start with amendments to the population. not receive direct central fiscal transfers but to the Constitution, according to which received them indirectly through rayons’ aimed at strengthening the development the reform of powers of local councils and lo- budgets. Several levels of transfer provisions of Ukraine and improving the well-being cal administrations were to be streamlined. and numerous key expenditure units result- of the population. However, since the approval of amendments ed in high fiscal non-transparency as well appeared politically unfeasible6, the reform as inefficiencies, which also reduced fiscal Later, the decentralization and the reform has started on the basis of the old Consti- sustainability. Territorial disparities were high of state governance were defined among tution. Yet, the Parliament still approved THE COMMUNITIES with little possibility of local government the Top-5 priorities of the Strategy the amendments to the Budget Code ARE STIMULATED to impact the situation. “Ukraine-2020”, which was approved by and the Tax Code, which changed the tax President in 2015. The distribution between local and central gov- TO MERGE THROUGH THE AIM Government Action Plan until 2020 (adopt- ernments. Furthermore, all essential legisla- OF THE DECENTRALIZATION REFORM ed in 2016) also lists decentralization reform tion was approved for the implementation THE FINANCIAL IN UKRAINE among the priorities. These two strategic of the decentralization reform – including STIMULUS. IF THEY DO After the Euromaidan revolution in 2014, documents define the decentralization the mergers of territories, regional govern- the new government identified decentrali- as the fiscal decentralization. Meanwhile, ment policies, and provision of administrative MERGE, THEY RECEIVE zation as one of its top priorities. The decen- the Association Agenda between Ukraine services at local level. HIGHER REVENUES tralization reform was launched with several and the European Union (EU) focused pri- important decisions taken by the government marily on the issue of the decentralization The decentralization envisages the creation very fast. of power. of administrative service centers at local government entities to enable the provision “Amalgamated hromada8 is the unification First, in April 2014, the government adopted According to the Concept of the Reform of Lo- of most services locally. As of June 2018, 756 of several settlements with a single admin- the Concept of the Reform of Local Self-Gov- cal Self-Government and the Territorial Organ- Administrative service centers have already istrative center. Any amalgamated ernment and the Territorial Organization ization of Power, the major tasks of the decen- been created (452 of them by rayon state ad- (community) with a city as an administrative of Power,5 which was followed by the ap- tralization reform included ensuring: ministrations), which is a substantial progress center is an urban hromada, any amalgamat- proved Action Plan for its implementation. • the access to quality public services; in the fulfillment of the task of better access ed hromada with an urban-type settlement These documents envisaged the implemen- • optimal division of powers between local to administrative services for the population. as an administrative center is a settlement tation of the broad-based decentralization and central executive bodies; • justification of territorial basis for activity 6 Jarábik, B. and Y. Yesmukhanova (2017) Ukraine’s 7 Law №333-2014 from April 1, 2014. Available [online]: of local self-governance and local ad- Slow Struggle for Decentralization. Available [online]: http://zakon5.rada.gov.ua/laws/show/333-2014- 5 The Resolution of the Cabinet of Ministry, N°333-p https://carnegieendowment.org/2017/03/08/ %D1%80 from April 1, 2014. Available [online]: http://zakon5.rada. ministrations to ensure access to quality ukraine-s-slow-struggle-for-decentralization- gov.ua/laws/show/333-2014-%D1%80 public services provided by them; pub-68219 8 Hromada is an amalgamated territorial community. 128 (DE)CENTRALIZATION UNDER EXAMINATION OLEKSANDRA BETLIY 129

hromada, and any amalgamated hromada The communities are stimulated to merge common problems faced by communities. with a village as an administrative center through the financial stimulus14. If they do According to the Ministry of Regional Devel- is a rural hromada”. (http://decentralization. merge, they receive higher revenues: in 2016, opment, since the beginning of July 2018, gov.ua9) total budgets of communities that amalga- EDUCATION, 199 cooperation agreements have already mated in 2015 increased by 49%15, while HEALTHCARE, been implemented and 861 communities The Law also introduced the institution in 2017, own revenues of 377 active amal- have taken advantage of this mechanism20. of a starosta10 in the amalgamated territorial gamated communities more than doubled. ADMINISTRATIVE Such activities relate primarily to such issues communities, who is to represent the inter- Moreover, such amalgamated communities as waste management and recycling or de- ests of rural residents in community council11. become direct recipients of the central fiscal SERVICES, ROADS, velopment of joint infrastructure. transfers – including healthcare, education, LIGHTING, WATER, According to the Ministry of Regional Devel- and infrastructural subventions (earmarked FISCAL DECENTRALIZATION PATH opment, Construction, Housing, and Com- transfers from the central budgets). WASTE, LANDSCAPING, In the end of 2014, the government in- munal Services of Ukraine (hereinafter AND SAFETY troduced steps for fiscal decentralization, referred to as the Ministry of Regional De- Still, the evidence indicates that some which were aimed to increase the financ- velopment), as of June 11, 2018, 743 amalga- communities lack fiscal sustainability. One CURRENTLY BELONG ing capacity of local government entities. mated territorial communities were formed of the reasons for this is that not all of them Tax-sharing arrangements were changed, by 3,443 communities with 6.4 mn residents were created in accordance with the regional TO THE COMPETENCE while the list of local taxes was modified (the number of residents in communities in- development strategies (in some oblasts such OF AMALGAMATED (some were abolished, while others were creased by about 5 times to about 8,400 per strategies were not approved)16. As a result, created). Local governments’ taxing power an amalgamated community)12. If such trends some of the amalgamated communities are TERRITORIAL was extended, as they have received bigger continue, the number of communities is likely too small to cope with their new responsi- freedom in setting tax rates and envisaging to decline from about 11,000 to around 2,400 bilities17. COMMUNITIES exemptions (even though the maximum rates communities13. have been capped). The data indicates that the amalgamated ter- ritorial communities spent increasing reve- and construction supervision and inspec- Key taxes that fill local budgets (cities of oblast nues for financing primarily social and other tions, which is expected to simplify the con- importance, rayons, and the amalgamated 9 decentralization.gov.ua is a special official web-por- tal devoted to the issues of decentralization reform. infrastructure. Overall, education, healthcare, struction procedures. The communities also territorial communities) currently amount to: It contains the information on the design of the reform, administrative services, roads, lighting, wa- received more powers in the management • 60% of personal income tax, part monitoring of its implementation as well as information on the assistance of international donors in the imple- ter, waste, landscaping, and safety currently of land resources. However, the evidence of the excise tax (important source of rev- mentation of the reform. belong to the competence of amalgamated shows that some communities lack manage- enues in 2015-2017)21; 18 10 Starosta is a local self-government official in villages territorial communities. The amalgamated rial competences and technical capacities. • 100% of unified tax paid by the taxpayers forming part of an amalgamated territorial community territorial communities received more re- This is true especially for rural communities. under the simplified taxation system, and; (hromada). A village head is voted during elections and sponsibilities in the area of architectural • 100% of property tax (property, land)22. declared by the decision of the amalgamated commu- nity’s council. It was evident that some amalgamated ter-

11 ritorial communities are more capable than According to the official estimate, in 2018, As of June 11, 2018, 653 starostas have been elect- 14 The survey, conducted by the Center of Democratic ed and more than 1.8 thousand individuals are acting Initiatives in 2016, showed that heads of local govern- others in dealing with new challenges and, these four taxes will account for 94.9% of total starostas. ment entities became more interested in merging with thus, were expected to be more successful tax revenues of local budgets. As previously, 12 Ministry of Regional Development, Construction, other communities after they saw the additional financ- in using additional financing and new pow- tax revenues of local budgets are primarily ing received by first amalgamated communities. This Housing and Communal Services of Ukraine (2018) ers. To ensure knowledge sharing, the Law comprised of shared taxes (personal income Monitoring of the Process of Decentralization of Power also reduced the skepticism about the amalgamation and Local Self-Government Reform as of 11 June 2018,. among representatives of civil society. on “Cooperation of Territorial Communi- Available [online]: http://decentralization.gov.ua 15 http://despro.org.ua/despro/Local%20Budgets%20 ties”19 defined the mechanism of dealing with 20 https://decentralization.gov.ua/en/about 13 of%20ACs.pdf This is somewhat more than primarily expected 21 First, since 2015, the local budgets received excise on 1,500 communities after the reform. See Carnegie En- 16 Ukrainian Center for Independent Political Research 18 Ukraine’s Slow Struggle for Decentralization. Availa- retail sales with the rate of 2–5%. In 2018, local budgets dowment’s (2015) Ukraine Reform Monitor. Available (2017) Decentralisation in Ukraine: Achievements, Ex- ble [online]: https://carnegieendowment.org/2017/03/ receive part of the domestic excise tax, excise of fuel, [online]: http://carnegieendowment.org/2015/10/05/ pectations, and Concerns”, August . 08/ukraine-s-slow-struggle-for-decentralization- and part of the excise on retail sales. ukraine-reform-monitor-october-2015/iik7). Still, this pub-68219 might change if some of the remaining communities 17 OECD (2018) Maintaining the Momentum of Decen- 22 The Budget Code of Ukraine . Available [online]: join already created amalgamated territorial commu- tralization in Ukraine, IECD Multi-level Governance 19 The Law of Ukraine, №1508-18 from June 17, 2014, http://zakon0.rada.gov.ua/laws/show/2456-17/conv/ nities. Studies. http://zakon3.rada.gov.ua/laws/show/1508-18 print1533816078654981 130 (DE)CENTRALIZATION UNDER EXAMINATION OLEKSANDRA BETLIY 131

tax and excise account for 69.2% of total In particular, oblasts and rayon administra- entities that increased their development tax revenues of local budgets23), while own tions are still comprised of “deconcentrated budgets in 2015-2016 had to reduce them local tax revenues remain low. In particu- and decentralized entities” and, thus, part in 2017 with a risk of underfinancing already lar, the revenues from property tax, which of their budgets should be classified rather IN 2017, THE LOCAL started projects. is perceived to be inefficient, remained low as “central government sector” according GOVERNMENT as some of the local government entities im- to the OECD methodology25. In any case, Still, the evidence indicates that not all local pose a zero percent rate for the tax. Still, local the increase in the shares of local budgets ENTITIES RECEIVED governments can spend received resources budgets received more powers in spending and local taxes still indicate the strengthening effectively. In particular, some local govern- revenues from shared central taxes, which of financial capacities of local budgets over MORE FINANCING ments keep part of the available financing became a benefit of the reform. recent years. RESPONSIBILITIES at the Treasury or on banking deposits27 instead of using them on the development (since 2015 local governments can keep Figure 2: The Local budgets in 2015-2018 unspent funds, while prior to that they had was withdrawn to the central budget. After to return them to the central budget). 60 the change, the government covers only 80%

Local budget share (with transfers) of possible fiscal gap, while well perform- STATE SUPPORT 50 in consolidated budget of Ukraine, % ing entities transfer to the central budget OF REGIONAL DEVELOPMENT not the full amount of revenue surplus, but • The decentralization and regional devel- 40 50% of its size. The financing of healthcare opment were stimulated by the approved Share of local taxes and fees and education was transferred to the rayon State Strategy of Regional Development 30 in local budget own revenues (General Fund), 2015-2018, % level and level of cities of oblast importance of Ukraine until 202028. The Strategy de- 20 and is provided in the form of formula-based fined three aims of its implementation: direct subventions (earmarked central budget • increased regional competitiveness; 10 grants). The amalgamated communities are • territorial, social and economic integra- direct recipients of these subventions. tion; 0 • effective state management in the area The evidence suggests that in 2015-2016, of regional development. 2017 2016 2015 2018* local budgets spent additional revenues Note: * 2018 – official estimate primarily for road construction. This was In the framework of the implementation Source: The Ministry of Regional Development26 explained by the delay in the shift of powers of the Strategy, the Law on the “Funda- to local government entities (which were not mentals of State Regional Policy” was in- Local budget own revenues (general fund) Furthermore, since 2015, the govern- amalgamated). However, in 2017, the local troduced29. According to the Ministry of Re- gradually increased from 5.1% of GDP in 2014 ment has changed the policies in relation government entities received more financing gional Development, it resulted in a sharp to 6.7% of GDP in 2017 and are expected to transfers provided from central to local responsibilities. In particular, they became increase in state support of regional de- to grow further to 7.1% of GDP in 201824. The budgets. Before 2015, the government cov- responsible for financing utility services velopment [See Figure 1]. Overall, it par- share of local taxes and fees in local budget ered 100% of the fiscal gap, which did not (including heating) of health and educa- tially reflects the reduction in the support own revenues (general fund) increased stimulate local government entities to be- tion facilities, as well as payment of wag- in the form of equalization transfers in fa- over the last three years [See Figure 2]. Still, come more efficient. In turn, the revenues es to non-pedagogical staff of secondary these numbers should be taken with caution surplus of well performing local entities schools. The cities of oblast importance be- 27 Financial and Economic Analysis Office at the Verk- hovna Rada of Ukraine (2018) Local Budgets’ Deposits while being comparing to other countries. came responsible for financing vocational as of July 1, 2018 (inforeference). Available [online]:, education schools. The provision of some https://feao.org.ua/products/local-budgets-depos- 25 OECD (2018) Maintaining the Momentum of De- its-july-1-2018/?lang=en 23 The State Treasury Report on the Budget execution centralization in Ukraine, IECD Multi-level Governance privileges was also shifted to the local level. for 6 months of 2018. Studies. 28 Постанова КМУ (2014) Державна стратегія регіонального розвитку України (ДСРР) на період до 2020 року», №385 від 24 26 The gap in time between the increased re- Ministry of Regional Development, Construction, Ministry of Regional Development, Construction, 6 серпня 2014 р. Available [online]: http://zakon2.rada.gov. Housing and Communal Services of Ukraine (2018) Housing and Communal Services of Ukraine (2018) sources and transferred financing responsi- ua/laws/show/385-2014-п/paran11#n11 Monitoring of the Process of Decentralization of Power Monitoring of the Process of Decentralization of Power and Local Self-Government Reform as of 11 June 2018,. and Local Self-Government Reform as of 11 June 2018,. bilities might be considered as a drawback 29 Закон (2018) №157-19 від 5 травня 2018 року. Available Available [online]: http://decentralization.gov.ua Available [online]: http://decentralization.gov.ua in the reform path. The local government [online]: http://zakon1.rada.gov.ua/laws/show/157-19

134 (DE)CENTRALIZATION UNDER EXAMINATION OLEKSANDRA BETLIY 135

Figure 1: State Support of Regional Development subvention constitutes also one of the steps in the framework of decentralization. Pre- 20 UAH bn viously, this financing was conducted from the central level (first, by the Ukravtodor, DONORS 18 and then by newly created State Road Fund). HELPED 16 In the framework of the implementation THE GOVERNMENT 14 of the Law on the “Fundamentals of State 12 Regional Policy”, the Regional Development IN THE DRAFTING Agencies were created almost in all oblasts, 10 OF LEGISLATION whereas the Centers of Local Self-govern- 8 ment Development were established in all AS WELL AS oblasts. 6 IN THE IMPLEMENTATION 4 SUPPORT OF DECENTRALIZATION OF THE CHANGES REFORM BY INTERNATIONAL DONORS 2 The decentralization reform is among 0 the focus of technical and financial as- Centers in all oblasts, while another one fo- 2014 2015 2016 2017 2018* sistance of numerous international do- cuses on the establishment of Administrative 32 Subvention for social and economic development nors . Donors helped the government Service Centers. State Fund for Regional Development in the drafting of legislation as well Subvention for infrastructure of amalgamated as in the implementation of the changes. Several large projects were financed, Funds for construction of football fields Several projects are aimed at the strength- and some are still financed by the U.S. Agen- Subvention for rural healthcare development (*incl. UAH 4 bn carry-over from 2017) ening of capacities of local governments, cy for International Development (USAID)34. Funds for support of sectoral regional policy (*incl. UAH 0.6 bn carry-over from 2017) especially in amalgamated territorial com- In particular, these are projects DOBRE munities, to use increased financing effi- and PULSE, which were highly evaluated by Note: * 2018 – official estimate ciently and effectively, and fulfill respon- the Ministry of Regional Development. Source: The Ministry of Regional Development30 sibilities in an optimal way. Overall, the Ministry of Regional Develop- vor of support through more transparent ment, people’s deputies typically redistribute Currently, the largest project that supports ment is very active in the cooperation with earmarked grants. The grants of the State part of funds allocated for the SFRD in favor the implementation of the decentralization the international donors35. The Ministry creat- Fund of Regional Development (SFRD) are of non-transparent and inefficient social reform is the EU financed U-LEAD33. The pro- ed the Council of Donors with the aim to en- distributed on a competitive basis. and economic subvention to regions31. ject is implemented by the Deutsche Ge- sure strategic coordination between the gov- sellschaft für Internationale Zusammenarbeit ernment and numerous international donors. Overall, the financing of the SFRD should be In 2018, the local governments are also (GIZ), German Corporation for International The coordination is conducted on the basis envisaged at 1% of forecasted central budget expected to receive an earmarked grant Cooperation (GmbH), and Swedish Interna- of a created Matrix of Assistance, which clear- revenues (general fund), and the govern- (subvention) for construction, repair, tional Development Cooperation Agency ly outlines the contributions and tasks of each ment envisages financing for the SFRD close and maintenance of local public roads with (SIDA)). One of the components of the pro- project in the implementation of specific de- to the benchmark when it is to be submitted a total amount of UAH 11.5 bn, which is one ject foresees the creation of Decentralization centralization reform measures and steps. to the Draft State Budget Law for the next of the biggest priorities of the government’s fiscal year to the parliament. However, dur- policies in recent years. The provision of such 34 USAID (2017) Governance and Decentralization. ing the voting for the Budget in the parlia- Available [online]: https://www.usaid.gov/ukraine/fact- 31 Social and economic subvention is a central fiscal sheets/governance-and-decentralization transfer to specific community typically lobbied by peo- 32 There are 15 projects financed by a number of do- 30 35 Ministry of Regional Development, Construction, ple deputies, often on the basis of political decisions. nors, including the EU, USAID, Canadian Government, For details of the support by international donors see Housing and Communal Services of Ukraine (2018) For details see Centre for Economic Strategy (2018) governments of other countries. See https://donors. IER (2018) “Priorities of the EU’S Assistance to Ukraine: Monitoring of the Process of Decentralization of Power Subvention for Socio-Economic Development: How decentralization.gov.ua/. Beneficial Alignment”, by O. Betliy, Y. Anhel, I. Kosse, V. and Local Self-Government Reform as of 11 June 2018. to Stop Public Funds Allocation According to Political Kravchuk, O. Krasovska, and I. Fedets,. Available [online]: Available [online]: http://decentralization.gov.ua Preferences. Available [online]: https://goo.gl/RysRZN 33 http://donors.decentralization.gov.ua/project/u-lead/ http://www.ier.com.ua 136 (DE)CENTRALIZATION UNDER EXAMINATION OLEKSANDRA BETLIY 137

KEY CHALLENGES This is likely to be a task for the new govern- FOR THE FUTURE ment, which will have a mandate for the con- The decentralization reform is among tinuation of the decentralization reform after the biggest successes of Ukraine’s reform THE ESTABLISHMENT THE ANECDOTAL the presidential and the parliamentary elec- path over recent years. It includes the fi- OF AMALGAMATED EVIDENCE SUGGESTS tions scheduled for 2019. nancial strengthening of local government entities, which become more powerful while TERRITORIAL THAT CORRUPTION In any case, an essential point for the future making decisions on territorial development. is the effective communication of the impor- The establishment of amalgamated territorial COMMUNITIES ACTUALLY tance of decentralization reform to the pub- communities in the framework of the fiscal IN THE FRAMEWORK BECAME A BIGGER lic. The government should clearly explain decentralization reform is among crucial the plan (the sequence of measures) and ex- changes recently launched by Ukraine. It OF THE FISCAL ISSUE AT THE LOCAL pected results of the reform to the public results in the creation of capable commu- DECENTRALIZATION LEVEL AFTER DECISION to increase the support for the reform. Over- nities, as well as increased fiscal transparency. all, such a road map of the decentralization REFORM IS AMONG MAKING WAS SHIFTED reform really needs to consider the fact that The reform is also supported by the popu- it tightly interrelates with the education, lation. In 2017, 42% of the population sup- CRUCIAL CHANGES FROM THE CENTRAL healthcare, and tax reforms, which are high ported the steps taken in the framework RECENTLY LAUNCHED LEVEL in the policy agenda. ● of decentralization reform, while 27% neg- atively evaluated the measures introduced by BY UKRAINE the government36. According to the experts’ survey, the decentralization reform is the sec- Another challenge defined in the OECD study ond most successful reform37. relates to ensuring an enabling environment projects, while others have not improved for the reform, which, in particular, relates However, the implementation of the decen- the performance. As a result, the capacities to the corruption41. The anecdotal evidence tralization reform still faces challenges38. One of the leaders of local government entities suggests that corruption actually became of these relates to the lack of managerial impact the equity and quality of primary a bigger issue at the local level after decision competences of leaders of local government and secondary education and healthcare making was shifted from the central level. entities (especially of amalgamated territorial provision. The communities, especially in ru- communities) to implement fiscally respon- ral areas, lack professionals in many sectors The reform also indicates that the powers sible policies39. In particular, the evidence – including public health, education, infra- of the rayons and amalgamated territori- already shows that the performance of local structure, and energy efficiency. al communities should be streamlined. In government entities varies after they have particular, this relates to a clear definition received more financing. Some of them ef- The role of local authorities increases in pro- of the spending responsibilities between fectively finance infrastructural and social vision of vocational and educational train- different tiers of administrative units. ing (VET) as they are expected to coordinate the state order in VET schools with local The creation of the amalgamated territori- 36 Survey of the population, conducted by the Ilko employers. This is an essential prerequisite al communities again indicated that there Kucheriv Democratic Initiatives Foundation on June 9-13, 2017: https://dif.org.ua/article/gromadska-dum- of the adaptation of skills, competences, is a need for a broad administrative territorial ka-naselennya-shchodo-reformi-detsentralizatsii and vocational qualifications to the needs reform. The current number of rayons (dis- 37 The survey of experts was conducted by the Ilko of the local economy40. Therefore, more ca- tricts) is excessive. Moreover, the administra- Kucheriv Democratic Initiatives Foundation on June pacities are needed at the local level in this tive division of other countries suggests that 8-13, 2018. See https://dif.org.ua/uploads/pdf/994166 OLEKSANDRA 2655b4882a3310fb8.05753855.pdf area as well. the oblasts might be also further merged. BETLIY 38 Here, only several challenges are listed.

39 The principles of fiscal responsibility in the framework 40 ETF (2018) “Ukraine – Education, Training and Em- 41 OECD (2018) “Maintaining the Momentum of Decen- Leading Research Fellow and Project Coordinator at In- of decentralization include greater transparency, moni- ployment Developments, 2017”, European Training tralization in Ukraine”, IECD Multi-Level Governance stitute for Economic Research and Policy Consulting toring, and reporting mechanisms at the local level. Foundation. Studies. (Kiev, Ukraine)