30^th Session of the Congress of Local and Regional Authorities – 22 to 24 March 2016

Speech by Vyacheslav NEHODA, First Deputy Minister of Regional Development, Ukraine

23 March 2016

Mr Chairman, delegates!

I would like to start by thanking you for giving me the opportunity to appear before you and bring you some information on the progress that has been achieved with the plans that Ukraine has set itself in the process of reform of virtually every part of the existing state system.

May I also take this opportunity to say some words of thanks to our European partners who have stood shoulder to shoulder with Ukraine during these difficult times for our country, and have consistently supported Ukraine as a sovereign state with its integrated and indivisible territory within legally established borders, and in our efforts to achieve peace and to free ourselves from external aggression, an aggression that must be halted by our common efforts and prevented from spreading across Europe. We would like to express our sympathy, and to say that the suffering of ordinary people caused by yesterday’s terrorist actions in Brussels are close to our hearts.

I would like to present for your attention an update on progress with the introduction of reforms in the sphere of local government and decentralisation of power, and with respect to other matters relating to the extension of local democracy.

I would also like to take the opportunity to express my thanks to the Secretary General of the Council of Europe Mr Thorbjørn Jagland for the attention and support he has given to the initiatives conceived jointly with the Council of Europe, and to the specific measures aimed at their practical implementation; and I would particularly like to thank him for his personal presentation, last year, of the Council of Europe’s Action Plan for Ukraine 2015-2017. We are very appreciative that this is the most substantial action plan ever adopted by the Council of Europe. 

I would also like to thank Mr Andreas Kiefer, Secretary General of the Congress, who visited Ukraine on 3-4 March together with a delegation from the Rapporteur Group on Democracy (GR-DEM) comprising 10 ambassadors headed by the Group’s Chair, Ambassador Astrid Emilie Helle.

The objective of the visit was to meet representatives of the authorities and the public to gather information on the current situation regarding implementation of the joint Action Plan about which I spoke at the start.

We expect that the results of the visit by the delegation to Ukraine and their conclusions will enable a realistic assessment to be made of the situation that has come about in Ukraine. At the same time we are grateful for the attention given and the efforts made by the Council of Europe and the Congress of Local and Regional Authorities to provide Ukraine with real support.

Mr Chairman, delegates!

In my speech I would like to dwell on certain key matters to do with implementation of decentralisation and reform of local government in Ukraine and to give you a report on the main programme (strategic) tasks, the first results ofthe reforms and the priorityplans for 2016.

At the same time I would also like to emphasise that one very useful document for the team which is working on implementing these tasks is the Programme (Road Map) which came about as the result of the findings of post-monitoring in Ukraine and was ratified by the Congress Monitoring Committee on 20 March 2015.

If I may remind you, this Programme comprises three main topics:

- handover of powers

- financial independence

- unification of territorial entities and inter-municipal cooperation.

One other very important component of the reforms is changes to the Ukrainian Constitution.

Last year the President of Ukraine set up a Constitutional Commission headed by the Chairman of the Supreme Council of Ukraine Volodymyr Groysman. Council of Europe experts have been invited to work with the Commission, and in fact have already worked with it.

Government programme documents have identified as an important task the provision of support for the process of introduction of amendments to the Ukrainian Constitution, and particularly for a bill drawn up by the Constitutional Commission and submitted by the President for consideration by the Ukrainian Parliament with a view to decentralisation. 

There is no doubt that the effectiveness and dynamism of promotion of reform and the systemic nature of this reform to a great extent depend on the adoption of these Constitutional amendments and the shaping of basic legislation arising out of them.  

There is no doubt that it is only amendments to the Constitution that will enable matters to do with the setting up of executive agencies of regional and district councils, reorganisation of local government administrations to turn them into bodies of the prefectural type and precise definition of an administrative and territorial entity to be resolved, and a number of other guarantees for the development of local government to be put in place.

On 31 August of last year the bill was passed by the parliament at its first reading. Unfortunately there were varying reactions among the public and in the parliament to specific provisions of the proposed changes.

The main stumbling block was a provision that was seen by many as offering special status to two particular regions (Donetsk and Luhansk) which are occupied and supported by Russia.

This provision became the main cause of debates and may constitute a serious obstacle to support of the bill by the parliament; apart from this, the bill is 99% free of serious criticism and could receive the necessary votes.

With these political circumstances in mind, the parliament has, during the course of last year and this, been implementing reforms as per plan B – within the confines of the current Constitution.

Our actions have primarily been aimed at reinforcing the basic local government unit – the hromada, and at correspondingly handing over powers to those units (extending their powers) and also at handing over financial resources to support these powers and offering financial autonomy, or, as we say, implementing financial decentralisation. 

Financial decentralisation has become one of the key reforms, and it started on 1 January 2015 following the adoption of what is effectively a new Budget Code, with some amendments to the Tax Code as well.

So this reform has opened up real potential for existing municipal authorities and newly-created formations by cementing in place guarantees of stable funding in comparison with the preceding period.

As an argument for real financial decentralisation, I shall quote just one figure – in 2015 (compared with 2014) revenue to local budgets increased by more than 42.8%, and unexpended balances in local budget accounts by the end of last year had increased by nearly three times.

And you have to bear in mind that we obtained this result under conditions of military aggression and the country’s loss of significant economic potential in the East. 

A second important area is municipal consolidation.

Parliament has passed the basic acts.

Number one is the Territorial Associations Cooperation Act, which governs matters to do with financial and organisational cooperation at a local level, combining financial and other resources of different local budgets in order to solve common problems in the socio-economic development of territories.

Number two is the Voluntary Unification of Territorial Communities [obshchyny] Act, which entered into effect in March of last year. Its implementation should provide for the setting up of a new territorial base for communities [obshchyny] (hromady) – the basic unit in local government, and for the maximum transfer of powers and resources to that level. 

These two acts, incidentally, were drawn up with the involvement of Council of Europe experts, and we are grateful for that.

Reinforcement of communities [obshchyny] is one of our priority tasks, because in Ukraine today there are around 10 770 basic territorial formations, more than 90% of which are very small and are not in a state to provide quality services and to support local development.

We think that the results of unification of hromady which began last year are highly positive and very encouraging.

Given that local elections in Ukraine were set for 25 October, the government had a very brief period – from May to mid-August – to put this reform in place so that the new hromady could play a part in the forthcoming elections. 

To this end we, with support from international technical assistance, set up non-governmental reform offices in each region, the majority of which played a very important part in preparing for and carrying out the reform. 

Regional councils and the government developed and ratified regional prospective plans for the creation of hromady, as a basis for the unification of territorial communities [obshchyny].

As a result, around 800 small hromady were voluntarily unified into 159 new ones, where the first local elections took place in October of last year.

It is very important that the unification process continues, and a further 13 newly-created obshchyny, which have been created out of around 50 small ones, are expecting to hold local elections in March or April of this year.

We feel that this result is an initial success for Ukraine and an encouraging continuation of the process of municipal consolidation. This has become possible through numerous decisions and large-scale communication work on the part of all levels of authority, Ukrainian and foreign experts and local government associations.

It is very important that we managed to find several very weighty incentives which have stimulated obshchyny to unite, and these include tax breaks, the potential to have an influence on land resources and extra budgetary support, among others.

At this stage, one priority task of the government is the need to support the development of united obshchyny using organisational, financial and other resources to provide strong incentives for all the others which are waiting to assess the advantages they might gain from unification.

A substantial subvention has been envisaged in the national budget for all newly-created obshchyny without exception, which is to be directed their way for modernisation of local infrastructure, in order to improve the quality of services provided by local government agencies.

Potential has also been envisaged to obtain additional financial support for obshchyny to implement their projects out of the State Regional Development Fund.

I would like to emphasise that at this stage one very important component of reform is programmes aimed at raising the professional level of newly-elected officials and clerical staff at local government agencies.

We are obtaining tangible support in implementing these programmes from the Council of Europe’s project which is actively operating in Ukraine.

Ladies and gentlemen!

I could elaborate further on the measures and results that have already been introduced.

Meanwhile we are aware that we are only at the beginning and most of the work to be done still lies ahead.

Besides amendments to the Ukrainian Constitution, the government has identified the tasks that are planned for implementation this year. These plans are highly ambitious, but they are realistic and they will be carried out.

The government has clearly specified that one of the main priorities in the programme of activities is to push through decentralisation and regional development.

We are planning, and we have already begun work on, sectoral decentralisation, particularly in sectors which are of particular importance to the public, like education, health, social security, land relations, housing, town and country planning, conservation of energy and others.

We are approaching the highly complex but important reform of the territorial administrative system not only at the grass roots level, but also at the level of sub-regional division.

These changes will make it possible to set up an absolutely new and modern system of territorial organisation of authority in Ukraine, which will enable the maximum extent of decentralisation of powers to be instituted and these powers to be transferred to all levels of local government.

To sum up the transformations mentioned above which are under way in Ukraine, we have the creation on a regional level of an effective system of executive agencies and local government which is totally in line with the provisions of the European Charter of Local Self-Government.

We are sure that the results will be positive. This certainty is reinforced by the tangible support we are receiving from the Council of Europe and the Congress of Local and Regional Authorities in putting things into effect, and bearing in mind the tasks that are envisaged in the Council of Europe Action Plan for Ukraine 2015-2017.

May I once again, Mr Chairman and delegates, thank you on behalf of the Ukrainian government and of our delegation at the Congress for the support you are giving to Ukraine.

Thank you for your attention!