Decentralising Ukraine: the view from Khmelnytsky

Three years of Ukraine’s most successful reform have produced results that are, at times, unexpected and ambiguous. RU

Yulia Abibok
3 October 2018

For villages in the Khmelnytskyi region, it is more profitable to unite in communities with each other than to be attached to the city. Photo CC BY 2.0: Serge Bystro / Flickr. Some rights reserved.The minibus that has been quietly rocking its full load of passengers, drowsy from the heat, to sleep, suddenly starts juddering.

“This isn’t our road,” Inna Abdulkadyrova, head of the Humentsi unified territorial community (OTO), hastens to announce, to deflect any questions about the state of the road. “It’s the responsibility of another council. The roads in Humentsi itself are excellent.”

The village of Humentsi, in western Ukraine’s Khmelnytskyi oblast, became the centre of a new “unified territorial community” in 2015. Before its creation, Abdulkadyrova had already been elected four times as village head. After snap nationwide local elections in 2015, Abdulkadyrova’s remit widened: she is now responsible for an extra 18 villages, 245 square kilometres and 9,500 of her fellow citizens.

Humentsi has long been a prosperous village, one of the richest in the region. It has four medium sized companies providing tax revenue and jobs for the locals, as well as a couple of dozen small businesses. And the tourist centre of Kamianets-Podilskyi (with a well-preserved old town and a medieval fortress among it attractions) is only a few kilometres away.

Thanks to the local government reforms that began in 2015 and allocated serious money to the newly-created OTOs (including funds for infrastructure development), Humentsi also has an excellently rebuilt school, new nursery schools, a health centre, an administrative service centre and, yes, good roads.

The only fly in the ointment is the handful of poor villages that have been attached to Humentsi, to ensure that it has all the requisite elements of a model unified territorial community.

“I still don’t understand,” I say to Abdulkadyrova, “why you took these poor villages under your wing and now have to share your resources with them.”

“To avoid becoming part of the town,” she replies, referring to Kamianets-Podilsky. “The town doesn’t make profits.”

Waiting for change

The Khmelnytskyi region now has 41 OTOs, 22 of which were created in 2015, at the start of the local government reform. Ukraine as a whole has 705. They unite more than 8,800 population centres, and 8,200 of them are villages, making up around 30% of the country’s territory.

Anatoliy Tkachuk, a former deputy minister for regional development, is now a Council of Europe specialist and head of Ukraine’s Institute of Civil Society. He is one of the key operators in the sphere of local government reform, as well as one of the “fathers” of the current decentralisation process. Tkachuk comes from Khmelnytskyi oblast himself, so he tests all new developments on his own patch first.

“Back in 2005 we initiated pilot projects on remodelling communities in the Khmelnytskyi and Ternopil oblasts,” he tells me. “It was these communities that we got to unite first. In 2015, when the reforms were just starting, their opponents hadn’t yet realised how serious they were and didn’t bother fighting them. So in 2015 we were able to set up the most appropriate structures – large communities with a prominent centre.”

Indeed, the decentralisation reform has been in the works for at least a decade. The first time it was seriously discussed was in 2005, just after Ukraine’s Orange Revolution. The country gained a Vice-Prime Minister for administrative and territorial reform – but he didn’t last long, and neither did the position. The impulse behind this reform, which today also has many opponents, quickly came to nothing.


Sports ground in Humentsi. Photo courtesy of the author. All rights reserved.The second serious attempt at reform began after EuroMaidan, partly as a reaction to the demand for “federalisation” that was issuing from Moscow and being repeated by those involved in the so-called “Russian Spring” in Eastern Ukraine. Ukraine’s response to this was decentralisation.

Reform was essential for several reasons. First, Ukraine was still a rigidly centralised state and, despite all the talk about the development of local government structures, all Kyiv did was limit the powers of the regions. Municipal heads were dependent on Kyiv because the allocation of central budget funding worked on an individual basis and was dependent on personal loyalties. Mayors often found themselves forced to choose or alter their political colour in line with whatever party was in power in the capital. Local elections were often tainted by political thuggery.

Second, the population of villages and small towns was continuing to decrease. In many of these places, the only jobs were in the public sector, which took up the entire local budget. Some classes in local schools had only between three and seven pupils, and the crumbling infrastructure hadn’t seen any repairs for decades. The overwhelming mass of local expenditure was made up of subsidies, but even they were only enough to tinker round the edges.

Even in the early 2010s, progressive local community leaders had developed detailed amalgamation projects to simplify the social infrastructure networks they had inherited from the kolkhoz system, but the existing legislation didn’t provide any mechanisms for implementing them. Small communities were continuing to die out, and life in villages and small towns was often becoming unbearable. Many didn’t even have gas or running water.

A jump start

The Ukrainian government eventually launched its local government reform in 2015. The key element of decentralisation was that local communities would no longer be under the control of district level government and would instead have direct inter-budget relations with Kyiv. Towns previously governed by regional authorities and OTOs, which at the start of the year still only existed on paper, would receive new financial resources, while oblast and, in the first place, district authorities would lose many of their powers.

The rules governing the “levelling” of local government finances, where Kyiv stripped relatively rich towns and villages of some of their “surpluses” in order to subsidise and cover the funding deficits of poorer communities, were overturned immediately. Communities’ prosperity levels were to be defined according to a special formula, and part of any “surplus” was to remain in the hands of the villages and towns that had generated it. Communities would also retain a large proportion of taxes and levies, and local medical and educational facilities would be financed directly by special subsidies from the public purse.

But, as usually happens, there were hitches in the process. The reform took away the portion of individuals’ income tax that previously went towards funding their local communities, and which had provided the bulk of their finances. This step should have stimulated the amalgamation of small communities, which in had in the past taken place on a sort of voluntary basis. But the law permitting the creation of OTOs hadn’t yet been passed when the reform began to be implemented.

At the same time, the reform gave villages and towns the right to keep the excise duties levied on their lands. Thanks to this, small settlements with petrol stations acquired a source of finance that they had never had before, but on the other hand they lost whatever impetus they might have had to amalgamate with their neighbours. In Kyiv oblast, for example, where proximity to the capital has spawned a large network of petrol stations whilst the cost of land has soared to unimaginable heights, there are only nine OTOs – as many as in the front-line and only partly Kyiv controlled Luhansk Oblast.


Inna Abdulkadyrova, head of the Humentsi unified territorial community with the leader of the Khmelnytskyi regional council, Mykhaylo Zahorodny. Photo courtesy of the author. All rights reserved.Finally, the reform sparked conflict between town and countryside. The amalgamation process launched in 2015 is supposedly voluntary, but it is usually subject to certain rules. Amalgamation should take place according to so-called “high-potential” plans, adopted for each region by its regional council and Cabinet. The plan determines the number and composition of OTOs to be created in a given oblast, as well as their centres. The centre has to be more or less in the middle of the community and dominate it in economic terms compared to other centres of population; otherwise, conflicts will arise in the OTO. “Because when five or six paupers unite, they remain paupers,” says Mykhaylo Zahorodny, leader of the Khmelnitskyi oblast council.

However, a seemingly excellent project to create an OTO often turns out to be incompatible with relationships and interests in the proposed area. If an amalgamation is to take place without a “high-potential plan”, the communities that need to come to an agreement must also receive permission from the oblast and central authorities, and this does sometimes happen. But if the authorities then refuse to make amendments to an agreed plan, the local initiative is penalised: these OTOs can’t enter into direct inter-budget relations with Kyiv, but have to remain under their district’s control. In other words, it you are not happy with a “high-potential” plan, don’t even think about suggesting an alternative project: the supposed voluntary nature of amalgamation only allows you to amalgamate the way they want you to – or give up the idea completely. And joining an OTO is a one-way ticket – there’s no legal provision for leaving.

Joining an OTO is a one-way ticket – there’s no legal provision for leaving

The creation of an OTO assumes the abolition of existing local authorities: instead, “elders” (with purely representative powers) will be elected. This will take place at snap elections, after which a local council and executive committee will be formed. Many rural communities, mainly rich ones such as Humentsi, have been strongly opposed to amalgamating with towns, fearing that they might just melt into urban life and lose the right to manage their own resources and any influence they may have had on their local area. But while Humentsi has managed to attract another seven village councils and 18 villages into amalgamation with it, some rebellious OTOs end up with just two or three.

“Now, everyone is happy to break the rules, waiting for ‘zero hour’ when the local government reform bill becomes law. After the law is passed, weak, artificially created OTOs will be sucked into normal, large communities and that will be the end of it,” says Anatoliy Tkachuk. “I tell them: it’s your choice, if you’ve decided to be weak but proud. If the Humentsi OTO wasn’t big, its future would already be decided: it would be part of Kamianets-Podilskyi.”

A difficult divorce

Ukraine’s first OTO elections took place in the autumn of 2015. In the nearly three years since then, it’s hard to say what the reform has achieved. Social surveys tell us that, despite the fact that there are many more supporters of decentralisation than opponents, more than half the population, including OTO residents, say that nothing has changed since. After 2015-2016, the subject was pretty much dropped by the Ukrainian media. Now it only hits the headlines when there’s some kind of scandal.

The reform still has powerful opponents. Its progress is being blocked by politicians close to ethnic minorities and by the Fatherland party led by ex-PM Yulia Tymoshenko, a consistent opponent of the reform. There is, however, a less sophisticated and more logical conflict going on at regional level, where the OTOs are, as the joke goes, at the stage of divorce and division of property. Even at public events to discuss reform, there are endless clashes between district and OTO heads.

The other issue here is that powers have still not been divided between districts and OTOs. Ukraine’s National Audit Office, for example, has pointed out that many OTOs still haven’t opened primary medical care facilities, and have handed the funding they were given for this to the districts. So some local medical services are still run by districts, while others are now being managed by conscientious OTOs. Perhaps that’s why Ukrainian pollsters are finding that the public believes medical services have deteriorated since the reform.

In some regions, a somewhat comic situation arises whereby OTOs occupy an entire district while traditional district authorities remain in place. “Ideally, the district structure should be abolished,” says Tkachuk, “but that level of local government is written into Ukraine’s constitution and parliament will never produce the number of votes needed for that to change. So all the reform’s authors are hoping for is to at least amalgamate districts, as well as local communities in the near future.”

Provisional results

Trust and mistrust ratings in Ukraine suggest that local government is much more stable than central governmental structures, so the success of the reform can only be judged in individual communities, where community leaders have enormous influence. In Humentsi’s village council, for example, in 2015, before there was an OTO, each member of the community was worth no more than an average of 2,700 hryvnya (£78), while in 2018 each member of the OTO should be worth almost twice that amount. For comparison, in Kamianets-Podilskyi, the figure is only 3,700 hryvnya (£107), whilst in the regional centre, Khmelnitskiy, it is 6,200 hryvnya (£179) per head of population.

These figures are easily explained: the reform has changed people’s mindset. New or newly re-elected community leaders have begun to scrupulously create order in local finances, feeling themselves to be, for the first time, “owners of their own land” – a phrase I have often heard from OTO officials in different parts of Ukraine.

Community leaders have begun to scrupulously create order in local finances, feeling themselves to be, for the first time, “owners of their own land”

Local small and medium business owners have, finally, under the authorities’ watchful eye, had to legalise their staff’s status and pay them a proper salary (with income tax deducted). Many communities have also conducted a full-scale inventory of their parcels of land for the first time. There is serious competition for investors. Realising the impact of responsible “landowners”, foreign capital has started flowing into regions away from the fighting – mostly in the western part of the country.

But there is another side to the coin. Having at last earned enormous sums of money by local standards, OTO chiefs don’t always spend it rationally. Anatoliy Tkachuk says that there have been several cases where money has been “buried” – either because of traditional corrupt practices or out of misunderstanding – in, for example, projects to rebuild half-derelict kolkhoz structures such as schools and hospitals where there is no longer anyone to either need them or staff them. An equally sad situation is a bloated management apparatus with unrealistically high salaries that eat up the lion’s share of the community resources released by the reform. Fortunately the present stage is a kind of pilot project for the new admin structures that appeared in 2015-207 as a result of snap elections.

Many of the imbalances will probably be ironed out by Ukraine’s local elections in 2020. But the future of the actual reform will depend on the presidential and parliamentary elections of 2019. It’s unlikely that the Ukrainian government and parliament will want, or be able to spend the intervening year completing the process and compulsorily amalgamating all the remaining communities as part of high-potential plans. And there is no guarantee that a new central government, in whoever’s hands it may be, will want to continue the reform process. The peculiar, ever captivating attraction of Ukraine is that the election results will be unpredictable – just like the politics of those they bring to power.


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