Ukraine: Decentralize or Perish

Ukraine must give its local governments a chance to flourish

Ukrainian women embroider a map of Ukraine with the different flags of the regions in the country during a pro-Ukranian meeting in the southern coastal town of Mariupol September 13, 2014. VASILY FEDOSENKO/REUTERS

Ukraine’s current system of highly centralized governance is a holdover from the Soviet period. Unlike its western neighbors, Ukraine never fully committed to the local governance reform that should have accompanied the liberalization of its command economy. In a recent Foreign Policy article, Yuliya Bila argues that Ukraine would benefit from an intergovernmental system — similar to that of Poland or Germany — that encourages local solutions for local problems. She argues that in a diverse country of over 40 million people spread out over a territory larger than any in Europe, it makes little sense for the central government to micromanage local affairs.

But micromanaging is exactly how things have been run in Ukraine. Locally elected district, city, town, and village councils are completely dependent on the decisions of the central government — especially financially. Almost all taxes collected at the local level are sent to Kiev, where the decisions are made, the programs are crafted, and a significant chunk of the money disappears through incompetence and corruption. What remains returns to the local level in the form of underfunded social services and programs that may or may not fit the needs of local citizens.

This centralized system has encouraged the bloating of the central government’s bureaucracies and prevented Ukraine from transitioning away from a paternalistic mode of governance. In the absence of developed institutions or effective checks and balances, this paternalism has nurtured a ruthless oligarch-politician class which has succeeded in exploiting public institutions to achieve private gain. Investing in energy efficiency, developing modern infrastructure, and providing public goods like education, healthcare, and defense were often last on the “to-do list” for a series of venal Ukrainian governments. There was virtually no accountability to the average citizen.

During two decades of this kind of centralized mismanagement, public institutions had degraded to the extent that students could outright buy their university degrees and taxpayer-funded hospitals would regularly refuse to serve citizens without a bribe. The military had been so gutted that Ukrainian soldiers had to buy their own guns and uniforms at the start of the conflict in the Donbas, despite Ukraine being a net weapons exporter, thus turning many Ukrainians turned to political apathy.

Effective decentralization in Ukraine is not the same as the version of federalization that has been advocated by the Russian government and separatist leaders in the Donbas. Unlike that intentionally destabilizing vision, an effectively decentralized system would not allow regions to veto the central government’s decisions on foreign policy, international trade, or other national issues. Instead, it would empower local leaders to use locally collected tax revenue to address issues of local development, such as where to build a bridge or how much to pay their schoolteachers. Combined with an administrative overhaul, a new round of local elections, and a greater focus on transparency, devolving certain powers away from the central government would allow local leaders to more effectively address the needs of their communities. This, in turn, would enable Ukraine to grow into a stronger, more modern state that can more effectively resist internal and external destabilization.

Read the complete article:
Yuliya Bila. Decentralize or Perish: To beat Russia, Ukraine must give its local governments a chance to flourish. Foreign Policy, April 14, 2015.