Administrative-territorial reform and decentralization of power authority have been at the centre of discussions in Ukraine since 1990s. Local government is believed to be more efficient if it is capable to settle own problems. However, potential efficiency of the regions depends on many factors. One of the most important factors is the ability of local government to implement development strategies: to create business friendly environment and raise investments. Without this ability regional welfare becomes dependent on donations. But will administrative and fiscal decentralization increase competitiveness of the regions? The issue became the motion for 5 public debates organized by the Foundation for Effective Governance and Intelligence Squared (London) in Kyiv, in December last year.

In her welcoming speech Director of the Foundation, Natalia Izosimova, stated that decentralization of power authority, financial resources and responsibility will help increase competition between the regions for investment and let local governments develop their regions more effectively. “Decentralization is one of the ways to coordinate relations between the Center and the regions. However, there are numerous examples of corruption, irresponsibility and unprofessionalism of local public servants. It might become a disaster for Ukraine if we delegate additional resources and power authority to the locals without introducing effective control mechanisms first. It is also important for the local governments to be able to implement regional development strategies on their own”, noted Natalia Izosimova. In addition, Ukraine has deprived areas where independent local financial bodies simply cannot function. Such territories need state support from the national government.

According to the speakers advocating decentralization at the debate, the main problem today lies with the central authorities, which are afraid of losing their grip on power. “However, there is no other way if we want to ensure good living standards. We need to solve problems on the spot rather than in the office. It is necessary to create independent financial instruments to ensure development of territorial communities and we need to change the system of local elections. Moreover, I maintain that local and central officials should be held totally responsible for their actions”, stated Vinnitsa Mayor Volodymyr Groysman at the debate.

Irina Khakamada, Candidate of economic sciences (Ph.D.) and lecturer, also stressed inevitability of decentralization. “The period of stability in global economy is over. We’re looking at a sweeping wave, stirred up by the appearance of new economic players. Only responsibility of all economic entities: national economic systems, corporations, entrepreneurs – can win under these conditions”, explained Ms. Khakamada.

Other debate participants spoke in favor of partial decentralization. For instance, Volodymyr Yatsuba, MP and former Minister of Regional Development and Building of Ukraine, stated that with due consideration of every region’s potential, it is reasonable to advocate their fiscal decentralization and financial independence in the future. He also emphasized the necessity to consolidate administration resources at the central and regional levels, to create a definite system of subordination, and to work out an effective procedure of decision-making, particularly during the period of the economic crisis and political turmoil in Ukraine.

Pierre Defraigne, an economist and Executive Director of the Madariaga College of Europe Foundation, pinpointed the risks of delegating authorities, financial resources and responsibilities from the Center to the regions. In his opinion, decentralization may hamper regional development and in the future even pose a threat to Ukraine’s territorial integrity. “First of all, it’s necessary to solve the problems that have become the scourge of the Ukrainian society: political instability, corruption, nepotism, infrastructure deficit. Only then you can opt for decentralization”, said Mr. Defraigne. He also emphasized striking disparities among Ukrainian regions and noted that regions in Ukraine trade more with the rest of the world than among themselves. “So, I am a bit skeptical about the idea of improving Ukrainian regions’ competitiveness through decentralization”, stated Mr. Defraigne