When Ukraine became independent in 1991, it inherited from the Tsarist as well as Soviet systems of rule an allocation of almost all prerogatives in the capital. Until today, features of the previous over-centralized and semi-colonial governmental system can be found in many officially state-socialist and post-socialist countries across the globe. Arguably, decentralization is therefore no less important for post-Soviet countries to overcome their Tsarist, Leninist and Stalinist legacies than liberalization, decolonization, democratization, privatization and Europeanization (i.e. the adoption of the EU’s acquis communitaire).

The overconcentration of competencies in the capital does not only lead to a number of political, administrative, economic, legal, cultural, behavioral and even mental pathologies in the post-Soviet world. It is, above all, a main reason for the low quality of public services throughout Ukraine, including such fields as primary as well as secondary education, healthcare, road construction or social support. It is also one of the causes for the slow economic development of many Ukrainian regions, during the last 25 years. Ukraine’s local authorities often lacked and are partly still lacking sufficient funds, powers and skills to address even the most basic infrastructural needs of their communities. Ordinary citizens had and often still have little opportunity to influence decisions affecting their most urgent immediately local matters.

Since 2014, the government has thus adopted a whole battery of parallel measures to change previous center-periphery relations. These multiple re-directions and novel regulations, taken together, amount to a comprehensive decentralization reform. Moreover, various Western states and international organization, above all the EU, are resolutely supporting Ukraine’s decentralization via a broad variety of instruments and with funding amounting altogether to approximately 200 million euro. If the accelerating changes take root at the local level, decentralization will contribute to changing post-Soviet Ukrainian state-society relations, at its core.

First, local authorities are now receiving far larger revenues through redistribution of tax income from the central state budget to municipal and communal accounts. For instance, during 2015, the monetary volume of local budgets increased by 42 percent compared to 2014 – from Hr 70.2 billion to Hr 99.8 billion. In 2016, the local communities’ revenues increased additionally by 49 percent reaching Hr 146.6 billion. In fact, they earned 16 percent more than had been initially projected for that year. This unexpected rise of local revenues, especially via personal income tax (PIT), was the result not only of inflation, but also of new taxation formulae that motivated businesses to pay their taxes properly, and to get away from handing out salaries in envelopes. In addition, a new model of competitive distribution of inter-budget transfers is aimed at fostering both the support of weaker regions and economic rivalry among local communities.

Second, in order to increase the institutional and financial capacity of local authorities, the government initiated a process of voluntary unification of small counties into administratively more potent and larger political subunits called “amalgamated territorial communities” (ATCs). That was a highly necessary step to get away from the large number of over 11,000 Ukrainian primary level counties. For instance, before the reform, six thousand local communities had fewer than three thousand residents. Within 5,419 budgets of local self-government, subsidies from the center exceeded 70 percent. 483 territorial communities were to 90 percent or more maintained via support from central state budget funds.

No wonder that this part of decentralization reform, once unification became possible, quickly got off the ground. Already by the end of 2016, the so far entirely voluntary amalgamation process had rendered impressive results: 15 percent of the previously existing local counties had – on their own initiative and without any pressure, though with some financial incentive, from above – fused into 367 amalgamated territorial communities (ATCs). Apart from new competencies, the new ATCs received additional tax revenues and direct state subsidies for developing infrastructure, improving healthcare, and implementing educational projects. Due to their new revenues, those 159 amalgamated communities that had been created during 2015 increased, as Ukraine’s Ministry for Regional Development proudly reported, their budgets more than sixfold, during the first nine months of 2016 when compared to the analogical period of 2015. The new entities received various types of revenues, especially PIT, and additional competencies to direct their expenditures.

Some rapid physical developments in the first amalgamated territorial communities represent the, so far, most visible results of the decentralization. The officials of the new ATCs used much of the additional resources they now had at their disposal for infrastructural projects in order show their communities’ inhabitants quickly the benefits of their novel political functions and administrative prerogatives. For instance, in 2016, more than twice more road surface was laid, in Ukraine, than during the two previous years (though this was also a result of the general economic recovery that had begun in mid-2016). The central government provides financial assistance to amalgamated communities in the form of state subsidies which amounted to approx. Hr 1 billion in 2016 and will be around Hr 1.5 billion in 2017. The ATCs have been using the additional funds for the reconstruction and repair of educational and healthcare facilities as well as for other public works.

Another aim of decentralizing and bundling decision-making has been to enable ATCs to attract larger investment projects. So far, these have, however, been rare, and reflect the generally low amounts of FDI that Ukraine is receiving. That has, perhaps, less to do with Ukraine governmental structure than with the country’s poisoned international image as an allegedly war-torn and still super-corrupt country – features that are certainly present, yet often overdrawn in international press reports.

Other aspects of the reform package, however, remain frustratingly incomplete, as the parliament has so far failed to adopt a critical constitutional amendment. The modification of Ukraine’s basic law is necessary to complement and support the already enacted changes in ordinary legislation and ongoing changes in the local communities everyday life. While originally not connected to the resolution of the armed conflict in the Donets Basin (Donbas), the constitutional changes related to decentralization were, in 2015, bundled together with one of Ukraine’s political commitments, under the Minsk process. The latter concerns the provision of a highly controversial “special status” for the Donbas territories currently controlled by Russia and its proxies, in eastern Ukraine. Against the background of Moscow’s demonstrative and continuous violation of the Minsk Agreements since 2014, a large majority of MPs in Ukraine’s parliament, the Verkhovna Rada (Supreme Council), so far refuses to support the comprehensive constitutional reform package. That is insofar regrettable as this legal bundle also includes several decentralization clauses, unrelated to the Minsk process.

In early 2017, Ukraine’s decentralization reform has entered a critical phase marked by a recent adoption of several new laws aimed at fostering amalgamation of communities. This encouraging legislative success offers hope that the already impressive practical progress will continue. To date, decentralization has already improved the financial well-being of many local communities in different regions in Ukraine and laid the foundation for a better quality of life for Ukrainians living outside the richer metropoles like Kyiv, Odesa and Kharkiv. While the idea of rapid decentralization does not enjoy unconditional support from all parliamentary parties, the numerous stakeholders of the ongoing reform among public officials, elected mayors and new councillors, as well as the population at large, bode relatively well for the future of local administration reform.