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Multi-level Governance, Public Investment and Subnational Finance

OECD Project Supporting Decentralisation in Ukraine 2021-22

 

PROJECT CONTEXT: RUSSIA’S LARGE-SCALE WAR OF AGGRESSION AGAINST UKRAINE 


Russia’s large-scale aggression of Ukraine, starting on 24 February 2022 has sown catastrophe in municipalities across the country, destroying lives, livelihoods, homes and infrastructure. It has also provoked a humanitarian crisis with over 7.8 million refugees million people having fled the country as of November 2022, while around 6.2 million people are internally displaced. Moreover, Russia’s war against Ukraine is having a devastating economic impact. By September 2022, damage to physical infrastructure was estimated at over USD 114.5 billion.

Despite the tremendous strain on their financial and human resource capacity due to the war, many municipalities are continuing to deliver local public services and are shouldering additional responsibilities to support the war effort. In doing so, they have built on the experiences gained through the regional development and decentralisation reforms implemented as of 2014. These reforms resulted in the creation of 1 469 amalgamated municipalities, the establishment of an elaborate multi-level regional development planning framework, as well as a significant increase in local public service delivery and public funding for regional and local development.

In this context, the OECD implemented the Supporting Decentralisation in Ukraine 2021-22 project. It responded to a request from the Government of Ukraine, and the European Union to support Ukraine’s decentralisation and regional development reforms by following up on the OECD reports Territorial Review of Ukraine (2014) and Maintaining the Momentum of Decentralisation in Ukraine (2018). The parameters of the work were defined prior to 24 February 2022. However, in order to ensure the maximum relevance of the work the scope of the collaboration was expanded to include a focus on the role of effective multi-level governance in post-war reconstruction and recovery.

The project resulted in the OECD report, Rebuilding Ukraine by Reinforcing Regional and Municipal Governance, launched by the OECD Secretary-General, Mathias Cormann on 2 December, at the 47th meeting of the Regional Development Policy Committee. The report presents an in-depth analysis of Ukraine’s progress in implementing its multi-level governance reforms and explores the role of subnational governments in disaster management. It recommends ways in which Ukraine, together with international partners, can use multi-level governance, regional development and decentralisation to support subnational reconstruction and recovery to address urgent humanitarian needs, rebuild local economies and communities, and strengthen their resilience. In doing so, the results of the Supporting Decentralisation in Ukraine 2021-2022 project feed into OECD’s contribution to Ukraine’s national recovery plan.

 

OBJECTIVES OF THE PROJECT


  • Help the Government of Ukraine identify actions to support place-based reconstruction and recovery;
  • Provide recommendations to the government on disaster management that draw on OECD member country experience;
  • Measure Ukraine’s progress in addressing regional development disparities over the past decade;
  • Assess the effective use of public funding for regional and local development, including the State Fund for Regional Development, as well as municipal own-source revenue;
  • Identify actions to improve co-ordination among and across levels of government for the design, implementation and financing of regional and local development projects that meet local needs and reflect national priorities;
  • Determine the effect of the decentralisation reforms, including amalgamation, on territorial economic development, service delivery, municipal administrative capacity and local democracy;
  • Identify measures that the government can take to improve the successful implementation of the decentralisation reform in municipalities where progress has been slow to take root.

PROJECT ACTIVITIES


1. MEASURING THE OUTCOMES OF DECENTRALISATION AND AMALGAMATION IN UKRAINE
The OECD undertook an analysis to understand the effects of the decentralisation reforms—adopted after the 2014 Maidan Revolution—on municipal performance and identify success factors leading to positive local development outcomes. For this, the OECD analysed two complementary elements: a) the responses to an online survey, completed by 51% of Ukraine’s 1 469 municipalities, that looked at municipal human resources capacity, finances, investment and cross-jurisdiction co-ordination, among other elements; and b) a Data Envelopment Analysis of municipal efficiency. In addition, the OECD looked at Ukraine’s capacity to monitor municipal performance and development over time to support evidence-based decision making for post-war reconstruction and recovery and into the future.

2. SUPPORTING REGIONAL DEVELOPMENT IN UKRAINE
The OECD conducted a broad analysis of regional development in Ukraine. This included an assessment of subnational development trends, as well as Ukraine’s planning and funding frameworks for regional and local development. Related to planning processes, the OECD examined recent advances in Ukraine’s regional development policy, and how these could be leveraged to support post-war reconstruction and recovery. It also assessed the effectiveness of existing co-ordination mechanisms to ensure vertical and horizontal policy coherence. Moreover, the OECD analysed the framework surrounding regional and local development funding, including the different mechanisms used by national, regional and municipal governments to fund regional and local development.

3. DISASTER MANAGEMENT FOR RECOVERY AND RECONSTRUCTION
The OECD report includes a dedicated chapter on ensuring effective multi-level governance for disaster management, recovery and reconstruction. The chapter highlights the different phases of disaster management and the role that subnational governments play in each phase. It then explores how to foster adaptable multi-level governance arrangements in a disaster and during recovery. Finally, the chapter considers how adopting a place-based approach to the recovery can help Ukraine overcome regional development challenges that existed prior to the war, while also supporting territorially differentiated reconstruction needs.

 

FINANCING


The project was implemented by the OECD under the auspices of the Regional Development Policy Committee and as part of the framework of the Memorandum of Understanding for Strengthening Cooperation between the OECD and the Government of Ukraine. It was made possible thanks to the financial support of the European Union, Latvia, Lithuania and the Slovak Republic.

 
ADDITIONAL INFORMATION

Please visit: https://www.oecd.org/regional/

Previous work carried out by the OECD on Ukraine's territorial reform includes:

Policy Response on the Impact of the War in Ukraine: Turning to regions and local governments to rebuild Ukraine (2022). Also available in French and Ukrainian.
Supporting Decentralisation in Ukraine (2019)
Maintaining the Momentum of Decentralisation in Ukraine (2018). Also available in Ukrainian
Supporting Decentralisation in Ukraine (2017-18)
OECD Territorial Review of Ukraine (2014)

 

KEY CONTACTS

Gabriela Miranda

Country Manager for Ukraine

Global Relations and Co-operation

Gabriela.miranda@oecd.org

Maria Varinia Michalun

Head of Unit

Governance and Strategic Planning for Regional Development 

mariavarinia.michalun@oecd.org

 

 

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