The Tyzhden had a talk with Georg Milbradt, Special Envoy of the Government of the Federal Republic of Germany for the Ukrainian reform in the areas of governance and decentralisation, to discuss the assistance provided by the German Government to Ukraine to carry out reforms, as well as successes and problematic areas in their implementation.

According to Pavlo Klimkin, Minister of Foreign Affairs, your appointment as Special Envoy of the German Government in Ukraine is a symbol of close cooperation between our countries. In this regard, please tell us more about your duties in this position.

— This mission appeared in the framework of an agreement between Petro Poroshenko and Angela Merkel. Probably, because Ukraine has always been criticised, it was necessary to send an experienced G-7 politician here. First we had a long list of tasks. However, the German side soon chose three main areas: decentralisation, high-quality public administration and public service. Given the state of affairs and the way the reform process is going on, decentralisation, in my opinion and in the opinion of those involved in it from the Ukrainian and German sides, is the most important one.

It is very important as it will change the way people think and behave. They will be responsible for themselves, and the structure, when new changes are always initiated from above to the bottom, will also be broken. Due to decentralisation, citizens will try to solve their problems on their own. I also believe that this will strengthen democracy in Ukraine, as citizens will realise that they can improve certain things. At the highest level, in Kyiv, it is relatively difficult for some people to achieve the desired impact, but it will be much easier to solve issues in small hromadas. I think that it will also contribute to the fight against corruption. Although this reform decentralizes it as well, it will be easier to counteract corruption in such a format. This is proved by international researches and, I think, it will not be different in Ukraine.

Decentralisation is now a national priority. In the 1990s Ukraine undertook to introduce local self-government and signed a corresponding European charter. Though, the necessary reform was not carried out. Subsequently, they tried to implement it after the Orange Revolution. However, during the presidency of Yanukovych this process stopped moving. Nevertheless, it is interesting that at that time experts continued to work in Ukraine. Therefore, after the Maidan their drawers were filled with necessary developments, and therefore the government was able to adopt a fairly clear programme already on 1 April 2014. It could not have been done in five weeks. Thus, everything was ready on the Ukrainian side, and the new government started its work. Then they tried to support it financially, however, provided that strong and functional units would form through amalgamation. Effect can be achieved by joint work.

When the new hromadas amalgamated, schools and roads were equipped and repaired. Other things improved in the life of territorial amalgamations, including the service sector, issues related to, for example, kindergartens began to be addressed. I think, in general, everything is moving fast enough. However, in the process of decentralisation, along with the success problems appear. Only one third of hromadas have voluntarily amalgamated and have been functioning so far. In order for the rest to start acting, some incentives are needed (more own revenues and additional competencies), or new territories have to be amalgamated forcefully. Ukraine has decided to do it on a voluntary basis.

There is a problem that hromadas are most often formed where there are large enterprises, therefore, of course, they can be considered successful, since they receive profit taxes from these industrial structures. In the past, 60% of revenues from these enterprises went to regions. How do you estimate such a process of AH formation? What could you advise to smooth out the unevenness?

— Decentralisation of tax revenues was a great success. There is also a compensation system that reduces the differences between rich and poor hromadas. However, the municipal fiscal system needs to be improved, for example, reformed and high-income real estate tax.

Own revenues are also important in order to hire qualified staff. That is why the law on state service is required. Unfortunately, the Verkhovna Rada and the President did not agree on this and the first attempt to approve it failed. However, the following one should be done.

Not only money plays a big role for hromadas, but also the fact that AHs are masters of their territory. It is meant not in the context of ownership, but in the fact that they are responsible for what happens on their territory, therefore, have a planning autonomy. Similarly, state ownership will be transferred to hromadas.

This is just the beginning of the way, when part of the rayon powers is passed on to new hromadas. The rayon level needs to be reformed as well. There are currently large hromadas in size of rayons. People in rayon administrations know this. And they are partly not interested in the formation of larger hromadas. 130 rayons out of 490 have not made a step in the AH establishment (no hromadas have been initiated within these rayons). Often, the rayon administration slows down these processes. Partly, it is happening at the oblast level, but mainly at the rayon level: people are afraid of losing their jobs. Therefore, in order to continue decentralisation, this segment should be resolutely restructured. Rayons are necessary in such a large country as Ukraine. That is why they have to become bigger and get new powers so that people have prospects. Thus, the next big step after the formation of larger hromadas is the territorial and functional reform for the rayon level.

In addition, there is another problem. Definitely, not only small villages, but also cities of oblast significance, are the economic drivers in the country. That is why they should grow along with their suburbs. The relevant law, which has already been approved and signed by the President, allows large cities to participate in the programme. This is a very important step.

The process continues. The question now is what to expect after the local elections of 2020. Will the number of already amalgamated hromadas be enough to work on one system, or the system of “two classes” will operate: new hromadas under the new law, and old ones under the old law, with the difference that the latter will depend on the rayon, while the first will obviously not. It is difficult, but the problem needs to be solved.

High-quality public administration is another important topic. It is about its new and more structured organisation. For example, Ukraine has a significant problem, because the Soviet system created a large number of state legal entities. Of course, they are burdening taxation. This phenomenon needs radical changes.

The complex issues also include corruption and judicial system. Privatisation of state-owned enterprises is another important topic. As far as they exist between the government and the market economy, they are particularly prone to corruption. It is difficult to solve, since there are questions on who should privatise, what can be purchased by foreigners, and what is being sold by Ukraine. A free land market is required as well. The Verkhovna Rada is extremely hesitant about this. As far as other issues, such as investment, are concerned: when foreign investors want to invest, they should feel that their funds are safe in the Ukrainian banks. There are also other topics I’m dealing with, but you can not do it all at once. I'm just a human. Therefore, I focus on strategic importance, namely decentralisation.

I am here at the request of Ukraine. I'm not a teacher. The state has to decide itself, what it aspires to. My task is to support the country, so I try to persuade people, talk with deputies so that they support this reform. I think decentralisation is a rather popular topic among the population. Although people in Ukraine usually have not very positive perception of reforms, since they mainly lead to deterioration.

In one of your interviews you said that the decentralisation reform could also change the mentality. Have you experienced it in the GDR, particularly in Saxony, where you were once a Prime Minister?

— Of course, it changes. And this would not have happened without moving to the local level. The GDR also had a prerequisite – resistance to the old regime provoked by fraudulent local elections. In 1989, they were obviously rigged. And this is understood now.

The first thing done by the new government after the revolution was holding of the new local elections. As a result, completely different people were elected. The GDR had the same problem as here: the size of communities had to be reduced. It also became clear that in order for communities to fulfill their new functions, there should be a sufficient minimum size of communities. A village of 500 residents can not provide a great self-government. Of course, this also leads to change, because democracy moves from below. I do not believe that democracy can be directed from the centre.

It is also easier for NGOs to get influence at community level. In Germany, the level of communities is not that formed in terms of parties and politics. Therefore, I think, it will be the same in Ukraine. Decentralisation is something that creates changes in heads.

Analysing the examples of the decentralisation reforms in Poland and the GDR, which of the examples, in your opinion, is better for Ukraine?

— Each country has its own history and traditions. Poles had a general plan for everything: from voivodships, counties, cities to gminas. It was a great law, where everything was taken into account. I do not think that the same could have been done in Ukraine as in Poland. Although some people want it to be this way. I think that in order to succeed, it is necessary to make decisions step by step. There are other examples in Europe, where on the contrary, they avoid amalgamation of communities.

For example, in France there are 35 thousand such communities, which, however, should work with each other. Each community is united by a certain goal. The French administrative structures of these communities are called millefeuille, or Blätterteig in German (in Ukrainian it is translated as “puff pastry” - Ed.). There are many levels, but their number can not be increased. I'm telling this in Ukraine not to inform about the new direction, but to look at the truth and make a decision with confidence.

The amalgamation process is very slow. You mentioned the forced amalgamation methods. Should Ukraine resort to them?

— From the beginning, Ukraine has chosen the path of voluntary decision-making, and it has to follow this path further. When you already have a large number of people who amalgamated, then you can talk about arranging the map so that there are no white spots. Usually we set up a certain deadline. This was the case in Germany as well. You need to have both a stick and a carrot, but the first one is enough to be just shown. The stick is not yet relevant. By 2020, we have the opportunity to get a lot of new structures, that amalgamated on a voluntary basis.

You also mentioned the list of draft laws that have to be passed so that the decentralisation reform works. But, for example, the first draft law in this list "On Service in Local Self-Government Bodies" was rejected by the Verkhovna Rada on 3 April. How do you generally evaluate this preparation process and how much time is needed to start the reform?

— All laws from my list are currently under consideration in the Verkhovna Rada. The last ones were once again submitted for the Government’s consideration. All of them are at different stages. Some are coming to the second reading and can be approved shortly. The problem of the decentralisation reform, in contrast to the reform of healthcare or education, each of which has its own great law, is that within its boundaries large number of laws need to be amended, which, in turn, partly change other legal acts. When you consider these laws, you will not be able to understand their meaning at once, because they involve reviewing other legal documents. Therefore, it is better to consider these laws in “several conveyor lines”.

What are your predictions about the future of the decentralisation reform in Ukraine? How much more time do we need?

— In Germany, we began with the restructuring of the districts and created new ones, which took three years. However, along with the local self-government reform, it took eight years. In Poland, the reform continued for the same period. In Ukraine the problem is that 25 years have passed. Therefore, I suppose, it no longer has the time Poland or East Germany had. It is also difficult to compare with such reforms in other post-communist countries, since Ukraine is territorially larger than Slovakia or Estonia. It is good to compare with Poland, but it had democratic and decentralised structures before the communist times, which was a great advantage. Besides, large part of the territory had a long-standing self-government. Thus, when it comes to changing the mentality, then prior to the Second World War self-government was functioning in Halychyna and Poland. Within the Grand Duchy of Lithuania, many Ukrainian cities had Magdeburg Law, which is self-government in itself. Here Ukraine can find historical foundation. Instead, the imperial and communist systems rejected self-government.

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Georg Milbradt — German politician, Prime Minister of Saxony in 2002-2008. He was born in 1945 in Eslohe (North Rhine-Westphalia). He studied economics, law and mathematics at the University of Münster, where he worked as a researcher in 1970-1980. From 1973 he was a CDU member. Since 2008, he has taught economics at the Technical University of Dresden. In early August 2017, Georg Milbradt was delegated by the German Government as a Special Envoy for reforms in Ukraine, namely in the field of high-quality public administration and decentralisation.