SSRD project newsletter highlights need to reform Ukraine's regional development policy

Periodical newsletter published by the Support to Sustainable Regional Development (SSRD) — project funded by the European Union

Urgent need to reform the state
regional policy in Ukraine

Ukraine has not avoided globalization.
Life poses new challenges to state and
Ukrainian society that cannot be
ignored.
These challenges are both of external
and internal origin. It is extremely
difficult to respond to external
challenges. On the other hand, internal
challenges due to Ukraine's status not
only worsen the situation with the
external ones, but sometimes provoke
their emergence. That is why the
conversion of the problems that pose
internal challenges to Ukraine into new indicators, level of investment attrac- such as the Eastern Poland Development
opportunities has become a major tiveness, competitiveness and sophis- Program worth of EUR 16 billion for 7 years
reason for neutralizing the external tication of innovation environment which aims at turning the voivodeships of
challenges. continues to dramatically grow. This Poland neighboring with Ukraine to
challenge is explained not only by the highly-developed and wealthy regions; on
External challenges unification of the leading nations in the other hand, program of development
1. Expanding of global processes in a the EU and, as a consequence, burst of of Belgorod Region and transformation of
way that substantially changes the development opportunities for our Belgorod in the alternative of Kharkiv.
international labor distribution European neighbors, in comparison to
market and promotes competition for Ukraine, but primarily by the internal
all types of resources, especially Ukrainian problems as well. The
energy, not only complicates the competitiveness score of the state with Round table
conditions for development of population of 47,000,000 people at the dedicated to
Ukraine, but also leads to loss of state end of hundred of the world countries regional
benefits from its geopolitical position is a shame. development in
the Verkhovna Rada
as a transit country, as a bridge of Ukraine
between East and West, between 3. Build-up of a potential strain on the
North and South of Europe. Ukrainian border through establishing
Real projects of placing new transit the centers of growth in the areas Ukraine in
routes for Russian and Central Asian adjacent to the state border of Ukraine cross-border
energy to Europe bypassing Ukraine, by the neighboring states which leads cooperation
as well as the construction of trans- to an outflow of labor, intellectual and
port corridors and logistics centers of other resources from the border
air transport outside of Ukraine only regions of Ukraine, and additional
evidences the reality of the situation. social tensions in these regions. Cluster Initiative
Our western neighbors that became Development
2. Ukraine’s lagging behind the devel- in Vinnytsa region
full-fledged members of the EU
oped countries in living standards adopted their own regional programs,

The views expressed in this publication do not necessarily reflect the views of the European Commission.

2 Support to Sustainable Regional Development in Ukraine

The situation is just the same in smaller regions may remain poor, however approximately at the same level
sections of Ukrainian borders with of development.
Hungary and Romania. Having become
the EU members our western neighbors 5. Even greater problem than the regional differences in develop-
gained much more opportunities for their ment, is the gap between rural and urban areas that is also reflected
own development and especially in the via social status of population and sectoral makeup of the economy
border regions, compared to Ukraine. of these areas (the problem is particularly perceived in the regions
with a mono-sectoral makeup).
The situation is just the same in smaller
sections of Ukrainian borders with 6. Government grants and programs for the regions fail to support
Hungary and Romania. Having become the achievement of balanced regional economic development.
Newsletter

the EU members our western neighbors
gained much more opportunities for their 7. Lack of funding for regional development, primarily, almost
own development and especially in the absent public funding, which would promote the economic poten-
border regions, compared to Ukraine. tial of regions.
Internal challenges 8. Low quality development planning at the regional level is
1. Lack of the well-shaped nation-wide complemented by the unclear and overloaded system of govern-
values recognized by the society that ment programs, policies and strategies (including sectoral ones).
would enhance the unity of the state, as
well as the nation-wide political, 9. Low capacity of local and regional authorities in ensuring imple-
economic, linguistic, cultural, information mentation of the local sustainable development policy. The struc-
space. Unfortunately, ‘self-autonomation’ ture of local government is not aimed at supporting the activities of
of the regional communities took place in areas economic development, but mainly at servicing the social
Ukraine. Own TV, newspapers, universities, infrastructure.
oligarchs, the history with its own myths.
Erosion of space commonness leads to 10. Low level of cooperation between the localities (local adminis-
internal confrontation for the reasons that trative units) in order to implement joint initiatives in the sphere of
seem negligible to our neighbors on the development and solving local problems by means of concentration
background of global challenges. of joint resources and efforts.
2. The political structuring of regions and Ukraine’s ranking
attempts to use it together with the prob- Nowadays everybody competes with everyone in the world. Com-
lems of regional development, as well as petition also involves the states that compete for resources, both
economic, social, cultural, mental and natural and investment and human.
other differences between the regions for
escalating political confrontation both at Ukraine’s rating among the largest 46 states of the world is rather
the national level and in interregional disturbing.
relations.

3. Lack of adequate national regional Index Rank
policy has even more aggravated the risks Economic Development 41 out of 46
and negative trends of Ukrainian life:
growing asymmetry in levels of regional Resources and efficiency of their use 39 out of 46
development, rural degradation, crisis of Knowledge economy 23 out of 33
urban settlement network, reduction and Infrastructure 37 out of 46
deterioration of the labor potential,
increased migration of working popula- Environment 37 out of з 46
tion, especially young people, from many Institutions 41 out of 43
Ukrainian regions to abroad. Living and health standards 32 out of 46
4. Key issues of regional development Inflation rate 46 out of 46
include not only significant and growing Domestic investments per person 34 out of 46
regional differences, but general Foreign investments per person 35 out of 46
economic backwardness of regions and a
tremendous need for regional economy
restructuring. Therefore, the ‘regional
differences reduction policy” is not The situation with the level of competitiveness in Ukraine is even
sufficient. ‘Development policy' is more worse. Ukraine is in the eighth ten by the level of competitiveness!
needed i.e. support to the development of
all regions based on their comparative and Competitiveness of the state depends on the competitiveness of its
competitive advantages. Differentiated regions and vice versa. It is impossible to ensure the prosperity of
approach to financial assistance or other the whole country, if the disparities between the regions only
incentives based on the level of regional increase.
development calls for rather careful
approach as development balancing Disparities between Kyiv and the rest of the regions are growing
policy may reduce overall growth or cause dramatically.
the situation where all (or majority) of the


Support to Sustainable Regional Development in Ukraine 3
between Ukraine's average index and
that of Ternopil Region is 3.4 times.

Transfer policy in Ukraine is structured in
such a way that the motivation to
increase own economic potential of a
region or local community has disap-
peared. Local communities and local
authorities rely solely on the redistribu-
tion of funds from the state budget.

Newsletter
After almost 19 years of independence
Ukraine faces a challenge: to make a
breakthrough and occupy a worthy place
among the leading nations of the world,
or stay in backyards of world develop-
ment with a primitive economy and
profound irreparable depopulation.
This issue can only be resolved subject to
national unity and concentration of
forces and resources to adequately
Gross value added UAH/capita per year respond to global challenges faced by
Ukraine.
Thus, Ukraine needs a brand new
national regional policy which would
enable to minimize the risks of current
global challenges and transform
regional differences into opportuni-
ties for success of the state.
The draft bill “On Principles of Regional
Policy” shall become a major legal docu-
ment to finally resolve the issue of
legislative clearance of the process of
formation and implementation of the
national regional policy.
1. This law clearly defines hierarchy and
Low competitiveness of Ukraine inhibits foreign investments. More system of predictive and planning docu-
competitive regions show much higher level of foreign investments ments in this area:
attraction as compared to the depressed ones. 1) national regional development
strategy;
2) regional development strategies;
3) Implementation Plan of National
Regional Development Strategy;
4) implementation plans of the regional
development strategies.
In its turn, the national regional develop-
ment strategy and regional development
strategies are based on the Strategy of
Development of Ukraine, General Outlay
of the Ukraine’s Territory, outlays at the
regional and local levels.
2. The law defines a system of institutions
responsible for development and imple-
mentation of national regional policy
and determines the powers of these
In 2007, the disparity in amount of investment per capita grew even institutions:
more: the level of investments in city of Kyiv and Ternopil Region 1) central executive body for regional
amounted to $3605.3, and $46.4 per capita respectively. A 77.7-fold policy;
imbalance! And as of January 1, 2009 disparity by this index has 2) central executive body for economic
increased by 92 times. policy;
3) central executive body for finance;
The situation is much alike regarding tax revenues in the regions. The 4) National Coordination Council of
difference between Kyiv and Ternopil Region in 2008 was 16.6 times, and Regional Development;


5) Coordination councils of regional development. in the Concept of National Regional Policy and trans-
lated into the legal language in the draft bill “On
3. The law provides for regional development projects Principles of Regional Policy” is promising and meets the
financing instrument – State Regional Development needs of Ukrainian regions and complies with the best
Fund, which is new for Ukraine, but commonly used European practices.
instrument worldwide. So far, the first channel of the funding of the regional
development remains prevalent; this situation will
4. The law provides the opportunity to involve various continue to exist at least in mid term. However, the
sectors of society in regional development, and enables economic crisis narrows the opportunities of both
these sectors in the region to form preconditions for central government and local authorities in respect of
economic growth and social development through funding of the regional development.
Newsletter

Regional Development Agencies. The direction chosen

Round table dedicated to regional development in depressed areas by establishing the mechanisms of
the Verkhovna Rada of Ukraine operation of SEZ, industrial parks, clusters and other
forms of fund raising;
• Implementation of the investment projects on
modernization of the coal industry, attracting non-
government investments to ensure the development
of production potential of mining regions.

Tanja Zabukovec-Kovacic, head of the expert team,
addressed the participants of the round table with
information on the approaches and practical steps to
reform the state regional policy in Ukraine.

Cluster Initiative Development in Vinnytsa region

The chairman of the committee on issues of industrial Within the framework of designing the Action Plan of
and regulatory policy and entrepreneurship in Vinnytsa Regional Development Strategy, the Support
the Verkhovna Rada Natalia Korolevska to Sustainable Regional Development in Ukraine
with the opening speech Project has begun to establish agricultural producer
clusters (fruit and vegetable cluster).
On April 21, 2010 the round table was held in the
Verkhovna Rada of Ukraine on ‘New approaches to There are over 25 thousand hectares of gardens in
development of depressed regions of Ukraine’, with the Vinnytsia. In autumn most of the crop is sold to the
following issues being discussed: local fruit-processing companies. 5% of the crop is
• Depressed areas and institutional support of exported to Russia and Belarus. Apple production in
their development; Vinnytsia region accounts for 42% of total apple
• Public approaches to promotion of the sustain- production in Ukraine, and apple yield of the firms of
able regional development; Vinnytsia region is 2.3 times higher than the average for
• Relationship between the state and local Ukraine. However, there is a strategic gap in productiv-
budgets for the introduction of instruments of state ity: in China and Poland the productivity is three times
regional support; as much as in Vinnytsia region.
• Methods of state support to labor market at
the regional level; The cluster aims at using shared capabilities of the fruit
and vegetable producers in Vinnytsia region, attracting
additional investments for the diversification of the end
product, as well as getting access to the new market
outlets of Vinnytsia region. The cluster is being estab-
lished on a voluntary basis by informing potential
participants about the benefits of joint operations.

The task of the project team involved in the cluster
development is to elaborate a cluster strategy specify-
ing overall strategic direction of the cluster develop-
ment, and proposals on a number of the projects within
the cluster (initiatives). As part of the Project operations
on this initiative the following events will be carried
out: training of the working group members at each
Project Team Leader Tanja Zabukovec-Kovacic stage of the cluster, workshops with participants
and regional development policy Yuri Tretyak (members) of the cluster; assessing and advising on key
elements of the cluster: mapping, needs and
• Promoting investment climate of the challenges, strategy, organization and management.



Ukraine in cross-border cooperation Priority 3: Networking and people-to-people coop-
eration
In September 2004, the European Commission (EC) The programme web site with full information on the
adopted a new strategic direction for its external relation- programme and information on the relevant calls for
ships with countries outside the EU and outlined new proposals (including eligible regions) can be located
instruments, with consistent rules and procedures to at: www.pl-by-ua.eu
govern global interventions. With the context of coun-
tries in close proximity to the EU, two new proposals for __________
regulations for the period 2007-2013 were elaborated: 1)
the European Neighbourhood and Partnership Instru-

Newsletter
ment (ENPI) that will support actions in Eastern Europe,
Southern Caucasus and Central Asia, Middle East and
South Mediterranean Basin and 2) the Instrument for
Pre-Accession Assistance (IPA) for candidate countries
(Croatia, Turkey, fYRoM) as well as potential candidate
countries (basically the remaining Western Balkan states). Hungary-Slovakia-Romania-Ukraine Cross
These two instruments are policy driven and are intended Border Cooperation (CBC Programme)
to replace the numerous instruments of the previous
period. Both will have a cross-border component (CBC) The programme involves approximately 68 MEURO
for which complementary ERDF funding will come from for the period 2007-2013. Its management (Joint
the new "European Territorial Cooperation" objective, Managing Authority or JMA) and secretariat (Joint
currently INTERREG. Cross-border components of the Technical Secretariat or JTA) structures are based in
ENPI and IPA include economic and social cohesion as Budapest. The Programme’s identified the priorities
well as external policy objectives. are:
Of the many components of the ENPI, one of the most Priority 1: Promote economic and social develop-
important components is the cross border cooperation ment - Increase knowledge transfer and practice-
(CBC) component, although this is often overlooked as an sharing between and promote joint developments of
important driver of regional development in the context businesses, local governments and the civil society
of wider Ukrainian development. Under this component,
the ENPI will finance “joint programmes” bringing Priority 2: Enhance environment - Enhance the
together regions of Member States and partner countries quality of air, waters, soil and forestry resources and
sharing a common border. It is expected that these reduce risks of damages on natural environment
actions will simplify procedures and substantially
enhance programme efficiency, as the procedures will be Priority 3: Increase border efficiency - Increase
harmonized (where in the past New Neighbourhood efficiency of border management on the Ukrainian
Programme or NNP, Ukraine operated under Tacis rules border
and member states under ERDF procedures). Building on
the “Structural Funds” model and implemented on The programme web site with full information on the
principles such as multi-annual programming (2007- programme and information on the relevant calls for
2013), partnership and co-financing, the CBC component proposals (including eligible regions) can be located
of ENPI promises to be a potent and effective instrument, at: www.huskroua-cbc.net
especially in the more ‘grassroots’ programme implemen-
tation. The CBC component of the ENPI will be ____________
co-financed by the European Regional Development
Fund (ERDF).
Ukraine participates in four (4) separate ENPI-CBC
programmes:

Romania-Ukraine-Moldova Cross Border Coop-
eration (CBC) Programme

Compared to the Neighbourhood Programmes
Poland-Belarus-Ukraine Cross Border Cooperation 2004-2006 the bilateral programmes between Roma-
(CBC) Programme: nia and Ukraine, and between Romania and
Moldova, respectively have been re-grouped in new
This Programme continues and broadens the cooperation programme - Romania-Ukraine-Moldova (with
in the border areas of the three countries which so far has budget 126.7 MEURO for 2007-2013). The
been developed within the framework of the Neighbour- programme made a focus at the following priorities:
hood Programme Poland-Belarus-Ukraine CBC 2004-
2006. This Programme has the biggest budget – 186.2 Priority 1: Towards a more competitive border
MEURO for 2007-2013, from the number of CBC economy
Programmes in which Ukraine participates. The Priority 2: Environmental Challenges and Emergency
Programme concentrates at the following priorities: Preparedness
Priority 3: People to People Co-operation
Priority 1: Increasing competitiveness of border areas The programme web site with full information on the
Priority 2: Improving the quality of life relevant calls for proposals (including eligible



regions) can be located at: www.ro-ua-md.net need to organize them to more effectively promote
community led sustainable development through civil
___________ society wider participation in local and regional policy
development and implementation. In many cases,
these RDAs have received support from local authori-
ties and/or local businesses – an attestation on the
RDAs’ importance as felt by many other local and
regional organizations.
In April 2001, a number of leading Ukrainian RDAs
Newsletter

Black Sea Basin Cross Border Cooperation (CBC) formed an association, the National Association of
Programme Regional Development Agencies (NARDA).

The Black Sea Basin Programme is one of the most In 2002-2003 NARDA has substantially strength-
complex, although it has a limited financial allocation ened capacities of its executive branch and member
(only 17.3 MEURO for the period 2007-2013). The Black organizations to promote sustainable regional
Sea Basin eligible area occupies a territory about of 800 development in Ukraine via sponsored by the Cana-
sq. km. and includes a population of 74.2 million people. dian International Development Agency NARDA
It involves ten countries, some of which include the Support Network Project (UA/Z020485) implemented
whole of their national territory (Armenia, Azerbaijan, by the EastWest Institute Kyiv Centre.
Moldova and Georgia), while for some others those
regions closest to the Basin (Bulgaria, Greece, Romania, The Project has contributed to NARDA’s sustainable
Russia, Turkey and Ukraine). The Programme priorities development by:
are: • Developing a strategic plan to guide NARDA
Priority 1: Supporting cross border partnerships for that includes mission, mandate, program areas, present
economic and social development based on common and long-term policies, strategies and activities related to
resources support and promotion of Regional Development Agen-
Priority 2: Sharing resources and competencies for cies;
environmental protection and conservation • Strengthening human resources in selected
Priority 3: Supporting cultural and educational networks areas;
for the establishment of a common cultural environ- • Strengthened partnerships between NARDA,
ment in the Basin RDAs, municipal governments, business, and NGOs at
The programme web site with full information on the local (municipal), sub-national (regional) and national
programme and information on the relevant calls for levels;
proposals (including eligible regions) can be located at: • Developing tools for identifying, developing,
www.blacksea-cbc.net disseminating and implementing “best practices” in
regional development for economies and societies in
transition.
Information on National association of regional
development agencies - Project’s partner As result of the project the number of RDAs repre-
sented by NARDA has increased from 17 in April 2001 to
Regional Development Agencies (RDAs) 27 in June 2003 to 33 as of today.
emerged in Ukraine in the mid 1990s,
with their position and effectiveness To be part of NARDA a Ukrainian RDA must meet the
gradually improving since the adoption following criteria:
of the Constitution in 1996 and the Law • be accepted and understood by the existing
on Local Self-Government in 1997. political structures;
• translate into operational projects all its objec-
The May 2001 Presidential Decree distinguishes RDAs tives;
as potential partners and supports the involvement of • coordinate its policies with other regional
RDAs in the design of local and regional development organizations already in existence;
strategies. Regional and local governments are encour- • find the necessary financial resources for its
aged to consult with RDAs in the areas of: improving basic structure and implement new projects;
the environment for innovative technologies in the • have the autonomy to take its own decisions, in
regions, developing local and regional investment the interinstitutional regional framework;
profiles, human resource development, coordination of • have a strong commitment from their technical
the technical assistance programs aimed at supporting staff, in order to obtain concrete results.
local development.
Majority of the Ukrainian RDAs members of NARDA
Today, RDAs exist in every Oblast center, as well as in proved to have:
many smaller towns. Most of them have been estab- • deep understanding of the problems and poten-
lished as autonomous, non-governmental organiza- tial of geographical areas they represent;
tions. The first RDA was created in the city of Zaporizh- • a strong ability to work with, not to work for, the
zhya in 1993, and most of the RDAs currently operating already existing economic, cultural, social and political
were created between 1996 and 1999. They vary widely structures in the area;
in terms of organizational capacity. In most cases, RDAs • a real operational and concrete development
were initiated by groups of people from small programmes, that make RDA's work useful and impor-
businesses and community organizations that saw a tant, through the creation of new jobs, new opportunities


and new solutions. • Support of local and regional policy reform;
• variable structures of partnership, promoting • Promotion of participation of NGOs and SMEs
cooperation between public and private sector actors in local and regional policy development and implemen-
and the additional grouping together of rural and urban tation;
public authorities. • Education, training and implementation of
practical projects in energy auditing, energy efficient
RDAs members of NARDA have been promoting a production, enviromental management, project
comprehensive approach to development: interdisci- management and business process engineering
plinary, integrated, interinstitutional, regulating the • Development of consultative arrangements
internal interplay of forces, avoiding dispersion of and partnership protocols with government institutions

Newsletter
efforts and the isolation of project generators, support- so as to contribute to local and regional policy develop-
ing the initiatives and rendering them viable. ment and implementation, promote government
accountability and transparency, promote domestic and
The central task of an RDA is to draw up a long-term foreign investment;
overall strategic plan, with economic, social and • Familiarization of RDAs with community
cultural aspects overlapping and designed to change philanthropy and independent local resource mobiliza-
mentalities, a prerequisite for the competitive position- tion mechanisms as an important component of local
ing of each area. In most cases, Ukrainian RDAs have the and regional development; and,
capacity of offering guarantees of technical quality to • Coordination of the exchange of information
the local measures and of conducting participatory between RDAs on “best practices” of civil society organi-
evaluations on the basis of their own internal compe- zations involvement into community and regional devel-
tence or through recourse to external expertise. opment in Ukraine.
NARDA’s mission is to efficiently coordinate the state There are five areas of NARDA’s programmatic
regional policy and its own regional development policy focus:
through the systematic realization of its functions by its 1. Strategic planning for territorial development
own efforts and coordinated actions of its members. 2. Small and Medium Enterprise Development
3. Energy-saving and development of alterna-
In fulfilling its mission NARDA provides the follow- tive sources of energy for community development
ing service to its members: 4. Rural development
• Assistance in the establishment and develop- 5. Foreign Direct Investments attraction to
ment of RDAs as inclusive and representative organiza- regions
tions;
• Advice to RDAs in working with local administra- Contacts: Kyiv, Khreshchatyk, 4, office 17, +38-044-
tions, the private sector, youth, media, NGOs and the 4941896, info@narda.org.ua
general public;

Modernization of municipal buildings in Sverdlovsk
(Luganska Oblast) under the Support to Sustainable
Regional Development Project
The Europe Day was celebrated in Sverdlovsk (Lugansk The honoured guests took part in the last bell feast at
Oblast) on May 28, 2010. On this occasion the city was Sverdlovsk Lyceum #1 – the first completed facility within
officially visited by Jose Manuel Pintu Teisheira, Head of the framework of the Project. Altogether 26 municipal
the European Commission Representation in Ukraine as buildings are supposed to be rehabilitated in Sverdlovsk -
well as ambassadors of the EU Member States. 13 educational buildings and 13 healthcare ones.

Lyceum #1 and our experts Uuno Kirsimagi New plaque on the building of Sverdlovsk Lyceum #1
& Dmytro Gruzinskyi


Newsletter

Rehabilitated kindergarten “Berizka” Kindergarten “Berizka”, facade works

Kindergarten “Zhuravushka” Sverdlovsk’s secondary school #9

Neurology department in Sverdlovsk Therapy department (day hospital)

http://www.ssrd.org.ua/index.php?lang=eng&page=news1&num=03062010n.txt- film dedicated to Europe Day in Sverdlovsk

EU Project “Support to Sustainable Regional Development in Ukraine”
E-mail: info@ssrd.org.ua
http://www.ssrd.org.ua
tel.:+38(044)4941898
fax:+38(044)2780920
Khreschatyk 4, office 20
Kyiv 01001, Ukraine


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