Supporting Decentralisation in Ukraine in 2021-22: Identifying the success factors for effective decentralisation and cross-government investment coordination

In order to continue improving the roll-out of the decentralisation reform and the regional development outcomes in Ukraine, the OECD will produce analysis and policy recommendations to:
- Identify and reinforce the success factors behind improved socio-economic performance and local development since the start of decentralisation in 2015;
- Address the main challenges encountered to successfully implement the decentralisation reform in localities (cities and hromadas) where reform seems slow to take root;
- Support the assignment of responsibilities among levels of government in Ukraine;
- Measure progress made in regional development performance since 2018;
- Assess the effective use of funding, the mobilisation of local own-source revenue and external financing for investment in local economic development; and
- Improve the co-ordination mechanisms among the central and local self-governments for the development of local projects and addressing municipal-level priorities, and assess the alignment of Ukraine’s practices with the Recommendation of the OECD Council on Effective Public Investment across Levels of Government.

The OECD project Supporting Decentralisation in Ukraine 2021-22 will build on this previous work. It will be structured in two main activities focusing on two policy areas: decentralisation and regional development. It is implemented within the framework of the Memorandum of Understanding for Strengthening Cooperation between the OECD and the Government of Ukraine.

1-MEASURING THE OUTCOMES OF DECENTRALISATION AND AMALGAMATION IN UKRAINE.
The OECD will select specific local self-governments that have been successful in implementing decentralisation reform to undertake an analysis that will help understand the success factors leading to positive economic and local development outcomes. Success factors will be determined following a comparative analysis comprising two local self-governments considered to be “leading” in terms of service delivery, administrative capacity, investment practices, citizen satisfaction within their respective regions, and collaborating with businesses, civil society and other public service delivery partners, compared against two other local self-governments that are “lagging behind” or are less performant in these areas.
The OECD will also observe the results in terms of capacity to steer public investment and coordinate among different levels of government in support of local development. The framework for this work will include the OECD’s Ten Guidelines for Effective Decentralisation.
2. SUPPORTING REGIONAL DEVELOPMENT IN UKRAINE.
The OECD will conduct a broader analysis of regional development in Ukraine, building on its previous studies in 2014 and 2018. This will include an assessment of sub-national development trends to measure regional development outcomes. It will also include an analysis of funding mechanism and decision-making processes for local government expenditures. It will assess the funding received by the central government (e.g. the State Fund for Regional Development), and the mobilisation of local own-source revenue and external financing for investment (e.g. PPPs, borrowing, etc.). In addition, it will examine how decision-making is coordinated among the central and municipal governments in ensuring the development of local projects and addressing municipal-level priorities for regional development.
The assessment will offer recommendations on how these mechanisms and the corresponding decision-making can be further strengthened on the basis of the OECD principles and Recommendation on Effective Public Investment across Levels of Government, and for effective public investment across levels of government, as well as the OECD’s Ten Guidelines for Effective Decentralisation. The work will be based on consultations with Ukrainian and international stakeholders active in Ukraine.