Georg Milbradt: "Decentralization changes how people think"
“Decentralization changes how people think”
Germany's special envoy to
Ukraine on reform in governance and decentralization on German government assistance in the implementation of reforms, successes and difficulties faced in this process
The Ukrainian Week spoke with Germany’s special envoy to Ukraine on reform in governance and decentralization, Georg Milbradt, about German government assistance in the implementation of reforms and about the successes and difficulties faced in this process.
Ukraine’s Foreign Minister, Pavlo Klimkin, has stated that your appointment as a special envoy to Ukraine is an acknowledgment of the close cooperation between our two countries. Tell us something about your objectives on this mission.
— This mission arose within the framework of an agreement between Petro Poroshenko and Angela Merkel. Most likely because Ukraine is always being criticized, it was necessary to send an experienced politician from the G-7. Initially, we had a long list of objectives, but eventually the German side settled on three main areas: decentralization, quality governance, and the civil service. The way things currently look and within the conditions that the reform process is taking place, I believe, and those who are involved in it on both the Ukrainian and German sides, that decentralization is the most significant. It’s very important because it will change the way people think and act. They will be responsible for themselves and, at the same time, the system in which all initiatives come from the top and trickle down will be broken. Decentralization means that citizens will have to independently work to resolve their problems locally.
I also believe that this will strengthen democracy in Ukraine, as ordinary Ukrainians will begin to understand that they themselves can make some things better. At the highest level, in Kyiv, it’s not always easy for individuals to have the necessary influence, whereas in smaller communities it will be much simpler to resolve issues. I think that
this will also contribute to the battle against corruption. Although this reform will also decentralize corruption, it will be much easier to combat it in this new format. This has been proved in international studies and Ukraine is unlikely to be different.
Decentralization is the national priority today. Ukraine committed itself to institute proper local government back in the 1990s and even signed the European Charter to this effect, but the necessary reforms never took place. Then you tried again after the Orange Revolution, but under the Yanukovych Administration this process stopped completely. What’s interesting is that experts continued to work on this in Ukraine all that time. By the time the second Maidan was over, their drawers were filled with the necessary blueprints, so the Government was able to adopt a pretty clear program by April 1, 2014. This could never have been done from scratch in just five weeks, which means that everything was ready on the Ukrainian side and the Government began to work.
Next was the matter of supporting all this financially, but on condition that it would be by amalgamating strong, functional local units. Working together, it’s possible to have an impact. Once the amalgamation of new communities took place, it became possible to equip and renovate schools and fix roads. Other things also got better in the lives of these territorial mergers, including public services, and those issues that concerned such things as kindergartens could also be resolved. I would say that things are moving along quite quickly. Still, there are successes as well as problems in the decentralization process. So far, only one third of communities have voluntarily united and are properly functioning. In order to get the rest moving, some kind of incentive is needed, such as more local revenues and additional powers, or else some new territories will have to be forcibly united. Ukraine has so far chosen to do this on a voluntary basis.
One problem is that territorial communities most often join forces where there are major corporations, and so, of course, they look successful, because they take in the corporate profit tax from these manufacturing companies. In the past, 60% of the revenues from these companies went to the oblast. What are your thoughts about the UTC formation process? What would you suggest to help smooth out the unevenness?
— The decentralization of tax revenues has been very successful. There’s also a compensatory system that reduces the differences between wealthier and poorer communities. Still, the municipal fiscal system needs to continue to be improved, such as by reforming and improving the property tax.
Local revenues are also important in order to be able to hire qualified personnel. This is why a law on the Civil Service is needed. Unfortunately, the Verkhovna Rada and the president have not been able to agree and the first attempt to pass it failed. There needs to be a second attempt.
It’s not just money that will play a major role for these communities, but also the fact that UTCs are masters in their own homes, so to speak. I mean that not in the sense of ownership but in the sense that they are responsible for what happens there and so they are able to plan autonomously. And so, state property will partly be turned over to these communities.
This is just the beginning of the path, when some county powers delegated to the new communities. County-level government also needs to be reformed. Right now, we’re seeing communities emerge that are as large as a county. The people who are in the county administrations are aware of this and they are reluctant to see bigger communities being formed. Of 490 counties, 130 have not taken a single step towards setting up UTC, meaning that not a single community has been initiated in these counties. Too often the county administrations themselves even hamper this process. In part, this happens at the oblast level, too, but generally it’s at the county level, where people are afraid to lose their jobs. And so, in order to continue with decentralization, this segment has to be decisively restructured. In a country as large as Ukraine, counties are necessary and so they, too, should become larger and gain new powers so that there are prospects for their people. This means that the next major step, after larger communities are formed, is territorial and functional reform at the county level.
Besides this, there’s yet another issue. The country’s economic engine is not just villages but also oblast-level towns, so they should grow together with their outskirts. A law to this effect has already been passed and signed by the president, and it allows large cities to participate in the program. This is a very significant step.
The process is ongoing. The question now is what can be expected after local elections in 2020. Will there be enough of these communities who have merged to work according to a single system or will there continue to be a ‘two-class” system: new communities with new rights and old ones that, unlike the UTCs, will remain dependent on the county. It’s difficult, but this problem has to be resolved.
As to the other aspect of my work, the Civil Service, the Verkhovna Rada has adopted the necessary document amending certain legislation regarding the Civil Service. Now it needs to be properly enacted. This means setting up more educational projects, which we are doing together with the Council of Europe. We’re on the right path, but we’re looking at 5-10 years to reach this objective. The adoption of the law cannot change everything. To change the mentality, it will probably take an entire generation. The National Academy of Public Administration has signed a cooperation agreement with international partners who are prepared to offer funding and experience.
Quality public administration is the next important topic. Here, we’re looking at a new way of organizing it, of making it more structured. For instance, Ukraine has serious problems because the soviet system established a huge number of state legal entities, and of course they create a tax burden. This phenomenon needs to be radically changed.
Other complicated matters are corruption and the court system. And, of course, the privatization of state compa-
nies. Given that they are currently suspended somewhere between the Government and the market economy, they are especially inclined towards corruption. It’s not easy to figure this one out, because the questions arise: who should privatize them, what can foreigners acquire, what is Ukraine selling, and so on. Ukraine also needs to have a free land market, but the Rada keeps waffling on this issue. As to other questions, such as investments, when foreign investors want to put capital into something, they should be able to feel that their money is safe in Ukrainian banks. There are even more areas that I’m involved in, but it’s impossible do everything at once. I’m just one person, so I’m concentrating on those areas that are strategically important, which means decentralization.
I’ve come here at the request of Ukraine. I’m not a teacher, and the country needs to decide for itself what it wants. My job is to support the country, and so I try to persuade people. I talk to deputies to get them to support this reform. I think that decentralization is quite popular among ordinary Ukrainians, although people here generally don’t see reforms as something very positive because reforms tend to mostly make things worse at first.
In one of your interviews, you mentioned that decentralization could actually change people’s way of thinking. What was your experience with reforms in East Germany, when you were PM of Saxony?
— Of course it changes. And it would not have happened without a transition at the local level. East Germany had its own back-story: opposition to the old regime provoked by stolen local elections. In 1989, they were obviously falsified and now it’s understood.
The first thing the new government did after the revolution was to hold new local elections. The result was that completely different people were elected. East Germany had the same problem as Ukraine: the size of communities needed to be reduced. It also became clear that in order to carry out their new functions, the minimal size of these communities had to be appropriate. A village of 500 cannot ensure proper self-government. Of course, this leads to changes, as democracy goes from the bottom up. I don’t believe that you can manage a democracy from the center.
At the UTC level, it’s simpler for NGOs to have influence as well. In Germany, communities are not that mature in terms of parties and politics. And I think it will be the same case in Ukraine. Decentralization is what changes how people think.
If we consider decentralization reforms in Poland and East Germany, which example do you think suits Ukraine better?
— Every country has its own history and traditions. The Poles had a general plan for everything, from the provinces to the counties, cities and municipalities. It was a major law that took everything into account. I don’t think that Ukraine could do the same as in Poland, although there are people who would like to see just that. I think that decisions have to be made step by step to achieve success. There are other examples in Europe where, on the contrary, they avoid merging communities.
For instance, France there are 35,000 communities that have to work with one another. Each of them is united by a particular goal. The administrations of these communities are called millefeuille, because of their manylayered structure. But their numbers cannot be increased. I was talking about this in Ukraine not in order to suggest a new approach but to look truth in the face and make the right decision.
The process of unifying communities is going very slowly. What about forcing things along, which you talked about?
— From the very start, Ukraine chose the path of voluntary decisions, so it should continue along that way. Once you have a critical mass of unified communities, then it will be possible to talk about fixing things so that there aren’t gaps in the national map. In general, we set deadlines, which was done in Germany as well. You need to have both a carrot and a stick, but usually you only need to wave the stick a little. Right now is not the time for it. By 2020, we should be able to see a lot of new structures that merged willingly.
You also mentioned a list of bills that need to be passed to make decentralization really work, yet the first one on the list, “On serving in local government bodies,” was rejected by the Rada on April 3. How is the drafting process going and how much more time will it take to really get this reform going?
— All the bills on my list are currently being reviewed in the Rada. They have all been submitted to the Government again. All of them are at different stages. Some are close to second reading and could be adopted soon.
The trouble with decentralization, in contrast to, say, healthcare reform or educational reform, which each have their main big law, is that decentralization requires a huge number of existing laws to be amended, and that will partly change other legal acts. If you take a look at these laws, you won’t necessarily be able to understand what they mean right away, because they require other legal documents to be revised as well. So it’s better for these laws to be considered in several passes.
How do you see decentralization eventually going in Ukraine?
— In Germany, we began by restructuring counties and setting up new ones, which took three years. Together with local government reforms, however, it took eight years. Reforms took just about the same amount of time in Poland. With Ukraine, the problem is that 25 years have passed and I don’t think the country can afford as much time as Poland or East Germany. It’s also hard to compare to similar reforms in other post-communist countries like Slovakia or Estonia, given that Ukraine is so much larger. Poland is a good comparison, but ht had democratic and decentralized structures even in communist times, which was a major advantage. And self-government had been going on in much of its territories for a very long time. So, if we’re talking about changing mentalities, there was selfgovernment in Poland and Halychyna prior to WWII. Within the Greater Lithuanian Principality, many Ukrainian towns had Magdeburg rights, which is essentially selfgovernment. Here Ukraine can find support in its history. By contrast, the czarist and communist systems rejected self-government.
SO FAR, ONLY ONE THIRD OF COMMUNITIES HAVE VOLUNTARILY UNITED AND ARE PROPERLY FUNCTIONING. IN ORDER TO GET THE REST MOVING, SOME KIND OF INCENTIVE IS NEEDED, SUCH AS MORE LOCAL REVENUES AND ADDITIONAL POWERS, OR ELSE SOME NEW TERRITORIES WILL HAVE TO BE FORCIBLY UNITED