What is the “good” we are seeking by supporting Ukraine’s decentralization process? A question I often ask as my program and I set out to work with 16 cities from four oblasts. To answer the question let me paraphrase Aristotle: through medicine we seek health, through arts- beauty, through strategy – advantage. What then, through building strong sustainable local government? In one word: prosperity.
Local governments in Ukraine are accountable to the communities they serve while operating within a wider legal and policy framework. However, since independence in 1991, they have had insufficient authority and few resources to implement their mandate and prosper. Previous central governments resisted efforts to advance decentralization, while creating complex local government legislation and starving local authorities of funds.
The priorities of citizens and business were not effectively integrated into largely outdated, non-democratic local decision-making processes. The regulatory burden on business placed Ukraine near the bottom of international “ease of doing business” rankings. These factors impeded the ability of local authorities to adequately respond to their citizens, manage their resources in an efficient and transparent manner, and create an enabling climate for business and local economic development. Now with an ambitious decentralization reform agenda, Ukraine is moving towards integration with the European Union and global markets, while local governments continue to gain responsibilities. The Partnership for Local Economic Development and Democratic Governance (PLEDDG) supports the decentralization agenda by strengthening local governments and the municipal sector in 16 cities in Zaporizhia, Poltava, Vinnytsia, and Ivano-Frankivsk Oblasts.
SMEs as an engine for regional development
Now beginning its second year, PLEDDG is funded by Global Affairs Canada and implemented by the Federation of Canadian Municipalities (FCM). PLEDDG is a six-year technical assistance program supporting the adoption of new local government powers, engaging community and business stakeholders, and helping municipalities facilitate business growth at the local level. Our program operates three main directions of activity: enhancing democratic governance, supporting local economic development, specifically SMEs with a focus on promoting more women in business, as well as promoting intergovernmental cooperation. PLEDDG believes that an effective business climate and business services are cornerstones of SME growth and economic prosperity. Part of our programming facilitates the creation of business support programmes in order to help grow and strengthen SMEs and, ultimately, Ukraine’s middle class. To better understand the current business climate, we recently conducted express Business Climate Analysis in our 16 partner cities. We asked: What do Ukrainian SMEs need at the local level to prosper? Three common themes emerged: favourable enabling regulatory environment; business infrastructure (including financial infrastructure with services catering to SMEs); and increased opportunities for local stakeholders to engage in partnerships that support business development.
With this analysis as a guide, our team is now working with each of our partner cities to determine specific programming and service needs. Several legislative changes need to occur at the state level in order to improve the overall SME regulatory environment.
Our support comes in the form of technical assistance engaging Ukrainian, Canadian, and Polish consultants. We will also contribute finances to various projects identified by municipal stakeholders and the business community. For an example of the types of SME related projects we may fund over the next 4 years, we can look at FCM’s previous efforts in Ukraine.
Support for Lviv startups
From 2010–2015 we worked with 12 cites from Dnipropetrovsk and Lviv oblasts with the Municipal Local Economic Development (MLED) project. Overall we funded 20 projects that supported local economic development. Together with municipal staff in Lviv, we established The Lviv Innovation Centre and Start Up Depot, which became the first Ukrainian municipal incubator catering to IT start-ups.
“Cooperation with the PLEDDG team in their previous project was very important not only due to financial support, but because of the practical technical assistance. In Edmonton, Canada, we were introduced to a business incubator model we were able to implement here in Lviv. We analyzed a lot of different models used in Canada, Poland, and Ukraine. Edmonton’s model proved the most attractive and achievable for us,” explains Oleksandr Kobzarev, formerly Director of Lviv City Institute, now Director of the Mayor’s Administration Department, Lviv City Council. Today the Lviv Innovation Centre is an independent self-financing organisation that recently partnered with the Polish Ministry of Foreign Affairs to expand the Incubator to almost twice its current size.
The Lviv Innovation Centre is an ideal model to replicate in Ukrainian cities because it demonstrates how technical assistance, with the right partners, can adapt global best practices to the Ukrainian reality and achieve tangible results. Furthermore, this model provides an opportunity for Ukrainian municipal leaders to exchange their experience and achievements in decentralized local governance and economic reform. Vinnytsia is leading the way in local governance reform and economic development. They recently established a City Development Institute aimed at attracting investment and promoting SME growth. “With PLEDDG we would like to focus on the development of investment and innovations programmes because, in the current economic situation, job creation is the prerequisite of any city’s prosperity,” states Vitaliy Pogosyan, Director of Economics and Investments Department
Vinnytsia City Council. PLEDDG began cooperation with Vinnytsia in this direction in July with projects supporting local economic development. Municipalities across Ukraine understand that job creation, economic growth and prosperity arise from the local level. As the country continues to implement reform, PLEDDG will support our partner’s efforts by providing assistance to SMEs, promoting government transparency and better dialogue between local authorities and business community so we can build strong sustainable local economies.