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Monthly Report 3: September - October 2005

Stop-Press!

The LARGIS web site has been re-opened and contains practical information and expert reports on Budget Reform, Regional Policy and Territorial Administrative Reform, as produced by the DFID LARGIS Project 2000-2002. LARGIS II products will be added, starting from November. The web site address is www.largis.org.ua

3 representatives of the Ministry of Economy have left for a short working visit to France to examine the operation of the French system of contracts for regional development. The visit will include 2 days in the Pas de Calais region of northern France as guests of the regional Prefecture.

A sister project to LARGIS II, named SuFTAR, begins work at the beginning of November. SuFTAR (Sustainable Financing of Territorial Administrative Reform) is a DFID project in partnership with the Ministry of Finance of Ukraine. Its activities and products will appear on the LARGIS web site.

Ihor Sanzarovsky took over from Tetyana Korneyeva as LARGIS II Project Coordinator in October. Tetyana is now Coordinator of the SuFTAR programme. Slava Gill began work as SuFTAR Finance and Technical Coordinator in September. Slava did the same job in the original LARGIS. Konstantin Frolenko has been contracted to develop the new LARGIS II web site

The following are the key occurrences and activities of September and October:

Ukrainian State Law on the Stimulation of Regional Development

This law, which received its first reading in the Verkhovna Rada in 2003 and which brings Ukrainian legislation on regional development into closer harmony with that of European Union nations, was approved by the Rada in early September.

The LARGIS II project is principally aimed at ensuring that the law can be effectively implemented, by assisting the Ministry of Economy to prepare the necessary secondary legislation and regulatory instruments. Without these the law, like many before it, would be destined to be inoperable.

Contracts for Regional Development

Contractual arrangements to support regional development are a key instrument of regional development policy in a number of European Union states, most notably France but also for example Germany, Spain, Italy and most recently Poland. A contract for regional development sets out a series of policies and programmes which are to be financed jointly by the state and the region, detailing the purpose of each measure and the responsibilities of each side.

Contractual arrangements presuppose a relationship of partnership between national and regional tiers of government - in this they present a significant challenge to Ukraine - and the fact that they allow for sharing the financial burden of capital spending can make possible the kind of major project which could not be undertaken by a regional authority on its own. Experience shows that the reassurance that a contract offers can be an incentive for other partners and private capital to become involved.

LARGIS II expert Gerard Marcou has continued his advice to Ministry specialist preparing the draft regulations governing contracts. In this period his advice has focused on coordination of the process at national level, on giving greater emphasis in the regulations to the place of regions' own development strategies, and on ensuring the participation of local self-government - towns and cities - in the preparation of projects to be included in contracts.

A study visit to France, to examine the practical working of regional contracts at regional and national level, will take place in November.

State Capital Investment Grants

The draft regulations in preparation in the Ministry of Economy address the issue of the allocation of capital investment grants, also known as subventions, from national to regional and local governments. The regulations will identify the proportion of grants going to all regions to support priority investment proposals and the proportion targeted to regions with consistently low levels of economic growth. The regulations will also specify the criteria to be used in evaluating individual investment proposals from regions.

The Ministry's aim is to make the subvention process fairer and more transparent, better targeted and producing better value from limited resources.

At the Ministry's request LARGIS II experts have provided detailed examples of procedures and criteria used for evaluating and ranking investment proposals from local government in European Union nations. The Ministry has also been advised on the framing of legislation to allow multi-year funding of capital projects, which is a particular problem for Ukraine and which is said to be one cause of so many major capital project s remaining unfinished.

Methodology for Defining and Ranking of Depressed Regions & Territories

This work is led for LARGIS II by Ukrainian expert Markiyan Dacyshyn, Director of the Institute of Reforms. The Institute has researched extensively on relative levels of social and economic development in the regions, towns and rayons of Ukraine. The methodology will enable much more effective targeting of the proportion of capital investment allocated to regions or sub-regions with low levels of growth. The Cabinet of Ministers has instructed that it should ready by mid-November.

Regional Development Agencies

A small working group of Ukrainian experts has been formed to advise the Ministry of Economy on an appropriate model of agency for Ukrainian conditions, taking into account an overall policy objective of harmonization with European Union approaches. The group is led by Euro Regio Director Serhiy Maksymenko and LARGIS II Polish expert Krzysztof Herbst.

A comparative analysis of the roles and tasks of RDAs in European Union nations and in Ukraine is being prepared by Myroslava Lendel and Viktor Tkachenko, for presentation to the Ministry in November. A study visit to a western European country with well developed agencies operating at a strategic level, probably Britain, is planned for early 2006.