25 May 2012

Dmitry Firtash: It is vital for Ukraine to decentralize economic control in regions and give more power to local authorities

020354Mr. Dmitry Firtash, President of the Federation of Employers of Ukraine has met with the administration and senior representatives of business community of Sumy region. Speaking to the gathering, Mr. Firtash, in particular, pointed out that economic control in regions of Ukraine needs to be substantially decentralized.


“Ukraine is a large country, and all matters pertaining to regional economic development physically cannot be decided on in Kiev. The central power authorities cannot have a perfect understanding of all particular needs of regions, especially given the diversity of regions in a country like Ukraine. They have strong leaders, strong economic elites and a lot of sensible thoughts. These thoughts must be taken into account and implemented. Therefore, regions need to be given more economic freedom and best regional practices need to be disseminated across the whole of Ukraine,” stressed Mr. Firtash.


He also expressed his conviction that financial flows centralization in Ukraine is a rudiment of the old Soviet economic planning system. These days, regions only receive 18 – 20 % of the national budget total. In advanced European countries, the proportion is different: in Austria regions receive up to 51 % of the state budget revenues, in Germany this index is 70 %, in Finland – 55 %, in Poland – 48 %.


“Budgets decentralization is a complex issue. Virtually all taxes collected locally are then channeled to the center which creates a huge imbalance. In Kiev, they obviously do know better how this money should be distributed but let’s give a thought to how these proportions may be altered to make sure that at least 30 and at best 50 percent of the budget could be left with regions,” urged Dmitry Firtash. “It is important that such decentralization become a reality and that local authorities assume certain obligations. For instance, they have to put in place preconditions for new enterprises emergence, they have to take care of the infrastructure,” said Mr. Firtash.


The FEU President believes that due to the lack of funding required for regional infrastructure development, Ukraine misses a lot of investment opportunities. Building an industrial plant requires laying roads, electric power transmission lines, water collection, gas supply and other imperatives but the infrastructure support in municipalities meets with very limited financing from the center. “A very paradoxical situation occurs: an investor wishes to build a plant but he has to think about a whole lot of accompanying things like roads, gas supply, etc. It’s easier to build a plant in Turkey or Romania where industrial sites are already connected to all vital communications, all it takes is just going ahead and producing your products,” stressed Mr. Firtash.


The FEU President argues that the situation may be changed, economic decentralization based on the best European practices and making regional authorities more resourceful is indispensible.