Sources of additional funding for development of amalgamated communities (by the example of Odessa region)

The analysis of the budgets of the amalgamated communities of Odesa region showed, that newly created amalgamated communities remain subsidized and, accordingly, are not able on their own account to maintain their own and delegated budget authorities. As earlier, they need vast amounts of basic donation.

To receive income, the communities need to be additionally funded, so that they could implement economic projects. Of these, the most important are the projects, which will motivate “points of economic growth”, provide business development and creation of jobs.

Additional Sources of Funding include the following:

Infrastructural grants from the State budget, funding of Communities’ projects at the expense of the State Fund for Regional Development (hereinafter referred to as SFDR), granting of internal and external investments for the communities’ development, international technical assistance for implementing local projects (ITP).

The main issues related to the mobilization and use of these funds by the communities of Odesa Region are as follows:

1. Ineffective policy of the communities’ local authorities, regional Administration and Council related to the use of State assistance, attraction of investments, and participation in ITP projects.

• In 2016 there were no applications to SFDR from a half of the amalgamated territorial communities (Baltska town community, Rozkvitivska village community, Chervonoarmiiska village community, Krasnosilska village community).
• It is required to approve Strategy of Regional Development of Odesa Region by 202_ and Plan of Measures aimed at delivering the Strategy in order to obtain financing of projects at the expense of SFDR. As of 1.04.2016 the Strategy of the Region was updated and approved, however, the Plan of Measures was not approved. This fact significantly influences the financing by SFDR the projects of the communities in the territory of Odesa Region.
• There are no Investment Promotion Programs in Odesa Region, as well as the amalgamated territorial communities with clear plan of actions for the foreseeable future.
• Infrastructure of the amalgamated communities of Odesa Region is not developed well (roads, water drain, internet connections etc.), having a negative impact on their investment attractiveness.
• Representatives of local authorities have no system knowledge in the field of project management and the quality of project proposals submitted by the communities to bids is low.
• Local authorities have not enough information on the projects of international technical support, being implemented in the Region.
• Institutes of civil society, that are able to attract ITP projects into the amalgamated communities, are inert or, even more, are absent in the community.
• Existing projects, presented by the amalgamated communities to SFDR and to ITP projects, have no economic orientation. In other words, the majority of projects is aimed at the repair of public sector establishments, not at achieving economic potential of the communities, development of local economy.

Conclusions and Recommendations  

The process of territorial communities’ amalgamation is blocked at the level of the entire districts and isolated territorial communities. As a consequence, only the fourth of the communities of Odesa Region joined the Perspective Plan of the communities’ territory formation.

The first amalgamated communities of Odesa Region were formed in accordance with the Perspective Plan of the communities’ territory formation of Odesa Region. According to the Method of formation of capable territorial communities, prepared by the Cabinet of Ministers of Ukraine, these communities are considered to be capable to render qualitative services and support own development.

The amalgamated communities of the Region received ancillary powers and also additional resources to their implementation (due to the budgetary decentralization), and achieved on the balance medical and educational establishments, as well as government grants to their maintenance.

However, the amalgamated communities of the Region still remain subsidized and not capable to make decisions on the development, using local income basis. In the same way as before, they exercise the majority of the delegated powers (except for the sphere of education and public health) with the use of basic donation. That is why there is a need to involve additional funds for the projects of economic development of a community, that will be able to achieve social and economic growth.

Analysis of using additional sources for the development of the amalgamated territorial communities   showed the low capability of such communities of the Region to use the resources. This problem is caused by the insufficient awareness of the Council of the amalgamated territorial communities on the possibilities to involve additional sources of financing, the absence of dynamic actions towards the implementation of projects using the funds of SFDR, the projects submitted to SFDR by the communities of the Region do not promote the activation of local economy, officials of the  amalgamated territorial communities have no project management skills, inefficient policy of Odesa Regional State Administration related to the attractions of investments and ITP projects into the amalgamated territorial communities.

Having analyzed the problems of attraction of financial resources for the development of the amalgamated territorial communities in order to increase resource potential of the communities, we can give the recommendations as follows:

The Cabinet of Ministers of Ukraine is proposed to:

The Ministry of Finances of Ukraine

• foresee the financing project management start seminars for the amalgamated communities.

The Ministry of Regional Development

• support, using the funds of SFDR, first of all, those projects of the amalgamated territorial communities, which promote the development of local economy, formation of “points of economic growth”;
• in order to attract ITP projects, carry out project management training for the representatives of local authorities of the amalgamated territorial communities.

Regional State Administration is proposed to:

• Approve the Plan of Measures to implement the Strategy of regional Development with inclusion of ITP projects therein;
• Start work towards the attraction of investments into the amalgamated territorial communities, find out perspective investment proposals of the amalgamated communities and download them onto the Web investment portal of the Region;
• Launch a Program to attract investment into the amalgamated territorial communities;
• Notify the amalgamated communities of the Region of available ITP projects, aimed at the local development;
• Update regularly information on Web site of Regional State Administration related to ITP projects in the Region, opportunities for the communities to take part in the investment forums.

The Amalgamated Communities are proposed to:

• Prepare project applications for financing from SFDR in accordance with the requirements of the Cabinet of Ministers of Ukraine, proving the effect, the project will have on the economy of the community;
• Start attraction of the international financial support projects into the communities, provide for a position of Project Manager in the Executive Body of Village Council.