Redistribution of the regional development fund

Draft bill #9165 of March 31, 2023 

Cosponsors: a group of 28 MPs 

Status: preparation for consideration 

Who is affected: residents of Ukraine, the Cabinet of Ministers, the Ministry for Communities, Territories, and Infrastructure Development, oblast military administrations, MPs, and local governments 

Summary of the bill: 

• money from the state regional development fund will be allocated for the implementation of investment programs and regional development programs if 50% of the money provided by the fund is allocated in equal parts to the Autonomous Republic of Crimea, all oblasts, the cities of Kyiv and Sevastopol and another 50% share is distributed in equal parts to Donetsk, Kharkiv, Zaporizhzhia, Kherson, Mykolaiv, Zhytomyr, Kyiv, Chernihiv, and Sumy oblasts 
• local budgets of small towns will be obliged to co-finance investment projects covering no less than 10% of the required amount, budgets of urban communities with over 225 thousand people — no less than 50% 
• applications for investment programs and regional development projects will be submitted by oblast and Kyiv city state administrations 

• the Commission for the preliminary selection of investment programs and projects will be formed by the Ministry for Communities, Territories, and Infrastructure Development 
• at least half of the members of the Commission will be members of the parliamentary Committee on Budget — delegates of this committee 
• the Commission will conduct a preliminary selection of projects and then submit them to open voting by citizens via the Diia platform. 

What’s wrong: 

• the decision to spend more than half of the regional development fund’s resources allocated to investment programs in areas where active hostilities continue and frontline areas that have been abandoned by a significant part of the population will lead to inefficient use of funds due to the risk of destruction of the objects built with this money 

• local governments will not be involved in the process of selecting investment programs, although they are supposed to have the leading role in managing their territories 
• if investment programs and regional development projects are funded without a clear plan for the reconstruction of the state and each particular region, funding will be spent inefficiently  
• parliamentary committees are not authorized by the Constitution to make any independent decisions. Thus, they cannot delegate their representatives to the Commission that will conduct the preliminary selection of investment programs and regional development projects 
• the inclusion of MPs in the Commission under the Ministry for Communities, Territories, and Infrastructure Development means that they will participate in the preliminary distribution of budget funds. Since this is the exclusive competence of the executive branch, the bill violates the constitutional principle of separation of powers 
• the selection of investment programs and regional development projects by citizens voting via the Diia platform is a manifestation of ochlocracy. It does not ensure the most efficient use of budget funds and instead only shifts political and legal responsibility for the efficient use of budget funds from senior officials. 

Alternative solution: 

• while the war continues, money should be spent on regions where there are no active military hostilities. This will allow to rebuild the economy, create jobs for those who have lost their jobs due to the war and internal displacement, and also to minimize the risks that the results of state investments will be destroyed in the course of military hostilities 
• a strategy for the restoration of the state and regions should be developed. It will have to take into account changes in demographics and state economy. State funding should be allocated based on this information 
• local governments should be involved in the development of regional restoration strategies and the selection of investment programs and regional development projects.