Decentralisation: the reform that changed the map

Ukraine inherited a local government structure designed for administration rather than for decision-making: thousands of tiny village councils, each too small to do anything, each dependent on transfers decided elsewhere.

The reform did two things. It amalgamated those units into larger communities with enough population and enough tax base to function. And it changed the fiscal arithmetic, giving those communities a defined share of personal income tax collected on their territory, along with local taxes they set themselves.

Why the revenue share is the whole reform

Before, a council administered a budget somebody else had decided. After, a community collected revenue that rose if local employment rose. That single change converts a local administration into something with an interest in whether a business opens.

I noticed it commercially before I understood it politically. Community heads started calling suppliers directly about road surfacing, lighting, water works and school renovation, with their own money and their own procurement. They negotiated harder than the old structures because it was their budget.

What it looks like on the ground

Uneven, which is the honest answer and also the point. Some communities used the money well — resurfaced roads, renovated schools, working street lighting, a functioning administrative service centre where you can obtain documents without travelling to an oblast capital. Others did not. Driving between two neighbouring communities, you can often tell which is which without being told.

That variation is uncomfortable and it is what devolved decision-making produces. The alternative is uniform mediocrity decided centrally, which is what there was before.

The commercial consequence

For anyone selling anything to the public sector, the counterparty map changed completely. There are now hundreds of budget-holding communities running their own tenders through the open procurement system. It is more work to cover and it is a much larger market than the one it replaced.

That I can see this reform's effects from a car window is not an exaggeration: on the same road, the town on one side of a boundary has resurfaced pavements and the one on the other has not — the difference is where the revenue share stayed. The commercial consequence is concrete too: I now sell equipment to a municipality rather than to a ministry. The place where decisions are taken moved, and the sales process moved with it.