Anatolii Blyzniuk, Minister for Regional Development, Construction, and the Public Utilities of Ukraine, is one of the leading figures in economic reforms. Proximity to the president (he once was his first deputy at the Donetsk Oblast Administration) allows him to show courage and resoluteness. The ministry is planning to bring housing construction up to the pre-crisis level and commission 10.2 million square meters in 2012, as well as increase the legal liability of builders for failure to meet housing construction deadlines. Its plans also include such a grandiose endeavor as administrative and territorial reforms. We began our interview with the minister with the latter.
The president said at a recent press conference that the reform of local government and speeding up other reforms on the local and regional levels would be a top priority this year. Is this going to be in the competence of your ministry and the linchpin of the regional policy it shapes? What do these reforms consist in?
“The administrative reform has passed its first stage that resulted in the reorganization of public administration bodies: in our case, two ministries – for regional construction and for the public utilities – have merged into one, the Ministry of Regional Development (Minrehion). We are now mapping out our main efforts in 2012. After the Committee for Economic Reforms approves the national plan of actions in this field, the president will issue a decree to this effect. But we know what should be done. As for the regional policy, one must shape a clear and effective structure of oblast administrations.”
In other words, cut the number of their functionaries?
“Not necessarily. It may be the other way round in some cases, depending on who performs what functions in the new system. So we should be always guided by the three criteria: what powers will be delegated, which of the structures will be more effective, and who will take part in these processes. The aim of reforming is to build an effective system.
“Besides, the president was right to say that the next stage of the reform is local government. Here, again, we must choose what we want. If it is about the principles of subsidiariness, which clearly define what a commune should do by itself, the latter should be also self-sufficient financially. What it is unable to do on its own should be delegated to the national level. In this case there will be a reciprocal process. Let us take, for example, the problem of territorial communities. Today, more than a half of the regions have territorial communities populated by fewer than a thousand people. Each of them has a village council chairperson, a secretary, and even a land surveyor in some cases. In what way and at what expense should they be maintained? There has been no answer to this question so far. For these people do no productive work or earn nothing for the country, nor do they offer any state-sponsored services, whereas, under the law, every individual at a certain territory, for example, within the radius of two kilometers, is supposed to receive a certain number of services. In other words, we should establish public standards, when we form the list of state-sponsored services.”
And, specifically, what sectors will be delegated to the provinces: medical care, school.
“Standards should be set stage by stage and consistently. The services will differ in the village, in the district, and in the oblast. For example, computed tomography can only be done in the oblast center or in some basis city of the same oblast. These large conglomerates should form around themselves and offer services by the principle of a single medical, educational, and legal space. The same applies to local and central governmental bodies.”
“AS A RESULT OF THE TERRITORIAL REFORM, NOT MORE THAN 3,000 OUT OF THE PRESENT 12,000 VILLAGE COUNCILS MAY REMAIN BEHIND”
When will this list be drawn up?
“By the end of 2012. A draft law that encourages territorial reform, ‘On the Merger of Territorial Communities,’ has been submitted to parliament. Today, the law ‘On Local Government,’ allows people to make a decision on unification by themselves. There have been instances of such merger in Donetsk oblast – four village councils have merged in two – and no problems at all. They became larger, and people only benefited from this. And the draft law, now in parliament, envisages financial stimuli for this kind of mergers.”
In other words, you want to reduce the number of village councils by way of merging them?
“Yes. We want to financially stimulate the merging of village councils, which will result in the reduction of their overall number.
“The administrative reform can be carried out in two ways: either everything is done voluntarily within the framework of the current law, or communities can be divided under a whiplash from Kyiv. But we cannot accept the latter option.”
To what extent is the number of village communes going to be reduced?
“There are 12,000 village councils today, but later, as a result of the reform, not more than 3,000 may remain behind.”
And when is the law “On the Merger of Territorial Communities” expected to be passed?
“I think it will be passed in the first six months of 2012.”
Is it a framework law? Will it enable you to reach every village? Are you going to impose your viewpoints on them?
“Yes, it is a stimulating law.”
Is it true that some local government bodies are flouting the law “On Regulating Urban Development”?
“Nobody is sabotaging anything. The truth is there are far from all conditions for implementing this law. Under the current law, every community in Ukraine must have urban development documentation. As of today, more than a half of the regions do not have it. This means that, in principle, there is nothing to sabotage. To do this work throughout the country, we need at least 320 million hryvnias. But the regions cannot afford to spend this money. There are still more problems in the districts. Overall, 3,495 districts in this country, i.e., 75 percent, do not have any urban development documentation, and cities do not have master plans.
“The absence of urban planning documentation is a pretext for denying a community the right to dispose of its land. For this reason, it was decided to postpone the enforcement of this law until 2013. But this does not mean that everybody should stay idle. Local government bodies should seek sources to draft the town planning documentation before the beginning of 2013.”
Is a construction boom possible in Ukraine in the near future – at least at the pre-2008-2009-crisis level?
“There will only be a construction boom when there is a balanced demand for housing. Today, there are no solvent buyers of housing in Ukraine. Far from all the 9.7 million square meters of the housing built in 2011 has been sold. So the number-one task is to form effective demand. We need and are working on the mechanisms that can stimulate it.”
And are there any revolutionary construction technologies that allow essentially reducing the prime cost?
“We were once told about a one-storey America in which many not-so-rich families lived. But, since then, the technology of one-storey and low-rise construction has made tremendous strides. And we can choose today a Canadian or German technology, when a 200-mm-thick heat-insulated wall corresponds to a 1.5-meter brick wall in terms of heat conduction. Otherwise, please continue building old-style. The cutting-edge technologies of today allow saving building materials as well as effort and energy resources to keep up a building. In each concrete case, one should also tale into account the cost of land. But will skyscrapers really save us? We will push somebody up to the 48th floor, only to hear them cry out: ‘Our elevator doesn’t work!’ If somebody chooses this kind of conveniences, they have the right to do so. But if you are offered a building within the area of several hectares somewhere near Kyiv, built on the basis of state-of-the-art technologies and worth, say, 500 dollars per square meter, not a thousand, as it is here, in Kyiv, think twice before refusing – choose it!”
IT IS SUGGESTED THAT THE AGREEMENT OF ONLY 80 PERCENT OF RESIDENTS BE ENOUGH TO RESETTLE PEOPLE LIVING IN KHRUSHCHEV-ERA APARTMENT HOUSES
The question of what to do with Khrushchev-era apartment houses was raised as long ago as in the Soviet times. Your predecessors in independent Ukraine also paid a lot of attention to this problem. But things haven’t got forward an inch. How are you going to tackle this problem?
“The problem is that we must resettle all the residents before we begin to reconstruct an apartment house. But there has been not a single instance in this country, when a hundred percent of the people living even in one building, let alone a neighborhood, agreed to be resettled or, for example, to have additional stories built. This is why the problem of Khrushchev-era buildings becomes more and more acute with every passing year, instead of being solved. It is increasingly difficult and even dangerous to go on living in them. So we are offering what I would call a democratic principle: if 80 percent of the residents agree to be resettled or to have the building revamped, the remaining 20 percent will have to join them. We suggest that this option be discussed.
“Besides, once it is known that people are going to be moved out of the building for some reason, residents of all, even one-room 19-square-meter, apartments suddenly present a list of 148 ‘relatives.’ Are we to furnish them all with new apartments? So it is necessary to introduce a regulation that only apartment owners can get a new housing in case of being resettled. If it is, say, three persons, they can count on 20 square meters plus 30 percent. And if they have, say, 60 square meters, they will be given 80. This should also be finalized in legal terms.
“When we introduce this kind of approaches and the public accepts this ideology, there will be a law. In that case we will begin laying new public utility lines to the ‘Khrushchev-era neighborhood’ and constructing the first new modern highrise into which we can resettle the residents of several old buildings. This can be done by an investor, who will get a house built at his own expense and sell or rent out what has been left, or this will be done on the basis of public-private partnership. The Khrushchev-era buildings will be torn down one by one, domino style, clearing the way to a new easy-to-live-in neighborhood. But, no matter how hard we may wish, this will not occur in 2012 – the stumbling block is the law and unwillingness of some residents to take any part in this process.”
At the latest Cabinet session, the prime minister instructed you to look into the unfounded increase of public utility rates in some regions. They have risen by a solid 8.3 percent throughout the country. Have you found and punished the culprits?
“I am not authorized to punish anybody. Central and local government bodies cannot interfere into business activities. They can solely work within the limits of their jurisdiction. But the premier was right to cite three regions which had suddenly raised the rates by 70-90 percent because they had not been raising them at all since 2008. Rates should be raised gradually.”
“THE POLTAVA CITY EXECUTIVE COMMITTEE RESOLVED TO CANCEL THE RISE OF RATES”
What are these regions?
“They are Kherson, Kharkiv, and Poltava. The Poltava City Executive Committee resolved today to cancel the rise of rates. The Kherson and Kharkiv executive committees are also going to discuss and decide on this. In all probability, these committees will cancel the raising of rates or decide that the rise will take effect later.”
In other words, public utility rates will not go up until the elections?
“It is you, not I, who said it.”
Are you worried by the destiny of the public utility organizations that receive no compensation for rate difference?
“Yes, this worries me. (The minister finds the law, reads out the underlined spots, and then explains.) Public utility rates are, as a rule, lower than the prime cost, whereas the law obliges local councils to set them on an economically sound level, and if the rate does not allow reaping a profit, the body that has set it must make up for the difference at the budget’s expense. It must be done, but the budget envisages no funds for this, so there will be no compensation. If the local council has signed a correctly-worded contract, not just made a verbal arrangement, with an enterprise on this matter, there will be no question ‘what to do’: you should go to the economic court and prove that you are right. I have said this more than once, although I think that it would be better if all our rates were economically sound and set without reference to politics. When I assumed this office, I promised to deal with economic matters only, not with politics. I am still standing on this.”
The premier instructed the heating and power generation sector to switch to coal. When can this be done? Do you see any risks here?
“No risks at all. We are working today to introduce the technologies that allow burning coal effectively with a lesser detriment to the environment. We can reach the highest effectiveness at thermal power plants rather than in boiler rooms. For example, some power plants are already applying the technologies of burning not coal but rock with an ash content of up to 60 percent. The ecological parameters of these technologies meet European requirements. At the moment of opening, the prime cost of electricity was not higher than in the case of nuclear plants. Meanwhile, the ‘free’ heat of power-generation and industrial facilities should be used for heating the cities. This will produce the highest effectiveness.”
Is it possible to convert all the heating and power-generation facilities to coal before the end of 2012?
“No, and we were not going to do this. One should assess the prime cost in each concrete case. Some facilities will be applying technologies for effective and pollution-free burning of coal. Others will be developing alternative sources of energy. If it is, for example, the Carpathians, you don’t need to carry coal there. They have enough timber which can be cut, briquetted and used on the spot, instead of being carried to Poland.”
The public utilities seem to be the sorest point in your multi-profile ministry. What are you going to do and what funds have been made available this year to motivate people to accept the reform of this sector?
“We have 160 million hryvnias to set up control stations and 40 million to credit the Associations of the Co-Owners of Apartment Houses (OSBB in Ukrainian) as a separate budget item, as the state has not yet devised a pattern of issuing loans to OSBBs. I hope we will be issuing concessionary credits at the expense of this money so that the funds come back as a result of economy. I want to introduce a pattern which could enable the person who has saved money to use it as repayment of the credit. Then we will set up a procedure that will stimulate the establishment of OSBBs by way of issuing a low-interest loan. But the ministry is not going to impose its approaches to local government bodies. For example, Kharkiv decided to allocate 50,000 hryvnias from the city budget to each newly-established OSBB.”
Are there any other stimuli for OSBBs?
“First of all, we must say to the residents: ladies and gentlemen, your building is your property!”
Will this do? This call will only be heard in new buildings…
“Then there will be nothing to speak of. And, some time later, as Professor Preobrazhensky used to say, there will be ruin in these buildings. Let them think. All of us should forget socialism or, to be more exact, the existing rudiments of the socialist system, and become true, responsible, and effective owners. ‘Count, save, pay’ is what every resident, every OSBB member, should regard as the law. They should understand that the state is not obliged to do this for you and instead of you.”
