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Home / Locations / Europe / Ukraine / Lviv's growing pains: why Ukraine's star city is eyeing decentralisation

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Lviv in western Ukraine is a tourism hub, enjoys close proximity to the EU border, is a haven for SMEs, and is less reliant upon politically connected oligarch families than its domestic peers. However, it is struggling to break the shackles imposed by central government, as Yuri Bender discovers.

When it comes to representing Ukrainian cities and their surrounding ‘oblasts’ – or administrative divisions – there is generally a cast of colourful characters involved. Kiev's current mayor, Vitali Klitschko is a former heavyweight boxing champion, who famously went toe to toe with Lennox Lewis in the 2003 ‘Battle of the Titans.’ His predecessor, Leonid Chernovetskyi, was nicknamed ‘Cosmos’ after publicly discussing his desire to explore outer space accompanied by his cat, before mysteriously disappearing and resurfacing in Georgia.

Now, another controversial persona has emerged. Mikhail Saakashvili – a former Georgian president and regional governor, who has again resurfaced in Ukraine – is attracting all the headlines as he tours the regions, adding his strident voice to the country’s increasingly important debate on decentralisation. “Lviv is the only successful case of transformation in post-independence Ukraine,” Mr Sakaashvili said in a private interview, shortly after his dramatic arrival in the western Ukrainian city from across the nearby Polish border, escorted by 200 supporters, who forced their way through the frontier post.

Earlier, Mr Sakaashvili had been deprived of his Ukrainian citizenship by president Petro Poroshenko. A former university friend, Mr Poroshenko had become increasingly threatened by Mr Saakashvili’s popularity as governor of the Odessa region, seeing him as a potential rival to power.

Bouncing back

Despite his controversial time as Georgian president – leading the country during a Russian invasion that some critics say he provoked – Mr Saakashvili is credited by most with vastly reducing corruption in the mountainous country, especially within the police force.

His promises to do the same in Ukraine are seen as a direct threat to the interests of the ruling authorities. That he was holed up in a hotel in the cobbled streets of Lviv’s historic centre is testament to the fact the city of Austro-Hungarian heritage is overseen by mayor Andriy Sadovyi, who is also involved in a stand-off with Mr Poroshenko over regional finances.

“Lviv has been transformed from a dilapidated, typical Soviet industrialised town to the most vibrant and well-structured city in Ukraine,” says Mr Saakashvili. “Almost the only problem is that no other city is following that standard and that the central government is trying to prevent them from succeeding. This is very bad when you are in a country with no rule of law and a central government that is against you. Mr Sadovyi is a very good example of the type of manager which Ukraine needs everywhere.”

Flourishing FDI

Under Mr Sadovyi’s rule, FDI in both Lviv and its surrounding region has flourished, with job creation surging ahead of capital city Kiev and its surrounding region. Most people attribute this to the benign environment offered to business by the region, its closeness to EU borders and the fact that it has successfully attracted SMEs in large numbers, rather than being weighed down by smokestack industries that are controlled by politically connected oligarchical clans.

Mayors in western Ukraine are particularly frustrated about what they see as a lack of engagement by the capital when it comes to the self-financing of cities, and some point to central government suspicion of any initiatives that unite regional bosses.

“Lviv and Donetsk have always had the best prospects. They have been like two magnets, drawn together,” says Vasyl Abaimov, executive director of the Lviv regional branch of the Association of Ukrainian Cities, himself a former mayor of Dobrotvir, in Lviv oblast. “The administrations of Lviv oblast and Donbas have had very warm relations from 2011, but Kiev was never interested and central government did not appreciate our horizontal relationships.”

National influence

Lviv has a tradition of self-governance from its time as part of the Austro-Hungarian and Polish empires, according to Mr Abaimov, and its strength as an IT hub, tourist centre and university city housing 40,000 students make it an attractive investment destination. “There are 2.5 million people living in the oblast, which is the size of Latvia,” he says. This school of thought maintains that the growth of Ukraine rests on the fundamental principle of self-governance of cities – if the latter is strong, then Ukraine will be strong.

Mr Sadovyi makes much of Lviv’s ability to influence Ukrainians from other parts of the country. “We have 2 million tourists every year, mainly from the east and centre of Ukraine,” he says. “They eventually go home and see that success is possible elsewhere.”

The notion of regional rivalries was, however, downplayed by most commentators visiting the recent Yalta European Strategy forum in Kiev, hosted by industrialist Victor Pinchuk, where high-profile guest speakers, including former UK prime minister Tony Blair and former US secretary of state Condoleezza Rice, mingled with Ukraine’s current crop of politicians, including the Lviv mayor.

Political consultants agreed that corruption was rife throughout the country, although there was less influence of the industrial-based oligarchs in western Ukraine and that decentralisation would further improve the situation.

“Ukraine is in need of serious decentralisation,” said Anders Aslund, a former presidential adviser, now a senior fellow at the Atlantic Council in Washington DC, speaking on the sidelines of the forum. “The west of Ukraine will grow faster due to the European supply chain. The big difference between the regions is that there are a lot more SMEs in west Ukraine, while the east is still very working class.”

This article is sourced from fDi Magazine
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