The task of strengthening the regions in financial terms has been already reflected in the new Budget Code and the Tax Code, president Yanukovych told the meeting if the Counc of Regions.

According to him, the fiscal and the budgetary reform have significantly strengthened financial independence of regional and local authorities.

"The new local tax for property was introduced, which is paid by wealthy citizens owning large real estate property, collection of some taxes was transferred from central to local level, for some taxes the portion allocated to local budgets was increased; single tax, local guarantees payments, a part of funds raised from sale of non-agricultural land, etc., were added to the list of revenue sources for local budgets, goal-oriented method of formation and execution of local budgets was introduced.

At the same, time I insist that funding of strategic regional development and interregional cooperation projects was carried out through a separate fund – the State Regional Development Fund. By the way, the European Union has a similar fund – the European Regional Development Fund, which primarily focuses on financing improvement of infrastructure in peripheral regions of Europe, invests in creating new jobs in the innovative industries, and so on," the president pointed out.

Yanukovych believes the State Regional Development Fund should carry out similar functions, and its activity must be regulated by a separate law of Ukraine.

s he told the meeting, the Fund will be responsible for financing projects of local development that are of strategic importance for the country, including:

• Construction of roads, energy and utility networks and other infrastructure;

• Creating jobs, especially in the regions with high unemployment;

• Provision of financial support to small and medium businesses, whose activities are relevant to each region’s priority areas of development.

"When reforming the system of regional development and creating a model of inter-regional cooperation in Ukraine, we should study the tools of strengthening regional development elaborated in the EU. They are plenty and I request the Minister of Finance and Prime Minister of Ukraine to begin this work as soon as possible," Viktor Yanukovych said.

According to president Yanukovych, first of all, these are regional and inter-regional clusters, and industrial parks. "Austria, for example, has Styria regional cluster, which has existed for 15 years, and is one of the leading European car production areas. It brings together about 180 participating manufacturers and about 200 allied organizations in the region. The cluster’s turnover is about 7 billion Euros," he said.

"The next direction is launching complex projects to improve infrastructure in the regions and their economic development support, ranging from road construction, to accounting and legal support of new projects.

For example, in Scotland there is a network of local initiative companies that coordinate the development of local economic infrastructure of the region, by providing administrative, accounting and marketing assistance, searching for real estate for new projects, helping in development of investment programs, etc.

Another important aspect, I would like to emphasize, is the development of inter-regional cooperation on the basis of relevant agreements. This will develop interregional markets, exchanges and territorial corporations.

Our neighbor Hungary is successfully operating its macro-region Pannonia, which specializes in tourism, automotive and wood industries. Pannonia Coordinating Board has concluded agreements with local authorities, thus combining the advantages of constituent micro-regions, created the foundations to support local industry, centers of employment potential, etc.

I suggest that the Government took an urgent decision to eliminate barriers to cooperation between Ukraine and European organizations, foundations and institutions that deal with political and financial support of regional development.

Of course, every region’s special opportunities must be taken into account.

European countries’ experience proves that key role in establishing inter-regional clusters and "growth points" can be played by a number of powerful high-tech enterprises, which form the entire production and marketing chain of a region. Leading enterprises shape modern management too. The conclusion is clear: we should support people with leadership qualities and modern approaches to the economy. This managerial capital plays a crucial role in implementing regional development strategies," President Yanukovych said.

He expressed confidence that effective regional policy cannot and will not be confined solely to supporting specific regions. The state should restore its influence on general macro-regional processes. Particular attention should be paid to interregional cooperation and collaboration.

"I want to emphasize: I consider establishment of interregional cooperation the economic dimension of national policy of consolidation and unity. This includes the entire spectrum of relations between the regions - economic, trade, financial and investment, scientific, technical, informational, cultural relations. Regions should strengthen cooperation and mutually complement each other. We should develop our domestic market.

By the way, as evidenced by the world economic crisis, our domestic market has a very high potential.

To encourage rapprochement of regions and find real mechanism of their cooperation and development, I suggest conducting regular forums on interregional economic cooperation in the regions with high mutual dependency...

Such forums could be held annually. Their task would be to work out models of interregional and inter-sectoral cooperation," President Yanukovych said in his speech.

The president also said that regional policy has external dimension too. Ukraine has already joint programs of cross-border networks and regional cooperation with the European Union, Russia, and Belarus. The practice of "Euroregions” and cross-border cooperation, such as Poland - Belarus - Ukraine, Hungary - Slovakia - Romania – Ukraine, should be continued, the president is convinced.

Yanukovych noted that 21 specific projects have already been prepared and financing for them found. For example, there is an active project uniting Lublin, Rzeszow, Lviv and Uzhgorod, aimed at preventing natural disasters. The Yavoriv district and Lubaczow County are connected by the renewable energy development project.

Accordng to the head of state, another important direction of the new regional policy is expending regions’ involvement in implementing national development projects. These projects will become a basis for preparing the investment reform, which includes radical improvement of investment climate and formation of high-quality investment projects, prepared in line with international standards, creation of a series of new instruments - Ukrainian Development Bank, the stock market, the mechanism of supporting exports, etc..

New approaches to project management, President Yanukovych said, include establishing a Single Window mechanism of working with investors, development of investment projects in line with international standards, which would simultaneously give more complete information on investment opportunities in each region.

"The project principle in planning development of the regions is a mechanism that should bring practical results already within a few months. I instruct the State Agency for Investments and Management of National Projects to identify 2 to 3 pilot areas for testing complex models of economic development. I will be also demanding broad use of state-private partnership mechanism," he said.

According to Viktor Yanukovych, beside general questions of regional policy, there are certain specific and very painful problems. In particular it is utility tariffs policy. "It is the most sensitive to regions and painful for the people," he said.

He reminded that under the legislation, the authority to approve utility tariffs belongs to local governments and a state collective body regulating utility services’ market. However, such important powers mean high responsibility for the results of tariff policy.

"I demand the Government and local authorities to conduct fair and balanced policy in this area. I request the Government to urgently inspect the implementation of the Law of Ukraine “On National Commission for Regulation of Communal Services’ Market of Ukraine "and take immediate steps for full implementation of the regulator’s powers in the area. The current situation is unacceptable," he said.

We also need to introduce clear legislative relations between central and local governments in the question of forming the tariffs and their responsibility for adopting inappropriate legal acts, President Yanukovych said.

Therefore, the President demands the Government and chairmen of local governments to tighten the control over utility tariffs. The President also requested the Prime Minister to take this work under his personal supervision and stressed that its success will determine the attitude to the government in the regions.

"Clearly, regional development must have a clear strategy and plan for its implementation. And it must be developed urgently, taking into account the existing experience. The Committee on Economic Reforms, the Government should immediately begin the work. Each region must have its own strategy of development, based on the priorities and objectives of economic reforms program for 2010-2014, and became a constituent part of the national regional strategy. Some regions, such as the Autonomous Republic of Crimea, have already prepared such draft strategies. And their experience will be extremely useful for others,” President Yanukovych said.

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