Decentralization, a path to economic and social stability
A group of experts from Moldova and I recently attended the regional conference “Making Decentralization Reform Work: Opportunities and Innovations for Local Governance and Service Delivery”, in Kyiv (Ukraine). Representatives of 18 countries discussed the current situation of decentralization reforms, with all their achievements and failures.
The majority of EU member countries have gone through decentralization processes. The most advanced in this sense are Poland and Scandinavian countries, particularly Sweden and Denmark. Baltic countries went the same way and reduced the levels of government and municipalities in the last 10-15 years. The reform had an immense impact: several tens of billions of Euros were used in a more efficient manner and the cities and villages of these countries revealed a new modern face.
The decentralization reform in Albania and Ukraine has an impressive speed. Whereas these countries have a larger territory than Moldova and a population of over 4 million, in just two years they reduced decisively the number of municipalities and ensured real autonomy.
As Ukraine is at war with Russia, the reform began in late 2014. 750 municipalities have merged voluntarily in just one year, creating 150 consolidated governments. The Ukrainian politicians assumed the objective of reforming 11 000 local governments and creating 1500 strong mayoralties, able to provide quality public services. They consider decentralization is a strong tool for achieving economic and social stability.
On the other hand, the Georgian reform left room for improvement. Though courageous administrative-territorial reforms have started under Saakashvili’s mandate, these reforms were not accompanied by fiscal decentralization and real autonomy of local governments.
Until 2015 Moldova has received funds in the framework of the Eastern Partnership. But these were not used in an efficient manner. It is acknowledged that decentralization has advanced as participatory process, having a good conceptual and institutional framework and changing the relation between the central and local budgets, but very few things were achieved within the last 5 years. Those almost one thousand mayoralties continue to be rather representative structures (of political parties?), which waste limited financial resources and do not offer necessary services.
The political factor continues to influence small mayoralties, which are maintained with the state financial support. Territorial fragmentation leads to ineffective use of human resources and impedes development and access to public services. The excessive territorial fragmentation also makes the implementation of a functional decentralization difficult and expensive. It is difficult to implement financial decentralization and autonomy when more than a third of municipalities have a population of less than 1500 people, which should be the minimum number according to national legislation. It is quite impossible to bring European funds in a municipality with a budget of 100 lei per capita. How could property and competences be transferred to a mayoralty with 3-5 employees? It would be meaningless.
The territorial-administrative reform is an indispensable condition for the decentralization reform. It should be done because the majority of mayoralties are too small and lack capacity, and depend on transfers from the state budget, having high administrative costs and bad and expensive services.
The merging of local governments would be a solution to make decentralization advance. This would enhance economic efficiency of public service provision. The district level of local government should disappear. It would save up to 200 million lei per year, which could be used to create better public services. The buildings of merged mayoralties could be redesigned and incorporate one stop offices. The jobs in local government could be therefore maintained and even multiplied, employees’ salaries would increase and services would get better.
Assuming this reform is indubitably a difficult political subject. The new government must show courage and political will to find a rational and acceptable solution. The Ukrainian experience shows that voluntary merger can be a solution in the initial stage. If the idea is accepted the reform will start immediately. The new territorial-administrative organization should come into force as of 2019. Otherwise, another reform idea will lose chance of becoming reality.
Mihai Roșcovan,
PhD in Economics