Governance and Local Economic International Conference on «Local Development and Governance in Central, East and Development: In search of an appropriate South-East Europe», governance structure in OECD LEED Trento Centre for Local Development Trento, Italy, 6-8 June 2005 1. Theoretical basis for local and regional economic development 2. The institutional framework for local Governance and Local Economic Development: economic governance in Croatia In search of an appropriate governance structure in Croatia 3. Local economies and economic governance in Croatia Authors: 4. Fiscal capacities for local economic Ivana Rašić Bakarić ([email protected]) Marijana Sumpor, MSc ([email protected]) - presenter development Jelena Šišinački, MSc ([email protected]) 5. Conclusion - local economic governance

Institute of Economics, , Croatia structures in Croatia (www.eizg.hr) 2

1 1.1 Specificities of locations in 1.2 Governance and good local regional development theory governance defined

† fundaments of contemporary regional † governance - “the exercise of political, development theory - concentration and economic and administrative authority to manage agglomeration, importance of institutions and a society's affairs” (UNDP, 1997) structural considerations † good governance - emphasis on characteristics † Recognition of economic importance of certain reflecting values and principles, norms and locations (regions) and their developmental practices that derive from putting people first and effects/impacts on the surrounding territory at the centre (positive & negative) † good local governance - institutional system † focus has shifted towards complex relations of for managing local public affairs, characterized by competitiveness, cohesion and sustainability three dimensions: performance, participation, partnership (“3 P”, Romeo, 2002)

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2 1.2 Governance and good local 2.1 The administrative-territorial governance defined – cont. structure of local governments in Croatia

† government became more variegated within † 1992 – Law on local self-government and different levels of government (Carmichael, 2002) government (cities and municipalities, counties - dual status) „ horizontally differentiated, provided by multiple agencies; „ vertically differentiated, conducted on multiple levels † 2001 - new Law on Local and Regional Self- Government (LLRSG) † multi-level governance stresses the complexity of policy making, implementation and „ regional self-government – 20 counties + city of Zagreb responsibilities among different governmental and „ local self-government – 124 cities/towns and 426 municipalities (CBS, 2004) societal actors in their activities on different levels † Main changes: new role of counties – dual † Changes in governing towards multi-level status abolished, new deconcentrated offices of governance are a result of changes in the modes national government on county level and nature of public sector activities

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3 2.2 The territorial size and population of the units on different government levels 2.2 The territorial size and population of No. of inh./km 2 the units on different government levels Population density and % of population in county centres (2001) 180 50% 162 City of Zagreb 2 160 147 † Croatia - continental surface 56.5 th. km and 31.4 2 Densit y: 1,217 inh./km 40% th. km2 Adriatic Sea; 140 116 120 2 102 † Total population 4.4 mil.; average density 78 inh./km 101 30% 100 87 85 84 „ Max.–1. city of Zagreb (1,217 inh./km2); 2. County 80 80 73 72 69 2 20% of Medjimurje (162 inh./km ); 50 60 47 42 46 44 „ Min.–County of -Senj (10 inh./km2) 39 38 40 10% † Concentration of inhabitants in 4 cities (>100,000): 20 10

Zagreb, Split, , 0 0%

a † Differences in GDP - 53% of national GDP produced in c lit r k ć e in p k ek i a a c nik pi d na ca e vci ij a n va ga ca i rod o s ic v ova os akov raž a/ S Rij ria/ Pul ro / Zad / Sis l Č a ti Gor ink / O b r a G 4 counties: City of Zagreb (30%), Primorje- a r/ ja Ist rivn / Pože / Krapilm a / V n p a da nj/ rje/ e / Sl. B ot i a nin/ Šibee K m ra Ko n Z ac/ Kar K -S Da iu va/ Du gora/ Bjeloo slavin v a (8%), Split- (8%) and (6%) imu ždin/ V / Veli ka vina m Ba o v o lo k đ a y sa rski ir ret il la avina/ Viroviti r Li Spl it- o B r -M Var nt riževci/ k Ka Me ina-Zagorj -P -Go Šibenik- ou e ar-S Osijek- K ega-S isa ap c od ov nik-Ne a-Pod S r ica- v c K reb i Br Pož iti Vuk ivn bro - v Pr imorj o 7 Zag nsk Du ir 8 vo Kopr V la S County-density County centre -Inhabitants

4 2.3 Functions of local governments – 2.3 Functions of local governments cont.

† LSGs should perform tasks of local importance, † LLRSG only lists mandatory functions of local which directly address the needs of citizens, and and regional self-governments which are not assigned to state bodies by the Details on actual responsibilities of levels of Constitution or by law; † government defined in broad number of † RSGs should perform tasks of regional importance, special laws, by-laws, regulations and cities >30,000 inhabitants can provide services that are county responsibility, if they have † As many responsibilities are shared between sufficient resources for their provision levels of government, implementation problems † Economic development, as a task is not on local level are common due to unclear explicitly a task of local self-governments, but a definition, lack of communication, frequent task of counties (RSG), while many LSGs are changes or financing is not ensured active in economic development

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5 3.1 Employment and active companies across sectors and counties % Croatia - Unemployment rates by counties (2001) 35 Croatia - Active population by counties (2001) 31,0 400000 30 27,7 26,5 26,0 25,1 25,1 350000 24,2 23,7 25 23,5 22,6 300000 20,2 19,7 19,6 20 17,1 16,8 16,5 16,5 250000 15,9 15,9 15 13,5 200000 12,1

150000 10

100000 5

50000 0 0 n a c j n dar a ja n ia ty b a e a m a na r re Istria or vci a r Z na tv -Se i un e a y a i a ac n e a v o ag raždi og ž r tr a a e da r ci a a ia nj k ra avon Z a ri agorj imurje ov ni savi Karlova d c V K -Z đ ranj Is aždin vin Za rl etv -K Se o Li Sl b of a e ota a r a avin agorj imurje r lit-Dalmati Po a- r-Bil a- M K B Z Ka đ Šibenik-Kni p g va c in -Dalmati - Va e Ne nik Lika- S a- e ni p it k Si rmium Pos a- r-Bilogo k- rod-P Osijek-Baran c ž Zagre City lo v r- n a M ca-Križev ti e ri Kra pl sije k-Mosl d- i Šibe ega-Slavon B -Moslavin vi Po City of ZagrebS Gorski o -Sirmiu Bj Zagreb count- O sa Dubr ov ni k -Ner iro Kop je Si Krapi Pož nski V Vukova Bjelov ubrovni o KoprivnD av Primorje-Gorski Kota Counties onski Br -Podravin 11 l 12 Primor Counties S Slav

6 Šibenik-Knin - Employment structure by sectors (2001) Šibenik-Knin - Legal entities by sectors (2001) Croatia - Employment structure by sectors (2001) Croatia - Legal entities by sectors (2001)

Agr icult ur e Public sector Agri cultur e Agr icultur e Public sector Agr icult ur e 3% Public sector services 1% Public sector 2% services 2% Manufacturing Manufacturing services Manufacturing 30% services Manufacturing 24% 26% 29% 14% 13% 14% 12%

Services Services Services Services 44% 71% 43% 72%

City of Zagreb - Employment structure by sectors (2001) City of Zagreb - Legal entitities by sectors (2001) Virovitica- - Employment structure by sectors Virovitica-Podravina - Legal entitites by sectors (2001) (2001) Public sector Agr icult ur e Agr icult ur e Agri culture Manufacturing services 1% 3% Agri culture 5% 23% Public sector Manufacturing Public sector Manufacturing 12% 26% services 11% Public sector services 18% Manufacturing 19% services 21% 41% 21%

Services Services Services Services 50% 1367% 14 26% 56%

7 Sisak- - Employment structure by sectors (2001) 3.2 Economic performance on county level Agriculture Manufacturing 3% Public sector 44% Regional GDP per capita (USD) and Export/Import of goods - coverage (2001) services 23% 2,50 8.000 7.000 2,00 Services 6.000 30% 5.000 1,50 4.000 1,00 Sisak-moslavina - Legal entities by sectors (2001) 3.000 2.000 0,50 1.000 Agriculture Manufacturing 0 0,00 Public sector 1% 11% services ia i c a a a n r c a a a r ia dar y a 14% str a ždin ova n a nt m I t a etv vin rl vin o Z in r a imurje a-Senj a lmati v v Zagreb e sla K k ilogo a la rmiu f i Ko Var eđ Li dr S b cou nik-Kni i o k o - e y rs ik-N M ijek-Baranj a -Posa t s gr Šibe d ar-S Ci ca-P ovar-B Split-D a v rov n i el O Z b Sisak-Mo -Zagorje Požeg uko Bj V Du irovit ski Bro -Križev V n Services Primorje-Go 74% Slavo

15 16 RGDP (000 USD) Coverage (EX/IM)

8 3.2 Economic performance on county level

Trade in Goods - Exports & Imports in mil. USD (2001) 3.3 Local economic governance in 607 Croatia 600 535 529 City of Zagreb 486 500 Exports: 1,486 mil. USD 471 † Legislation – prepared, adopted and managed at Imports: 3,641 mil. USD 387 national level 400 355 280 † Implementation – top-down (deconcentrated national 287 300 267 210 266 institutions, government offices) or delegated to RSGs 173 174 or LSGs 200 160 148 142 119 136 95 103 112 70 † Economic development programmes - 93 49 89 68 67 50 100 53 57 52 45 58 42 implementation managed across levels of 24 32 30 4 2 government 0 „ SMEs – domain of LSGs and RSGs c j i n n e a a a a y n tria r c di a a a r t a Is ž tv in ova orj ati ni n n žev ra e v -Se ranj m vo -Kni „ big industry – domain of the national government ri r imurje ka ag ogo a Va sla Karl đ -B cou nik K e Li Bil k b M r- -Sla ik-Ne Mo na-Z a ije ga k- pi s e Šibe vn a lov O Split-Dal Zagre ivnica- ro sa r Si Kr Pož Bje Vukovar-Si rmium Kop Dub irovitica-Podravin V onski Br od- Posavi17 18 Primorje-Gorski Kota v Sla Exports Imports

9 4.1 Fiscal analysis based on the 4.2 Fiscal capacity of the local consolidated general government data government in Croatia

† LSGs that are more developed and have economic † On aggregate level for all LSGs, the share of cities/ advantages due to concentration of businesses are towns in total revenues was 73% and counties in better position to collect more revenues only 13% † strength of the major urban centres was † With regard to capital revenues and expenditures, considered first phase of decentralization in 2001 – most significant share generated by the cities/ 32 LSGs (out of 546) and all RSGs towns † Counties received 49% of the total grants for all Though decentralization initiated, no significant † local governments and can not cover current changes in local fiscal data occurred expenditures with current revenues „ share of local budget revenues in consolidated general † 66% of public officials work in cities/towns and government budget in % of GDP was 5.2% in year 2000 only 10% in counties and 4.7% in 2003* * Data only for 32 LSGs and counties (approx. 70% of total)

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10 4.2 Fiscal capacity of the local Conclusion - local economic government in Croatia – cont. governance structures in Croatia

† On the case of 3 counties and their centres † Cities/towns that keep the position of the county (Virovitica-Podravina, Sisak-Moslavina, Šibenik-Knin) – economic center are clearly stronger and more able assumption confirmed that counties are weak to take care of local economic development than the compared to their centres county administrations † Total revenues of the all cities/towns in the † Growth poles can be identified: Zagreb, Split, Rijeka, counties significantly exceed the total revenues Osijek and other regional centres Šibenik, Sisak, Virovitica of the respective county self-governments † By ignoring the important development role of urban † Šibenik and Sisak managed to collect alone centres and relying on institutionally weak counties, more revenues than their RSGs (Virovitica 28.3 it is not surprising that local economic governance mil. HRK, Virovitica-Podravina county 35.9 mil. HRK) structures are not adequately set up to foster † All 3 towns have more staff than their RSGs development throughout the country.

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