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Hiqstep Report DIRECTORATE GENERAL FOR NEIGHBOURHOOD AND ENLARGEMENT NEGOTIATIONS – DG NEAR Short term high quality studies to support activities under the Eastern Partnership HiQSTEP Project Public Administration Reform at the Local and Regional Level in the Eastern Partnership Countries: Developments Since 2012 in the Field of Decentralisation STUDY REPORT First Draft Version 30.11.2015 Final version 28.12.2015 This report has been prepared by the KANTOR Management Consultants Consortium. The findings, conclusions and interpretations expressed in this document are those of the Consortium alone and should in no way be taken to reflect the policies or opinions of the European Commission. Preface This final study report on “Public Administration Reform at the Local and Regional Level in the Eastern Partnership Countries: developments since 2012 in the field of decentralisation and recommendations for the future” is part of the Project ‘Short term high quality studies to support activities under the Eastern Partnership – HiQSTEP, EuropeAid/132574/C/SER/Multi’, carried out by an international consortium under the leadership of Kantor Management Consultants. The present study has been carried out to support the activities of Platform 1 – “Democracy, Good Governance and Stability” – of the Eastern Partnership. In this regard, it is important to note that promoting good governance and decentralisation reform implementation have been identified as a priority area by the EaP Platform 1 “Democracy, Good Governance and Stability” Work Programme for the period of 2014-2017. The DG NEAR and DG Regio are the driving forces in cooperation with EaP Countries on this theme. The present study has been implemented by the team under the leadership of Dr Vyacheslav Tolkovanov, Study Team Leader, and composed of Dr Juraj Nemec, Senior International Expert and the following national experts: Valentina Gevorgyan (Armenia), Samir Aliyev (Azerbaijan), Miroslav Kobasa (Belarus), Nelly Dolidze (Georgia), Angela Cascaval (Moldova) and Nataliya Kyrychenko (Ukraine). The overall supervision, quality check and management have been carried out by Przemysław Musiałkowski, Team Leader of the HiQSTEP Project. Sincere thanks go to the national stakeholders in all six countries who provided information through interviews and responses to questionnaires. 2 CONTENT 1 BACKGROUND, PURPOSE AND ORGANISATION OF THE STUDY 5 1.1 Description of the assignment, objectives and expected results 6 1.2 Methods 7 1.3 Collection and analysis of the information for the study 8 2 ASSESSING THE PROGRESS IN LSG DEVELOPMENT AND PAR IMPLEMENTATION ON LOCAL LEVEL AFTER 2012: COMPARATIVE ANALYSIS 13 2.1 Compliance with the principles of the ECLSG and development of the LSG system according to the European principles of good governance 15 2.2 Progress made in the EaP Countries since 2012 in the area of improvement of legal and institutional framework for local democracy 25 2.3 Progress made in the EaP Countries since 2012 in the area of the development of the capacities of local authorities in human resources 29 2.4 Progress made in the EaP Countries since 2012 in the area of fiscal decentralisation 31 2.5 Evaluation of the level and the scope of the implementation of public administration reform on local level 38 3 OVERVIEW OF THE SITUATION IN EAP COUNTRIES 46 3.1 Armenia 46 3.2 Azerbaijan 52 3.3 Belarus 62 3.4 Georgia 70 3.5 Moldova 76 3.6 Ukraine 83 4 MAIN CONCLUSIONS AND RECOMMENDATIONS 96 4.1 Main EaP ‘regional’ issues 96 4.2 EaP countries’ specific issues 99 5 REFERENCES AND BIBLIOGRAPHY 108 3 Abbreviations and acronyms ATU Administrative Territorial Units CSF Civil Society Forum CORLEAP Conference of Regional and Local Authorities for the Eastern Partnership CoE Congress of Local and Regional Authorities of the Council of Europe Congress CoE Council of Europe EU European Union EaP Eastern Partnership ECLSG European Charter of Local Self-Government EUD Delegation of the European Union GG Good Governance HiQSTEP High Quality Studies for the Eastern Partnership LA Local Authorities LSG Local Self-Government LG Local Government OECD Organisation for Economic Cooperation Development PAR Public Administration Reform RG Regional Government SIGMA Joint Initiative of the OECD and the EU, principally financed by the EU STL Study Team Leader Country codes AM Armenia AZ Azerbaijan BY Belarus GE Georgia MD Moldova UA Ukraine 4 1 BACKGROUND , PURPOSE AND ORGANISATION OF THE STUDY In accordance with the approved Terms of Reference and the Inception Report, this Study is focused on the theme of the public administration reform on local and regional levels in the Eastern Partnership countries (developments after 2012 in the field of decentralisation and recommendations for the future). Today, all EaP Countries are facing an urgent need to implement large-scale decentralisation reforms. Decentralisation in these countries can be viewed as a part of a wider public administration reform, which requires re-distribution of tasks, competences, and resources at central, regional, and local levels. In particular, this means the transfer of wider responsibilities, competencies, and resources from the state to the local self-government (LSG) authorities, in line with the SIGMA/OECD revised Principles of Public Administration 1, provisions of the European Charter of Local Self-Government 2 as well as the Council of Europe Strategy for Innovation and Good Governance on Local Level and its 12 Principles for Good Governance on Local Level. A well-functioning public administration is necessary for democratic governance. It also directly impacts upon governments’ ability to provide public services and to foster competitiveness and growth. Public administration reform should lead to enhanced transparency, accountability and effectiveness and ensure a greater focus on the needs of citizens and business. An adequately managed and professional civil service, better policy planning and co-ordination, sound administrative procedures and improved public financial management are of fundamental importance for the functioning of the state and for implementing the reforms required for integration with the EU. Countries have to increase their efforts to improve their public administrations at all levels on the basis of national strategies. A strong political commitment is needed to steer the reform process, in particular at local and regional levels. Various legal acts in the area of local self-government which have been adopted at different times since dissolution of the former Soviet Union and the proclamation of Independence of the mentioned countries are based on different ideologies and, as a consequence, are not internally harmonised. In order to resolve these contradictions, there is a necessity for a comprehensive decentralisation strategy and a local government reform, which would include harmonisation of all relevant legislation, in particular constitutional amendments. Impact of decentralisation reform on regional development processes could be also evaluated in those EaP Countries where regional level of government exists. Undoubtedly, the successful implementation of PAR at local level will facilitate more effective modernisation in EaP Countries, further realisation of other (sector) reforms, and development of co- operation with international and European institutions, especially the European Union. It is important to note that the territorial-administrative system which was formed mainly during the Soviet period is quite complex. Therefore, the administrative territorial reform (ATR) should create the 1 It is important to note that SIGMA/OECD is currently adjusting the Principles of Public Administration developed for the Enlargement countries to the Neighbourhood context. 2 http://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/122 5 necessary institutional and legal basis for improvement of the structure of public administration, creating a more consistent local government system (based on local units with enhanced size and role), and eventually reinforcing decentralisation in EaP countries. The ATR can also resolve the anomalies (of status, territory, role, functions etc) of the administrative and territorial units. This should substantially improve the efficiency of the existing system of public power in terms of resource distribution, accountability and efficiency of services. The decentralisation reform could also contribute to the separation between LSG and State functions, and minimise interference of State bodies in LSG affairs. All these actions are important for ensuring the implementation of the SIGMA/OECD revised Principles of Public Administration. At the same time, the transfer of new competences to LSG bodies should be supported by the transfer of additional resources (human and financial). A major impediment to the development of LSG in EaP Countries remains its financial weakness. In addition to vertical imbalances in revenue allocation, the level of own resources and especially of local taxation is low and resources are increasingly unequal among local budgets along with increasing regional disparities. There is also a need to provide local self-government units with a stronger financial basis, especially through the granting of new tax powers. In conjunction with the accomplished or ongoing administrative territorial reforms (ATR) and the revision of the allocation of functions between State bodies and local authorities, a review of the present state grants and equalisation system
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