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Sustainable Decentralization in Croatia: C ross Cutting Issues. The World Bank. Introduction (Comparative Size of Local Governments). Introduction (the administrative structure). Introduction II (fragmented local administrative units). Introduction II (fragmented local administrative units). - PowerPoint PPT Presentation
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Sustainable Sustainable Decentralization in Croatia:Decentralization in Croatia: CCross Cutting Issuesross Cutting Issues
The World Bank
IntroductionIntroduction(Comparative Size of Local Governments)(Comparative Size of Local Governments)
Fig. 1.1-Local Government Expenditures as a share of General Gov. Spending
111212
1617
192020
2222
242525262727
303031
343435
3740
4244
59
0 5 10 15 20 25 30 35 40 45 50 55 60 65
Slovenia (2003)Slovak RepublikCroatia (2001)Albania (1998)
Romania (2001)France (2002p)Bulgaria (2002)
Lithuania (2003)Azerbaijan (1999)
Czech Republic (2003)Kyrgyz rep. (2001)
Estonia (2002)Hungary (2002)Moldova (2002)
United Kingdom (2002)Latvia (2003)
Italy (2000)Ukraine (2001)
Tajikistan (2001)Netherlands (2002)
Poland (2002)Georgia (2001)Finland (2001)Belarus (2002)
Kazakhstan (2002)Sweden (2001)
Denmark (2002)
IntroductionIntroduction(the administrative structure)(the administrative structure)
Central Government 20 (de-concentrated) offices of State
administration in the Counties + ministries and autonomous agencies
21 Counties*** (4.4 million inhabitants)
[Second/intermediate Level Self-Government]
124 Towns* (3 million inhabitants)***
[First Level Local Self Government]
426 Municipalities** (1.4 million inhabitants) [First Level Local Self-
Government]
* Urban communities, in general more than 10 ths. inhabitants ** Communities of less than 10 ths. inhabitants (mostly rural) *** Includes the City of Zagreb, 780 ths. inhabitants Data source: “Statistical Yearbook”, Central Bureau of Statistics, Zagreb
IntroductionIntroduction II II(fragmented local administrative units)(fragmented local administrative units)
Czech Republic: Local Self-Govt. Population Distribution
0.05.0
10.015.020.025.030.035.040.045.050.0
<.3 .3-1,5 1,5-5,0 5,0-10 10-20 20-50 50-100 100-200
Prague
Self-Govt. Unit size [in ths.]
Per
cent
age
of to
tal
% distr. Self-Gvt. Units
% distr. Population
Croatia: Local Self-Govt. Population Distribution
0.0
5.0
10.015.0
20.0
25.0
30.035.0
40.0
45.0
<1,0 1,0-3,0 3,0-5,0 5,0-10 10-15 15-50 50-100 100-200
>200
Self-Govt. Unit size [in ths.]
Per
cent
age
of to
tal %distr.Local Self-Govt. Units
% distr. Population
Albania: Distribution of Population and Sef-Gov. Units
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
< .3 .3 - .5 .5 - 1.0 1.0 -1.5
1.5 -2.0
2 - 5 5 - 10 10 - 50 50 -100
100-500
Sef-Gov. Units (in ths.)
Per
cent
of
tota
l
% distr.Self-Governing Units
% distr. Population
IntroductionIntroduction II II(fragmented local administrative units)(fragmented local administrative units)
Netherlands : Population and Local Self Government Distribution,
2004
0
5
10
15
20
25
30
35
40
45
50
<1,0 1,0-3,0 3,0-5,0 5,0-10,0 10,0-25,0 25,0-50,0 50,0-100,0 100,0-200,0
200,0+
Population Size
Per
cent
of T
otal
% distrib. of LG
% distrib.of population
France: Population and Local Self Government Distribution,
2004
0
10
20
30
40
50
60
70
80
90
<1,0 1,0-3,0 3,0-5,0 5,0-10,0 10,0-25,0 25,0-50,0 50,0-100,0 100,0+
Population Size
Perc
ent o
f Tot
al % distrib. of LG
% distrib.of population
Denmark: Local Self Government and Population Distribution
0
5
10
15
20
25
30
35
40
45
<1,0 1,0-3,0 3,0-5,0 5,0-10,0 10,0-25,0
25,0-50,0
50,0-100,0
100,0+
LGUs size (In ths)
Per
cen
t., o
f T
ota
l
% distrib. of LG
% distrib.of population
England: Local Self Government and Population Distribution
05
1015
2025
3035
4045
50
<1,0 1,0-3,0 3,0-5,0 5,0-10,0
10,0-25,0
25,0-50,0
50,0-100,0
100,0-200,0
200,0+
LGUs size (In ths)
Per
cen
t o
f T
ota
l
% distrib. of LG
% distrib.of population
IntroductionIntroduction (Change in the number of LG units in selected EU countries)
Country
Number of Municipalities in
1950
Number of Municipalities to
date Change
Lithuania 581 1996 56 -90%
Sweden 2,281 1992 289 -87%
Denmark 1,387 2002 271 -80%
Belgium 2,669 2002 589 -78%
Great Britain 2,028 1999 467 -77%
Netherlands 1,015 2004 483 -48%
Germany 25,930 1994 14,808 -43%
Austria 3,999 1992 2,301 -42%
Norway 744 1992 439 -41%
Finland 547 1993 455 -17%
Spain 9,214 2002 8,082 -12%
Latvia (1990) 570 2002 542 -4%
France (1945) 38,814 2004 36,729 -5%
Switzerland 3,097 2001 2,880 -7%
Italy 7,781 1999 8,099 +4%
Czech Republic (1990) 4104 1994 6,230 +51%
Introduction IIIIntroduction III(Structure of local revenue)(Structure of local revenue)
Composition of Subnational Government Revenues (country comparison-data 2001/3)
Own-Taxes
Tax-Sharing
General Purpose
Specific Purpose
Czech Rep. 3.9 43.8 36.3 0.0 16.0 100.0Hungary 16.3 16.8 17.0 1.7 48.2 100.0Poland 10.6 14.4 24.6 30.5 19.9 100.0Estonia 6.3 62.1 9.1 13.4 9.1 100.0Latvia 0.0 66.2 14.1 5.8 13.9 100.0Lithuania 0.0 91.0 4.8 2.3 1.9 100.0Bulgaria 0.0 47.1 13.4 32.4 7.1 100.0Romania 6.1 64.1 14.9 0.0 14.9 100.0Slovenia 10.6 49.4 17.5 15.9 6.6 100.0Slovak Rep. 22.8 39.5 19.3 0.0 18.4 100.0Average 7.7 49.4 17.1 10.2 15.6 100.0Croatia 1 3.0 53.0 29.0 0.0 15.0 100.0Sources: Ebel, R. D & S. Yilmaz, On the Measurement and Impact of FiscalDecentralization, WBI, 20021 World Bank staff estimates based on Dubravika J. Alibegovic (2004, table 8)and EIU.
Country
Composition of sub-national revenuesTax revenue
Non-tax Revenue
GrantTotal
Croatia: allocation of shared taxesCroatia: allocation of shared taxes
Percentage of collection allocated to:
State County Local Equaliza-tion Fund
Decentra-lization Fund
PIT 25.6 10.0 34.0 21.0 9.4(56.0) (10.0) (34.0) 0.0 0.0
CIT 70.0 10.0 20.0 0.0 0.0
Real estate transaction tax 40.0 0.0 60.0 0.0 0.0Numbers in parenthesis reflect the situation before the 2001 reformSee footnotes at Table III.3
National Tax
Croatia, Distribution of Shared Taxes (2001 reform)
Croatian DecentralizationCroatian Decentralization(Cross Cutting Issues)(Cross Cutting Issues)
I —Achievements since 2001
II —Main Current Challenges
III—The ways ahead: strategic directions
IV—Building Blocks for Policies and Inst. Reforms: Definition of responsibilities, and the legal and
administrative frameworks Intergovernmental fiscal relations and incentives to perform Capacity building, accountability and fiduciary management
I—Achievements Towards Decentralized I—Achievements Towards Decentralized Administrative Structure in CroatiaAdministrative Structure in Croatia
The achievements:• Major decentralization push in 2001 (education, health, social
assistance)• Legal framework broadly in line with LG European Charter • Local surtax piggybacking the national shared PIT• Allocation of shared PIT according to residence of taxpayer• Assignment of responsibilities according to delivery capacity• Establishment of a consultative “Decentralization Commission” at the
State Administration Central Office (2004)
Main message:The decentralization process in Croatia is neither complete nor sustainable yet, and important challenges on IFR have to be resolved for an efficient and effective public service delivery.
II—The Main Challenges on:II—The Main Challenges on:
1 Legal framework
2 Administrative structure
3 Functional responsibilities and competences
4 Revenue Assignment
5 Fiscal imbalances and the transfer system
6 Access to borrowing, indebtedness, and debt management
7 Autonomy, transparency and the accountability framework
Challenges on the legal Challenges on the legal frameworkframework
a. Overly complex and still incomplete
b. Inadequate implementation
Challenges on the Challenges on the Administrative StructureAdministrative Structure
a. Fragmented administrative structure and uneven capacity
b. Dual subordination of SNG executive authorities
c. Inadequate “supervisory” and “conflict resolution” mechanisms
d. Unregulated SNG civil service
e. Weak intergovernmental coordination and cooperation
Challenges on Functional Challenges on Functional Responsibilities and CompetencesResponsibilities and Competences
a. Unclear definition of responsibilities and inadequate incentives
b. Inefficient expenditure allocation
c. Inadequate criteria for setting minimum service delivery standards
Challenges on the Revenue Challenges on the Revenue AssignmentAssignment
a. Inadequate revenue autonomy
b. Ineffective non-tax revenue and real estate taxation
c. Inequitable profit tax sharing mechanism
d. Considerable disparities in revenue capacity
Challenges on Fiscal Imbalances Challenges on Fiscal Imbalances and the Transfer Systemand the Transfer System
a. Unpredictable transfer systemb. Complex and ineffective central
“controls”c. Limited scope and perverse incentives of
the equalization transfer systemd. Lack of transparency on capital
investment transfers
Challenges on the Access to Borrowing, Challenges on the Access to Borrowing, Indebtedness, and Debt ManagementIndebtedness, and Debt Management
a. Majority of SNG hardly are creditworthy, but high indebtedness on account of contingent liabilities, arrears, and off-budget operations
b. Underdeveloped municipal capital marketc. Unsystematic and unreliable SNG debt
management
Challenges on Autonomy, Transparency Challenges on Autonomy, Transparency and the Accountability Frameworkand the Accountability Framework
a. Autonomy and transparency are lowb. Fiscal reporting system unreliablec. Lack of monitoring system for public
service deliveryd. Weak citizen participation and vulnerable
accountability framework
III—Ways AheadIII—Ways Ahead
AA - - Strategic DirectionsStrategic Directions Completion of reforms initiated in 2001, by specifying responsibilities, Completion of reforms initiated in 2001, by specifying responsibilities,
enhancing local decision-making, and improving accountabilityenhancing local decision-making, and improving accountabilityBB - - Principles underpinning the strategyPrinciples underpinning the strategy
Commensurate resource to follow functional decentralizationCommensurate resource to follow functional decentralization Local authorities empowered by incentives (and sanctions) to perform, Local authorities empowered by incentives (and sanctions) to perform,
and made accountable to citizensand made accountable to citizens IGF relations be predictable, promote hard budget constraints, and IGF relations be predictable, promote hard budget constraints, and
encourage effective and efficient service deliveryencourage effective and efficient service deliveryCC - - Fundamental Institutional ArrangementsFundamental Institutional Arrangements
““Decentralization and Local Governance Strategy”Decentralization and Local Governance Strategy” A standing “Inter-Minist. Steering Committee on Local Governance”A standing “Inter-Minist. Steering Committee on Local Governance” A permanent “Technical Secretariat” on decentralization A permanent “Technical Secretariat” on decentralization
IV—Policy & Inst. Reforms-Building Block 1:IV—Policy & Inst. Reforms-Building Block 1:(Definition of responsibilities, legal and administrative
framework)a. Assigning functional responsibilities clarifying specific responsibilities and authority to perform establishing proper incentives to increase efficiency setting up service standards based on outcome/output & measurable
perform. criteria
b. Rationalizing the legal framework streamlining and consolidating regulations drafting secondary legislation stabilizing intergovernmental fiscal relations
c. Enhancing the administrative structure fixing up supervision and conflict resolution mechanisms eliminating dual-subordination of local executive authorities regulating the status of SNG civil servants and employees addressing inefficiencies from the fragmented SNG
administrative structure
IV—Policy & Inst. Reforms-Building Block 2:IV—Policy & Inst. Reforms-Building Block 2:(Intergovernmental fiscal relations & incentives to perform)
a. Improving revenue autonomy discontinuing profit tax sharing on a derivation basis streamlining local non-tax revenue legislation adopting a well-designed property tax as a local tax
b. Mitigating fiscal imbalances eliminating bureaucratic rigidities & empower local authority increasing transparency and efficiency on capital grants broadening scope of equalization grants
c. Accessing capital markets responsibly strengthening debt management and monitoring systems developing institut. framework and strengthening prudential rules enhancing regulation for SNG to access borrowing
d. Improving conditions for absorption of EU funds encouraging municipal capital market (Laws: Bankruptcy, Fiscal
Responsibility) rationalizing the fragmented administrative units
IV—Policy & Inst. Reforms-Building Block 3IV—Policy & Inst. Reforms-Building Block 3::(Capacity building, accountability and fiduciary (Capacity building, accountability and fiduciary
management)management)
a. Promoting capacity building encouraging on-the-job training in tandem with decentralization adopting a uniform national training strategy for SNG
b. Establishing a consistent accountability framework
eliminating unfunded mandates and ensuring macroeconomic consistency (through hard budget constraints)
strengthening report and evaluation systems (incl. internal and external audit)
promoting bottom up pressure mechanisms
c. Monitoring the decentralization process enhancing Government capacity on collecting, evaluating and
disseminating SNG key performance indicators.
Thank YouThe World Bank