Administrative Capacity in the Contextof Human Development

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Introduction

Latvia has two main levels of public adminis-tration: central (or national) and local (or munic-ipal). Each level has its own specific functionsand tasks, and ideally, their execution should bebalanced, as high quality public administrationrequires the same basic implementation princi-ples in both cases. The concentration ofresources and the optimization of governance atonly one level threatens the uniformity of humandevelopment as a whole. Chapter 4 examines thepossibilities of implementing effective and highquality public policy for promoting humandevelopment at both levels of governance inLatvia.

In the context of this Chapter and from thehuman development perspective, the activities ofLatvia’s administrative institutions will be exam-ined from various aspects:• management – the capacity for long-term plan-ning from a human development perspective;• multisectoral co-operation – the capacity towork in a team and to plan policies in co-opera-tion with other departments;• knowledge – the capacity to integrate policyexpertise in decision-making, to understandhuman development trends and to observe thesetrends for the most effective formulation andimplementation of policy;• accountability and reporting – the capacity toanswer to the public about policies and theirresults, and the capacity to promote participatorydecision-making.

The capacity of administrative institutionsdepends on many factors that are difficult todefine and to measure – from their infrastructureand environment to their management methods,financial and human resources, and finally totheir underlying values. Since modern technolo-gy plays a significant role in effective and suc-cessful governance, the extent of its use atLatvia’s administrative institutions will also beexamined.

Only through good governance will Latvia beable to attain its human development goals, andin order for this to happen, the operational capac-ity of the country’s policy-making agents will haveto be strengthened in all aspects. Good gover-nance has several specific principles based ondemocratic values (see Information 4.1).

The operational capacity

of Latvia’s central

administrative institutions

The aim of the next four sections is to analyzethe capacity of the State’s central institutions todevelop and implement sustainable humandevelopment policies. This will involve a study ofthe institutions’ leadership capacity, co-opera-tions skills, use of policy expertise and degree ofaccountability (or readiness to answer to the pub-lic in a clear and transparent manner).

Several Latvian and foreign experts have statedthat Latvia’s central administrative institutions donot possess the capacity to ensure the country’sintegration into the European Union. This capacityhas also been deemed insufficient for overcomingthe impediments of the transition period and forforming a modern, law-abiding and autonomousdemocracy. Capacity is tied to decision-making,human resources, infrastructure, and the use ofmodern technology. As pointed out in the EuropeanCommission’s reports of 1999 and 2000 concerningLatvia’s readiness to join the European Union, thecountry’s low ratings in institutional capacity arelinked to the slow pace of administrative reform.

Analytic reports on administrative reform inLatvia often mention various objective reasons forLatvia’s lack of success in raising the operationalcapacity of its policy-making institutions at thenational level:• For historic reasons there is a lack of senior civilservants with extensive experience in open policy-making practices.

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Administrative Capacity in theContext of Human Development

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• Latvia’s rapid transition pace has not permittedthe devotion of much attention to the learningprocess of policy-making. The fact that policy deci-sions sometimes occur “in order to put out fires”leaves little time for evaluating alternatives andinvolving the public in extensive dialogue.• In many instances ministry salaries are too lowto attract and to maintain the extended interest ofcompetent employees, which makes it difficult toensure “institutional memory” in government min-istries. Furthermore, the employee salary systemin State institutions has not yet been reorganized.The European Commission has pointed out thatmanagement contracts are popular both withinand outside of the civil service framework. Whilethese add to the basic salaries of ministryemployees, they also create a split salary system,

promote the development of semiautonomousadministrative institutions, and render control,monitoring and transparency more difficult.• There is a lack of a unified system to attractcapable university graduates.• Foreign experts have mentioned that there arenot enough civil servants in Latvia to implementgood governance effectively.

Latvia’s ministries understand these problemswell. The Ministry of Justice in its 1999 annualreport writes that: “One of the most serious problems hasbeen the change of staff. In 1999, 31 employees left theministry (24% of all employees), while in 1998, 20% of ouremployees left. The frequent change in staff prevents thedevelopment of a unified group of employees and retards theimplementation of a strategic plan for the ministry. Theprincipal reasons for the changes in personnel are the limit-

G u e s t a u t h o r

Inga Goldberga, Director of the Latgale Regional Development Agency

Increased regional awareness and activity

The year 2000 was a turning point in Latvian regional politics. Debates over the most suitable model of regional development for the country took place not only on a regional level, but also at the national level of governance and with the participation of the public, which closely followed the search for a common solution.

Latvia’s regions were particularly active in 2000, taking advantage of favourable decisions passed by the Cabinet of Ministers, as well as the European Union’s Phare programme aimed at supporting Latvia’s National Programme for the Equalization of Social and Economic Development. This regional activity was echoed at the national level. The government and other central institutions supported grassroots initiatives, included regions in the development of the Phare-funded national programme, and found the means to support regional development institutions. These were good examples of how the government and the Saeima can support development efforts outside of the nation’s capital.

A testimony of regional activity can also be found in the cooperation and coordination that takes place within Latvia’s regions in the drafting of regional development strategies, and in the establishment of regional development agencies as implementing institutions. The development of joint projects testifies to the large degree of activity and cooperation that has already taken place.

Although Latgale is the region with Latvia’s lowest economic indicators, it was the first to produce a development plan that complied with all of the European Union’s requirements – the Latgale Regional Development Strategy. All of Latgale’s local governments have agreed to its implementation, as have the region’s politicians under the Latgale Development Council. The Latgale Regional Development Agency has also been established in this regard. Thanks to their ability to clearly formulate their priorities, Latvia’s regions can participate actively in politics on the national level. As a result they are acquiring the opportunity to defend their interests and influence policy-making.

The search for region-to-region cooperation, led by well-educated regional development specialists, has emerged as a new trend. Regional awareness is increasing along with the regions’ political influence, and this will serve to decrease the “brain drain” of talent from the regions over the longer term, increase economic activity, and ensure balanced development across the country.

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ed career opportunities in the ministry and the highersalary offers in the labour market. This is tied to the low, setsalaries at the ministries and to the delay in developing andimproving this system.”

While higher salaries do help to attract young,well-qualified employees, they do not in them-selves guarantee that the institutions in questionwill be able to formulate policies that serve to pro-mote sustainable human development. Similarly, whileoutside factors and Latvia’s historic backgroundmay partially explain the country’s administrativeshortcomings, they do not provide an excuse forthese shortcomings. In this Chapter we shall exam-ine the strong and weak points of Latvia’s adminis-trative institutions, and establish how to developtheir strengths and minimize their weaknesses inthe formulation of high quality, human develop-ment-oriented public policy.

In search of a strategic

vision

A government must have a strategic vision inorder to work effectively. Namely, it must be able to:• see the total picture of human development;• conduct long-term planning;• feel accountable for its policy results;• bring together the various institutions involvedin policy-making, and coordinate their work to theachievement of common goals.

At present the Latvian government lacks a spe-cific strategic direction. It does not have a “unifiedvision” or an official plan directed to reachinghuman development goals over the next 10 – 15years and supported by all political agents.

I n f o r m a t i o n 4 . 1

Principles of good governance

Participation. All people must have the opportunity and the ability to participate in decision-making processes (either directly or through the mediation of interest groups).

Rule of law. Governance must be based on laws that are just and impartially applied.

Transparency. Decision-making processes must be transparent, and this requires a free flow of information. Decision-making processes, institutions and information must be sufficiently accessible for the population to understand and monitor the public policy process.

Responsiveness. Institutions of governance must respect and take into account the interests of various groups of society.

Consensus. Institutions of governance must act as a mediators among various groups, promoting compromise and the arrival at a consensus.

Equality and social justice. Men, women, and the least protected population groups must have equal opportunities to participate in governance and improve their quality of life. The promotion of social justice is the basic criterion for quality policy-making.

Efficiency. Institutions of governance must try to achieve an optimal cost-benefit relationship in performing their functions.

Accountability. Policy-makers must be accountable to the public that has delegated them power and the right to decision-making.

Strategic vision. Governance must be directed towards both short-term and long-term goals. Human development must be foremost in mind, taking historic, cultural and social factors into account.

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While the government declaration could promote acommon vision for the country’s administrativeinstitutions, it cannot guarantee the institution of acommon national strategy. There are several rea-sons for this.

First, any government declaration is a politicaldocument that applies only while the acting gov-ernment is in power. Thus, its sustainability is farfrom guaranteed. In addition, such declarations aretoo all-encompassing for the Cabinet to overseetheir implementation. They address a great deal ofissues, goals and tasks, of which many are second-and third-level priorities. Furthermore, because thedrafting of government declarations has no directlink to the drafting of State budgets, it is highlyunlikely that the priorities written within such dec-larations can be co-ordinated and implementedeffectively. As a result, government declarationslose their overall significance, and become formaldocuments for whose implementation neither thepoliticians themselves nor the country’s adminis-trative institutions feel entirely responsible.

The present policy-making processes in Latviaalso have other features that indicate the lack of astrategic vision. The Cabinet of Ministers hasapproved almost two hundred programmes andother strategic policy documents (strategies, con-cepts, et al.) that are only rarely co-ordinated.Focused human development cannot be attainedwithout a far-reaching vision. Again, the State bud-get’s detachment from the implementation of theseprogrammes must be mentioned. Although ministryemployees are assigned to work out the many pro-grammes prescribed in any government declara-tion, the allocation of national budget funds is usu-ally not connected with t these programmes, whichconsequently cannot be implemented effectively.

There is no institutionalized government moni-toring mechanism under which the governmentwould have to systematically produce reports onthe fulfilment of its policy programmes and on therealization of its priorities (see also Governmentaccountability later in this Chapter). However, theroots of the problem lie deeper within the policy-making process itself, where the country’s politicalleaders are unable to agree upon long-term humandevelopment goals. This problem is reflected inthe continuing inability to arrive at a NationalDevelopment Plan, which is meant to be a medium-term development programme connected withLatvia’s plans to join the European Union (seeInformation 4.2).

Politicians have a limited understanding ofhuman development as an integrated develop-ment process and as a complex policy goal. Forexample, in order to distribute the country’sresources more equally among the population andincrease the general level of prosperity (which isone of Latvia’s main human development assign-ments), social factors should be considered alongwith macroeconomic factors in planning the Statebudget. Worldwide experience shows that econom-ic growth alone cannot guarantee human develop-ment. Human development is based on social jus-tice, equality and participation. Latvia’s policymakers should be thinking more in the long term,and should plan budget resources for projects andprogrammes that will provide a long-term invest-ment in the development of the entire country. Thisentails both a rational allocation of budget funds,and accountability for the spending of publicresources.

As long as Latvia does not have a single, com-mon vision about its long-term development prior-ities, it will also lack consistent priority policies.Furthermore, as long as Latvia’s budget-plannersdo not place priority on sustainable human devel-opment, there is no basis to believe that any prior-ity policies will be effectively realized.

Finally, it is worth noting that any vision of thecountry’s development strategy must encompassnot only goals and priorities, but also the basicvalues that guide the government. The govern-ment must first identify its basic values in orderfor the public to understand what to expect of it,and it is not sufficient for government employeesthemselves to be aware of these values. Thesemust be stated clearly and publicly. As the politi-cal analyst William Dunn writes, the policy-makingprocess is actually a form of practical ethics, sincethe process of granting preference to a particularpolicy is not only a “technical” decision, but also amoral choice.

More attention must be paid in Latvia to theethical principles of policy-making. The assuranceof sustainable human development is closelylinked to such ethical principles as, for example,equality and participation, as well as accountability(see the analysis in Chapter 1). Therefore, politi-cians, civil servants and the “community of politicalmovers” must gain a better understanding of thebasic principles of human development. This canbe achieved to a great extent by attracting qualifiedpolicy expertise.

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Co-operation and

co-ordination

The formulation of open, human development-oriented policies is often hindered by the lack of hor-izontal co-operation between a country’s administra-tive structures. Integrated and co-ordinatedmulti-sectoral policies are just as important or evenmore important than single sector policies from the

human development perspective. In multi-sectoralpolicies priority is given to social justice, the rationalbalance of economic growth and the transparent allo-cation of resources, which can only be achievedthrough co-operative efforts. In view of the prerequi-sites for sustainable human development and the pri-orities connected with them (social integration,poverty reduction, gender equality, regional develop-ment, environmental protection and the rational useof resources), it is obvious that these issues cannot beresolved by one single department or ministry.


The National Development Plan – an attempt to create a strategic visionfor the country

In March of 2000 the Cabinet approved the preparation of a National Development Plan (NDP) that would reflect the development directions expressed in other strategic planning documents, and that would conform to the requirements of the European Commission. The Cabinet determined that the NDP should be a mid-term planning document for the next six years. It should analyze Latvia’s socio-economic situation, assign development priorities and stipulate the steps to be taken to realize these priorities.

A management group formed by high-ranking ministry employees is politically accountable for preparing the NDP. This includes approving the NDP’s preparation methodology, work plan, and programme priorities. A so-called “unity group” consisting of specially selected ministry employees is responsible for the NDP’s day-to-day preparation work. The experts who have been hired to write up the NDP must also consult with this “unity group.”

To those involved, the preparation of the NDP has been a significant learning process. Up until now there had been no attempts to work out a similar plan in Latvia, which means that there is no previous experience to rely on in implementing the project.

Several problems have already arisen in the preparation of the NDP. The project management structure does not promote a feeling of responsibility for the end result. Although the Secretariat of the Minister of Special Assignments for Co-operation with International Financial Institutions is managing and co-ordinating the preparation of the NDP, the management and co-ordination structure remains very fragmented. There is no politically neutral institution capable of simultaneously leading this process and putting aside ministry-level interests in favour of a “common cause” and human development priorities. There is also no higher-level political pressure to induce the maximally effective preparation of the NDP as a document supported by the entire government. Currently no one feels particularly responsible for the NDP as a whole, and the quality of the work put in is suffering as a result.

Those working on the preparation of the plan cite the lack of a long-term development strategy as a major impediment. At present there is no agreement on the direction of Latvia’s development over the next ten to twenty years, and this is delaying effective medium-term planning as well. The State budget planning process remains entirely separate from the NDP planning process. Several people involved in the preparation of the NDP have stressed that there is little sense in speculating about Latvia’s mid-term political priorities if specific budget funds are not allocated for the realization of the NDP.A positive element is that steps are now being taken to unite both processes.

It is significant that the NDP is being developed independently, and that it is not controlled by the European Union or influenced by outside forces. While the Latvian government has generally been able to fulfil activities entrusted from outside in an efficient manner, it must still learn to assume internal commitments and to fulfil them in a co-operative manner for the good of the entire country.

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Research indicates that poor inter-departmentalco-operation in Latvia’s administrative institutionsis hindering the realization of the country’s humandevelopment priorities. Although there are severalsuccessful examples of inter-ministry co-operation(such as in rural policy and Euro-integration), civilservants still place the interests of their own min-istry above all others, and lack the required deter-mination to co-ordinate their efforts in realizing acommon policy. This problem is not unique toLatvia, but afflicts all democratic countries to a larg-er or smaller extent. “Competition” between min-istries is not a universally negative phenomenon, asit may also be a motivating factor and give rise toinnovations. On the negative side, competition canlead to contradictions in State policy. The imple-mentation, monitoring and evaluation of plannedpolicies and programmes may become practicallyimpossible due to the existence of conflicting goals,tasks and activities. Latvia’s administrative institu-tions must seek to establish a greater balancebetween healthy and unhealthy competition.

Latvia’s policy makers themselves have discov-ered the negative consequences of insufficient co-operation between the government’s ministries.Surveyed ministry department directors men-tioned the lack of inter-departmental co-ordinationas one of the largest obstacles to high quality poli-cy-making. Ineffective co-operation is also cited asdelaying the development of specific policy pro-grammes. This has occurred in cases requiring theco-operation of all or nearly all of the government’sministries (such as the formulation of the NationalDevelopment Plan), or in the establishment of pro-grammes requiring the co-operation of two or threeministries (such as a complex plan for reducingpoverty, the assessment of regional developmentand the introduction of health studies in schools).An increasing number of ministry employees arerealizing the need for strengthening inter-depart-mental co-operation, yet statements referring tothe negative effects of a lack of co-operation remainmostly at the rhetorical level, and the situation isimproving only marginally. Therefore, particularattention must be paid to those factors that areimpeding increased co-operation, and to solutionsthat might serve to improve it (see Table 4.1).

As previously mentioned, the insufficientdegree of policy coordination is linked to theabsence of a strategic vision of the country’s future,and to the weak link between national budget andpolicy planning. As long as the budget and policy

planning processes remain separate and distinct,each ministry will focus on protecting its own inter-ests, rather than on implementing the interests ofthe country as a whole. In the absence of a commonframework programme with fixed development pri-orities, the principal mechanism for influencing thebudget’s hidden planning processes is each minis-ters’ self-seeking protection of his or her ministry’sinterests and priority programmes (a rather com-mon phenomenon in many countries). Co-opera-tion with other ministries is deemed to be of sec-ondary importance, as is the joint resolution ofproblems not figuring high on each ministry’s prior-ity list and which would require the “dilution” ofalready limited human resources. Each ministryattempts to “pull the blanket to its side” and toavoid extra duties. Party rivalry within the coalitionitself is also hindering effective horizontal co-oper-ation. Individual ministries are frequently underthe control of one party or another. Each party isinclined to protect the interests of “its own” min-istry at the expense of cooperation with others. Forexample, the Ministry of Welfare has traditionally“belonged” to Fatherland and Freedom/LNNK, whilethe Ministry of Foreign Affairs has for years beenthe domain of Latvia’s Way. The Ministry of Agricul-ture, for its part, is controlled by the People’s Party.The coalition government continues to operate forbetter or for worse, as its ministries vie with eachother in the competition for resources.

Other factors also serve to hinder inter-ministryor inter-departmental collaboration. Again, the slowpace of administrative reform must be mentioned.The European Commission’s report on Latvia’sreadiness to accede to the EU stresses that contin-ued delays in the reform of the country’s publicadministration system have weakened policy co-ordination and the ability of Latvia’s administrativeinstitutions to adopt EU legislation. One must alsomention the underdeveloped policy-making culturein Latvia, where emphasis is placed on “formal andofficial co-ordination” and the avoidance of legalcontradictions in policy making. Practical co-ordina-tion aimed at ensuring optimal policy planningresults for the population occurs rarely. Further-more, policy-making is based more on the country’slegislative framework than on consultations andresearch (see the next section of this Chapter).

While there are several positive examples ofhorizontal co-operation, these are exceptions thathave been induced by such outside factors as Euro-integration (see Information 4.3). The strengthening

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of inter-ministry and inter-departmental co-opera-tion is not “a question of time,” but must be active-ly promoted without further delay.

In individual cases interdepartmental policy co-ordination mechanisms have been developedregarding such issues as integration, poverty reduc-tion, rural development, and the formation of unof-ficial working groups. However, the results and

effectiveness of these mechanisms have suffereddue to the aforementioned negative conditions. Ayear ago there still was no neutral institutionresponsible for inter-departmental policy co-ordi-nation. Such an institution must be politically neu-tral, yet have the power and authority to achievemost of the practical work required for inter-depart-mental co-ordination. It should also support the

Manifestations

• The development, implementation, supervision, and evaluation of concrete policies is not co-ordinated. This often gives rise to conflicting goals, tasks, and policies.

• The development of specific policy programmes is hindered by a lack of co-ordination and collaboration between ministries.

• In the competition for limited resources, each ministry’s priority is to protect its own interests. Common national interests are secondary.

• In the allocation of the State budget, each minister aggressively protects the interests of his or her sector and fights for the accordance of priority to his or her programmes.

• Ministries “pull the blanket to their side” and avoid the extra responsibilities entailed by co-operation.

Factors

• The civil servants involved work mostly within one single ministry, and not within a united civil service. Therefore, there is no strong commitment to work for the sake of a co-ordinated, harmonized policy.

• There is no strategic State vision for the consolidation of executive policies.

• The national budget’s planning process is separate from policy-making processes.

• Individual ministries are frequently under the influence of one party. As a result, parties tend to protect the interests of “their” ministry instead of co-operating with others.

• Ministries will continue to compete with each other for as long as coalition governments remain in power.

• The reform of the State administration has been slow and is still not completed.

• Emphasis is placed on “formal and official co-ordination,” but real co-ordination ensuring optimal policy results occurs rarely.

Solutions

• A common development priority programme and plan must be worked out.

• The government’s ability to manage and oversee the implementation of an overall strategic vision and National Development Plan must be increased. This would strengthen the policy “centre” in Latvia.

• Policy-making must be based not only on the country’s legislative framework, but also on policy analysis, research and consultations.

• Policy makers should learn from successful inter-ministry and inter-departmental examples of co-ordination (such as Euro-integration), and should adopt successful co-ordination and co-operation mechanisms.

• Policy makers should ensure greater co-ordination and co-operation between regional institutions of governance under ministry control.

• The newly created Policy Co-ordinating Department of the State Chancellery must become an effective inter-departmental policy co-ordinator.

T a b l e 4 . 1

Manifestations of weak policy co-ordination. Factors and solutions

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government’s leadership by ensuring and oversee-ing the execution of the national strategic visionand plan. Some experts see this as the necessity tostrengthen the “policy centre.”

The first steps towards creating such a policy co-ordination institution have already been made. Inthe summer of 2000 the State Chancellery ‘s PolicyCo-ordination Department was created (see Infor-mation 4.4). It is hoped that the new department willbe able to mend some major holes in the policy-making process. One significant accomplishmentwould be the co-ordination of the budget planningprocess and fiscal policy with other priority policies.

The public administration’s

content capacity, or ability

to use policy expertise

In public administration the ability to delegateindividual tasks to others is of prime importance.Delegation ensures more effective results, as policyplanners cannot be experts in all of the fields forwhich they might be responsible. If the chief role ofpolicy makers (especially at the department direc-


Euro-integration – an example of positive horizontal co-operation

Policy planners questioned within the framework of research for this Report often mentioned Euro-integration as a positive example of horizontal co-operation. Euro-integration is one of the rare policy areas where all of the ministries have managed to agree.

Since strengthening inter-departmental co-operation within the Latvian administrative apparatus is of prime importance, it would be useful to establish what factors have made co-operation effective in the field of Euro-integration. Analysis indicates that the main factors for effective co-operation have been the following:• The institutional mechanisms of Euro-integration ensure the continuity of decisions. Political responsibility is entrusted to European Integration Council (EIC), which is composed of several government ministers. (It could almost be called “the second government,” because all ministries are represented except for the Ministry of Defence.) This Council has defined Euro-integration as a policy priority. The “executive power,’’ in the form of the Senior Personnel Committee, is a professionally able and responsible unit that ensures the execution of priorities at the ministry level. The balance of political and executive power is an essential requirement for policy co-ordination and effectiveness.• Strong management. The Prime Minister, as the highest figure in the executive, has been a strong and focused leader regarding Euro-integration. He has used his influence to ensure that the highest-ranking members of the government work towards one common goal.• Principle of unanimity. The principle of unanimity or consensus rules within the Senior Personnel Committee. This means that all members must agree on decisions, and that in the case of disagreement the issue in question must be referred to the European Integration Council. The principle of unanimity strongly stimulates the search for compromises and the need to work together. It is also one of the basic principles of good governance.• Co-ordination. The Euro-integration process is co-ordinated by a politically and professionally neutral State institution, the European Integration Bureau, which oversees the unified picture of Euro-integration and does not compete with ministries.• International regulation. The rules of the Euro-integration process are to a large extent dictated by outside agents, and therefore the government does not have to agree or disagree about the main parameters of the integration process.• Perspectives for civil servants. Euro-integration is a political orientation and value that unifies ministry civil servants. In addition, policy-making in a broader context – between Riga and Brussels – offers tempting career opportunities for young civil servants.• Urgency. Euro-integration is an urgent priority. The government cannot afford to be uncooperative.

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tor level) is to be competent administrators, then itis necessary for them to seek the advice of otherpolicy experts. Although highly professional policymakers are extremely knowledgeable about thespheres that fall under their competence, theyoften require assistance in researching and analyz-ing a given situation in depth. This involves prepar-ing concrete policy solutions and writing up broad-ranging predictions that would evaluate not onlythe short-term financial costs and expected resultsof these solutions, but also incorporate such humandevelopment factors as social justice and genderequality, environmental protection, and povertyreduction.

Countries with entrenched democratic tradi-tions entrust the preparation of source informationand problem-solving to experts from both Stateinstitutions and independent policy analysis insti-tutes (see Information 4.5).

In Latvia there are three principal means andmechanisms at the central level of governance forattracting non-government policy expertise:• unofficial consultations with experts and NGOs,

• official consultations with local and internation-al experts through the use of donor funding,• and the assignment of government researchcontracts to Latvian experts within the framework ofResearch Projects Commissioned by State AdministrativeInstitutions, for which the State annually providesresources.

Independent expertise provides policy plan-ning with an analytic and a scientific foundation.Given the opportunity, experts can produce infor-mation that makes it easier for policy makers tounderstand the total picture through the analysis ofone particular policy issue in the context of others.In addition, independent expertise improves thequality of the policy-making process by assuringobjectivity. It is also a link or a “bridge” betweenthe policy-making processes and the public.

An analysis of the policy-making processes inLatvia reveals that policy expertise is used official-ly only in rare cases. A survey of ministry depart-ment officials during the preparation of this Reportconfirmed this. Approximately 60% of surveyeddepartment directors said that they frequently, or


The creation of the State Chancellery’s Policy Co-ordination Department – a step towards ministry co-operation and integrated policies.

Realizing that the government’s policy-making and administration processes lack horizontal co-ordination, the Cabinet created a new Policy Co-ordination Department under the State Chancellery in the fall of 2000.

The planned functions of the department include:• Co-ordinating suggestions for national development goals, setting priorities and formulating policy;• Creating and co-ordinating a united national development planning and result-forecasting system;• Co-ordinating the development, realization and completion of the inter-ministry activity plan regarding the Government Declaration on the Work of the Cabinet of Ministers;• Evaluating draft laws and regulations submitted to the Cabinet and to the Prime Minister (if necessary from the policy co-ordination aspect), and submitting reports on these documents if required;• Analyzing how State institutions are faring in policy making and implementation, and providing suggestions for improvement if required;• Organizing co-operation with local and foreign institutions, within the limits of its competence;• Analyzing individual problems and offering suggestions for solutions at the request of the Prime Minister.

It is too early to tell how effectively this newly created institution will function, but some positive signs are already visible. For example, in the autumn of 2000 the Department analyzed how State decisions are adopted and how policies are developed and implemented in Latvia. In co-operation with the Soros Foundation – Latvia, the Department has also begun a review and evaluation of policy research commissioned by the State. It is hoped that such a “systems analysis” will become a basis for strengthening the policy development process and horizontal co-operation.

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almost always, make use of unofficial consultationswith experts and NGOs. But most directors saidthat they rarely or “practically never” officiallyinvolve independent experts in commissioningresearch for policy planning. As described in Chap-ter 2 of this Report, decision-makers use unofficial,“quick” consultations much more often than com-

missioned expert research. Even though unofficialconsultations do contribute to policy develop-ment, they do not contribute to transparency andpublic accountability. Written suggestions in theform of officially requested expert solutions pro-vide a transparent basis for the evaluation of anoffered policy solution. They can be objectively


What is policy analysis?

Definition.Policy analysis seeks to:

• a) explain a policy problem, b) analyze possible solutions to the problem (examining the consequences of various activity options, including the financial, social and other costs), c) offer a solution that will improve the situation, based on the obtained conclusions and forecasts d) evaluate the consequences of an already implemented policy.• the result of the analysis is a policy analysis document.

Policy analysis criteria. In working out a policy, decision-makers must ensure that the chosen solution is the right one, or the best of several proposals. An open policy system requires the offered solutions to be evaluated by objective criteria. This not only makes it easier for politicians to make decisions, but also makes their decisions more easily explainable and transparent to the public. Impartial policy choice criteria are the basis for transparency. Transparency, in turn, is the basis for open policy. Policy analysis is the instrument that provides the opportunity to implement policy choice criteria and to make the correct decisions.

Usually the suitability of offered policy solutions is determined by the following criteria:• Effectiveness – to what extent will the solution solve the identified problem?• Political viability – does the solution conform to the decision-makers’ strategic vision?• Feasibility – are there enough resources available (human, systems, financial)?• Efficiency – what is the relationship between the benefits and the costs?• Justice – have the situation and needs of the vulnerable segments of society been considered? Will the gap between the affluent and the needy increase? Will men and women equally benefit from the offered solution? Will the solution have a sustainable effect?

The methodology of policy analysis. Policy analysis specialist William Dunn writes that policy analysis can be effective only if it has a good methodology. During the last 50 years, the practice of policy analysis has evolved considerably and has become more complex, but there is a methodological nucleus on which experts agree. This nucleus is described as the critical diversity principle.

The critical diversity principle requires the synthetic unification of several methods and points of view. Its precepts include:• using several research methods,• attracting experts from several fields and academic disciplines,• using several criteria and indicators for the evaluation of a situation,• analyzing information from several sources and using several models in forecasting results.

The diversity of methods in policy analysis helps to ensure a certain objectivity and quality. Analysing a problem from various points of view reduces the possibility that the basis of a solution will be a faulty analysis or prejudiced theoretical assumption.

In Latvia, policy analysis processes must still be developed further in order for critical diversity principles to be fully observed. The strengthening and wider use of policy analysis in the country is one of the most significant prerequisites for policy improvement.

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discussed and evaluated by the populationaccording to objective criteria. Unofficial consulta-tions do not provide such opportunities for publicdiscussion.

Policy analysis research

financed by the State

budget

Official policy expertise can be divided into twocategories: expertise and research financed by for-eign donors, and expertise and research financedfrom the State budget. Expertise from the first cat-egory is more difficult to analyze, because there isno systematic information about what research hasbeen requested, who has financed it and what theresults have been. In addition, the goals of theexpertise conducted under the fist category are notalways set by Latvian policy makers.

However, an analysis of the second category ofexpertise (that is, State-financed policy analysisresearch and its results) reveals several problems.The analysis presented below refers to specificresearch procured with science budget resourcesand regulated by Cabinet Regulation No. 77 On theFinancing and Evaluation of Research Commissioned byState Administrative Institutions. While research com-missioning and budget planning for this kind ofresearch is co-ordinated by the Ministry of Educa-tion and Science, each ministry has a separate co-ordinator who is responsible for administering theresearch process in his or her ministry. These arethe only State resources available to governmentministries for financing policy analysis research.

The following picture is revealed in analyzingover 300 studies commissioned by Latvian Stateadministrative institutions in 1998 and 1999.

Link with policy analysis. Only about half of theresearch commissioned by government ministriesdeals with policy analysis. The rest deals with thepreparation of teaching materials and other issues(history research, public relations materials, bookprinting, computer programme development, etal.). Research financing regulations do not specifythat research must be related to policy analysis andthat requested funds must be directed to scientificresearch. Nevertheless, many research studies notclassifiable as policy analysis have been quite use-ful and well executed. Cabinet regulations state

that research “may be, for example, a study courseproject.” The question does arise, however, of howrationally the resources meant for research havebeen used.

The level of policy analysis. Very little policy analysisresearch has actually been conducted even amongthose research cases categorized as “policy analy-sis.” While frequently a situation is described andanalyzed, and general recommendations and con-clusions are provided, only 5% of all studies offer acomprehensive forecast of policy consequences,model possible solutions, and give recommenda-tions based on the study’s forecasts. In the socialpolicy area such in-depth research on the use ofState funding has never been commissioned. Whilethis could be due to the limited availability ofresources for research (see below), the fact remainsthat most of the research conducted in this area hasnot provided a maximum contribution to the policyanalysis and planning processes.

The reasons for this trend lie rooted in bothobjective and subjective factors:• In Latvia there is no policy-making traditionrequiring the execution of objective, high-qualitypolicy analyses. Such analyses should demonstratethat the offered policy solutions are the best out ofseveral options. Policy analysis is not a precondi-tion for the Cabinet’s approval of a policy, and suchresearch is not viewed as an indispensable part ofthe policy-making process.• Policy makers themselves do not always havethe ability to commission high-quality policy analy-sis studies. In order to expect good results, moreattention must be given to the formulation of prac-tical policy research questions and assignments.• State budget resources for policy analysisresearch are limited. Usually less than 5000 lats aregranted per research study. Although high qualityresearch can also be effected with relatively littlefunding, the overall lack of resources hinders thecommission of deeper analyses and the applicationof the “critical diversity principle.” In any case, themost rational division of the scarce resources avail-able and choice of research priorities should be atthe forefront of government research planning.• The fact that ministries submit their practicalresearch projects individually results in inter-min-istry competition and does not promote much-needed multi-sectoral research. Consequently,there is a lack of State-funded research projectsanalyzing issues of national importance from amulti-sectoral aspect.

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• There are several contradictions in the Cabinetregulations concerning the use of researchresources, particularly in regard to research goals.

Experts from the Latvian Academy of Sciencesassigned to evaluate research submissions oftenare not policy analysis specialists. Frequently theystress the importance of academic research ratherthan policy analysis. Furthermore, ministry employ-ees do not always organize research competitions,and sometimes assign research studies to “trust-worthy“ scientists and practitioners who may not bepolicy analysis experts.• Latvia’s administrative institutions are not per-mitted to hire foreign experts in State-fundedresearch. While this is dictated by the legitimatedesire to promote Latvian expert capabilities andto support local analysts, there has been no con-sideration of the fact that Latvian experts workingtogether with experts from other countries wouldincrease their own qualifications more rapidly.Latvian experts would learn more about themethodology of modern policy analysis, and ben-efit greatly from co-operation with the internation-al policy analysis community. This is borne out bythe fact that past research financed by foreigninstitutions and featuring joint research by Latvianand foreign experts is generally of a higher leveland quality.

Independent policy analysis

in Latvia

As mentioned earlier in this Report, independ-ent experts play an essential role in the policy-mak-ing processes. In Latvia, policy expertise is obtainedmost frequently on the individual level throughindividual consultants. In other countries policyresearch is entrusted to independent policy insti-tutes, or think tanks. Both individual experts and pol-icy institutes play an important role in the diversepolicy analysis community (see Information 4.6).

Several experts have concluded that the level ofpolicy analysis in Latvia is fairly low, although thereare some exceptions. This is a problem not only inLatvia, but also in other Central and Eastern Euro-pean countries, as there are several common fac-tors that hinder policy analysis in this region, suchas the weakness of the NGO sector and the ratherwidespread public mistrust of policy-makingprocesses.

However, another element that significantlydetermines the quality of policy analysis is thecapability of policy researchers. When asked to out-line the principal problems inhibiting the develop-ment of high quality policy-making in Latvia, policymakers mentioned the shortage of independentexperts (along with the inefficiency of availableexpertise), directly after the limited availability offinances and the lack of co-operation among differ-ent ministry departments. According to one min-istry department director, Latvia lacks “a scientificresearch institute that could study the develop-ment of the national economy on a high, profes-sional level.”

Research conducted in 1999 shows that severalorganizations in Latvia partly fulfil the role of policyinstitutes or think tanks. These can be divided intothree categories: academic institutes, NGOs thatexamine specific issues, and sociological and mar-keting research firms. The most serious in-depthanalyses and recommendations have been con-ducted by public interest organizations with specif-ic issues in mind, as well as academic researchgroups and project teams, which consist of individ-uals hired to conduct joint research on one issue oranother. Sociological research firms and academicinstitutes have conducted the most reliable datacollection and classification. While several organi-zations have worked productively with ministrystaff and other policy makers, there are no real pol-icy institutes and think tanks in Latvia. Policy insti-tutes, of course, are not the only solution, as indi-vidual experts also can be hired to assure ananalytic base for high quality decision-making.However, as several ministry employees haveadmitted, finding qualified individual experts is notalways easy.

This deficiency can be partly attributed toresearch traditions inherited from the Soviet era. Inseveral fields, such as chemistry and physics, Lat-vian researchers educated in the Soviet system areof world calibre. However, these achievements donot apply to quality policy analysis and interdisci-plinary research, where Latvia lacks the necessaryexpertise (for a more detailed analysis about thesituation in the sciences see the 1999 Report). Ingeneral, there has not been much scientific activityin the social sciences, which generate the necessarymilieu for political analysis. Furthermore, there areno policy analysis programmes at Latvia’s universi-ties. While several universities do offer a HumanDevelopment course, this is not sufficient to pro-

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What is an independent policy institute?

In European countries, independent institutions that work in the field of policy analysis usually are called policy institutes, while in the United States the term think tank is also widespread. The term think tank originated in the United States during the Second World War and designated places for military policy experts to work out military strategy. During the 1960s the meaning of this term widened to include designated expert groups or institutions working on concrete policy analyses and recommendations.

While all experts and analysts do not agree on the definitions of policy institute and think tank, most of them agree that such institutes must be:

objective – Studies must be based on research and scientific analysis methodologies, rather than on ideological viewpoints.

professional and competent – In order to maintain its trustworthiness, a policy institute must be able to analyze a situation professionally and in depth. It must use its analysis to develop policy solutions and predict the efficiency of each solution, not only from the financial point of view, but also from the perspective of social justice, gender equality, environmental protection and other factors essential for sustainable human development.

independent – Policy analysis must not be subordinate to political parties or other interest groups, including business groupings.

Policy analysis institutes must also:endeavour to promote and strengthen the entire policy-making process – Although policy institutes play

an important role in working out and popularizing policy alternatives, this is only one part of the process of policy analysis. This process also involves the formulation of questions and problems, the evaluation of policy, the promotion of dialogue and other activities.

be capable of influencing the policy-making process – The work of a policy institute cannot be isolated or removed from policy-making processes, because a policy analysis has little significance if it is not considered by policy makers.

be capable of influencing public opinion – A policy institute must have a good reputation among the media, and must be recognized as a trustworthy authority by the public.

Besides offering qualified policy expertise, the ideal policy institute should also build bridges between the public and policy makers. A policy institute can play an important role as a policy mover by strengthening contacts and links between politicians and public interest groups, and by promoting the growth of the policy-making community. The illustrations below show the ideal role of policy institutes in narrowing the gap between the public and politicians.

The public is frequently removed from policy-making processes.

If a policy institute represents only its own interests,then it has no influence on the public or onpolicy-making processes.

If a policy institute restricts its activities tostrengthening dialogue on policy issues in society,or to consulting only with policy makers,then it fulfils only half of its basic role.

A good policy institute must build a bridge betweencivil society and policy-making processes by offering qualitypolicy solutions and by promoting political dialogue in society.

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duce “a critical mass” of qualified policy analysisspecialists. As a result, there is very little competi-tion among Latvia’s highest quality researchers.

An analysis of all of these factors together showsthat the resolution of this problem must beapproached from two facets, one of which concernsLatvia’s State institutions themselves, where cur-rently there is little demand for independent, high-quality policy analysis. The few State employeeswho request such analyses sometimes lack thecapability to attract the necessary expertise, andtherefore policy analysts do not receive much stim-ulus to improve the quality of their work.

The other facet concerns independent policyanalysis itself, where the situation is no better.Although there are some exceptions, independentpolicy analysis conducted in Latvia is generally notconcrete enough, of inferior quality, and cannot beapplied practically. Therefore, the demand for suchanalyses is not growing, nor is there any meaningfuldevelopment in those areas where analyses of thistype would be required. To improve the situation,the developmental potential of policy analysis willhave to be promoted in both directions.

Lately some positive tendencies haveappeared, and there have been signs of growthopportunities. A number of independent policyanalysis expert groups are now developing andorganizing themselves “from below.” In 1999 and2000 several academic institutions and social scien-tist groups began to look for the means to developas policy institutes. Some have already found co-operation partners to strengthen their role as poten-tial think tanks. This institutionalizing process hascontinued in 2001. These new policy institutes arebeginning to implement both research and practicalprojects geared to promoting public participation.

The Soros Foundation – Latvia (SFL) has playedan important role in strengthening policy analysisactivities and the development of policy institutes.Since 1999 it has implemented a complex pro-gramme designed to raise the quality and promotethe growth of policy analysis. Its activities include anumber of research studies, support for policyanalysis research in the Foundation’s priorityspheres, and the organization of seminars or teach-ing sessions for policy analysis researchers. In thesummer of 2000 the Foundation organized a PolicyAnalysis Forum, in which the Prime Minister andother high-ranking officials and leading researchersparticipated. In January of 2001 seven young policyanalysis students began a one-year programme of

policy analysis research and study, and have beenassigned to five developing policy institutes.

To render research results more widely accessi-ble and to promote an exchange of informationamong policy analysts, the SFL opened a new Inter-net access portal on policy analysis in the summerof 2001. The SFL, in collaboration with the OpenSociety Institute, granted over 127,000 USD in 1999and over 231,000 USD in 2000 to the Local Govern-ment and Public Service Reform Initiative, and tothe Constitutional and Legal Policy Institute for thedevelopment of public policy analysis. In addition,the SFL granted 36,000 USD in 2000 for the initiationof an Education Policy Development Programme.

The fact that Latvian decision-makers andpoliticians place considerable trust in professionalexperts may boost the potential role of future poli-cy analysis experts. More than 80% of questionedSaeima deputies said that they trust professionalexperts “to a large extent” or “to a fairly largeextent,” although many deputies admitted thatexperts have little influence on decisions affectingimportant political issues. This indicates that therole of competent experts in Latvia’s policy-makingprocesses must be increased in a systematic man-ner by developing and strengthening policy insti-tutes, and by developing mechanisms for involvingconsultative experts in the planning, implementa-tion and evaluation of policy.

Government accountability

One of the most fundamental principles of goodgovernance is accountability, or the readiness, thedesire and capacity of State officials to report in atransparent manner about what they have (or havenot) done, and to answer to the public for theiractions.

In the context of open policy-making, reports onState administrative activities are a particularly sig-nificant link between the public and the country’spolicy makers. The people have the right to knowfor what purposes State funding has been allocat-ed, as well as the criteria by which financialresources have been disbursed. It is the State’sobligation to make this information easily accessi-ble and understandable to the public, and to beaccountable for it.

During the last few years, the government ofLatvia has taken significant steps towards theestablishment of greater transparency in this

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regard. From a legislative perspective, the most sig-nificant event was the adoption of the Freedom ofInformation Law in 1998. Although this law guaranteesthe right to information from State institutions,Latvia’s institutions of governance must work proac-tively to ensure transparency in the use of financialresources, as well as in policy implementation andevaluation. A positive step in this direction is the1998 Cabinet resolution under which ministry annu-al reports must be made public. In addition, allCabinet meeting protocols and resolutions are nowelectronically accessible at www.mk.gov.lv.

While the public can now access informationthrough the Internet on adopted State policies andread the texts of various programmes, it still faceshurdles in obtaining information on the implemen-tation of policies and specific budget expenditures.For example, although almost all ministries publi-cize their budgets in their annual reports, the figuresare mostly presented in such a general manner thatthey do not reveal a great deal. The budgets of spe-cific programmes, for example, are not listed. TheMinistry of Justice has been an exception in thisregard. In its 1999 report, the ministry listed howmuch was spent on each of its programmes and howmany of the planned activities were implemented. Ifall ministries presented such information to thepublic in a clearer manner, then resource spendingwould become more transparent and public partici-pation in dialogue about policy developmentprocesses and priorities would become more active.

While the number of Internet users in Latvia isgrowing, “normal people” wishing to acquire infor-mation by telephone or in person on the distributionof their tax money may not find this to be an easytask. Ministry home pages on the Internet are by farthe most accessible route for obtaining informationand for expressing suggestions or complaints.

To establish how much and what kind of infor-mation about ministry activities is available to thepublic on the Internet, each ministry’s home pagewas evaluated for this Report according to the fol-lowing criteria:• Annual reports about ministry activities – Arethese available in the home page?• Ministry budgets – Are they published and isthe information clearly presented?• The laws and policies of each department – Arethe laws and policy documents regulating thedepartment’s activities available in the home page?Are there explanations and information about policyimplementation, and how complete are they?

• Ministry commissioned research – Is there anyinformation about research studies, their budgets,and the research teams consulted? Is the informa-tion limited to brief research annotations or arecomplete research reports included?• Interactive opportunities – Is contact informa-tion listed in the ministry’s home page, and areother interactive opportunities offered?• Other aspects – Has the ministry taken advan-tage of technological opportunities in the creationof its home page? Are other participation or trans-parency opportunities offered?

Each ministry’s home page was evaluatedaccording to these six criteria and could receive amaximum of 60 points. The results in Table 4.2indicate that some ministries, such as the Ministryof Welfare, Ministry of Environmental Protectionand Regional Development, and Ministry ofDefence, have created their home pages skilfullyas a form of public accountability for their policies.Other ministries, however, have not made full usethe latest technology to ensure greater publicaccountability.

Several home pages made use of innovativeideas and provided good examples of how infor-mation technology can be used to create a bridgebetween policy makers and the public. The Min-istry of Welfare, for example, offers a “chat” featurethat permits correspondence with high-standingministry officials about current social policythemes (www.sarunas.lm.gov.lv). Although the “chat-ting” on each subject is for a limited time period,all Internet users may continue to read noticeexchanges and send in their comments even afterthe advertised discussion has ended.

The examination of issues that are vital tosocial policy from the viewpoint of ordinary peo-ple is a welcome new feature. For example, in thefall of 2000 the following themes were offered fordiscussion:• Women and employment opportunities• HIV/AIDS – Does it affect you or not?• Why should youth be concerned about theirpensions?• Who is responsible for contraception?• Is a poverty reduction strategy necessary andwhat would it achieve?

Through the use of information technology, theMinistry of Welfare has found a way to establish acloser link between the State’s policy-makingprocesses and the daily life of the people. Con-sidering that one can read a wide variety of opin-

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ions in the chat archives – starting with those ofthe minister, higher officials and departmentexperts, and ending with youth, students and pen-sioners – it appears that the chat feature promotesthe accountability of public policy, as well astransparency and public participation.

Much still remains to be done in order toensure the transparency and accountability ofLatvia’s administrative institutions, but informa-tion technology has already opened new opportu-nities that should be used by all of the govern-ment’s ministries.

The public administration

capacity of local

(or municipal) governments

Local governments play a significant role in theimplementation of human development policy.This role can be examined from two aspects, thefirst of which concerns public participation inadministrative decision-making on local-levelissues. The opportunity and the necessity for peo-ple to participate in the resolution of public issuesand the development of their community is evenmore pronounced at the local level than at thenational level. For many people, local govern-

ments represent the closest, the most familiar andthe most understandable level of administration.The system of relations between individuals andtheir local government must induce public partici-pation in the resolution of issues that concern notonly individuals and their families, but also theirlocal communities.

A beneficial precondition for participation atthe local level is the fact that the public trustslocal governments more than the country’s centraladministrative institutions. Research studies con-ducted by social survey companies testify thattrust in local governments is more pronounced inthe countryside and in small urban centres than inRiga and other big cities. According to a surveyconducted in the year 2000, over half (54%) ofLatvia’s rural residents trust their local govern-ment, compared to only slightly more than a quar-ter (28%) of people living in Riga. In Riga a greaterproportion of respondents chose to answer “Idon’t know,” which indicates that the relationshipin Riga between the municipality and the individ-ual is much more formal and distanced than it is inLatvia’s rural areas and other cities.

Local governments implement a whole string ofimportant functions that concern the economicdevelopment of the territory they administer andthe quality of life of those living within it. They areresponsible for health care, social welfare, educa-tion, public transportation services, the upkeep

Home page address

www.lm.gov.lvwww.varam.gov.lvwww.mod.lvwww.fm.gov.lvwww.mfa.gov.lvwww.lem.gov.lvwww.zm.gov.lvwww.jm.gov.lvwww.izm.gov.lvwww.km.gov.lvwww.sam.gov.lvwww.iem.gov.lv

Evaluation points*

5050494131312928241954

T a b l e 4 . 2

Latvian ministry Internet home pages – examples of accountability

Ministry

Ministry of WelfareMinistry of Environmental Protection and Regional DevelopmentMinistry of DefenceMinistry of FinanceMinistry of Foreign AffairsMinistry of the EconomyMinistry of AgricultureMinistry of JusticeMinistry of Education and ScienceMinistry of CultureMinistry of TransportMinistry of the Interior*Out of a maximum score of 60 points.

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and management of municipal administrative ter-ritories, the provision of communal services andother functions. The wide range of services dele-gated to local governments is based on theassumption that they are able to evaluate theirown needs and capabilities, and to plan theirdevelopment priorities and expenditures accord-ingly. Over the past few years, the functions andresponsibilities delegated to local governmentshave been increasing. Municipalities are thusacquiring a more significant role from the humandevelopment perspective, as their responsibilityand competence increases in the fields of educa-tion, health, participation, prosperity, and qualityof life.

The following sections analyze the capacity ofLatvian local governments to implement goodgovernance and to carry out the human develop-ment functions that have been entrusted to them.This capacity is analyzed from the followingaspects: the capacity to separate decision-makingand executive functions, local administrativecapacity (or the competence of local governmentstaff), technological capacity (or the ability to useinformation technology in administrative opera-tions), the capacity to promote public participa-tion in decision-making, and the capacity to pres-ent reports to the public.

In analyzing the capacity of Latvian local gov-ernments to ensure good governance that favourshuman development, certain factors must betaken into consideration.• The population in Latvia’s local governments isunevenly divided and varies widely. Large andsmall municipalities operate side by side. Smalllocal governments are far greater in number. Thesize of a local government frequently determinesits available resources and its ability to work effec-tively.• There is as yet no joint database from whichinformation about all local governments can becollected. On certain subjects, such as the educa-tion, gender and age of municipal employees, nodata are available at all. This makes it difficult toportray an overall picture of the country’s localgovernments.• Latvia’s local governments have considerableautonomy and freedom to choose their own prior-ities and development solutions. Therefore, theyeach devote varying attention to the aspects ofcapacity (education, information technology, pub-lic participation) that are analyzed in this section.

The relationship between

the decision-making and the

executive powers in Latvia’s

local governments

Although most local government activities aredevoted to everyday social and maintenanceissues, there is a growing tendency to engage inlong-term planning. The ability of a city or parish topresent itself in a positive light from a long-termperspective can help it to attract much-neededinvestment and participate in various develop-ment projects. Long-term planning requires theappropriate allocation of time and humanresources.

In connection with the yet-to-be-clarifiedadministrative territorial and public administrationreforms, there is much discussion about separatinglocal government decision-making and executivepowers as a precondition for effective management.Yet there is still no agreement on the extent andmanner as to which this precept should be applied.Should the position of executive director bedeclared as compulsory for all local governments?The current law on local governments permits themto decide for themselves. Consequently, in manymunicipalities the decision-making and executivepowers are not separated, and the head of themunicipal council is also its chief administrator.Currently slightly more than a quarter of Latvianlocal governments (28%, or approximately 160) haveexecutive directors.

Arguments for and against the separation of thedecision-making and executive powers are of botha theoretical and practical nature. Theoreticallymost local governments agree on the necessity toseparate the two powers, as this would promotegreater competence in municipal decision-making.Frequently local government councillors lack theknowledge and experience necessary for executiveadministrative tasks. The goal of the executive is toalleviate the burden of decision-makers andrelieve them of the need to work on time-consum-ing day-to-day issues. This enables decision-mak-ers to adopt better policy decisions and to elimi-nate the frequently-seen contradiction where thehead of a city council is involved in both the prepa-ration and execution of municipal decisions.

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In addition, the executive can ensure adminis-trative continuity, as theoretically executive per-sonnel do not have to leave their posts followingchanges in the decision-making administration. Thegreater stability of executive positions helps toensure the continuity of decisions taken, and thatinitiated development priorities, plans and proj-ects will not radically change together with a newdecision-making administration.

Furthermore, the separation of decision-makingand executive powers promotes mutual control,supervision and stability. The parallel existence oftwo branches of power decreases the opportunitiesfor illegal lobbying and corruption.

As stated above, most local governments sup-port the separation of the decision-making andexecutive powers, but only about one quarter ofthem have implemented it. The reason most fre-quently cited for combining the positions of munic-ipal leader and executive director is the lack offinancial and human resources. This is a particular-ly pressing problem in Latvia’s smaller municipali-ties, where financial resources are very limited.Local government leaders also fear losing controland influence in delegating powers that theypresently hold. Furthermore, there is widespreadconcern that two antagonistic powers may developand prove unable to co-operate. Some municipalleaders are afraid that with the establishment of aseparate executive, their municipality’s autonomy

may be threatened by a merger of local executiveinterests with those of central State executiveauthorities.

Although the separation of decision-making andexecutive powers is a useful instrument for promot-ing local government efficiency and human devel-opment, one cannot unequivocally conclude thatsuch a separation at the local level would be bene-ficial in all cases. It would probably not be sensibleto impose such a separation of powers in the coun-try’s smaller municipalities, considering their diffi-cult socio-economic situation and shortage ofresources. Administrative territorial reform, whichwould lead to the formation of larger municipalities,remains a pressing necessity. Only then might it bemore practical to separate the decision-makers fromthe executive. In any case, the honesty and compe-tence of municipal employees, and their ability torespect democratic principles, must be upheld.

Local government

administrative capacity –

education and knowledge

In this section the administrative capacity oflocal governments is examined from the aspect ofstaff professionalism and competence. At the

G u e s t a u t h o r

Dainis Rozenfelds, Chairman of the Kandava District Council

We are living better than before

No matter what times we may have lived through, I can be proud of being from Latvia. I am proud of my parents, my family, my children and my grandchildren.

Humans will always be driven by the desire to live a better life in the future and this is good. If we look back critically at the last few years, then we must admit that we are already living better than before. We are quickly approaching accession to the European Union, which will provide another guarantee for our further growth and give additional meaning to the lives of our youngsters. The number of people who have difficulty adjusting to the new system is decreasing. I believe that for the next few years our main priority should continue to be the further development of our rural areas.

I am also proud of our notable achievements in culture and in sports. I have often felt proud to witness the advent of modern technology in our daily lives, the implementation of significant projects and the upgrading of our infrastructure.

There are still many problems to deal with, but we will be able to solve these ourselves, without losing our Latvian essence and while maintaining good relationships with our neighbours.

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beginning of local government reform in 1992, thenecessity for a new and high quality continuingeducation system for municipal leaders andemployees was outlined, in part, to promote a par-allel development of democratic processes inLatvia’s local governments. From a practical pointof view, the implementation of a local government’svaried and responsible functions – which includehealth care, social services, education and culturalservices – requires well-educated and independ-ent-minded decision-makers.

As previously stated, the lack of both humanand financial resources is preventing a number oflocal governments from adequately fulfilling all oftheir assigned functions. For example, in one vitalsphere of local government work – social assistance– 91% of municipal employees had no education insocial work in 1999. The data obtained from a sur-vey of local government leaders shows that 36% ofthem have studied agriculture, 17% have studiedengineering, 13% economics and 10% teaching.Most municipal leaders have no specialised admin-istrative education, which once again illustrates thenecessity for increased education opportunities toraise qualifications. The specifics of local govern-ment work require the skills and knowledge to fol-low changes in legislation, process a great deal ofinformation, and understand municipal activity andcommunity development in the broader context ofeconomic globalization, Euro-integration, and polit-ical participation.

At present the education of local governmentemployees is entirely in the hands of the munici-palities themselves. The leader of each local gov-ernment can personally determine how many andwhich employees to hire, the extent of their qualifi-cations, their salaries, and further educationalopportunities. A precondition for the optimizationof the administrative system as a whole is a uniformpersonnel development system for all levels ofmanagement, permitting the education of a profes-sional, qualified civil service that works under dem-ocratic principles of governance and high standardsof conduct (see the introduction of this Chapter).Theoretically under the present public administra-tion concept, a civil service with the same person-nel management system as that of the country’scentral administrative institutions must be imple-mented in Latvia’s local governments. This wouldentail the same system of quality demands, careerplanning, work performance and evaluation,salaries, disciplinary monitoring and promotion.

Currently, however, a personnel planning systemis being implemented only at the State administra-tive level, for which State budget resources havebeen allocated. An institutional data base has alsobeen established and the appropriate regulationshave been enacted. The new Law on the Civil Service,which was adopted in September 2000, does notforesee the implementation of State civil servicepractices in local governments. One unintentionalexception can be noted. In 2000 the State School ofAdministration organized and paid for the trainingof 22 municipal executive directors. However, thiswas merely a lucky coincidence that occurred thanksto individual activity and initiative, and which is notexpected to continue in the next few years. The cur-rent situation can be described as one that excludesmunicipalities from the uniform establishment of acivil service in public administration.

Various public administration models usedthroughout the world differ according to the cen-tralization level of specific public administrationcomponents. In Latvia the State administration’sability to create a professional civil service – whichis one of a State’s central functions – is still in ques-tion. There still has been no clear decision for oragainst the centralization of Latvia’s administrativesystem, under which the civil service would operateat all levels of governance.

There is still no clear place for local governmentsin the overall scheme of State administrative reform.Yet as stated above, the current public administrationconcept foresees the inclusion of municipal workersin a unified civil service. Although the viewpoints ofmunicipal leaders vary on this issue, one overridingfear is that the autonomy of local governments will bethreatened by centralization tendencies. Not manymunicipalities wish to be integrated into a joint per-sonnel-planning system, which admittedly wouldhave the positive effect of providing certain guaran-tees and social protection measures for municipalemployees. This issue must really be viewed togeth-er with the need for a sensible administrative territo-rial reform. If a large number of smaller municipalitieseventually does consolidate into a smaller numberlarger entities, then there will be more reason notonly to separate executive power from decision-mak-ing power, but also to integrate Latvia’s local govern-ments in one common civil service.

To satisfy the local government need for addition-al education opportunities, a whole series of institu-tions have become involved – the Latvian Local Gov-ernment Studies Centre, the University of Latvia’s

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State and Local Government Project ManagementStudies Centre, the Consultation Centre of the Asso-ciation of Local Governments, and several ministries.These are all individual institutions with independ-ent municipal employee training programmes. Cur-rently in Latvia there is no common system of goal-orientated municipal employee training. Theteachers and trainers of these institutions do nothave a common teaching strategy or programme con-tent (themes, theories, proportion of practical work,priorities) or approach (direct teaching, correspon-dence courses, study groups), or methodology, orteaching qualifications, or target audience.

In addition, there is no local government studiesco-ordination mechanism for supervising the train-ing process. Furthermore, study finances must beprovided by the local government and are deter-mined by the head of each municipality. The recep-tion of additional financing from the State for furthermunicipal training is one of the chief demands ofLatvia’s local governments.

The Phare State Administrative Reform Programmewas initiated in 1999 to overcome the ad hoc approachto municipal employee training and to implement acommon local government training system, yet itsimplementation has been suspended and there is nosign of it resuming in the near future. Once again,resources and time have been spent without theassurance of continuity. As a result, the training of localgovernment politicians and employees is continuingin an uncoordinated manner. In such a situation eachlocal government must decide on the training optionthat best conforms to its needs and resources.

Without an organized municipal training systemand one unified system of criteria, the quality oflocal government services is not likely to improvequickly, as these should be provided by adequate-ly prepared specialists. Several essential questionshave not been answered concerning the requirededucational background, skills and evaluation ofmunicipal specialists for the provision of qualityservices to the population.

Local government

administrative capacity –

information technology

In the 21st century, information technology (IT)has become a precondition for local governments

to be at the forefront of national developmentprocesses. IT facilitates the acquisition and organi-zation of quality information, without which a suc-cessful municipality cannot operate (for moredetails see the 1999 Report). High quality comput-er technology has become necessary for local gov-ernments to provide such essential services as theregistration of residents, social assistance, healthcare, educational and cultural opportunities, sup-port for local enterprises, environmental protec-tion, employment promotion, as well as the upkeepof the local infrastructure, streets, and roads.

The acquisition of information technology hasdepended mainly on the financial capabilities ofeach local government and on the initiative of itsmunicipal leaders. Therefore the use of IT comput-ers and software varies widely among Latvia’s localgovernments (see Table 4.3).

As shown in the table, a fairly large proportion oflocal governments is still not equipped with com-puters, and about a third of those in use are out-dated. (Computers with 486 processors should bereplaced as soon as possible, because they do nothave the capacity to deal with modern informationsystems.) Local governments with Pentium I and Pen-tium II computers are able to use modern informa-tion systems. The proportion of Pentium III comput-ers reveals the percentage of local governmentsthat have been able to acquire computer technolo-gy within the last year.

Most of the software mentioned in Table 4.3 isrequired for municipal operations according tomodern standards. Accounting software should beused by all local governments, yet at present onlytwo out of three local governments do so. Only onein eight municipalities is linked to the NAIS Regula-tory Enactment Information System, while only one-fifth uses the Internet. The contrast with Latvia’scentral government institutions could not begreater, where the Internet has become a daily anduniversal means of communication, as well as adocument search and information tool.

Those local governments with no computertechnology are faced with a slower flow of informa-tion and documents. Traditional means of docu-ment circulation can no longer assure effectiveresults. Municipal activities require co-operationwith the central government, which possesses cen-tralized (and computerized) information on thepopulation, real estate, taxes, et al. While part ofthis data is collected in the municipalities, the vari-ety of means used to collect, organize, preserve,

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C H A P T E R 4

and process it reduce local governments’ capacityto partake in the optimal circulation of information.In addition, municipal computer systems are oftenisolated and not linked with similar systems else-where – even within the same municipality, not tomention other parts of Latvia and centralized Stateinformation systems.

The computerization of local governments, likeemployee training, must ultimately be resolved atthe State level. A significant step in this directionhas been the implementation of the government-approved Unified Local Government Information System.By the year 2004, all municipalities are to be linkedto a single data transmission system, with access toState registers and with information about eachmunicipality provided on the Internet. The firststeps for implementing the programme were takenin 2000, when the extent of local government com-puterization was established through a comprehen-sive survey. In addition, the Local Government Infor-mation System Concept was worked out, and Statefunds were allocated for the acquisition of comput-ers and software, as well as the consolidation of thedata transmission infrastructure. Local governments

will also provide partial funding in order to increasetheir participation and interest in the project.

The fact that the State has already invested450,000 lats (over 700,000 USD) to support the com-puterization of local governments gives hope thatthe work started will continue. The implementationof modern information technology should greatlyimprove municipal administrative work by speed-ing up decision-making, and decreasing both thenumber and volume of documents and notices tobe submitted. It should also promote a greaterdegree of information exchange among State insti-tutions, municipalities and the public, and providethe public with better local government informationservices.

Public participation and

accountability

A survey of local government leaders and thepublic during the preparation of this Report gavethe opportunity to clarify the views of both sides

T a b l e 4 . 3

The use of computer technology and software in Latvian local governments (no data on Riga included)

Type of local govenment

CityDistrictParish

Use of computers(% of localgovernments)

729264

Use of softwareType of software

Accounting softwareComputerized calculation of real estate property taxComputerized registration of residentsComputerized registration of natural migrationUse of the Internet (with permanent or modem connection)Use of the NAIS Regulatory Enactment Information SystemUse of the GIS programme

Used by % of all local governments

6951422421137

Total number ofcomputers inlocal governments

9821701176

Computers by typeof processor

486

322535

Average no. ofcomputers perlocal government

16243

Pentium I,Pentium II

657060

Pentium III

355

1 2 6


about public participation in the decision-makingprocess. An overwhelming majority (86%) of sur-veyed municipal leaders believes that the publichas either very extensive or fairly extensive oppor-tunities to influence decision-making at the localgovernment level. However, only 22% of the publicthinks so. One-third (33%) of municipal leaders per-ceive the passivity of the population and the lack ofparticipatory motivation as a very serious problem,while another 58% see it as a fairly serious problem.Most of the surveyed local government leadersbelieve that the public has sufficient opportunitiesto participate in local decision-making processes,but is impeded by its own passivity and lack ofinterest. Most surveyed members of the public feelthat they cannot influence decision-making in theirlocal government, although they generally believethat people do want to participate in the develop-ment of their community, and that mechanismsshould be introduced to increase public participa-tion in policy-making.

Besides attitudes and opinions, the researchconducted for this survey also sought to establishwhat local governments and the public are current-ly doing to promote local participation (see Table4.4). Local government leaders indicate that munic-ipalities engage in consultations and various formsof co-operation with the public, civil society groups,NGOs and State institutions. A certain initiative andactivity on the part of both municipalities and thepublic is evident regarding meetings with deputiesand municipal employees, and regarding publicdiscussions. However, local government initiativesregarding consultations with interest groups andNGOs, and regarding the delegation of functions toNGOs have not been as successful.

Overall, the democratic link between the vari-ous political agents at the local government level isstill at the search and development stage, and thusineffective. This is also shown by the public evalua-tion of available forms of participation in local gov-ernment decision-making. For example, in many ofthe surveyed municipalities, elected politiciansand councillors have met with the public and heldpublic discussion meetings. Yet less than one-thirdof the surveyed public has participated in suchactivities and only one-third regards these partici-pation forms as effective. The survey results showthat participation, public involvement, and open-ness in local government activities are priorityissues that must be fully, rather than formallyimplemented.

One determinant of local government capacityis the quality of adopted and implemented deci-sions and their evaluation by the various partiesinvolved. The evaluation of municipal activities canoccur either through the form of an internal controlsystem, or through various means of public controlwith the participation of the inhabitants, the massmedia and public organizations. The Law On LocalGovernments indicates that city or parish councilmeetings must be open, and that council decisions,council chairmen’s directives, audit commissionconclusions and open meeting resolutions must beaccessible to the public.

One step towards the promotion of greateropenness and accountability may be soon be takenwith an expected amendment to the Law on LocalGovernments, under which local governments wouldhave to submit annual public reports, as has been thecase with government ministries since 1999. Thefirst such local government reports may be submit-ted in 2002 on the current calendar year. While thisexpected amendment can be considered as a pos-itive step, there are serious doubts about its effec-tive implementation. Some local governments havealready said that they lack the means for fundingsuch reports, as well as the human resources forwriting and publishing them. Others doubted theusefulness and practicality of such reports.

The above again confirms the often-stressedcontention in this Report that the availability ofinformation on its own does not necessarily entailparticipation.

Internal audits

Internal audits are one mechanism for ensuringthe internal control and accountability of local gov-ernments. The basic task of such audits is to establishwhether local government activities have conformedto the law and to the interests of the electorate.Unfortunately, current internal audits or control sys-tems do not work in practice or are ineffective. As aresult, such democratic principles of governance asthe transparent use of financial resources andaccountability for adopted policy decisions have notacquired the needed momentum.

A well-organized and planned internal controland financial monitoring mechanism can also serveas a valuable policy analysis instrument. Currentlyinternal audits are much better organized and moreseriously conducted in Latvia’s central administra-

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C H A P T E R 4

tive institutions. Ministries have developed specialdepartments for this purpose, organized trainingsessions, issued handbooks, developed reportforms and attracted foreign investments.

According to law, each local government mustsubmit an annual report listing all of its revenues,expenditures, loans and special budgets to the

State Treasury. The most essential part of thereport – an evaluation of the efficiency of the localgovernment’s spending practices – is prepared byan audit committee that is part of the local govern-ment structure. The Law On Local Governments statesthat audit committees must establish whetherfunds have been spent in accordance with their

T a b l e 4 . 4

Local government activity in promoting public participation, and actual public participation in municipal policy-making processes

Often, always Sometimes Practically never Yes No

Local government activity in promotingpublic participationWhat methods and resources do you use, and howoften do you use them for resolving important issuesat the local government level? (% of surveyed local government leaders*)

Consultations andco-ordination withother local governmentsMeeting withmembers ofthe publicConsultations withinterest groupsand NGOsConsultations andco-ordination withentrepreneursConsultations with theAssociation of LatvianLocal GovernmentsPublic discussionmeetings

Consultations withministries andministry departmentsConsultations withpolitical parties,politiciansDelegation offunctions to NGOs

* The answer “cannot decide” is not included in the Table.

977

220

6832

0

4548

7

4450

6

4447

9

3460

7

1969

12

831

60

344

50

90

1684

694

793

793

1189

1189

693

693

Public participation in municipal policy-making processesHave you partaken in any of the activities listed below? (% of surveyed inhabitants*)

Wrote letters to mylocal government

Met withmunicipal deputies

Participated indiscussions about my

city’s development planInclude myself among thecategory of entrepreneurs

and self-employedTurned to NGOs

Participated in publicdiscussion meetings

Met with ministersand civil servants

Met withSaeima deputies

Active memberof an NGO

1 2 8


intended use as outlined in the annual budgets.The committees must also verify the efficiency ofspending by local government agencies, enterpris-es and employees. In addition, they must ascertainwhether municipal property has been upheld inaccordance with the law and in the interests of thepublic. The audit committee reports to the localgovernment council of deputies, reports all irregu-larities and provides recommendations for theirfuture prevention.

An analysis of the work of audit committeesreveals that many local governments do not havethe capacity to plan their financial resources effec-tively, evaluate the efficiency of budget spending,and implement transparent budget-planning andreporting procedures that conform to the law. Thework of many audit committees is only conductedfor form’s sake. Only in rare cases do committeesinclude evaluations on the efficiency of resourcespending in their reports.

Several reasons can be given for the develop-ment of such a situation. The lack of capable spe-cialists or human resources has already been men-tioned. The Law on Local Governments does notstipulate the required professional expertise ofcommittee members. The formation of audit com-mittees is actually a political decision that is left tothe discretion of the dominant political forces ineach local government. As a result, there is a riskthat such audit committees will turn a blind eye todiscovered irregularities. Practically no attentionhas been devoted to training audit committeemembers or providing them with handbooks andpractical recommendations on the execution oftheir work. Minimum standards of professionalcompetence should be established for audit com-mittee members.

The fact that audit committee members work ona voluntary basis in their free time also contributesto the formal nature of such audits, which may paymore attention to economic activities than on thequality of governance and management efficiency.Although by law audit committee work should bepaid for from local government budgets, in practicefunding for such work is usually not provided.Resources are also not allocated to hire profession-al audit companies or certified auditors, who by lawmust be invited by the local audit committee atleast once a year to conduct a professional audit.Last year, according to State Auditor data datingfrom September 2000, annual audits conducted bycertified auditors had been submitted only by 30%

of local governments. The main argument present-ed for not submitting the required reports has againbeen based on the inability of local governments topay the high fees of certified auditors or auditingcompanies. Furthermore, in Latvia there are only131 certified auditors for 578 local governments. Inaddition, many certified auditors specialize inauditing private companies, but not public institu-tions. These factors have also hindered compliancewith the demands of the law.

Since the size of Latvia’s local governments andthe resources available in each municipality variesgreatly, co-operation in the development of effi-cient auditing systems could occur through the jointformation by smaller local governments of commoninternal audit systems that would decrease auditexpenses and improve their quality. Emphasisshould be given to the publication of audit resultsthat are accessible to all inhabitants.

Administrative

characteristics of Latvia’s

smaller local governments

Latvia is administratively divided into local gov-ernments of varying size, the vast majority of whichare very small (see Information 4.7).

The population in almost a third of Latvia’s localgovernment territories does not exceed 1000 peo-ple, and does not exceed 2000 people in 71% oflocal government territories. An overwhelmingmajority of local governments (84%) administer ter-ritories whose population numbers less than 3000.This fragmentation of Latvia’s territory has beeninherited from the first period of independence(1918 –1940), and from the subsequent Soviet peri-od, which lasted until 1991. The fact that municipal-ities remain small is also influenced by demo-graphic processes, namely, the migration ofinhabitants to larger urban centres, and by the slowprocess of voluntary local government unification.While the optimal size of local governments has notyet been determined, several political analysts andexperts from Phare projects in public administrativereform and regional development have pointed tothe necessity of forming larger local governments.Although the size of a local government is notalways the determining element in its develop-ment, the smaller a local government, the larger the

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C H A P T E R 4

risk that its development will be slower and that itwill have less resources at its disposal than largerlocal governments.

Several potential risks threaten the efficiencyand democracy of smaller local governments.• The limitations of political choice. In order to developsuccessfully, a local government must have demo-cratically elected politicians and capable leaders atits helm. Since democratic elections are based onchoice, they work best under conditions of widerchoice. Small local governments have a small elec-torate that is reduced even more by the fact that onaverage only half of eligible voters use their right tovote in local government elections (56% of eligiblevoters participated in the 1997 municipal elec-tions). Small local governments have a smallernumber of deputies to be elected and a limitedchoice of candidates. Therefore, the complaint thatthere is “nobody to choose from” is widespread insmaller local governments. To promote greaterpolitical activity and wider choice, the Saeimadecreed that in the 2001 elections, each local gov-ernment must have at least two lists of candidates.• The presence of personal biases. In smaller local gov-ernments the subjectivity of personal likes and dis-likes is much more pronounced. For example, localgovernment leaders frequently assemble peoplethey know and like in choosing their staff, and rarelyuse professional qualifications as criteria for the

selection of employees. Smaller local governmentshave a greater likelihood of becoming captive tospecific interests, which could lead to the unjustifi-able use of resources and the introduction of unde-mocratic styles of governance.• The lack of human resources. By law all local govern-ments must perform the same set of functions andprovide the same range of services. Smaller local gov-ernments experience greater difficulty in hiring a suf-ficient number of competent personnel to performthese services. This deficiency is particularly evidentin the smallest and least developed rural municipali-ties, and is partially fuelled by the migration of youngand talented people to more developed urban cen-tres, including Riga. Smaller local governments can-not afford to hire many employees and thereforetheir functions are performed by less people, whosimultaneously perform secretarial work, social work,supervise registry offices, and conduct other tasks. Assome local government functions require specificknowledge, they are either not implemented or areperformed poorly due to the lack of specialists. Thelack of qualified lawyers is an acute problem in manymunicipalities. The problem of finding competentpeople to work in local government auditing commit-tees has already been mentioned. In smaller localgovernments financial savings are usually imple-mented at the expense of staff, and often five or sixfunctions are performed by two or three employees.


Breakdown of Latvian local governments at the end of 20001

Breakdown of local governments by status (in November 2000 Latvia had 578 local governments)Parishes 473District cities 65Counties (newly formed joint municipalities) 7Republic cities 7Districts 26

Breakdown of local governments by size of population (except for the 26 district local governments)1 – 1000 170 31%1001 – 2000 220 40%2001 – 3000 72 13%3001 – 10,000 66 12%10,001 – 30,000 17 3%30,001 – 900,000 7 1%

1 Latvian Department of Local Government Affairs

1 3 0


• The weakness of administrative procedures. The Law onLocal Governments requires the establishment of onepermanent committee for financial and socialissues and one for educational and cultural issuesin each local government. These committeesdevelop and prepare draft decisions for review atcity or parish council meetings. The work of localgovernment institutions and enterprises, budgetprojects and expense estimates are under theauthority and control of these committees. Again,due to the lack of human resources, these commit-tees do not even exist in some small local govern-ments. This in turn has a negative effect on thequality of decision-making. In order to promote thereorganization of administrative procedures, theLaw on Local Governments requires each local govern-ment to work out its own statutes. Theoretically,these statutes regulate the organization of localgovernment activities and decision-making proce-dures. The statutes of Latvia’s larger municipalitieshave been more or less developed, are opera-tional and are regularly up-dated, whereas in thesmaller municipalities they are frequently of poorquality, out-dated and not always followed. Thisresults in a greater risk of spontaneous and subjec-tive decision-making that is concentrated within anarrow circle.

• The shortage of financial resources. The capacity oflocal governments to implement administrativeactivities designed to promote human develop-ment depends to a great degree on the financialresources at their disposal. Good governance costsmoney. In most cases, the wealthier the municipal-ity, the more opportunities and tendencies for it toadvance and develop.

An analysis of local government revenues andadministrative expenditures shows that revenuesfrom taxes and non-taxed income per residentincrease along with the size of local governments,while administrative expenditures and State subsi-dies from the Local Government Equalization Fundcorrespondingly decrease (see Figure 4.1).

The weak financial capacity of smaller local gov-ernments is reflected in all three financial analysissections. The smallest municipalities have thesmallest revenue and their upkeep is the mostcostly. As a result, smaller local governments can-not support themselves and properly perform theirassigned functions, which is why they receive thelargest State subsidies. The proportion of adminis-trative expenditures in local government budgetsfluctuates from two percent to one quarter. Thehigher the proportion of administrative expendi-tures, the less resources available to perform other

F i g u r e 4 . 1

Local government revenues, expenditures and State subsidies in relationship to local government size

Revenues (taxes and other sources) Administrative expenditures State subsidies

140

130

Lats

perinh

abita

nt

Number of inhabitants

120

110

100

90

80

70

60

50

40

30

20

10

011601-290003500-116002500-34992000-24991500-19991200-1499900-1199600-899599

1 3 1

C H A P T E R 4

important tasks, not to mention long-term invest-ments for community development. An examina-tion of the ratio of taxed and non-taxed local gov-ernment income per person – which is an indicatorof a local government’s economic capacity – showsthat the country’s smaller municipalities are in theleast favourable position.

It must be stressed, however, that in spite of thepotential risks (which can apply to any municipali-ty) and their unfavourable position, many smallmunicipalities are working quite successfully, andskilfully coming to terms with their unenviable situ-ation. An analysis of their performance mechanismsand degree of efficiency would be useful.

The power to reduce the many risks facingsmaller local governments does not depend solelyon the skill and honesty of their personnel. Otherfactors, such as their location and infrastructure, arealso important. One proposed solution for strength-ening local governments involves the consolidation(or amalgamation) of smaller municipalities intolarger ones. This process is slowly being imple-mented within the framework of administrative ter-ritorial reforms begun in 1992. However, to dateonly 28 local governments have merged into 11 con-solidated local governments that include sevencounties, and it is still too early to judge whethertheir overall operational capacity has increased.

The slow pace of reforms to date shows that inspite of the promised advantages of amalgamation,many local governments are reluctant to engage init. Experts who have surveyed several districtsadmit that the amalgamation process itself pres-ents some difficulties. The main benefits of amalga-mation would include the improvement of adminis-trative and economic capacity (which in turn shouldlead to higher service quality), the increased spe-cialization and higher qualification of employees, agreater concentration of financial resources,improved territorial development planning andparticipation in international projects, and the fur-ther decentralization of State governance in thefavour of local governments (through the allocationof more functions currently executed by the State).

The main drawbacks include public oppositionto amalgamation, the costs incurred by suchchangeovers, and the distancing of councillors fromtheir electorate. The chief benefit of maintainingthe fragmented administrative territorial division inits current form would be the preservation of closercontact between local government councillors andthe public. Yet the losses are many: a heavy, ineffi-

cient and slow administration process, encumberedbudget planning, a possible increase of administra-tive expenditures, an arduous process of outliningactivity priorities, the continuing uncertainty aboutfurther development perspectives and the ultimateprospect of forced amalgamation.

Amalgamation is the most convenient routefrom an administrative point of view, as it wouldalleviate the supervision, co-ordination, and execu-tion of administrative tasks and attract specialists.This would also promote quicker economic growthand encourage human development. Whateverroute is taken in the course of reforms, it is essen-tial to ensure that all principles of good governanceare strengthened, namely: participation, trans-parency, responsiveness, equality and justice, effi-ciency, accountability and strategic direction.

Conclusions and

recommendations

If planned national programmes are not grantedsufficient resources, then their implementation willremain in doubt. In order for policy-making to pro-mote human development, budget planning andadoption processes must be linked to the strategicpriorities and vision of the country.

A long-term development vision must first beagreed upon for the country, before human devel-opment goals can be set and their implementationmonitored and evaluated. The State Chancellery’sPolicy Co-ordination Department has an essentialrole to play as the principal co-ordinating institu-tion for working out this vision.

National programmes and budget allocationsreflect national priorities and values. In order topromote transparency and understanding about itsvision for Latvia’s future, the government must pub-licize a declaration of its values, ethical foundationsand fundamental principles of governance. Thesefundamental principles must be formalized andembodied in the daily functions of the State’sadministrative institutions. Mechanisms for moni-toring the observance of these fundamental princi-ples should be established, with emphasis beingplaced on the prevention of bad governance, ratherthan on penalties in the event of transgressions.

In order for the multi-sectoral co-ordination ofhuman development policies to become more effi-cient, and for all individuals to feel that they also

1 3 2


have a role to play in the country’s overall develop-ment, the principle of team activity must bestrengthened among ministry staff. Unhealthy com-petition between ministries must be diminished,and obstacles to inter-ministry co-operation in pol-icy-making must be eliminated.

Governmental public relations mechanisms mustbe developed to increase transparency and account-ability. Besides the “traditional media,” the Internetand the latest technologies should also be used.

Annual reports are useful instruments that pro-mote ministry responsibility, but do not incorpo-rate concrete policy goals or indicators to measurethem. Therefore, the reader (in this case, the pub-lic) has little opportunity to analyze the efficiency ofthe country’s administrative institutions. Informa-tion about budget expenditures must also belinked to information about the execution of con-crete programmes. These principles should beobserved in the local governments’ forthcomingannual reports.

In order for quality policy analysis to play anincreasing role in Latvia’s national policy-makingprocesses, the capacity of policy analysts and theinstitutions requesting such analyses must beincreased. Changes must also be made to the Statesystem of commissioning policy analyses in orderto facilitate the transfer of international experienceto local policy analysts and increase the level of co-operation between Latvian and foreign researchers.Research by foreign experts is usually conductedoutside of local policy analysis circles. Consequent-ly, the capacity of Latvia’s clients and local analystsis not increased.

Inter-ministry co-operation in the research ofmulti-sectoral issues must also be promoted, andpolicy analysis priorities should reflect national pri-orities.

To improve the quality of public policy in thenearest future, the capacity of independent policyanalysis experts and policy institutes must also beraised in order to permit them to conduct qualita-tive analyses of public policies and to forecast theconsequences of such policies through cost-benefitstudies, including the evaluation of social costs.Here social costs are understood as the widening ofinequality or misunderstanding between varioussocial or ethnic groups or between men and women.

In this regard, the opportunities for potentialspecialists to gain the necessary policy analysisskills must be increased in Latvia’s higher educa-tion system.

Decisions on important issues that concernmunicipal development, their implementation andtheir adequate supervision are dependent on theknowledge and skill of local government politiciansand employees. The necessity for skilled and hon-est people is compounded by the fact that localgovernments are more difficult to supervise andcontrol than the central State apparatus.

Increased public participation in local govern-ment decision-making must be promoted, particu-larly regarding such essential issues as communitydevelopment and improving the quality of life. Thiscan be done by organizing more public discussions,by involving public interest groups in decision-making and development planning, and by organiz-ing partnerships between local governments, NGOsand businesses.

In order for local governments to perform theirfunctions according to modern requirements, prior-ity must be placed on increasing their technologicalcapacity.

The autonomy and decentralization of local gov-ernments is not always is the best solution forimproving municipal capacity. A single overallapproach for improving the administrative capacityof local governments must be developed andimplemented. To date the greatest emphasis hasbeen placed on strengthening the capacity andimproving the quality of the country’s central (ornational) institutions.

In promoting high standards and demandinghigh quality services from local governments,appropriate financing must be provided and amunicipal support programme must be estab-lished at the national level. The development of aunified training system for municipal politiciansand employees would be a positive step. Onlythen would it be possible to implement uniformand compulsory standards of service in all localgovernments. Resources must also be allocated toincrease the administrative capacity of local gov-ernments. Without an appropriate local govern-ment infrastructure, which includes informationtechnology, local governments will be able toensure neither a qualitative flow of information,nor document circulation, nor an effective deci-sion-making process. In many local governmentsthe principal means of document circulation isstill the national postal service. Some local gov-ernments have no faxes or computers or Internetconnections, and their telephone lines are of poorquality.

1 3 3

C H A P T E R 4

Local government capacity could be raised bydeveloping various local government co-operationmodels, thus respecting their municipal sovereign-ty and permitting them to choose on their ownwhether or not to amalgamate.

Administrative capacity is not developing at thesame speed and equally successfully in Latvia’scentral and local institutions of governance. In cer-tain aspects of capacity, achievements have beenmuch more pronounced at the central level of gov-ernance (some examples include access to informa-tion, internal auditing and public accountabilityprocedures, and uniform training systems). In order

for human development in Latvia to be more uni-form, the capacity of the country’s administrativeinstitutions must be more evenly balanced out.

In certain aspects of capacity not much has beenachieved at either the central or local governmentlevel. The attraction and use of policy expertise hasnot been effective, and assessment indicators arenot used. Therefore it is impossible to evaluate theresults of several development processes. Evalua-tion and transparency are still insufficiently appliedin the country’s administrative institutions. Thishinders policy continuity, as well as the participa-tion of an informed and knowledgeable public.

Documents

Administrative Capacity in the Contextof Human Development