Analysis of the decentralization process in Macedonia

By Srgjan Dimitrievik

SeeNet Operative Secretariat for Bosnia and Herzegovina and Macedonia

December 2010

Summary

The start up of the process of decentralization: setting the legal basis ................................. 3

A milestone in the process: the fiscal decentralization ........................................................ 4

An equal regional development ....................................................................................... 6

The Inter-Municipality Cooperation .................................................................................. 6

Progress and problems in the process of decentralization ................................................... 7

The main national actors in the decentralization process .................................................... 8

Association of Municipalities (ZELS) .............................................................................. 8

Ministry of Local Self Government (MLS) ....................................................................... 9

Offices for Regional Development ................................................................................. 9

The international support to the decentralization process.................................................. 11

Key factors ................................................................................................................. 13

List of main documents related to decentralization ........................................................... 14

References ................................................................................................................. 14

List of acronymic ......................................................................................................... 15

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Annex. List of project focusing Local Self-Governement implemented in Macedonia ............. 16

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The start up of the process of decentralization: setting the legal basis

The process of decentralization has begun in Macedonia with the adoption of a Strategy on Reform of the System of Local Self-Government in 1999. The process was intensified after signing the Ohrid Framework Agreement (OFA) in 2001. OFA carried to the adoption of amendments to the Constitution that were necessary to achieve

the objectives defined by the Strategy. Particularly, the amendments enable the process of further decentralization of competencies, provide an enlarged scope for the use of languages1 in the local government and define new procedures for the adoption of laws related to the

system of local self-government. The adoption of a new Law on Local Self-Government in January 2002, strengthening the

local administrative autonomy, represented another important step.

The municipal competencies, prescribed in the Law on Local Self-Government include: child

protection, collecting taxes, urban and rural planning, managing primary health care, primary and secondary education, social welfare services, communal activities (comprising water supply, sewerage, public hygiene, waste administration, public transportation, construction and maintaining local roads), sport and recreation and all cultural activities, local economic

development. In order to intensify the activities for implementation of the decentralization process, the

Government of Macedonia in 2003: • Adopted an Operational Programme for Decentralization of Powers for 2003-

2004 that defines the time-schedule for approving the necessary laws; • Established an Inter-ministerial Decentralization Working group and a

Coordinating Body of State Secretaries to coordinate the decentralization process with other reforms in the social and administrative spheres;

• Signed a memorandum for collaboration with the Association of the Units of Local Self-government (ZELS);

Moreover, the Ministry for local self-government (MLS) signed a memorandum with ZELS and with the Agency for Civil Servants to coordinate the training of local servants.

In 2004, a huge move forward was assured by the adoption of three crucial laws aimed at enhancing the quality of local governance by enabling further development of the decentralized system:

• Law on Financing of the Local Self-government that regulates the financing of the

municipalities through their own incomes and donations by the Government2. • Law on Territorial Organization of Local Self-Government that reduces the number

of municipalities (units of local self government) from 124 to 843.

• Law on the City of Skopje that sets the City (composed by 10 municipalities) as a separate unit of local self government.

Amendments to over other 70 laws were required in order to carry out the transfer of

competencies, funds, facilities and personnel from central to local level. Many of them have been approved, but the process has not been completed.

1 According to OFA, in the units of local self-government where at least 20% of the population speak a language other than Macedonian, that language and its alphabet shall be used as an official language, in addition to the Macedonian language and its Cyrillic alphabet. 2 2004 Law on financing of the local Self-Government, art.3 3 http://mls.gov.mk/pdf/brosura.pdf

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The majority of the laws identified in the Operational Programme for Decentralization of

Powers have been adopted before July 20054:

Local economic development:

• Law on catering • Law on tourism • Law on craftsmanship • Law on trade

Health care:

• Law on health protection • Law on infectious diseases protection of

inhabitants Local financing:

• Law on financing of the Units of Local Self-government

• Law on communal taxes • Law on administration taxes • Law on property taxes

Social and child protection

• Law on social protection • Law on child protection

Environment

• Law on Nature protection • Law on Environment/Waste

management • Law on the quality of air

Culture:

• Law on culture • Law on museums • Law on memorial monuments • Law on libraries

Sport:

• Law on sport Defence:

• Law on defence • Law on protection and rescue

Education and science:

• Law on primary education

• Law on secondary education Urbanism and rural planning:

• Law on determination of names of

streets, squares and other infrastructure buildings

• Law on public roads • Law on water supply and sewerage

• Law on public transportation

Following the establishment of the normative and institutional framework, the activities for the implementation of the decentralization process started on July 1, 2005, with the transfer of competencies, employees, equipment and properties from the central to the local level and with the municipalities capacity building in order to enable them to successfully take over the

devolved competencies.

A milestone in the process: the fiscal decentralization

The fiscal decentralization process in Macedonia started in July 2005 with the implementation of the Law on Financing the Units of Local Self-Government.

The Law foresees the following type of transfers, approached in 2 phases, from the central government to the municipalities5:

• Three earmarked grants for assisting municipalities respectively in the areas of education, culture, social policy and child protection;

• VAT revenues; • Retention of Personal Income Taxes;

• Capital grants; • Funds received for delegated competencies.

According to the Law and subsequent legislation, the municipal revenues6 are: • Property taxes (annual property tax, tax on transfer of real estate, tax on inheritance

and gifts) • Local fees (communal fees, administrative fees)

4 While part of laws are in procedure to be adopted and another part is completely missing.

5 2004 Law on financing of the local Self-Government, art.8 6 2004 Law on financing of the local Self-Government, art.4

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• Communal charges (construction land charges, communal activity charges, spatial

planning charges) • Revenue from assets (leasing, interests, property sale) • Financial donations (a contract between the donator and the mayor after approval from

the municipal council)

• Fines • Self contributions (authorized through a local referendum) • Revenues from concessions on mineral resources and

• Revenues from Personal Income Tax (PIT). Local authorities operate through a set of separate budgetary accounts:

• Principal budget;

• Budget of donations; • The budget of earmarked grants and • The budget of self-financing activities.

With the exception of possible delegated functions, all municipalities have the same expenditure responsibilities while only the City of Skopje has special legal provisions for sharing the competencies with its constituent municipalities7.

The Law provides municipalities with sufficient flexibility to seek the most efficient form to deliver services. Thus municipalities can establish municipal companies for delivery services or delegate private companies. Some municipalities are setting up inter-municipal cooperation

agreements with neighbour municipalities with the aim to jointly implement some functions requiring certain scale.

As defined by the Law on Financing of the Units of Local Self-Government8 the first phase of fiscal decentralization foresees the fulfilment of the following conditions:

• The municipal administrations should have at least two employees qualified to work on financial management, budget preparation, budget execution, accounting and

financial reporting; • The municipal administrations should have at least three employees qualified to work

on determination and collection of taxes.

The second phase of fiscal decentralization was supposed to start in July 2007 but its implementation has been postponed to January 2008. To access to this phase municipalities have to meet following criteria:

1. The conditions for phase I are fulfilled;

2. Good financial results are shown in the previous 24 months;

3. There is an adequate staff capacity for financial management;

4. The notification to the Ministry of Finance about the good results from the work is timely

and regular, and Ministry of Finance verifies it;

5. There are no outstanding liabilities towards suppliers or any other creditor that overcome

the usual payment condition

In January 2007 a Commission for monitoring and assess the compliance of these conditions was established. The Commission consists of a president, nine members and a secretary appointed by the Government of Macedonia. Notably among the members there are the President and Vice President of ZELS, mayors of municipalities, representative of the line

ministries, academia and international experts.

7 The City government of Skopje and the municipalities that compose it, are assigned as a whole the same package of functions as other municipalities. 8 2004 Law on financing of the local Self-Government, art. 46

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An equal regional development

The adoption of the Law on the equal regional

development in May 2007 started a new phase in planning and balancing the development of Republic of Macedonia regions.

With this Law the Government established the institutional framework for an EU-compatible regional policy, grouping

Municipalities in eight regions9. The administrative structure of regions foresees:

• Council for Regional Development (composed by majors of all municipalities within the region). The Council is a decision-making body responsible for the adoption of regional programs and strategies, definition of a list of prior projects affecting local economy and citizens life needs and for their implementation.

• President of the Region (elected among mayors by the Council). • Office for Regional Development responsible for the definition of a program for the

regional development coherent with the programs of member municipalities, a related

action plan and consequent projects and for their implementation. Moreover the Office should represent the Region and provide information about it.

The Offices for Regional Development are financed by the Ministry of Local Self-Government

(50%) and by the municipalities (50%) according to the number of citizens in each municipality10. The Ministry of Local Self-Government has an annual program and funds to support the

development of the regions. By the law11, 1% of national GDP should finance regional projects but this result is far wawy to be reached12.

Up to now approved projects focused on the development of specific marginalized localities and of rural settlements.

The final adoption of the national Strategy for Regional Development in the year 2009 offered the possibility to concretely apply the aim declared in the Law on the equal regional development about the revitalization of numerous deserted areas in Macedonia.

Moreover the Strategy strengthens the idea that local economic development is linked to the development of new businesses and to the establishment of strong public-private partnerships.

The Inter-Municipality Cooperation

Аs a result of the decentralization reform, central government transferred to Municipalities an increasing number of competencies. But not always the financial, administrative and human resources capacities of Municipalities increased of the same measure.

In order to overcome some of the existing deficiencies in autonomous implementation of the assigned tasks and to deliver efficiently public services, the Law of Inter-Municipality Cooperation was enacted in June 2009. The Law enable Municipalities to sign inter-municipal

9 http://mls.gov.mk/reg_mapa/index.htm 10 Law on equal regional development, art. 62 11 Law on equal regional development, art. 27 12 For the 2011 budget, ZELS required of Government of Macedonia to allocate at least 1% of the

national GPD to encourage equal regional development.

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cooperation (IMC) arrangements/partnerships13 aiming at facilitate their economies of scale

and provide higher quality and more efficient services for the citizens. In the period 2006-2010, UNDP supported the signature of 23 IMC agreements involving 54 municipalities. In 2011 additional 3 agreements are expected to be signed involving 6 municipalities14.

Progress and problems in the process of decentralization

The Macedonian Government has recognized regional development as a strategically important issue in the EU accession process even if decentralization wasn’t immediately accepted by all

Parties. Ethnic Macedonians opposition parties and nationalist parties called for a referendum against the decentralization that took place on November 7, 2004. The initiative failed due a low a turn-out of voters (barely 26%) after an openly declared EU and US support to the Macedonian government.

In the meantime main legislation was set up and Macedonia moved into line with European standards and has aligned itself with the European Charter of Local Self-Government. According to GTZ, the necessary institutions have been set up, additional staff recruited and

financial resources made available. In four of the eight development regions, strategic documents (regional development programs) have been prepared. Inter-municipal networks with regular meetings of decision-makers have been established. More than 70 regional

development projects have been implemented jointly to date. However, a fully developed legal framework for implementing efficient regional policies and regional economic development is still lacking, as are institutions with appropriate expertise and capacity.

Regarding fiscal decentralization process, following progresses can be presented: 67 out of 84 municipalities entered phase two which aim is to provide a more substantial transfer of competencies to the local level.

Municipal tax collection is improved. Municipalities received a higher share of the revenues collected from management of the State owned lands. Efforts were made to strengthen the capacity of municipalities in the areas of property tax

administration, public financial management, debt management and financial control. Internal audit units were established in 38 municipalities. In 36 municipalities, service centres and their branch offices were established. Staff was trained and working procedures were put in place.

In 2010 ZELS actively participated in the preparation of two important Laws such as the Law on construction sites and the Law on legalisation of illegal constructions whose drafts are in parliamentary procedure.

In the position document of ZELS for 2011, an increasing VAT for municipalities from the current 3% to 4,5% is requested as well an increase of the amount of personal income tax from the current 3% to 15%15.

Although some good results have been achieved, many important issues still remain16: 1. Great diversity and disparities among municipalities capacities to perform specific

functions;

2. Dysfunction and slow down of decision-making processes when the Mayor and the majority of the Counsellors belong to opposing political parties;

13 Inter-municipal Cooperation can be defined as an arrangement between two or more local authorities for accomplishing common goals, providing a service or tackling with a mutual problem. 14 Information provided by UNPD Project for Inter–Municipal Cooperation in Macedonia 15 Source: http://www.zels.org.mk 16 Source: Ivana Boskovska “The decentralization process in Macedonia”, Analytical - Vol.3, Issue 1 (2010).

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3. Information, supervision and monitoring functions still not defined/implemented while a

successful decentralization would require a strong central government capable for monitoring;

4. The central government does not always keep the rules it makes. 5. The local government budget unit in the Ministry of Finance lacks capacity to support

fiscal decentralization and the inter-ministerial working group did not meet for a year prior to August 2009.

Other problems are: Municipal revenue isn’t sufficient to address adequately the assigned tasks. The main causes are a still centralized management of State-owned lands, not adequately monitored or implemented property tax collection and not updated databases of tax payers.

Even if the decentralization foresees the transfer of responsibility for culture, sport and social protection to municipalities, they are not provided with adequate budget (that remain at central level). For instance, regarding the education the Ministry of finance transfers the earmarked funds to

Municipalities for maintenance and heating expenses of school buildings, salaries of employees and transportation of school students. However, the allocated funds are not sufficient due to an inadequate planning of expenses. Therefore, ZELS has requested the Government to

foresee more funds for education in national budget for 2011 according to a calculation prepared by different-sized municipalities which shows that the actual amount of funds isn’t satisfactory17. Moreover priorities of capital investments for the schools, are defined in the annual program prepared by the Ministry of Education who transfers funds directly to the

schools. In this way municipalities still have no budget for investments in the schools.18 To overcome these issues ZELS requests to establish criteria for allocation of funds for capital investments in the schools and it asks to be actively involved in the work of the central bodies

on planning of these funds19. Another consequence of this lack of budget is that municipalities cannot participate to EU funded project due their difficulty to provide a co-financing resources.

Eleven municipalities remain in phase one and they have sizeable debts. There is no consistent set of data on arrears accumulated in municipalities. The accounts of twenty two municipalities (twelve of them are in phase two), have been

blocked by legal proceedings relating to arrears. The administrative capacity of some municipalities, particularly the smaller ones, remains low

in the areas of financial management, tax administration and financial control. The transparency and accountability of local government administrations is still inadequate. In several instances, trained staff of municipal service was replaced following the election of a

new mayor. Exchanges of data between cadastre, civil registry, Republic revenue Office and municipalities isn’t adequate to the needs.

The main national actors in the decentralization process

Association of Municipalities (ZELS)

ZELS holds important responsibilities for taking forward the decentralization process.

17 Source: Office of ZELS in Skopje 18 Source: Ministry of Local Self-Government 19 Source: http://www.zels.org.mk

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According to USAID, “ZELS has become the primary voice of municipalities’ interests and

opinions during the course of decentralization. ZELS has effectively lobbied for adjustments that support municipal interests and is a leader in defining the policy framework for decentralization”. ZELS and the City of Skopje on October 2010 opened a joint office in Brussels which will

enable a closer relationship with EU institutions. Important municipal associations cooperating with ZELS are the Association of Finance

Officers and Association of Public Communal Enterprises. Ministry of Local Self Government (MLS)

MLS has three pillar activities: Decentralization, Regional development and IPA II component –

Cross Border Cooperation (CBC) MLS is responsible for the preparation of a 3-years Program and an Annual Action Plan for Decentralization.

In order to expand municipalities revenue, MLS has supported a proposal aimed at transfer of competences over construction land from MLS to the municipalities. However, the related Draft Law prepared by Ministry for Transport transfers to municipalities only the management (and

not ownership) over construction land20. Currently the 3-year Program 2011-2013 is under preparation. In order to define directions and objectives, a study about the decentralization process will be prepared by UNDP. The study will analyze the institutional and legal framework as well as the implementation of the

decentralization process up to now. Analyze will be completed by the end of February 2011 and will provide directions for the 3-year Program of MLS that will be adopted by March 2011.

As the balance of the regional development is an issue, in 2010 MLS organized the First Regional Conference on reducing the disparity of municipalities in Ohrid, with the support of GTZ. 17 countries from SEE and Caucaso region attended the meeting during which the document Ohrid agenda for regional policy has been adopted. The next conference will be

held in Serbia in 2011. Regarding the Cross Border Cooperation (IPA II component-CBC21) so far there were 3 calls (Albania, Bulgaria and Greece in 2010) and 1 call is planned with Kosovo at the beginning of

2011. No CBC is planned with Serbia. While the CBC with Bulgaria is the most coordinated (thanks to previous experience with CARDS programs), with Albania and Kosovo the cooperation isn’t based on long term relationships.

Within an ALDA program, MLS signed a 3-year-long Memorandum with the Region of Low Normandy (France) and every year the parties define the priorities.

MLS is interested in supporting the establishment of relationships and twinning between Macedonian and Italian regions as well it is interested in signing a Memorandum of Understanding with SeeNet partners. Moreover MLS is interested in exchange of experience in

management of EU funds. Offices for Regional Development

These Offices are in charge for the definition of programs for regional development that should

be coherent with municipal development strategies and with the national program for using of IPA funds, defined by the Government of Macedonia. Regions are not involved in decision-

20 The law on construction land is in process for adoption by the Macedonian parliament, Source: http://www.zels.org.mk/ 21 Source: http://mls.gov.mk/index.php?news=327

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making process related to definition of priorities for IPA funds that is in charge to the

Government. Regional Offices are also enabled to establish relationships and synergies with regions from other countries and to exchange experiences in using European funds.

Almost all regions established partnership with international organizations and receive assistance (in term of training and capacity building, particularly on preparing project proposals) and financing22. In particular 4 regions are involved in a GTZ program and 2 regions

in a UNDP one, Swiss Development Agency-SDA is working in Pelagonija Region and USAID is partially working with Skopje Region.

Skopje Region, composed of the City of Skopje and its 10 urban municipalities and 7 rural

municipalities, is the richest region in the Country but also the less experienced in managing EU funds as the area wasn’t eligible in any Cross Border Cooperation (CBC) program23. Moreover, Skopje Office for Regional Development was the last established one (only on December 2009), and it has been fully operative only since August 2010 when the director’s

office was strengthened by a staff of 2 persons. Skopje Region adopted a 3-year development program 2009-2014 and an annual Action Plan.

The identified priorities of Skopje regional development are the following: Economic measures: 1. Economic measures (local and regional) for the establishment of security and protection of the

elementary level, such as family and small family businesses. Support the policies, incentives and

financial methods to bear fruit for a short time; 2. Promoting entrepreneurship; 3. The Macedonian products and services (tourism) should be protected and branded and promoted at

the domestic market first and then on the nearby regional markets; 4. Promoting business incubators and technology parks; 5. Financial education and literacy of citizens.

Environmental measures: 6. Measures to purify the soil by planting specific crops such as turnips, etc. 7. Measures to protect air and water through the strict implementation of environmental permits; 8. Investment in alternative energy sources like solar panels and windmills - generators of electricity; 9. Investing in conserving electricity, i.e. energy efficiency measures.

Institutional measures: 10. Ensuring fairness in the legislative and executive system of governance, transparency and

accountability; 11. Ensuring the effectiveness of government (local and central) system in the delivery of public services

to citizens; 12. Strengthening inspection supervision of all social categories; 13. Continuous measurement and monitoring of the values of key institutions.

The main problem of the Region is the disparity between rural and urban municipalities, because the 7 rural municipalities have specific priorities related to infrastructures and waste management and water supply (only one legal depot “Drisla” is existing) not perceived as

priority from the urban municipalities. In particular, a feasibility study and cost benefit analysis is needed to open a center for collection and selection of garbage.

Skopje Region has signed a Memorandum of collaboration with “Gorenska” region (Slovenia) and Regional agency of Slovenia and two study tours in Slovenia has been conducted (for

22 Source: interview with MLS 23 At the beginning of 2011 a CBC call for proposal is foreseen with Kosovo, although Skopje Region could apply they have difficulties to identify a reliable partner from Kosovo.

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majors and for local economic development department representatives). But the Region

hasn’t any permanent partner that can provide technical assistance in institutional capacity building and sharing the experience of using the EU funds. While technical assistance in designing and implementing infrastructure projects is needed (as well as infrastructures are the priority of the region). 24

The international support to the decentralization process

The European Union (EU) is the largest donor in the region and its importance is gradually increasing while the resources available from other donors, such as the World Bank and

USAID, are diminishing. In the framework of the Stabilization and Association Process (SAP) one of the main areas of European Union assistance to the Republic of Macedonia government is the support to the

Local Self Government Sector. As stated in European Delegation in Macedonia web site, the EU support combines capacity building at the central level with several municipal pilot components, assisting the Ministry of Local Self-Government in carrying out its responsibilities as a coordinator of the governmental

decentralization program and enhancing the operational capabilities of the state institutions and municipalities.

List of main projects in attachment.

Moreover the European Union provides assistance to the candidate countries and potential

candidates in their progressive harmonization with the EU standards and policies as well as with the acquis communautaire, through the Instrument for Pre-Accession Assistance (IPA25).

Republic of Macedonia as candidate country for EU membership has access towards all 5 IPA

components, namely: • Transition Assistance and Institutional Building; • Cross-Border Cooperation; • Regional Development;

• Human Resources Development; • Rural Development.

A significant support comes also from the U.S Agency for International Development (USAID). USAID Macedonia focuses its activities in the development of modern finance and tax administration systems, supporting municipalities in accessing the second phase of decentralization.

List of main projects in attachment. Another important supporter of the decentralization process of Republic of Macedonia is UNDP

UNDP contributed to the development of some key laws, policies and studies (Law on Inter-Municipal Cooperation, Draft Law on Legalization of Illegal Buildings and Informal Settlements, Assessment of the Status of the Decentralization Process and the subsequent Fiscal

Decentralization Assessment for Equitable Services for All), which provided strategic advice to the government.

24 Information is provided by Centre for Development of Skopje Region in October 2010 25 Established by the EU Council with the adoption of the Regulation (EC) No. 1085/2006 on 17th July 2006, as unique pre-accession instrument for the period 2007-2013, this instrument replaces and unifies the previous pre-accession instruments: Phare, ISPA, SAPARD, CARDS.

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Moreover UNDP supports the institutionalization of the inter-municipal cooperation to

overcome municipalities’ capacity deficiencies in delivering public quality service due to size and resource constraints. As results of this efforts, on 15 October 2010, UNDP and the Ministry of Local Self Government signed contracts for the implementation of 8 inter-municipal cooperation projects26.

As stated by UNDP web site, in the period 2010 – 2015, UNDP will continue to focus its activities on the improvement of the effectiveness, accountability and transparency of the local

governance system for provision of local public services, promoting equitable and inclusive regional development, and enhancing inter-ethnic dialogue and social cohesion.

List of main projects in attachment.

In December 2010 representatives of ZELS and ANCI signed an agreement for cooperation in the area of sustainable tourism development27, within the framework of the SEENET Cooperation Program.

26 http://mls.gov.mk/index.php?news=319

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Key factors

• Ohrid Framework Agreement defining the cohabitation of different ethnic communities in

Macedonia improved the allocation of power among ethnic communities. It foresees that in

municipalities where there are different ethnic communities that present 20% of the

population, all decisions are brought according to the ‘Badinter Rule’28.

• Every Macedonian municipality has its Mayor and municipal council elected through direct

elections. They have also their own budgets financed by personal income tax and from

supplements of the national budget.

• Today Macedonia’s territory is divided into 84 municipalities (plus the City of Skopje

which consists of 10 municipalities) and 8 regions which have only administrative role.

With the adopted changes municipalities have bigger responsibilities then before in the

budgetary matters as well as into the local economic development, the environmental

protection, urbanism, cultural and sport’s activities, the social and children’s protection and

the education.

• An important part of the whole decentralization process is the fiscal decentralization

started in July 2005. However, municipalities still struggle to gather their own income and

the State still finance most of them.

• Under conditions of lack of sufficient financial, administrative and HR capacities, especially

smaller Municipalities face difficulties to autonomously implement the assigned tasks and

efficiently deliver public services. To overcome this situation a Law on Inter-Municipal

Cooperation has been adopted in 2009.

• Reforms are still needed as this decentralization process is far from over. The authorities

need to provide continuous reform environment in order to build upon earlier

decentralization successes.

28 Badinter rule, grants the Albanians the right of veto, even without the support of other ethnic minorities, in issues concerning culture, religion, the use of language and education.

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List of main documents related to decentralization

1999 - Strategy on Reform of the System of Local Self-Government.

2001 - Ohrid Framework Agreement (OFA)

2002 - Law on Local Self-Government in January

2003 - Operational Programme for Decentralization of Powers for 2003-2004

2004 - Law on Financing of the Local Self-government

2004 - Law on Territorial Organization of Local Self-Government

2004 - Law on the City of Skopje

2007 - Law on the equal regional development

2009 - Strategy for Regional Development

2009 - Law of Inter-Municipality Cooperation

2009 - National Programme for adoption of the aquis communautaire

2010 – Ohrid agenda for regional policy

References

• Analytica “Decentralization trends in Macedonia 2006” (August 2006).

• Regional Networking Project of Freedom House Europe “The process of decentralization in

Macedonia, Prospects for Ethnic Conflict Mitigation, Enhanced Representation, Institutional

Efficiency and Accountability” funded by USAID (2006). • Public Administration Reform Department OSCE, Spillover Monitor Mission to Skopje “Survey

on decentralization 2007” (September 2007). • Ivana Boskovska “The decentralization process in Macedonia”, Analytical - Vol.3, Issue 1,

(2010). • Public Administration Reform Department OSCE, Spillover Monitor Mission to Skopje “Review

of decentralization for 2008” (November 2008).

• Aleksandar Lj. Spasov, Institute for social democracy “Progress” “Decentralization in

Macedonia (equal regional development and the local economic development)” (November

2009). • The Association of Local Self-Government Units in Macedonia (ZELS) supported by Spillover

Monitor Mission to Skopje “Report on the current state and the needs of municipalities for

entering in the second phase of fiscal decentralization in Macedonia” (December 2007). • Center for Economic Analyses (CEA) “Report on the process of decentralization in Macedonia”

USAID (July 2007).

• Final report USAID “Macedonia Decentralization Project” (August 2007).

• Ministry of Local Self Government of Macedonia “Information on the decentralization process

October 2008 – August 2009” (September 2009).

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List of acronymic

ADKOM Association of Public Communal Enterprises

AFO Association of Finance Officers

CBC Cross Border Cooperation

GDP Gross Domestic Product

GTZ German Technical Assistance

EU European Union

IMC Inter-Municipal Cooperation

IPA Instrument for Pre-Accession Assistance

MLS Ministry for local self-government

OFA Ohrid Framework Agreement

PIT Personal Income Tax

SAP Stabilization and Association Process

SDA Swiss Development Agency

UNDP United Nations Development Program

USAID United States Agency for International Development

VAT Value Added Tax

ZELS Association of the Units of Local Self-government

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Annex. List of project focusing Local Self-Governement implemented in Macedonia

European delegation in Macedonia, source: www.delmkd.ec.europa.eu

EU assistance in this sector amounts to €56 million. Under the CARDS Program, several sequenced projects were implemented paving the way towards the concrete launching of the Decentralization Process:

• From 2000, Technical Assistance for Local Self-Government (totaling € 8,9 million)

provided policy advice to the Ministry of Local Self-Government to enhance the dialogue between all stakeholders in the transfer of competences. Priority is given to strengthen administrative capacities at central level, in particular at the Ministry of Local Self-Government for facilitation, monitoring and supervision of the decentralization process in the different areas of competence. The municipalities were also supported in enhancing the service delivery to the citizens, while the Association of Municipalities (ZELS) was assisted in the elaboration of a business plan and the

establishment of an office for training coordination. The EU has also introduced Municipal Award program in order to recognize sustainable achievements and best practices of the municipalities which have made tangible impact in improving the lives of citizens. Three municipalities were awarded with financial support for infrastructure projects that they have recognized as most valuable for the wellbeing of their citizens.

• 2005-2007, Technical Assistance to Support the Fiscal Decentralization (€ 2,0 million) with

the aim to assist the government to effectively manage and implement the financial aspects of the decentralization process. The program supports the municipalities to increase their capacity to implement proper financial management systems ie. accounting practices and reporting mechanisms.

• The Training and Capacity Building for Local-Self Government Institutions (€ 2,8 million) completed in 2006 focused on developing management and technical practices for the efficient functioning of municipal urban planning units and strengthening the guiding and monitoring role of the Ministry of Local Self-Government in this area.

• During 2006, IT Equipment and a related Transfer of Knowledge Program were delivered to all

municipalities to strengthen the municipal urban planning management. The IT equipment is capable of digitizing data and images, therefore enabling the exchange of urban planning information in an efficient and consistent manner. A customized software for a Database for Municipal Urban Planning was designed and installed at the Ministry of Local Self-Government.

• The assistance for the Development of Local Infrastructure (€ 37,7 million) finances local infrastructure projects on the basis of competitive calls for proposals through Project Implementation Units, providing project management and supervision services for the projects proposed by municipalities. The project contains an on-the-job training component, supporting

the municipal administrations involved in the preparation and implementation of the construction works.

• In order to enhance the operational capabilities of the Association of the Units of Local self Government (ZELS), the EU has funded (€ 0.8 million) construction of their administrative

headquarter building. The ZELS House of Municipalities will host all the ZELS employees and the regular visitors in nice new facility providing offices, meeting halls and storage place in total of 1100m2. This building is designed introducing the concept of energy saving and solar energy.

• In addition the European Agency for Reconstruction has been entrusted to manage € 4 million of

grant funds from the Danish Government in support to Municipal Environmental Infrastructure Projects for the economic and social development of the municipalities through the reconstruction of small-scale sewerage facilities and building of the municipal technical management capacity. The program was successfully completed and delivered a total of 12 projects mainly in the rural areas of Bitola, Ohrid, Kumanovo, Strumica, Stip and Skopje.

USAID's Decentralization Project, source: http://macedonia.usaid.gov/

USAID’s Decentralization Project is assisting Macedonia in the development of more effective, responsive, and accountable local government. It is a continuation of the USAID Local Government Reform Project, which provided technical assistance in the area of decentralization to the Government of the Republic of Macedonia, to the Association of Units of Local Government (ZELS) and to the Local Governments. The total value of the project is $11.5 million through July 2007.

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The program includes funds designated for:

• IT hardware and software support to selected municipalities to implement their new

responsibilities,

• small scale community improvements that make visible the benefits of decentralization,

• grant support for municipal associations. The core structure consists of the Policy Reform team, Association Development team and Municipal Management Services team, all of which are supported by the cross-cutting Citizen Participation team.

The Municipal Good Governance Fund (MGGF) is a funding facility within the Program, with an amount of $3,500,000 designated to support municipal small scale community improvement projects and IT hardware and software procurement for many municipalities in Macedonia. The awards have all been made to projects identified by municipalities with input from citizens, neighborhood associations, NGOs, and the business community. Municipalities were eligible for community projects only if they had achieved milestones in their competences and institutionalized citizen participation practices.

With the passage of the key decentralization legislation, the project focuses its assistance to municipalities on developing the managerial and administrative capacity to successfully assume the new responsibilities under decentralization. In the majority of municipalities, the project does the following:

• Supports the establishment of financial management and tax administration capacities, with a

special focus on property taxes and relevant local revenues;

• Ensures regular utilization of citizen participation mechanisms in public decision-making through practicable IT solutions; and,

• Assists in the implementation of one stop permitting systems that result in improved zoning, city planning, permitting, etc.

The project continues providing support in building the capacity of the following municipal associations, with a special focus on increased financial independence, member service functions and sustainability:

• Association of Units of Local Self Government (ZELS);

• Association of Finance Officers (AFO); and

• Association of Public Communal Services Providers (ADKOM). The project assists the government of Macedonia in defining a sound secondary legislation and regulatory environment toward the successful implementation of the decentralization process.

The program also assists in the establishment of a regulatory environment for the providers of communal services, which will result in higher collection rates, improved customer satisfaction, and improved financial management.

USAID’s MACEDONIA LOCAL GOVERNMENT ACTIVITY (MLGA)

Key Facts Start date: .................. July 30, 2007

End date:.................... June 30, 2011 Project budget:.......... $5,986,978 Implementer: .............ARD, Inc. Expected results:

• Municipalities have increased financial management capacity and accountability, and as such: (a)

are eligible to continue to “Phase II” of the decentralization process of the Government of Macedonia, and (b) are eligible to borrow from private credit markets.

• Municipalities are increasingly capable of generating own-source revenues and are decreasingly

dependent on central government transfers;

• Municipalities are increasingly transparent and accountable to citizens regarding local government financing and decision making.

Components: The MLGA Task Order defines six technical components: 1. Intergovernmental Finance Policy 2. Accounting, Budgeting and Financial Management 3. Planning, Capital Budgeting and Municipal Credit 4. Tax/Fee Collection and Own Source Revenue Generation

5. Local Economic Development 6. Transparency and Accountability

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Achievements/Impact: The MLGA provides technical assistance, training and systems support to Macedonian sub-national

governments. This includes fiscal and budget management, local revenue raising, community participation, and planning and development of local government associations. The project prioritizes fiscal decentralization, including the development of the necessary planning, management and accounting skills to allow Macedonian municipalities to access private credit markets and achieve European Union standards. The MLGA, working with the Association of Municipalities (ZELS) is leading the policy dialog on fiscal

decentralization and construction land management, two key concerns for intergovernmental relations in Macedonia. The MLGA is also on schedule to complete installation of key systems for local property tax administration and financial management in the 20 municipalities not served in the previous USAID project. Upon completion, USAID will have standardized local property tax administration and financial management across the country, dramatically streamlining coordination between local governments and the Ministry of Finance (MOF).

The MLGA also piloted the first external financial performance audits of municipal government in Macedonia and is providing technical assistance for audit replication as interest in this practice increases. The MLGA is also building capacity for international capital markets to provide credit rating services to Macedonia municipalities and plans to have the first international financial securities rating for a local government in Macedonia before the end of 2009.

UNDP, source www.undp.org.mk

PROJECT TITLE: Inter-municipal Cooperation for Better Service Provision and EU Accession

PARTNERS: Ministry of Local Self-Government, Ministry of Finance, Association of Local Self-Government Units (ZELS), Civil Servants Agency, Municipalities of Vasilevo, Novo Selo, Bosilovo, Tetovo, Brvenica, Stip, Karbinci, and others. FINANCED BY: Kingdom of Norway and UNDP BUDGET: US$ 2,250,000 IMPLEMENTING PERIOD: Aug 2006 - Dec 2010

UNDP support the Government of Macedonia to establish new administrative structures for inter-municipal cooperation, develop supporting financial schemes and train civil servants. The established inter-municipal cooperation arrangements were specifically targeting smaller municipalities, assisting them to mitigate financial and capacity constraints in service provision. Thus, at the outset of the program, the cooperation among municipalities has focused on urban planning, communal services and financial management. The overall objective of the program is to contribute to the development of inter-municipal cooperation in

the country, thus supporting the efficient provision of affordable and quality public services to citizens. Ultimately, the program seeks to establish an effective and sustainable system for supporting IMC which would be adopted and expended by the Government on a national scale through its own policies and resources. To achieve this goal the program focuses on creating necessary human and institutional capacities for implementation of inter-municipal cooperation. In order to provide solid institutional framework and enduring effects, the program is supporting the continuous policy dialogue with the central Government,

donor community, financial institutions and private sector. This would provide coordinated actions in support of IMC and easy access to financial recourses for practical implementation of joint initiatives In period 2010-2015, Program interventions will follow a two-pronged approach: a) support to the national authorities in addressing the remaining policy issues and b) strengthening capacities and governance systems of sub-national level authorities responsible for implementation of decentralized

competencies. UNDP will also continue to work with municipalities, the National Commission for Prevention of Corruption and ZELS on reducing opportunities for corruption on local level. The focus is on institutionalizing the use of the developed anti-corruption tools and products (i.e., the measuring methodology and the Code of Ethics) while securing the certification of compliance with ISO 9001:2000 standards and encouraging a more pro-active role of civil society and media in this area.

UNDP will continue providing substantive contribution to the operationalization of the new National Strategy for Regional Development. The focus is on capacity building – support to the Bureau for Regional Development in managing policies and allocating funds in a transparent and accountable manner and to the two planning regions (Vardar and North-East) through capacity building activities for

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initiating and implementing of projects in line with their regional development programmes and the national priorities.

Finally, the UN joint programme, funded by the Spanish MDG Fund, aiming to strengthen inter-ethnic cohesion which is in its initial stages of implementation, aims to enhance social capital, to strengthen national systems and capacities for inter-ethnic cohesion and to promote inter-cultural sensitivity and civic awareness.

Gtz, source www.gtz.de

Title: Regional Economic Development in Macedonia (RED) Lead executing agency: Ministry of Local Self-Government (MoLSG) Overall term: January 2008 to December 2010 Objective: The responsible institutions pursue regional development and regional economic

promotion in compliance with EU standards, thereby creating an enabling environment for companies and increasing the regions’ attractiveness as a business location. In the medium and long term, unemployment is reduced, incomes rise and fewer people migrate from the country’s structurally weak regions. Improved cooperation within and between the regions also

reduces the potential for conflict between the Albanian and Macedonian populations. The program is implementing a multi-level approach:

• It advises the responsible national ministries and authorities on further developing the legal and

institutional framework.

• The newly formed regional development councils and regional centers receive support in

establishing themselves and developing a range of services for the municipalities.

• The program also supports local partners in implementing regional development measures, thus strengthening cooperation between the partners and enhancing their project management skills.

As well as providing organizational development and management consultancy, supplying materials and

equipment and providing grants for regional projects, the program focuses on capacity development within the recently established institutions at all levels. The program cooperates closely with InWEnt – Capacity Building International, Germany – and international organizations in Macedonia. Further information:

• Cooperation for a better future (2008)

Trilogy of brochures produced by the programme Regional and Municipal Economic Development in Macedonia (GTZ RED)

• From a pilot project to a nationwide approach (brochure 1)

en-from-a-pilot-project-to-a-nationwide-approach-2008.pdf, 1.52 MB (English) mk-od-pilot-proekt-do-univerzalen-pristap-2008.pdf, 1.55 MB (Macedonian) al-nga-pilot-projekt-ne-qasje-univerzale-2008.pdf, 1.53 MB (Albanian)

• Regions planning their development (brochure 2)

en-regions-planning-their-development-2008.pdf, 1.66 MB (English) mk-regionite-go-planiraat-sopstveniot-razvoj-2008.pdf, 1.71 MB (Macedonian) al-plan-per-zhvillimin-regjional-2008.pdf, 1.66 MB (Albanian)

• Regional development through regional projects (brochure 2)

en-regional-development-through-regional-projects-2008.pdf, 3.05 MB (English) mk-regionalen-razvoj-preku-regionalni-proekti-2008.pdf, 2.37 MB (Macedonian) al-zhvillim-rajonal-permes-projekteve-rajonale-2008.pdf, 3.08 MB (Albanian)