CM/Inf(2003)27...Council of Europe decentralization mission in Kosovo (CoEDM)

Ministers’ Deputies

Information documents

CM/Inf(2003)27 19 June 2003

———————————————

Council of Europe decentralisation mission in Kosovo (CoEDM)

Interim Report

———————————————

Table of Contents

1. INTRODUCTION

The first round of consultations

2. POLITICAL CONTEXT

The October 2002 decentralisation initiative

Serious divergence between ethnic communities

3. THE STATE OF LOCAL SELF-GOVERNMENT

The confusion over municipal competences

Organization and functioning of municipalities

The sub-municipal level

Local finances

Local service delivery

4. DECENTRALISATION IN TRANSITION COUNTRIES

Different developments in Kosovo and Central and Eastern Europe

The basic units of local self-government

The different tiers of self-government

Ethnic problems

The distribution of competences

Finance and property issues

Local election systems

5. CONSIDERATIONS FOR A REFORM STRATEGY IN KOSOVO

Reform criteria

Possible elements of the reform

1. INTRODUCTION

In a letter dated 1 November 2002 and addressed to Walter Schwimmer, Secretary General of the Council of Europe, Michael Steiner, Special Representative of the Secretary General of the United Nations (SRSG) called upon the expertise of the Council of Europe to help Kosovo develop a proposal for the decentralisation of governmental institutions in line with United Nations Security Council Resolution 1244, the Constitutional Framework and modern European practice.

The letter stated: “The fundamental aim of decentralisation is to strengthen democracy by bringing government closer to the people. This will improve the delivery of public services and provide equal benefits and services to all… There is a need to consider the competences of central and local authorities and redefine them where necessary. There is also a need to consider the establishment of administrative units below the municipal level.”

Following two fact-finding missions in December 2002 and January 2003 by the Council of Europe Secretariat and discussions with representatives of UNMIK and the Provisional Institutions of Self Government (PISG), on 5 February 2003 the Committee of Ministers agreed that the mandate of the Council of Europe’s mission in Kosovo would be to assist UNMIK and the PISG in designing a framework for local self government reform in consultation with all the relevant actors.

The Council of Europe Decentralisation Mission (CoEDM) was established on 10 February 2003 for a period of nine months and placed under the authority of the Secretary General of the Council of Europe. Ambassador Carlo Civiletti from Italy was appointed Head of Mission, with György Bergou from the Secretariat of the Congress of Local and Regional Authorities of Europe as Deputy Head and Ivo Šanc from the Czech Republic as Project Adviser. In Strasbourg, DG I – Legal Affairs, and in particular its Directorate of Co-operation for Local and Regional Democracy, was given responsibility for looking after the work of the mission.

Following his initial meeting with members of the CoEDM on 20 February 2003, SRSG Steiner, in a letter addressed to Secretary General Schwimmer, confirmed the mandate of the Mission as well as the conditions of its work, including the provision of logistical support and encouraging local actors to participate in the process of consultation, whilst maintaining CoEDM’s independence from UNMIK.

This interim report will focus on the overall political context, the actual situation in the municipalities and local communities, the current structure of local administration in Kosovo from an international perspective and, most importantly, it will provide a broad outline of a possible local government reform.

In the next phase of its work, CoEDM intends to continue its consultations with the relevant actors on the basis of the ideas outlined in the interim report, with a view to elaborating detailed proposals on the various elements and the timing of the reform. At the end of its term, CoEDM will hand over a comprehensive recommendation for forwarding to UNMIK and the PISG, who will be responsible for implementing the reform of local self-government in Kosovo. If requested, the Council of Europe should also offer its help in drafting the relevant legislation.

The first round of consultations

Shortly after setting up its offices, the Mission embarked upon a broad range of consultations with all the relevant actors, including representatives of the international community, the major political parties of the Kosovo Assembly, representatives of the Kosovo government, NGOs, municipal and village representatives as well as representatives of minority communities.

During the first three months the Mission held meetings with the following key political and government representatives in Kosovo:

- Ibrahim Rugova, President, LDK

- Bajram Rexhepi, Prime Minister, PDK

- Nexhat Daci, President of the Kosovo Assembly

- Hashim Thaci, Party Leader, PDK

- Ramush Haradinaj, Leader of the Alliance for the Future of Kosova (AAK)

- Oliver Ivanovic, Member of Kosovo Assembly Presidency (KP)

- Ethem Ceku, Minister of Environment and Spatial Planning

- Jakup Krasniqi, Minister of Public Services

- Hysen Bajrami, Director of Local Administration, Ministry of Public Services

- Hasan Isufi, Director of Municipal Budget, Ministry of Finance and Economy

- Milorad Todorovic, Inter-Ministerial Coordinator for Returns in the PM’s Office

- Lutfi Haziri, President of the Association of Kosovo Municipalities

- Dragisa Krstovic, Leader of the KP Parliamentary Group

On the international side, the CoEDM worked in close co-operation with the different branches of UNMIK: Meetings were held with SRSG Michael Steiner, Principal Deputy SRSG Charles Brayshaw, Deputy SRSG and Head of Civil Administration Francesco Bastagli, Head of Community Affairs Jay Carter, Head of the Office of Returns Peggy Hicks, the Legal Advisor Alexander Borg-Olivier, the five Regional Representatives of Pillar II (Civil Administration) as well as the thirty Municipal Representatives or their deputies during regular meetings in the regional centres or in the municipalities.

The Mission also developed good co-operation with OSCE and held talks with Head of OMIK Ambassador Pascal Fieschi, Director of Democratization Friedhelm Frischenschlager, Deputy Director Adam Schmidt and representatives of the Political Department and the Municipal Assembly Support Team, lead by Hartmut Pürner. It also met with a number of Democratization Officers in the OSCE field offices and took part in various workshops organised by the Democratization Department on municipal responsibilities and decentralisation.

CoEDM also held consultations with representatives of other international organisations, including UNDP (Jennifer Slotin), the EU Lessons Learnt and Analysis Unit (Verena Knaus), the European Agency for Reconstruction (Alan Packer) and the EU Monitoring Mission (Mario Dottori).

Meetings with NGOs included the Kosovar Institute For Policy Research and Development (Leon Malazogu), the International Crisis Group (Val Percival), the Centre for Political and Social Research (Dmitry Pozhidaev) and the Friedrich Ebert Stiftung (Besa Luzha).

Talks were held with representatives of the Liaison Offices of France, Germany, Italy, Russia the United Kingdom and the United States, as well as with KFOR Commander General Mini.

The Mission carried out an intentsive programmeme of field visits in the municipalities of Pristina, Gjilan/Gnjilane, Strpce/Shterpce, Mitrovice/Mitrovica, Leposavic/Leposaviq, Dragash/Dragas, Decan/Decani, Kamenice/Kamenica, Shtime/Stimlje, Prizren, Skenderaj/Srbica and Vushtrri/Vucitrn, meeting with municipal presidents, vice-presidents, CEOs, as well as representatives of sub-municipal units (local communities and villages).

Discussions were held with representatives of the following villages and urban quarters: Pristina 11, 12/1, 12/2, Laplje Selo, Preoce (in the Gracanica area), Zhegra, Prelepnica, Firaja, Gotovusha, Tunell, Partizansko Brdo (in Mitrovica North), Krushevo, Lapushnik, Isniq, Carrabreg, Karagach (in Peja), Ransic, Gorazhdevac, Ajnovce, Veliko Ropotovo, Rogacica, Carallevo, Recane, Zhur, Runik and Samodrezha.

These meetings have led to a deeper understanding of the current political context, the existing state of local government in Kosovo, its functioning, its weaknesses and its potential, as well as the reality of the sub-municipal units. These units (called local communities – “bashkesia lokale” or “mesna zajednica”), though varying considerably and currently having few competences and an unclear democratic status, could form the basis of a reform project, aimed at bringing services and decision making closer to the population.

2. POLITICAL CONTEXT

The political climate in Kosovo currently appears worse than ever since 1999. There has been a worrying chain of events, moves and reactions, a vicious circle that is affecting negatively any attempt to rationalize the discussions on reforming local self-government: Interference from the presidential election campaign in Serbia, periodical Serb withdrawal from the Kosovo Assembly, inclusion of Kosovo in the preamble of the Constitution of Serbia and Montenegro, consequent moves in the Kosovo Assembly for a proclamation of independence, turmoil after the arrest of suspected Kosovo-Albanian war criminals, announcement of and reaction to the establishment of a Commission to transfer competences from UNMIK to the PISG, change of policy in the Serbian government demanding opening of negotiations on Kosovo’s final status, statements advocating territorial partition of Kosovo and even some provocative language raising the spectre of armed conflict, the divisive resolution of the Kosovo Assembly on war values, etc.

Paradoxically enough, this tense climate results in an increasing hostility towards UNMIK and the international community, with the effect of impeding constructive cooperation for the benefit of all the people of Kosovo.

In April, the leader of the PDK Hashim Thaci proposed a moratorium on the Kosovo status issue. It remains to be seen if this initiative, which is in line with the concept of “standards before status”, will succeed in mitigating the present tense political climate and promote more pragmatic and constructive discussions. Unfortunately, so far it has only produced a split among Kosovo-Albanian parties.

The October 2002 decentralisation initiative

In October 2002, trying to persuade Serbs to participate in the upcoming municipal elections and to resolve the contentious issue of Mitrovica, UNMIK put territorially based local self-government for the Serb population on the agenda. SRSG Steiner announced a “decentralisation plan” for Mitrovica which was essentially a form of ethnically-based self-government.

According to this plan, if Serbs participated in the elections, municipal units could be established for “sizeable non-majority communities.” Shortly, the concept of decentralisation was expanded beyond Mitrovica, to take care of the significant Serb population in the enclaves across Kosovo. Municipal units could be established for sizeable non-majority communities within a municipality, and could be composed of one or more villages, settlements and urban quarters. Such sub-units would be established on the basis of a request by elected municipal assembly participants or through a petition from community residents.

These sub-units would have the same responsibilities as were outlined first for northern Mitrovica - including primary and secondary education, primary healthcare, rural and urban planning, the development of services and facilities in accordance with municipal policy and other local issues such as markets, cultural activities and sports. They would have a budget and a local council.

Due to a large extent to the confusing messages received from their political leaders, Serbs did not participate in the local elections, except in the five municipalities where they constitute a majority. But the decentralisation initiative failed not only because of the non-participation of the Serbian population, but also because it was created for political expediency only, without appropriate analysis of potential pitfalls

Kosovo Albanian leaders immediately became wary of the concept and attacked the plans as leading to partition or cantonization of Kosovo. The plan also raised unrealistic expectations within the Serb community, and the failure to make quick progress to create sub-units reduced trust among them. While the Council of Europe has been invited to reshape the decentralisation process to focus on local self-government, the process has become highly politicized.

Serious divergence between ethnic communities

Democracy and institution building in Kosovo, despite the gradual process of normalization, continues to be affected by the persistence of a deep-rooted ethnic divide. No surprise therefore that the major political difficulty that CoEDM is facing concerns the conflicting views on decentralisation as an instrument of stabilizing the relations between ethnic communities on mutually accepted conditions and according to European standards. The dogma of “ownership” is still creating resistance, on the one hand to accepting decentralisation as a valid institution in multi-ethnic societies, and on the other to accepting a combination of local self-government and participation at other levels of an integrated society according to the principle of subsidiarity.

The insistence of the Albanian majority that decentralisation should in no way be conceived or implemented on ethnic lines has been continuously repeated to the Mission, both at the central and at the municipal levels. According to that approach, decentralisation should only concern citizens and not ethnic communities. The reason put forward for this preclusion is that ethnic decentralisation would result in legalizing parallel structures (Serbian control and direct administration of ethnic enclaves). To this rather simplistic reasoning, the Mission objected that decentralisation, far from legalizing parallel structures, would be the only way to obtain a progressive dismantling of them, by offering sufficient institutional protection. It would be the only way to mend de facto mono-ethnic situations by reinstating multi-ethnicity in them, avert temptations of territorial division of Kosovo and stabilize inter-ethnic relations as has happened in the experience of several regions in Europe.

But there is another more conceptual refutation of ethnic decentralisation, asserted especially at the level of central provisional self-government institutions: The argument is that government policy and Kosovo institutions already assure protection of ethnic minorities. Accordingly, ethnic issues should not be approached by devolving local decision-making and administration, but by improving the overall legal, social, political and institutional set-up. The government – it is argued - is encouraging tolerance, interethnic dialogue and returns and has even included in the cabinet two Kosovo-Serb ministers. The law and democratic institutions provide for such positive discrimination of minorities as over-representation in the Kosovo Assembly and a guaranteed ethnic proportion in offices of public administration (as well as in the Kosovo Police Service).

This line of reasoning is not entirely convincing and does not offer a reason to deny the relevance of decentralisation in addressing ethnic problems. Policy declarations, however well inspired, have to be confronted with everyday reality at all levels and this applies also to the degree of implementation of legal provisions. The claim that there is already a tolerant multiethnic society provided with legal and functional instruments of minority protection is far from satisfactory for the Serb community, which objects that these provisions are purely symbolic and do not offer sufficient guarantees against abuses of “majoritism”.

This explains, if not justifies, the selective participation in the municipal elections, the abandonment of functional local institutions like Community Committees and Mediation Committees by Serb representatives and the frequent withdrawal of Serb participation from the Kosovo Assembly.

The Serb community appears at this juncture with a very weak and divided leadership, sticking to defensive and reactive positions, rather than promoting a strategic vision of its role in the future of Kosovo. This explains the difficulties of taking a position before last October’s municipal elections, and the situation has only been deteriorating during the presidential election campaign in Serbia and more recently following the assassination of Prime Minister Djindjic.

A chain of events characteristic of the present political climate in Kosovo have eventually escalated into unilateral political messages, like the Statute of the Union of Serb Municipalities in northern Kosovo and the declaration of the Association of Serb Communities in the Promoravlje/Anamorava area, on radical platforms advocating partition and territorial division into ethnically defined entities, the Serbian part under direct control of Serbia. These platforms refer explicitly to the model of Bosnia and Herzegovina, despite the obvious objections that such a solution would be geopolitically incompatible and unacceptable for the international community.

They are motivated by claims of an accelerated slide of Kosovo towards independence, presumably with the acquiescence of UNMIK, and have been fostered by some official statements emanating from Belgrade.

Already in 2002 the Coordination Centre for Kosovo (CCKM) drafted a “Political Platform for Democratic Decentralisation and Strengthening Self-government of Local, National and Regional Communities”. This project, also known as the “Covic paper”, while upholding in theory the principle of multi-ethnicity, is based on a complex bi-cameral system with self-defined ethnic territorial entities (physically tied by corridors) and “national communities”, possibly associated in a Community Union, as basic constituents of self-government at all levels. It is doubtful, however, how the coexistence of all-powerful ethnic territorial entities could preserve the multiethnicity of Kosovo.

Shortly before his assassination, the late Serbian Prime Minister Zoran Djindjic proposed to open the issue of Kosovo’s final status, and his suggestion included the establishment of some form of Serbian “mini-state” in northern Kosovo, with the eventual possibility of exchanging territories and populations. Unfortunately he was prevented from clarifying this proposal, which appeared at that moment to be based on internal political considerations.

The absence of more workable and constructive positions in the Serb community is regrettable, considering that decentralisation had been put on the agenda, and with a sense of urgency in the case of northern Mitrovica, at the demand of the Serbian politicians before the municipal elections of last October.

We have to admit, however, that the lack of a more constructive approach by the Serb community and its mistrust in Kosovo democratic institutions is not entirely due to intransigent prejudice but also to objective difficulties, like the lack of security and of freedom of movement (which incidentally might be common to all sides of the ethnic divide, as is the case in Mitrovica) and the need for essential services that the Kosovo institutions currently cannot guarantee. Progress and normalization in this respect would be a basic preliminary requirement for any practicable reform of local self-government.

3. THE STATE OF LOCAL SELF-GOVERNMENT

The confusion over municipal competences

Provisional institutions for democratic and autonomous self-government at municipal level were established by UNMIK Regulation No. 2000/45 on Self-Government of Municipalities in Kosovo, laying down not only the responsibilities and powers of municipal assemblies and their committees, but also the basic rules for the election of these assemblies and fixing the number of members for each of the 30 municipal assemblies in Kosovo.

This regulation, largely in line with the requirements of the European Charter of Local Self-Government should serve as a basis for democratic and functioning local democracy. However, partly due to some insufficiently clearly specified competences, but also to a lack of appropriate implementation mechanisms, its provisions have been put into effect in a very uneven fashion in the different municipalities. Moreover, many functions and responsibilities specified by this Regulation have been taken away from the municipalities by subsequent UNMIK Regulations.

An example of the lack of clarity on the competences is in article 3.1 (a): “Providing basic local conditions for sustainable economic development” does not stipulate in a sufficiently precise manner the responsibility of municipalities in the field of economic development, and in reality all municipalities complain about the limitations on exercising powers in this field.

Even though Regulation 2000/45 states that local public services and utilities (article 3.1. f) are municipal responsibilities, Regulation 2000/49 on the Establishment of the Administrative Department of Public Utilities essentially deprives municipalities of their right to manage local public services.

The exercise of powers in the field of providing public services and infrastructure, which includes water supply, sewerage, road maintenance, local transport, etc., is generally one of the weakest points in all municipalities. The contradictory regulations in this area created total confusion as regards the relationship between municipalities and public enterprises. In principle, municipal assemblies should establish, through a local regulation, the types of services that public enterprises should provide in their area, clarify the obligations in a contract, establish fines for non-compliance and set up an inspection mechanism or supervisory board. In reality many of the municipalities have failed to establish a proper working relationship with public service providers.

Some municipalities have issued relevant local regulations, but even those are lacking proper enforcement mechanisms. In most cases the assemblies focus on the issues of management, like politically motivated appointments or dismissals of managers, instead of those of service provision. Supervisory boards have been established in most of the municipalities, but the manner of their organisation, their structure and number of members varies.

Municipal registration of public enterprises is generally poor. In some municipalities there is no clear idea as to how many enterprises operate in their area, and there is often a mix-up of public and private enterprises in the administrative procedures.

According to Regulation 2000/45 the management of municipal property (article 3.1 h) is a municipal competence, but in reality this is another big weakness in the functioning of municipalities. Most of them have problems in properly defining municipal property and have been unable to establish a system for the proper identification and protection of municipal assets. No municipality has been able to complete the registration of municipal land and buildings.

Municipal property has been manipulated and appropriated in various ways, either during the abolition of Kosovo’s autonomy or after the war of 1999. Very little has been done in reviewing the ground on which property was appropriated. The number of court cases on reclaiming property is small, most municipalities lack professional bodies that could deal with such issues.

Furthermore, Regulation 2002/12 on the Establishment of the Kosovo Trust Agency has placed all publicly owned and socially owned enterprises and related assets under the administration of KTA, preventing municipalities from managing a large part of the public property in their territories.

Illegal construction is a frequent occurrence in all municipalities, especially in larger towns such as Pristina. Municipalities have so far failed to put an end to this phenomenon, although they often blame the police for not doing enough to help the fight against illegal construction. The strategy to fight illegal construction should be to identify all illegally constructed buildings that should in no way be legalized, and then to establish criteria by which building permits could be issued.

The management of forests is a serious problem in most municipalities, which lack the powers to prevent illegal woodcutting and deforestation in their area. In principle the regional structures of central government are in charge of forest management, but in practice very little has been done to protect this precious asset of Kosovo.

In other key areas of competence, assigned to the municipalities in Regulation 2000/45, such as pre-primary, primary and secondary education (article 3.1.i) and primary healthcare (article 3.1.j), the sharing of competences has been clarified to a certain extent from the beginning of 2002, following the signing of Memoranda of Understanding between the Department of Local Administration and the relevant Ministries.

The role of Municipalities in the education system is the provision and maintenance of the education infrastructure comprising school buildings and equipment, transport and textbook acquisition, as well as the management of education funds and education staff. These responsibilities are exercised by the Municipal Directorate of Education (MDE) headed by the Municipal Education Director. However, there are still many complaints about the role of the Education Officials appointed by the Ministry of Education, who often limit the powers of the MDE, especially in the appointment of school directors. Unfortunately, the management of education staff still suffers from politically motivated appointments and dismissals.

In the primary healthcare sector municipal competences have also been reinforced as they gained power to manage the functioning, organization, staffing and administration of the Family Health Care Centres. However they are complaining about the influence of the regional Health Offices reporting directly to the Ministry of Health, which often delay the process of payments and procurements, and in many cases limit the exercise of powers by the municipalities.

Organization and functioning of municipalities

The Municipal Statute, adopted by the Municipal Assembly, regulates the implementation of the responsibilities of the municipality. The Statute specifies the number of municipal directorates, the duties and responsibilities of each director, the qualifications required for appointment and the appointment procedures.

The actual organisational structure differs from municipality to municipality. Some have six directorates, others have twelve. In some municipalities the directorates are organised on a sectoral basis, such as public services, property, emergency, etc., in others they follow a different structure. Such a heterogenous structure of organization creates complications in the vertical line of communication between the central authority and the local authorities.

The basic provisions on municipal civil service are in section 34 of Regulation 2000/45, stipulating that “the conditions of municipal civil service shall be such as to permit the recruitment of high-quality staff on the basis of merit and competence”. In reality not much regard is paid to the issue of professionalism and experience of the people that are employed by the municipalities. The principle of political neutrality is also often disregarded and in many cases the recruitment procedure is politically motivated. There are also numerous examples of nepotism.

The general view is that municipal staff is often incompetent and unfamiliar with general administrative procedures, which results in long delays in carrying out administrative tasks. This calls for increased efforts to train municipal employees, especially those dealing with administrative procedures.

In some municipalities local municipal offices have been established in villages to provide administrative services and in others local community offices cater for minority communities. In many cases municipal officials complain that they do not have access to the work of these offices, there is no real cooperation between these offices and the municipality and that their functions and responsibilities are unclear.

The relationship between the UNMIK Municipal Representatives (formerly Municipal Administrators) and the local administration is shifting towards cooperation and coordination. The powers to suspend certain municipal decisions are exercised less frequently, mainly in cases of appointments and dismissals of senior employees. In certain Serb municipalities these powers have never been exercised, even though these municipalities have never respected or implemented UNMIK Regulations and have functioned parallel to the Kosovo system of public administration.

Section 21 of Regulation 2000/45 specifies the three mandatory Committees that have to be established in every municipality: the Policy and Finance Committee, the Communities Committee and the Mediation Committee. The latter in most cases plays a marginal role, as members of the municipal assembly are often unclear about the function of this Committee or the cases to be treated by it. In certain cases the Committees have members that are not members of the municipal assembly, which probably stems from a misinterpretation of article 21.4, allowing the co-opting of such members only in the case of non-mandatory Committees.

Regarding the issuing of local regulations, dealing with issues and procedures within the scope of municipal responsibilities, the situation again differs from municipality to municipality. In general, there is a lack of experience and professionalism in drafting such regulations. In most municipalities there is no transparency in the process of drafting and adopting the regulations. Even in municipalities that try to organise a proper debate prior to issuing a regulation, the discussions usually lack substance. There is hardly a case where comments made during such discussions have been incorporated into the final draft.

In a recent report on the boycott within the municipal level of government in Kosovo, the OSCE Mission in Kosovo concluded that democracy is not yet up and running seven months after the last election in one third of Kosovo's municipalities. Political gridlock is most apparent in the municipalities of Decan/Decani, Kacanik, Kamenice/Kamenica, Kline/Klina, Lipjan/Lipljan, Malisheve/Malishevo, Novoberde/Novo Brdo, Suhareke/Suva Reka, Viti/Vitina and Strpce/ Shterpce.

As a form of protest against the majority party, elected members of the opposition do not participate in the work of the municipal assembly or its committees. They cannot accept their role as the opposition and take a constructive part in the new municipal government. Each case falls into one of several patterns with a similar result - citizens are being deprived of effective representation and a functioning local government.

The report also recognizes that citizens and civil society also have a role to play in responsible governance by placing pressure on assembly representatives to participate, rather than boycott, within their municipality.

The sub-municipal level

According to Section 5 of Regulation 2000/45, each municipality shall make arrangements with villages, settlements and urban quarterswithin its territory to ensure that the needs of all inhabitants in the municipality are met. With the approval of the municipality, these units may carry out activities that are within the responsibilities of the municipality. In this event, they should receive commensurate resources from the municipality. The municipal statute and local regulations shall stipulate the form of co-operation between the municipality and villages, settlements and urban quarters and the scope of work and organization of these units.

Whilst some municipalities issued relevant regulations and established village committees to determine the modalities of cooperation between the municipality and its sub-units, agreements on delegating activities or responsibilities hardly exist. In some villages local municipal offices carry out limited registrar functions, collecting files for transmission to the municipal centre for stamping.

In certain municipalities, for instance in Shtime/Stimlje or Gllogovc/Glogovac, the relationship between villages and the municipality has been made more formal, with regular cooperation between the Policy and Finance Committees and village leaders. Village leaders usually transmit local requests to the municipality, which are then treated according to a list of priorities. Municipal officials also attend meetings of the village committees, but municipal action does not necessarily follow those meetings. Village representatives are usually not on municipal payrolls, even if the municipal statute foresees some allowances.

In the former (Yugoslav) system of public administration, 407 sub-municipal units (local communities – “bashkesia lokale” or “mesna zajednica”) existed on the territory of Kosovo, bringing together geographically and economically coherent clusters of settlements. Some of them continue to exist in an informal way, others, for example those in Skenderaj/Srbica or Kamenice/Kamenica have been formally re-established by the municipality. The council of the sub-municipal unit (SMU) is composed of the village leaders in its area, who elect a President among themselves.

This is similar to the village councils, who also elect among themselves the village leader. However, the democratic status of these councils is unclear: In some cases elections were held during public gatherings of the local population, in others they were simply appointed in accordance with the results of the last municipal elections in the area. In a few cases they claim to have been elected by secret ballot, although the organisation and monitoring of those elections are doubtful.

What appears to be a common characteristic of the village and SMU councils is that they have no formal competences or budgets, they often lack appropriate office space, their role is mainly to represent local interests in the municipality and, in some cases, to carry out local projects based on donor assistance and self-contribution of the population.

Given that bringing government and services closer to the people is the primary aim of the proposed reform, it is necessary to obtain further reliable information on the actual situation at the sub-municipal level and its potential for an increased role. The Centre for Political and Social Research, a Kosovar NGO associated with the University of Pristina, is currently carrying out a Kosovo-wide survey in this field. The survey, prepared in consultation with CoEDM, is designed to provide information on the following main issues:

- Availability of municipal by-laws or regulations relating to the functioning of sub-municipal units

- Population, economy, ethnic composition, etc.

- Modalities of election/appointment, degree of participation by the community, frequency of meetings, etc.

- Number of employees, structure and assigned functions

- Actual performance of sub-municipal units for the past year (implemented or initiated projects)

- Available internal, external, and municipal resources

- Modalities of coordination with municipal and central institutions

- Major challenges and requirements

The first part of the survey will collect general indicators relating to the existence of SMUs, their legal status, competences, structure, size, urgent problems, etc. This part of the survey also attempts to measure the level of satisfaction in the municipality and in the SMU with the current status and invites their opinion as to what can and should be changed to improve the situation.

The second part, which has been included due to repeated concerns voiced by the local and some international experts about the economic viability of SMUs, should the latter be institutionalized in a more independent way, includes certain economic indicators, such as economic profile of the community, resources available, budgetary sources, availability of centrally or municipality-provided services, etc. This part of the survey also seeks to identify additional economic opportunities for the SMUs by asking the opinion of the municipal administration as well as the SMU itself.

The third part is directly related to the goals of decentralisation and comprises indicators that show how efficient the SMU is in providing vital services to the population. Like the previous sections of the survey, this one attempts to explore both the level of satisfaction with the existing services and the needs and possibilities for increasing the range of services which can be provided at the sub-municipal level.

The last part of the survey concerns what may be defined as the core issue of decentralisation – representative democracy. To what degree SMUs are representative of the community, how responsive and responsible they are to the community, how much the community itself supports SMUs – these are the questions that this part seeks to answer. One has to bear in mind, of course, that the four main parts of the survey are, in reality, strongly interrelated.

Full results of the survey are expected to be available by early July 2003, and CoEDM intends to build its final recommendations on the findings.

Local finances

The Central Fiscal Authority (CFA) is responsible for the overall financial management of the Kosovo Budget and the budgets under the responsibility of the municipalities, which together constitute the Kosovo Consolidated Budget, supported by the Kosovo Consolidated Fund. All revenues, including municipal revenues, form part of the Kosovo Consolidated Fund and as such must be deposited in the fund. Municipal revenue deposited in the Kosovo Consolidated Fund is automatically allocated to municipal budgets.

Table 1, taken from the March 2002 Fiscal Monitoring Report of the CFA, provides a breakdown of the 2002 Kosovo General Government Budget by Ministries, Reserved Departments and Municipalities. The municipal budgets are further broken down into budget lines for Municipalities Administration, Local Community Offices, Education and Health.

Table 1

Kosovo General Government Budget 2002
	Million euros	% of sub-group	% of total budget
Ministries

Assembly	3.69	1.92
Office of President	1.20	0.62
Ministers and Ministerial Offices	0.95	0.49
Office of the Prime Minister	0.73	0.38
Ministry of Finance and Economy	0.50	0.26
Ministry of Public Services	13.98	7.26
Ministry of Agriculture, Forestry and Rural Dev.	1.43	0.74
Ministry of Trade and Industry	0.20	0.10
Ministry of Transport and Communication	11.71	6.08
Ministry of Health, Envir. And Spatial Planning	38.97	20.24
Ministry of Culture, Youth and Sports	5.12	2.66
Ministry of Education, Science and Technology	38.96	20.24
Ministry of Labor and Social Welfare	66.55	34.57
Advance to the Min. of Finance	8.15	4.23
Total Ministries	192.5	100.00	49.64

Reserved Departments

Central Fiscal Authority	8.88	7.36
Directorate of Administrative Affairs	5.36	4.44
Directorate of Civil Protection (KPC)	16.36	13.55
Police Services	23.5	19.47
Justice	10.88	9.01
Correctional Services	6.5	5.38
Directorate of Rural Affairs	0.74	0.61
Directorate of Infrastructure Affairs	2.46	2.04
Radio and Television of Kosovo	2.56	2.12
Independent Media Commission	0.41	0.34

Banking and Payments of Kosovo	1.33	1.10
Ombudsperson	0.37	0.31
Joint Advisory Council on Legislative Matters	0.07	0.06
Community Affairs Office	0.1	0.08
Advance to the SRSG	5.38	4.46
Other reserves	35.81	29.67
Total Reserved Departments	120.71	100.00	31.13

Municipalities

Municipalities Administration	22.63	30.35
Local Community Office	1.55	2.08
Education	35.15	47.14
Health	15.23	20.43
Total Municipalities	74.56	100.00	19.23

Total	387.77		100.00

It is not easy to put these figures into an appropriate perspective: OECD published a survey in the year 2000 on fiscal design across levels of government, analysing the tendencies in six transition countries (Czech Republic, Hungary, Poland, Estonia, Latvia and Lithuania). Whilst the data published in the survey is not directly comparable to that available from Kosovo, there are still some possibilities for comparison.

Table 2 indicates the share of total subnational revenues in consolidated national government revenue during the period covered in the survey (1997-1999):

Table 2

Subnational revenues in consolidated national government revenue
	1997	1998	1999
Czech Republic	18.0	18.3	20.8
Hungary	26.6	27.4	26.7
Poland	21.1	21.6	28.8
Estonia	20.0	21.0	22.1
Latvia	25.3	25.3	26.0
Lithuania	24.2	25.8	22.8

Table 1 indicates that in the 2002 Kosovo general government budget the share of municipal grants in total government expenditure was around 19 %. Table 3 provides a breakdown of the 2002 municipal budgets into own revenues and government grants by municipalities. Combining municipalities’ own revenues with the amount of grants, the share of total municipal revenues in the general government revenue comes to 21.6 %, largely in line with the figures of the transition countries.

Table 3

	Municipal Budget 2002 (euros)
Municipalities	Government Grant	Own Revenues	Total
Gllogovc/Glogovac	2,260,307	230,593	2,490,900
Fushe Kosove/Kosovo Polje	1,160,169	161,568	1,321,737
Lipjan/Lipljan	2,446,473	255,646	2,702,119
Obiliq/Obilic	925,935	120,154	1,046,089
Podujeve/Podujevo	3,465,438	639,115	4,104,553
Prishtine/Pristina	9,919,467	1,789,522	11,708,989
Shtime/Stimlje	998,831	56,242	1,055,073
Dragash/Dragas	1,414,673	56,242	1,470,915
Prizren	6,494,018	881,467	7,375,485

Rahovec/Orahovac	2,052,371	397,274	2,449,645
Suhareke/Suva Reka	2,518,535	345,633	2,864,168
Malisheve/Malishevo	1,918,173	223,946	2,142,119
Decan/Decani	1,534,656	230,081	1,764,737
Gjakove/Dakovica	3,860,922	51,129	3,912,051
Istog/Istok	1,663,595	104,815	1,768,410
Kline/Klina	1,698,844	203,494	1,902,338
Peje/Pec	3,887,312	529,698	4,417,010
Leposavic/Leposaviq	717,441	15,339	732,780
Mitrovice/Mitrovica	3,803,787	484,705	4,288,492
Skenderaj/Srbica	2,277,748	199,404	2,477,152
Vushtrri/Vucitrn	2,720,663	370,687	3,091,350
Zubin Potok	766,851	22,497	789,348
Zvecan	745,668	19,429	765,097
Gjilan/Gnjilane	4,051,467	507,202	4,558,669
Kacanik	1,488,733	184,065	1,672,798
Kamenice/Kamenica	1,986,986	230,593	2,217,579
Novoberde/Novo Brdo	405,782	22,497	428,279
Strpce/Shterpce	583,576	55,731	639,307
Ferizaj/Urosevac	3,899,861	521,518	4,421,379
Viti/Vitina	1,829,309	254,623	2,083,932
	-	-	-
Unallocated contingency	1,065,416	-	1,065,416
	-	-	-
Total	74,563,007	9,164,909	83,727,916

The consolidated figures could suggest an appropriate level of fiscal decentralisation in Kosovo, as far as the share of municipalities in total government spending is concerned. However, if we consider the share of own revenues in total municipal revenues, the picture is different.

True, there does not seem to be an overall pattern of “revenue autonomy” in the transition countries: The profile of revenue sources across the sub-national revenue base differs to a large extent, just as the decision-making power for setting the base and rate of taxation and the grant designs is very unevenly distributed across the countries (Table 4). But with an 11 % share of own revenues, Kosovo municipalities would surely feature towards the bottom of any comparison table.

Table 4

Sub-national

revenue sources

(1999)

% of financing

Czech Republic

Hungary

Poland

Estonia

Latvia

Lithuania

Own revenues

- own taxes

- non-tax revenues

40.2

(3.9)

(36.3)

33.3

(16.3)

(17.0)

35.2

(10.6)

(24.6)

15.4

(6.3)

(9.1)

20.4

(0)

(20.4)

4.8

(0)

(4.8)

Other free revns.

- general grants

- tax sharing

43.8

(0)

(43.8)

18.5

(1.7)

(16.8)

44.9

(30.5)

(14.4)

75.5

(13.4)

(62.1)

58.4

(2.4)

(56.0)

93.3

(2.3)

(91.0)

Tied revenues

- specific grants

16.0

48.2

19.9

9.1

21.2

1.9

Total

100

Only in Lithuania is the share of own revenues smaller, but adding to that the amount of shared taxes received by local authorities, the proportion of non-tied revenues exceeds 90 %. In fact, if other free revenues are added to own revenues, their combined share exceeds 50 % across the transition countries.

Whilst directly comparable data from Kosovo is not available, the figures in table 2 suggest that among the four categories of government grants only “Municipalities Administration” can be considered as general grant, consequently the combined share of own revenues and other free revenues falls below 38 %. Measured on that basis, the degree of decentralisation is relatively cautious.

In 2002 an effort was made for the first time to distribute the general grant across municipalities on the basis of “fiscal need”. That is, the grant is distributed across municipalities on a per-capita basis modified by objective criteria that reflect cost differences in providing a similar market basket of locally provided public services. The objective criteria used in determining the distribution of the grant include: population size, population density, number of villages, number of minority villages, levels of utility services, school age population as a percentage of overall population, and factors related to the impact of the conflict on municipal conditions.

In addition to these “fiscal need factors” there is a small “earmarked” portion of the general grant. This portion is related to the “fixed costs” of maintaining municipal government. It covers some of the costs of wages and salaries for elected municipal officials and municipal assemblies' staff and costs for maintaining local community organizations in villages. Also, a flat €100,000 is provided to each municipality regardless of size as a supplemental basic allowance to defray the basic minimum costs of maintaining municipal government. In the future, as municipal own source revenues become increasingly developed, a municipality's fiscal need should be balanced by objectively measured differences in per-capita fiscal capacity.

With the grants earmarked for health, education and local community offices, municipalities do not have the option to switch resources between sectors. As with primary healthcare, the designated grant for primary, secondary and pre-primary education is distributed across municipalities on the basis of objective criteria. In particular, the grant allocation to each municipality is based on a minimum level augmented proportionally to the number of pupils enrolled in the municipality. As a result, municipalities with high student enrolment numbers receive a larger grant allocation than municipalities with small student enrolment numbers.

The specific grants are divided into three economic categories: wages and salaries, goods and services, and capital outlays. In the case of the education grant, for each municipality the goods and services and capital outlays portion is calculated as being the residual of the grant allocation minus the wages and salaries portion. The proportion of wages and salaries varies from municipality to municipality, as a function of the actual number of support staff and teachers.

Own revenue at local level will take time to develop and is not expected to cover a large proportion of local expenditure in the short term. As municipal own source revenues gradually grow, it will become increasingly clear that some municipalities will have a greater or lesser ability to raise revenues from their own citizens because of different levels of wealth and economic activity across Kosovo. These differentials should be progressively factored into grant calculations. In the future, the general grant should be modified to reflect differences in revenue raising efforts across municipalities, i.e. grant policy should reward municipalities that engage in more intensive revenue raising efforts, after taking fiscal capacity into account.

As a full breakdown of municipal own source revenues is not available at this stage, the following remarks are based on information gathered during the meetings in the different municipalities. All municipalities have issued local regulations on local taxes and duties. These cover licenses and other fees, rents on municipal assets and fines. An Administrative Direction issued by DLA and CFA determines the areas where municipalities can levy taxes and duties for the services they offer. Municipal regulations in this area have to be certified before they take effect. Some municipalities criticised this Direction for its shortcomings, including the failure to set clear limits for local levies.

In the category of own revenues, traffic fines have been cited as the most important income source in 2002 in almost every municipality visited. This situation will change from 2003, following widespread implementation of the property tax in Kosovo. In the 2003 municipal budgets, property tax features as the most important own revenue source.

The implementation of the property tax started last year as a pilot project on the basis of Regulation 2001/23. A limited number of municipalities took part in the project, directed at assessing homeowners and commercial property. Because many of the cadastre records were damaged and there are many land ownership disputes, the pilot projectwas limited to municipalities that have the administrative capacity and the property information to levy this tax. These included Pristina, Obiliq/Obilic and Prizren. However, eventually most municipalites applied to the CFA for certification in order to participate in the property tax programme.

Upon receiving the certification, municipalities have to pass a municipal regulation on the imposition of the property tax. The tax is based entirely on the market value of immovable property and set as a percentage thereof. All properties in the same class (like apartments, office buildings) and location should be evenly assessed. Within the limits set by the tax regulation (maximum 2 % of market value), the municipalities have the flexibility to set their own tax rates according to the needs and aspirations of the community.

There has been some confusion over which institution should assess the property values and on what parameters. Municipal officials went door to door to confirm property records and gather resident input on community projects and priorities. Through the pilot programme, municipalities have started to develop a system for equitable valuation of property, determine an acceptable tax rate and devise tax collection and compliance procedures.

The initial reaction of citizens to this tax was somewhat negative. The property tax cannot be avoided, because if it is not paid after sufficient notice or passage of time, the tax delinquency will be collected from the forced sale of the property or assignment of rents.

Still, the experience of other transition countries warrants some caution: In many places the experience with property taxation has not met with the desired degree of success. The common failures of these reforms are found in lack of commitment to local government financing, lack of planning, poor development of local resources and lack of a holistic approach. Like any other tax reform, property tax reform cannot take place in a vacuum. Strategic goal setting, planning, development of administrative and valuation capabilities are among the many considerations that should be part of the process.

In March 2003 the Kosovo Assembly launched the debate on a draft law on property tax, however UNMIK notified the Assembly President about the reserved nature of tax policy and advised that a law would not be appropriate at this stage.

During 2002 all municipalities had to undergo an independent audit to establish whether they meet the standards for being fully responsible for financial and budgetary management. Twenty-four municipalities have been certified so far, and the authority for financial administration has been transferred to them, in accordance with article 46.2 of Regulation 2000/45.

Local service delivery

Most citizens’ primary experience of local government is through accessing municipal services. An unbiased discussion of how decentralisation can contribute to greater efficiency and effectiveness in the delivery of essential services deserves greater prominence in the politically charged environment of Kosovo. Any strategy for reforming local government should be based on a comprehensive analysis of people’s perceptions of how their diverse needs can be served most effectively. To address this problem, UNDP has recently undertaken a survey of 6,000 individuals of all ethnicities to collect information on the perceptions of local government and public services in Kosovo.

Perhaps one of the most significant findings gained from the survey is the level of confusion that currently appears to exist in the public mind about which type of government is responsible for which service in Kosovo. For instance, approximately 10% of Kosovars continue to hold UNMIK responsible for transferred competences, such as healthcare and education.

Another indication of confusion was the extent to which respondents attribute responsibility to the local authorities when the competences are unclear. For example, a majority of respondents attributed responsibility to municipal authorities for consistency of water supply, sewerage and sanitation, whereas in reality public utilities are not controlled by municipalities. The population is equally confused about landscape, plant and animal conservation, urban and rural planning, land use and public health.

There are wide variations among both municipalities and ethnic groups as to the levels of satisfaction with service delivery. Whilst there is a general satisfaction with health centres (ambulantas), hospitals, public health and schools, there is a general dissatisfaction with public utilities, sewerage and sanitation, rubbish collection, local road maintenance and social services.

Respondents were also asked whether they viewed the personnel in various places of service provision as “client-oriented”. In case of healthcare services 75 % of respondents replied yes, whereas only 50-60% of the respondents considered the staff of municipal offices and local community offices as client-oriented.

Kosovars seem to have a consistent vision as to the key problems they face: Most of them identify unemployment as the main problem, however they do not have a clear understanding of the role of local government in addressing this issue. The results suggest that citizens surprisingly do not see much if any role for local government in economic development. Clearly, there is a need to clarify the role of local authorities in this sphere and, on the other hand, to inform the people about the extent to which they can expect a certain level of service and accountability in having their problems addressed.

A better system of evaluating people’s satisfaction with services and the authorities that manage them should be a key tool for holding their local government accountable and for adjusting policies and priorities. As part of a local government reform strategy, it would be useful to establish publicly acknowledged quality requirements and standards at the local level, to assure better service provision and equal treatment for all community members.

4. DECENTRALISATION IN TRANSITION COUNTRIES

Different developments in Kosovo and Central and Eastern Europe

In the period of strict centralisation immediately after World War II, the municipality in Yugoslavia lost many of its local self-government functions. Rather, citizens encountered the first layer of state power when submitting applications or requesting the recognition of their rights. With the introduction of social self-management in the 1950s, the municipality regained its self-government functions and its powers. Its authority constantly increased until the dissolution of the Socialist Federal Republic of Yugoslavia. Though supervised by federal or provincial bodies, a municipality in fact had many original powers during this period.

Municipalities organized sub-municipal units (local communities) on their territories, in both urban and rural areas as a forum for the expression of common interests of citizens in a defined territory. Usually, a local community had one full-time employee who performed the duties of the secretary. It was assumed that the citizens on their own would support the promotion of their interests in a local community, but municipalities and other organizations could transfer funding for their purposes. Of course, the political supremacy of the fully centralized Union of Communists also prevailed in all units of local self-government.

Part IV of the 1974 Constitution of the Autonomous Socialist Republic of Kosovo also mentioned the local community as the ultimate unit of local self-government. It outlined the procedures for their establishment and their competences, which included areas like childcare, social welfare, education, culture, sports, environment, urbanism, etc. They could be established upon the request of the local population, and their activities were partly funded from the municipal budgets.

Like most other Balkan countries, the Federal Republic of Yugoslavia - Serbia and Montenegro - pursued a process of strong centralisation after 1989, and many powers were consolidated by the state. The autonomous status of the provinces of Vojvodina and Kosovo was abolished. The municipality remained the main unit of local government, but with very little formal authority in contrast to other formerly socialist countries that introduced decentralisation programmes as a component of the overall social transition. This process was viewed by all the former Yugoslav republics as a nation-state building process and there was widespread support for the process of centralisation. Centralisation was also facilitated by the integrated structure of local government, as FRY municipalities usually covered a large geographical area with several villages and urban settlements.

Following the NATO intervention and the establishment of the UN Interim Administration Mission in Kosovo, the international community chose to re-establish the former Yugoslav structures of municipal government (plus the municipality of Malisheve/Malishevo, which was abolished as a municipality in 1991 as part of the centralisation process, but remained an entity in the Kosovo Albanian parallel system). The so-called “regions” that were created after 1989 with the political purpose of reinforcing central control over predominantly Albanian Kosovo have also been maintained in the UNMIK administrative system. The relatively centralised structure has been reinforced by the local electoral system, which is based on closed party lists and which completely lacks the constituency principle. Thus, local communities have been effectively marginalized in the decision-making process.

Of course, there were valid arguments for this course of action in 1999/2000: In the aftermath of war, when it was necessary to maintain strict international control over the political/institutional rebuilding of Kosovo, this integrated and fairly centralized system of municipal government looked more suitable than a fragmented or decentralized system. There were also strong arguments for economies of scale, especially since the economic base and human resources for decentralisation did not exist. Therefore it seemed easier and more logical to re-establish former structures than to launch a reform process.

Consequently, the territorial structure of Kosovo remained largely identical to that of the former system: Most of the municipalities cover a large area of several settlements, with an average population size close to eighty thousand. Contrary to other countries of the region, no real decentralisation has occurred in Kosovo so far. Whilst some of the arguments for maintaining the status quo may still be valid today, it seems necessary to evaluate the possibilities of a reform, especially in the light of the experience of Central and Eastern European countries that have carried out local self-government reforms in the past decade.

Before making any proposal for Kosovo’s decentralisation, it is appropriate to investigate the reform processes that have taken place in the different countries of Central and Eastern Europe on their way from totalitarian regimes towards genuine democracies. Of course, within the framework of this report, we can only summarize the basic issues and dilemmas of these reforms in a rather simplified manner. Although the main features can be identified for the whole region, in an investigation and comparison of a particular process, the responses of each country to specific challenges are quite different.

The basic units of local self-government

The process of decentralisation and local government reform is one of the most important aspects of the institutional and systemic reforms that have been introduced across Central and Eastern Europe. In administrative reforms anywhere, the search for an optimum vertical territorial structure of government and for optimum government areas has always been a highly relevant issue. The main aim of the reforms was to break away from the communist-type system of territorial administration and to institute democratic local government. Decentralisation, deregulation, and “de-etatisation” of public administration were the dominant aims. Territorial self-government was introduced in urban and rural municipalities and separated from state public administration. The reform has instituted a new structure of municipal organs and a new regulation of resources. The most important element of the reform was the creation of new entities of local government, entailing the establishment of basic legal and managerial units.

The choices made in each country were very different: Some accepted the principle that local government was linked more or less to settlement structure following geographical boundaries, as exemplified by the Czech Republic, Slovakia and Hungary. These systems are non-integrated, meaning that a relatively large number of municipalities exist without any administrative amalgamation. The splitting of existing municipalities into smaller independent units fulfilled local ambitions and enhanced local initiatives and local feelings. It was an understandable component of the democratisation process, but fragmentation, at the same time, can become a source of major problems that may jeopardize the success of the reform process

On the other hand, integrated systems operate for instance in Lithuania, Slovenia and Poland, meaning that the framework of local government units is adjusted to comprise larger proportions of the population irrespective of the geographical boundaries of settlements. These systems are based on the philosophy that small communities cannot mobilize sufficient political and organizational resources to launch ambitious projects. Economies of scale cannot be achieved within the framework of very small communities, narrow municipal boundaries constrain or impede the provision of municipal services, which are thus frequently duplicated and difficult to coordinate. With a fragmented structure and inter-municipal differences in the provision of services, it is difficult to attain equity.

The issue is to strike a proper balance between the participatory aspect of local government and representative democracy, which argues for smaller municipalities, and the aspects dealing with economic and administrative efficacy, which favour larger units. The levels of decentralisation and centralisation have to be weighed against functional and contextual factors, and their optimum, rather than maximum or minimum, is to be sought. Both insufficient and excessive decentralisation can cause problems. For varying reasons, reform programmes found it extremely difficult to make a strategic choice between these options. In many countries the strategic direction of the reform changed during the process, for instance in FYROM and Albania, where, after a considerabe increase in the number of municipalities, the tendency shifted towards integration.

Whichever solution was chosen, a common characteristic of Central and Eastern European countries is that systems have been constructed from the bottom up, meaning that the basic levels of local government were established first, and streamlining the general structure of public administration occurred later. Some key country-specific points have emerged that affected further development, such as the demand for small unit autonomy in Hungary, the defence of neighbourhoods in Lithuania and preservation of three levels of territorial administration in Poland. Despite these differences, the enthusiasm for strong and clearly defined basic units is common.

As mentioned, a new structure for basic local government units has not been considered so far in Kosovo, in spite of the fact that the current structure results in a number of deficiencies: Most of the municipalities are too large and the quality of administrative services provided by them is poor. The gains in economies of scale are far outweighed by the democratic deficit caused by inappropriate territorial representation within municipal assemblies, their distance from a large part of the population and the lack of public control and participation.

The different tiers of self-government

Another common issue faced by most countries of the region was the challenge to establish different tiers of self-government. The municipal tier, whether highly fragmented or not, does not provide units of adequate size for the more specialized services such as secondary education, hospitals, or residential care institutions. Most post-communist countries had a legacy of powerful state administration at a regional/county level that does not fit comfortably in a democratic system of government; they lack direct accountability either to a local electorate or to national ministries, and are often vested with considerable authority to intervene in municipal affairs.

While most reform programmes have contained a commitment to establish an upper tier of self-government, doing so has often proved a tortuous and protracted process. These contentious issues often take many years to resolve because forces at both national and municipal level lack sufficient positive enthusiasm for the creation of potentially powerful political rivals. Thus, in the early period of local structure development, the basic levels were preferred in almost all of the countries. The general trend was to introduce government administrative units with general competences rather than intermediate tiers of self-government.

The basic difference, of course, is that self-government units are representative bodies elected by citizens in general elections, with defined self-governing functions, independent budgets and relative autonomy in the way they fulfil their prescribed tasks. In contrast, administrative units operate as representatives of the state without direct representation and are regulated and supervised by central departments. Thus, they do not possess democratic autonomy in their decision-making. They have general responsibilities - that is, they do not have a single area of competence (like fireprotection, public health, etc.) but many.

For most countries it took a whole decade or more to embark upon reforms of government tiers, aimed at establishing self-governing regions. In some countries ethno-political issues, rather than geo-economic or administrative considerations played a key role in the process.

Ethnic problems

Ethnic problems, in general, are characteristic of the whole region. The dissolution of former federations more or less resolved ethnic tensions in Slovenia, the Czech Republic and Slovakia. This is not the case in the Baltic states; due to ethnic heterogeneity, institutional instruments that involve ethnic minorities in local government are extremely important. In Latvia the local government council may set up a standing committee on the affairs of foreigners and non-citizens if at least one-fourth of the inhabitants registered in the administrative territory are of such status.

In Hungary the proportion of national minorities is not as high, thus the establishment of new institutions was less difficult than in other countries in the region; a special minority local government system is in operation. Access to local bodies is possible with the assistance of specific facilitating regulations, and minorities may establish their own governments at the settlement level. Positive discrimination for minority representation in municipal councils is a practice regulated by law in Slovenia as well.

In Kosovo, because of the failure of Serbs to participate in significant numbers in the municipal elections, they have lower levels of representation than is warranted by their population. With the exception of five municipalities, they missed the opportunity to increase their influence in local assemblies. Admittedly, minority members of municipal assemblies lack some of the guarantees that are afforded to them at the central level. The Communities committees and the Mediation committees, which are supposed to address minority concerns, are not functioning well in most municipalities.

UNMIK established Local Community Offices to ensure that community rights are protected. However, the ability of these offices to improve the lives of minorities is constrained by the difficulties of bringing minority issues into the work of the municipality. An effort is underway to transfer authority over these local community offices to the municipality.

There was also an initiative to ensure that minorities receive a “fair share’ of the financing of the municipality. Only six out of 24 municipalities that were audited in late 2002 gave a fair proportion of their municipal budget to support minority populations. Moreover, the goal of public service employment for communities roughly equal to their share of the population has not been achieved either.

Serbs are trying to defend their interests through alternative means, like the establishment of the controversial Union of Serb Municipalities and reiterating their support for Serbian parallel structures. They also demand decentralisation, but, as mentioned before, their concept of decentralisation is the creation of two entities – a Serb entity that is linked to Serbian institutions and an Albanian entity that is autonomous. They even threatened that failure to make progress would lead to Serbs electing their own local assemblies and stopping all cooperation with UNMIK

Such concepts, advocating territorial division based on monoethnic homogenity and separated institutional and administrative structures are in contradiction with European standards, Resolution 1244 and the Constitutional Framework. CoEDM intends to propose a reform that would provide ethnic communities with sufficient self-government in sub-municipal units, whilst preserving the territorial and administrative integrity of Kosovo.

The distribution of competences

Another important dilemma of the reform process in the Cental and Eastern European countries was the distribution of competences between the different levels. Most local government legislation assigns responsibility to the basic municipal level for “communal services”, such as local roads and lighting, heating, water supply, sanitation, waste management, parks and cemeteries. Management of housing is also included though the extent and nature of these tasks changes with privatisation of the public housing stock. These are often recognized as “own” or “original” functions of municipalities. The most contentious item in devolution of physical infrastructure is water supply, as it usually covers a range of urban and rural settlements. In many places where such assets have been transferred to the municipality where they are located, grave operational difficulties and disputes have inevitably arisen.

Greater difficulties in the reform process surround the responsibility for the “human services”, (education, health, social welfare and culture) and the local regulatory tasks (for example urban planning and construction control, civil registration, trade and occupational licensing and child protection). Uncertainty and argument surround the mismatch between catchment areas for schools, hospitals, social care institutions, etc. and the size of municipalities, together with the inability of smaller municipalities to employ qualified professional staff. These difficulties do not in themselves challenge the principle of decentralisation, but pose practical difficulties that often exceed the political support for decentralisation or the willingness of interest groups to compromise.

Very often human services and regulatory tasks are defined as tasks of state administration rather than local self-government, which can at most be delegated rather than devolved. In terms of the human services, this definition implies that there are universal rights to minimum standards of provision that the State must guarantee. In respect of the regulatory tasks, the definition implies that the task involves an impartial application of national laws to the circumstances of individual citizens, in which there is no room for local variation or discretion; these are seen as roles for qualified bureaucrats, not elected politicians.

There are, of course, strong countervailing arguments for decentralisation of both human service and regulatory competences. The services are of strong concern to citizens, putting pressure on local governments to devote resources to their development. To retain such services under central management is to exclude the contributions of local resources and local accountability which local government is under strong pressure to provide.

Until a satisfactory framework for devolving the human services is developed, various interim solutions apply. In some cases service management is retained by central government offices which suffer from the lack of local accountability. In a second scenario responsibilities are shared, as where local governments manage schools but teachers are paid by central government, or the State provides social benefits but local government provides welfare services. In a third case competences are fully transferred to local government, but some decisions are still made unilaterally by sectoral ministries like teachers’ salary increases or extra social benefits which are not accompanied by changes in local revenues.

Similarly, the argument that regulatory tasks should be excluded from local self-government jurisdiction because of their judicial nature is oversimplified. Many regulatory decisions do involve elements of subjective judgment, e.g. the capacity of a family to bring up its children or the architectural consistency of a proposed new construction. Decentralisation of regulatory tasks may well be the most satisfactory solution in the long term, but a lot depends on the circumstances, including the availability of professional staff.

Competence-sharing between the different tiers of government will be one of the key issues of the reform in Kosovo as well. The choice between the different models in the field of public services and regulatory tasks should be worked out in consultation with the ministries concerned. The devolution of competences can only be implemented gradually, as administrative capacities develop at the various levels of government.

Finance and property issues

The dependence of effective decentralisation on an adequate and equitable financial base needs no explanation. In financial terms decentralisation has demanded a range of fundamental reforms in Central and Eastern Europe. Firstly, it has been necessary to distinguish clearly between the responsibilities of different levels of government for meeting the costs of specific services. This has to be in line with the assignment of competences, and the process is, therefore, subject to the uncertainties and arguments outlined in the previous section. Decisions are also required on which revenue sources should accrue exclusively to local governments, which should be subjected to some intergovernmental sharing (and in what proportions), and which should be retained exclusively by the central budget.

This poses several difficulties. Until the assignment of responsibilities has been resolved it is impossible to quantify the relative resource needs of individual tiers of government. The structure of taxation may be concurrently subject to reform to adjust it to the requirements of a market economy.

There are strong arguments of accountability and efficiency (together with the provisions of the European Charter of Local Self-Government) for giving local governments some power to determine liabilities for local taxes, fees and charges. Ministries of finance have been in no hurry, however, to surrender their exclusive powers in these respects, often supported by macroeconomic arguments concerning the control of inflation and the encouragement of private investment. Nor have they been under pressure from local government lobbies, eager to obtain larger tax shares rather than taxing powers.

A system of redistribution may still be needed, particularly if extensive responsibilities for the human services have to be financed by local governments, requiring rough equality in per capita expenditure. This demands the creation of equalization transfers, either vertical or horizontal based on normative assessments of the differences between local needs and resources. Calculating such formulae poses technical challenges of measurement and data collection, but also political judgment over the balance between equality and incentive.

In most countries the demands of both efficiency and equity and the increasing intervention of private sector ownership or management have led to a progressive decline in the general subsidization of public utility services. This involves the challenge to apportion responsibility between the State and local government for making such decisions, for imposing the consequent rises in consumer tariffs, for funding and managing the individually targeted compensation for poorer consumers of essential services, and for meeting the increasingly urgent demand for investment in repair and upgrading.

To list this agenda (which excludes the practical issues of revenue assessment, budget management, auditing requirements, etc.) is to indicate its complexity and the demands it makes both on technical capability and political courage.

Regarding property issues, it has been an obvious and generally accepted principle of decentralisation that transfer of ownership of public property should accompany assignment of functional responsibilities to any legally autonomous tier of government associated with their performance. In practice, this has often proved a contentious and protracted process.

Earlier patterns of ownership or management have complicated the procedure of transferring property rights in line with the assignment of competences. City governments claim ownership of hospitals or secondary schools that serve a much wider area with consequent difficulties for the allocation of running costs and control over access. Municipalities, on the other hand, are made responsible for the provision of utility services that are the monopoly of regionally owned and managed networks. Technical solutions are possible, such as joint ownership of utility companies, but application is obstructed by arguments over the apportionment of shares and the opposition of current management who have succeeded in some countries in thwarting the process by buying out the assets or the contractual rights to manage them.

In many countries property transfer is also subject to systemic difficulty, such as the lack of inventories and cadastral records and overload of the professional apparatus by the problems of restitution and privatisation. Again technical difficulty combines with political conflict and ambivalence to impede and delay an essential component of the decentralisation process.

All of the difficulties and dilemmas listed above are present in Kosovo, and in most cases the situation is worse than elsewhere: The clarification of competences and revenue allocation has hardly commenced, not to mention equalization transfers or the privatisation of basic public utilities such as water and electricity. Property ownership is unclear, not only due to a lack of cadastral records but also to the unresolved status of socially owned enterprises. The situation is further complicated by the fact that budgetary and taxation matters are still reserved powers of UNMIK. No doubt, fiscal decentralisation will be a difficult and protracted process in Kosovo.

Local election systems

The electoral process was reformed everywhere in Central and Eastern Europe to incorporate democratic regulations and techniques. Basically two systems of elections can be distinguished: majoritarian and proportional. In local elections, a unified system exists for integrated models, where the size of local governments is approximately equal, such as in Lithuania. In other cases, more than one electoral mechanism isused.

In Polish municipalities with fewer than twenty thousand inhabitants, a single majority system is in place; those with more than twenty thousand inhabitants havea proportional system. In Hungary the population threshold between the two methods is ten thousand, though here, the majority system is supplemented by compensation arrangements on a party basis. The threshold was stabilized immediately in Hungary’s case, but in Poland the first two local elections used a forty thousand-inhabitant threshold for determining the method of election.

Generally speaking, the extent of party influence depends very much on the size of municipalities and territorial units. Empirical research yields the followingconclusion: the larger the municipality, the stronger the party involvement. In many countries the majority of the population lives in towns and cities that are also the bases of municipal governments in integrated systems. Party orientation in these urbanized areas is very strong due to the weight of the population concerned.

Parties have fewer supporters as a whole in Hungary and Latvia. In non-integrated systems independent candidates have better access to elected bodies on the local level than they do nationally. A relatively high proportion of small units prevents party candidates from winning the majority of mandates. The example of the Czech Republic is also closer to this model, though the level of party politicization in local elections is relatively higher. The exception is Slovakia, where despite the existing fragmented system - that is, consisting of many small municipal entities - party involvement is very high.

In Kosovo the electoral system is a proportionally based system, where voters choose political parties, not individual representatives, with the result that municipal politicians do not have a specific constituency to whom they are accountable. There are many complaints that municipal politicians never visit local communities to discuss their needs: Re-election depends only on the position on the party list, not on personal contacts with the electorate. The current proportional, closed list system is cheaper and easier to administer in the absence of a census than a constituencybased system. It also ensures appropriate gender balance. However, these benefits are outweighed by the loss of accountability that all communities experience.

5. CONSIDERATIONS FOR A REFORM STRATEGY IN KOSOVO

Perhaps the main argument for decentralisation in Kosovo lies in the size of the current municipalities: Most of them are too large, even when compared to other countries with an integrated system. Pristina municipality has about 500,000 inhabitants and there are six other municipalities with a population of more than 100,000. The quality of administrative services in those units is generally poor: They have to cater for too many people and a large part of their population is distant from the municipal centre. There is a lack of public control and citizen participation and there are too many possibilities for corruption and misuse of power.

There can be various models for the reform of local self-government and public administration in Kosovo. CoEDM has been considering several strategic options regarding the territorial structure of administration, which is the key element of any local government reform. In particular, the following scenarios have been investigated:

a) Maintaining the existing number of municipalities whilst strengthening their position by devolving additional competencies to their level. Sub-municipal units would continue to play a minimal role under this option.

b) Increasing the role of the sub-municipal level by establishing appropriate structures (groups of settlements and urban quarters) and transferring certain municipal competencies to those structures. Municipalities would continue to act as the main units of local self-government.

c) The sharing of competences and decision-making powers between the municipal and the sub-municipal level, by establishing democratically elected local councils (i.e. a new tier of local government) and gradually empowering them to manage local affairs. The existing municipalities would still continue to be key units of public administration, but their powers would be shared with the sub-municipal units.

d) Maintaining single-level local authorities as the basic units of self-government, but bringing them closer to the population by creating new municipalities on the territory of some of the existing units, which are considered too large and too distant from the citizen.

e) Creating a regional level of self-government around the 5-7 largest towns in Kosovo, thereby establishing a new tier between the central and the municipal level. The number of municipalities could be substantially increased under this option, taking account of the boundaries of the former sub-municipal units.

The reform concept should find an optimal solution to fulfil the criteria of respecting the principles of the European Charter of Local Self-Government, financial and organizational feasibility, and political acceptability including the protection of ethnic minorities’ interests.

Reform criteria

Local democracy and representation should improve: The current municipalities often play a symbolic role only, without formulating concepts, plans or policies. The executive is generally too politicised, directors are appointed on the basis of political affiliation. Smaller self-government units should provide better conditions for transparency and public control.

Due to the large size of municipalities, not only is public control difficult, but also territorial representation is compromised. Large rural areas with dispersed villages have minimal chances to pursue their interests in the municipal centre. The position of ethnic minorities is even more difficult: Due to the large territorial coverage of municipal assemblies, minorities cannot have a meaningful weight.

There should be a resulting improvement in the quality and efficiency of public services: Administrative services are centralized in municipal centres; therefore citizens must waste a lot of time travelling and queuing for basic services such as civil registration, birth, marriage and death certification, car registration, etc. Centralized municipalities are unable to cope with illegal construction and the usurpation of land: the situation in building licensing and urban development in general is catastrophic. Significant progress in this field could be achieved by decentralizing administrative services and by increasing public control.

The devolution of administrative services will be a key element of the reform. The ministries and municipalities concerned should work out the concrete steps for decentralizing services in accordance with specific conditions and needs. The possibility of establishing mobile administrative offices should also be investigated, especially in large rural areas with dispersed settlements.

The reform should not entail excessive costs: The economic situation in Kosovo is extremely difficult, public budgets cannot be increased in general. Nevertheless, altering the territorial structure of public administration will obviously require resources. There is some potential to increase local revenues if the administration is decentralized, as it can be more efficient in collecting fees for business licenses, building permits and even the property tax.

Fixed costs can be kept to a minimum by establishing new administrative offices only in a limited number of villages or urban quarters, where premises are already available. Consequently, not all new units will require new staff: They should be allowed to combine with or contract the offices of other (stronger) units for administrative services. Administrative staff in municipal centres should be reduced and redeployed to the new offices.

The reform should be feasible from an organizational point of view: The proposed changes should build upon existing municipal structures and / or the former sub-municipal level (local communities). Obviously, the role of those former structures will be redefined. If some territorial changes are necessary, the preferred solution should be merging former units instead of defining new boundaries. The exact territorial arrangement of sub-municipal units should be elaborated in the initial reform phase in each municipality and approved by the Ministry of Public Services / Department of Local Administration.

The reform should be politically acceptable to Kosovo institutions and citizens: This is perhaps the most sensitive and difficult part of the project. As described before, there are completely different approaches and expectations within the two main communities in Kosovo. Albanians will resist any attempt to give more autonomy to Serb communities, and the latter will not accept anything less than full autonomy. Municipal leaders will be reluctant to share powers with the sub-municipal level. There is still a general lack of trust in democratic institutions among the population: Very often (especially in Serbian communities) people are still relying on instructions from “above”. All this points towards a cautious and gradual approach when designing and implementing the reform.

On the positive side, Kosovo politicians are fully aware of the necessity to fulfil European democratic standards. They are keen to be seen by the international community as leaders capable of putting Kosovo on the right track. Serbia and Montenegro, as a new member state of the Council of Europe, should also associate itself with the recommendations of CoEDM. This should also influence Serb political leaders in Kosovo, who will need to understand that Serbian communities will also benefit from the enhanced status of local communities across Kosovo.

The reform should tackle the ethnic issue, without using ethnic criteria as the starting point: Although CoEDM intends to elaborate a proposal based on demographic and territorial criteria for reforming the structure of public administration, and in many cases it will lead to ethnically mixed units, it will also in practice result in enabling important ethnic communities to manage a significant part of their own affairs, having their own competences and budgets. Strengthened sub-municipal units could help to ease the tense situation in northern Mitrovica and in other Serbian enclaves. At the same time, with the new units being part of a comprehensive Kosovo-wide system of public administration, they will not endanger the territorial integrity of Kosovo.

Apart from the structural reform, minority protection should be improved through modifying the rules for the composition of Communities Committees, which should be established not only in mixed municipalities but also in mixed sub-units. In the units where one minority community is significantly larger than the other minority communities, it should be allowed to constitute a majority on the Communities Committee, thereby preventing it being outvoted by representatives of the majority and the other minorities. Special rights for Communities Committees within local assemblies should be established, including the right of veto under certain conditions.

Possible elements of the reform

As probably implied by the above, CoEDM considers option c) as the most feasible strategy that would best satisfy the various criteria set up for the reform. In fact, the Mission has already elaborated a detailed proposal based on this strategy, however it still needs a lot of expert consultation and political negotiation before it could become “the” official strategy for the Kosovo local government reform. Therefore here we only provide a brief outline of the proposals.

The centre of such a strategy would be the establishment and reinforcement of sub-municipal structures, together with a clear description of their duties and competences. The aim is to bring decision-making closer to citizens through the creation of smaller units of local self-government. In some of these units decentralized administrative offices would offer services to the population. The reform should be implemented gradually, starting with relatively simple services and progressively developing more sophisticated forms of administration. This is due to a lack of democratic traditions, but also to the limited financial and human resources.

The existing municipalities would remain key components of the public administration system. In spite of their deficiencies, a lot of effort has been invested during the past years to make them functional. It would be unwise and costly to dismantle them and to start creating new municipalities from scratch. There are, however, one or two municipalities with a very small number of inhabitants that would logically be merged into neighbouring municipalities and restructured as sub-municipal units. Their citizens would receive local services from the sub-unit, which is largely identical with the former municipality.

As mentioned, a limited number of offices would be established in some bigger villages or urban quarters. This would allow the decentralisation of certain municipal administrative tasks, delegating them to the sub-municipal units. On the other hand, the big municipalities (with the seven largest cities at their centres) should co-operate more closely with the central authorities. Certain central administrative tasks could be either delegated to them, or they should be able to monitor and influence deconcentrated units of central administration by providing proper conditions for their functioning. The result should be better services to the citizens.

The key elements of this strategy are as follows:

Territorial structure: Decisions will be required whether to maintain all of the existing municipalities or to merge some small municipalities into neighbouring bigger ones. The number and territorial definition of the sub-municipal units to be created should be decided upon. There will be a need to designate those units where administrative offices should be located.

Organizational structure: It will be necessary to set the rules for electing councils at the sub-municipal level and for appointing administrative staff where applicable. It is also necessary to establish appropriate working relationships between the different types of government units, for instance by setting up relevant committees.

The system of elections: Together with municipal elections, local councils (i.e. the councils of SMUs) should be elected by secret ballot on the level of the sub-municipal units. The rules of these elections should be elaborated in the framework of a general electoral system reform.

Distribution of competences: Competence-sharing between the different levels of government, including the new basic units of local self-government is one of the key issues of the reform. This system should be elaborated in consultation with all the ministries concerned. Furthermore, the devolution of competences can only be implemented gradually, as the administrative capacities develop at the various levels. Decentralisation in this respect should be guided by the principle of subsidiarity, i.e. responsibilities should be devolved to the lowest practicable level.

Financial feasibility: On the one hand the one-off costs of the reform should be kept as low as possible, on the other hand a sustainable system of local finances should be established. Fiscal decentralisation will require fundamental reforms in the system of Kosovo’s public finances. Decisions will be required on the revenue sources of the various tiers of government, on whether those sources should be exclusive or shared between different levels and, if shared, in what proportions, who should have the power to set the rate of taxes and the level of fees, etc.

Minority protection: Although the reform should not be designed along ethnic lines, it should contribute to easing the tension in certain areas, where new units of local government would provide ethnic communities with substantial self-government. In multiethnic units, additional measures would be necessary to protect the interests of minority communities. New rules on the operation of Communities Committees and Mediation Committees will have to be established.

Timing: Elaborating full details of the reforminvolves choices that are either politically or technically difficult (or both), it requires the reconciliation of conflicting interests and it demands tenacious preparatory work. In the current political environment of Kosovo, a cautious and gradual approach is indispensable. Not only do the technical details of the various stages need to be elaborated, but the key political actors, including representatives of the ethnic communities have to be convinced of the necessity and benefits of the reforms. If the international community succeeds in overcoming that hurdle, and the framework of the CoEDM proposal is generally accepted as a basis for the reform, a three-year implementation period, spanning the years 2004-2006 could be envisaged.