13th Plenary Session of the Congress : 30 May to 1st June 2006

Speech by Ferdinand Poni, Ministry of interior of the Republic of Albania

Strasbourg 1st June

Effective decentralization, local authorities capable to exercise their competencies, good governance and consolidated democracy at local level

Honored Chairman,
Honored local government representatives,
Ladies and gentlemen

It’s my distinct pleasure to be given the chance to take the floor in the temple of the European democracy, here in the parliamentary assembly of the Council of Europe. For us Albanians years ago Europe has been a dream and I have the feeling that despite my engagement and long experience dealing with the issues of democracy and local institutions, my satisfaction and emotions are really too strong and special now that I am in front of you. On this occasion please accept my greetings on behalf of the Albanian Government, local elected representatives and administrators to this plenary session of the congress, to wish you for your mandate and to assure you for our utmost commitment for more local democracy, consolidated institutions, citizen’s participation in defining conditions for their wellbeing.
I would also like to give my wishes to you Mr. Chairman for your election in this duty, and at the meantime to express my gratitude to Mr. Di Stassi for the contribution given to the Congress in particular for the local democracy at European level.
Allow me to highlight the fact that the decentralization challenge, thought as a very touchable indicator of the Albanian Society efforts, to be able to produce values in one and each cell, has always been for the Albanians a very important component of the activity of its structures in this period of transition from a totalitarian rule to a democratic society, from a an isolated society to a society perceived, established and oriented toward citizens and their communities. I have the pleasure to emphasise that the Albanian Government is willing to consolidate the decentralisation process, to establish solid local institutions in order to create better and more possibilities for the citizens and for the regional and European integration. The program of the government “Berisha”, which we had the chance to elaborate in the Conference we organised on May 9, 2006, for the donor coordination in the field of decentralization, among important issues such as: establish the rule of law, fight against corruption, organised crime, state capture, establish a consolidated administration, transparent and liberal conditions for the citizens, their business and their activity, decentralization is one of the main priorities. This represents not only a priority but also our challenge, and in this perspective I may say that it has been in the focus of our work to make it more concrete by defining clear objectives, plans and intensive timeframes in order to be successful in this very important component of the state and democracy, such as local government and local institutions, as well as decentralization as a process aiming to mobilise the contribution of all actors at central and local level for more local autonomy, consolidated local institutions, administrations of communes, municipalities and regions able to provide to their citizens and communities the best public services, for more democracy and participation of citizens at local governance. Allow me to give a special gratitude and consideration to all our friends, representatives of USA, Germany, Sweden, Italy, Swiss, Norway, Denmark, and to all international institutions such as: European Union, Council of Europe, OSCE, UNDP, World Bank, for their contribution and key assistance they have given to this process and to the local authorities and institutions in Albania.

Ladies and Gentlemen,
I thing that it is worth saying that the conception of local elected representatives, local administrations and the process itself, its objectives, outcomes of Decentralization process are inevitably established within the frames of European Documents, which set norms for the local democracy and Autonomy such as: local representatives elected having a consolidated status and possibilities to exercise freely their mandate, local units having juridical, administrative and financial skills to solve the most part of the issues that concern the citizens, sufficient budget to exercise their local competencies, intensive cooperation of local units with their counterparts in country and abroad, harmonic and sustainable development, but also sustainable support for assuring representation at local and national level.
In this view point the process is going on based on:

The above documents and respective legal provisions establish conditions to actual priorities of decentralization process, but even to relations among actors involved in the process; central government, local elected authorities, representatives of civil society and representatives of international community. These priorities goal is that through necessary legal improvements, powerful and continuous interventions of institutions, consolidation of human capacities, allocation of sufficient and sustainable sources guarantee the process, and allow us to notably improve the problems under discussions or not yet solved out in the Decentralization process, on the status of locally elected officials, consolidation of local administration, guarantee of service delivery for citizens’ process, on local budget and national one related to local governing, necessity of transparency and relations between central government and local one, how to continuously guarantee stability of sources in disposal of local governing units as very important elements.

Priorities in a serious effort aim in defining exact deadlines for their finalization, taking into consideration or estimating the complexity and difficulties in fulfillment of set activities or even increased good will of Albanian government or international community to realize and turn into reality the defined objectives and not let them only as objectives written on a piece of paper.

Of course the pace of Decentralization has not been neither the required, nor the expected one, that is why the Government and of course even institutions dealing in the processing and realization of Decentralizing policies have part of their program to win all the lost time.

First, It is already established and functioning the Inter-ministerial Committee on Decentralization and the Expert Group on Decentralization, which are expressions of an institutional form aiming at coordinating all efforts from all ministries in this direction, to offer more institutional possibilities in attraction of foreign support and incite debates for more efficiency and for a permanent and long-lasting consultation process with the local elected and their associations.

Second, acceleration of the assets inventory process and their transferring to local government. During this year and at maximum during the first 6-month period of next year would be realized the total transferring of assets Completion of public asset transferring objective from central government to local government would include all objects serving to the last one in exercising of all functions and competencies, and it would be estimated with increased efficiency on the use and administration of assets in favor of economic and social development, improved level of services in favor of local community, as well as in the support in the reform and some other above mentioned laws.

Third, Transfer of the function of potable water supply to local government. Within this year will be realized a total transferring of all pipeline network, and aqueduct enterprises to local government. Along to aqueduct enterprises transferring to local government we would realize not only a transfer of a competence to local governments foreseen in the organic law, but in compliance with the Charter dispositions, the transfer process of water supply will be followed by all necessary interventions and regulations within the functioning regulation framework of the sector, aiming that this sector respond to decentralization documents and at same time be sent to the market as commercial sector. The state, during this transferring process, would take over itself the clearing of all these enterprises for bad debts with the single goal that all actual mismanagement problems should not be transferred to local government, would maintain a solid investment scheme.

Fourth, financial consolidation and local budgeting process. We are quite determined that in compliance with the European Charter Self-Local and Regional Government, Constitution of Albania, Organic Law on local Government, as well as the National Strategy on Decentralization any function or competence transferred to local government is followed by its relevant financial invoice, at least the amounts allocated up to that time for the performing a service. In order to assist local units in exercising their competencies and functions, the sate have given to them from the state’s budget unconditional transfers, which means that Local government bodies (their councils) decide for the distribution of these funds, in the same way they decide for the funds coming from their taxes, tariffs or other own incomes.

Before performing the local fiscal reform, over 80% of the local budget came from the central government, while after over 60 % of the budget comes from local taxes and tariffs. For the year 2005, 63 % of the own incomes on local government (incomes for exercising the functions transferred up to the present) are coming from local taxes and tariffs and only 37 % of these funds come from the unconditional transfers of the state’s budget, (for more information see the table attached). For the year 2005 about 32 % of the grant was allocated to the local government as a conditional grant. For the first time this year we have decentralized the funds on investments in rural and urban roads so that the amount of the conditional grant to reduce from 32% to 15 %. The amount of 15 % that is conditional grant which goes for investments in education, health, in fact is semi-conditional because the local government units have a wider autonomy in deciding about their priorities for investments in the sector of primary health care and pre-university education. Starting from the current year (2006) we have managed to increase the unconditioned transfer with 37% more than during 2005 and this will be increased with every passing year, while during 2003, 2004 and 2005 the amounts defined as contribution of central government to local government have been respectively 6.3, 6.2, 7.3 milliard leke, that means constant rise or rising less than 10%. Under the conditions, when we are lacking the local cost, maintenance of this pace of central government contribution for local government budget would help for a better exercise of the duty and mandate of local elected. All small and middle investments, from this year on, have been decentralized putting an end to the era of political and corruptive clienteles. Investments for bigger projects have also been distributed according to clear defined criteria based on the law “On the State’s Budget for 2006” as well as through a Committee of experts and a clear competitive procedure. Herewith you can find a list of local taxes. Local governments have discretion in rising or lowering the level of tax on small business, tax on buildings and agricultural land in the amount of 0-30%. As regards to the tax imposed for occupation of public space, table tax, or temporary taxes in general. The local government units have full autonomy in setting the base level and the rate of tax. Local government bodies concerning the public services offered have complete discretion in setting the tariffs rate.
Besides the tax on small business and the tax for the registration of vehicles, local governments collect themselves all the local and taxes and tarrifes. Within 2006 even the tax on small business will be transferred for collection and administration by the local governments.
The experience to date has shown that year after year the incomes coming from local taxes and tariffs have rised. This affirms the fact that the most of local governments have been effective in collecting and administering their local taxes. Even in the yer 2005 when the tax on small business was halved, the incomes coming from this tax in national level were 3.9-mililiard leke out of 4-milliard planed for 2005. Transfer of tax on small business to local governments not only makes them responsible, but also putting an end to the era of political and corruptive clientelism that might accur to local government units. Starting from 2002 for the distribution o the unconditional transfer we have used one formula. This formula is based in maximum on objective criteria. However each year are made efforts for changes aiming that this formula and scheme be as sustainable as it can and relevant for the local government. The formula is based on these criteria: i) population ii) surface of the communes and iii) the coefficient of urban services. In addition the formula takes into consideration the fiscal capacities, which means that some small communes or municipalities through equilization coefficients are favorised with the only aim to have a minimun level of public services.
In the formula of the distribution of the unconditional transfer, for 2006 we have made these improvements:

surfaces of the communes, eliminating differentiation in financial treatment between communes and municipalities.

the local units to increase their incomes, with the solidarity and contribution to assist the local units with limited resources on generating incomes. The coefficient of fiscal equilization for 2005 has been 35%. The Association of municipalities, personally the Mr. Edi Rama, that this coefficient of 2005 to be reduced. Taking into consideration the request of the association of municipalities, as well as evaluating that the fiscal equilizations should not become instruments stimulating laziness for 2006, so the equilization was reduced to 30%. It is also rediced the coefficient of virtual urban population from 8 to 5 to 2% with the reason of keeping the balances between local units in need and others which have the ambition for increasing the quantity and quality of public services. Even for the communes where the coefficient of rural population that has influence in the surface criteria is reduced from 8% to 4 % with the same argument as for the coefficient of urban services. In these conditions, none of local government unit take grants less than a year ago and 88 % of Local governments get more grant than in 2005, while in 2005 they got more grant than 2004, but only 66 % of local units.

the elections of July 3rd, 2005, in which were corrected the inaccuracies carried from the registration of the population completed by INSTAT in 2001.

Geografy, while in the former years were used approximate surfaces ay district level.

Fifth, Increase democracy at local level for better and more efficacious governance. From this point of view, Decentralization is not a donation of central government for local one. It is a fundamental requirement of democracy, which springs from the respect for community right to participate in governing and the indispensability to pass from the right to speak to the right to be listened and consequently to the end that decentralization cannot be realized without public participation. It is this participation which increases the efficiency, reduces costs, creates conditions for a better use of resources, influences them to be directed in favor of people, but at the same time gives a possibility to community to participate and contribute in realization of projects it benefits from. That is the reason why along side the preparation of laws and efforts for their enforcement, making public conscious, transparency and its promotion to contribute in government decentralization process is a priority of the work we have undertaken to realize in this reform. From the political importance but even from the technical difficulties it is very important the improvement of Municipality and Commune Councils’ functioning. Priorities of Albanian government for better and more transparent governing should be considered as an important starting point which conditions our priority for improvements, why not even legal ones, but first of all institutional ones and from the point of view of development of human capacities in the functioning of the Region, Municipalities and Commune Councils. We aim like that to have better relations among Local Councils and Local government units, more control over local administration, and better governance in consultations with community and expressed in organized public forums. Every local governing body would have the inner functioning statute and regulation, aiming at institutionalization of all necessary practices to be put in the correct role community representative and in its service. Especially important would be the deepening and precise definition of executive attributes of Mayor and commune chairmen and finding out of new and better-consolidated relations for the role of village chairmen aiming at a better representation for peasants of remote areas, for their daily problems, but even to facilitate the workload of local administration and communication. An effort deserving to be mentioned in this direction is that realized by a project of Co- Plan in cooperation with SNV and we are forecasting to have a further support from the Government of Republic of Germany.

Sixth, special support would be offered to local government in line with strategies on stable priority development or even with that on poverty reduction. In the territory of Republic of Albania, with inclusion or not of local government have been either compiled or are under processing the sectorial development strategies, which need a better and more complete and more adequate inclusion of regions, municipalities and communes in the stage of projects preparation and completion. Local government units have important competencies linked with economic development, like those of urban planning and public services, which depending on the fact whether they have been successful or not, would condition even the global solution but more than that would affect the life of citizens who are living in them and their living conditions. Local government units meet objective difficulties in exercising their functions, especially for those directly related to standard services delivery to citizens. Through different financial mechanisms, would be encouraged the local government units demonstrating ability and positive results in application of reforms leading to empowering the role of local government in services delivery to communities. We would as well aim that all local government units ensure through policies delivery of an average or equal minimum of public services. This would be ensured without affecting the initiative and ambitions of local governing units, which aim at offering public services of higher level and standard. All central institutions should work in all fields to harmonize and bring closer the sectorial strategies with decentralization strategy. They would serve to offering solutions to daily problems and clarify all improvements to be made in legislation with regards to functions and competencies transferred to local governing units.

Seventh: Priority in this matrix is even in improvement and modernization of Civil Service, which would offer better service conditions and an improved address system. Of special importance is citizen’s equipment with identity cards. Our Ministry has prepared specific projects for all these three projects. The project on identity cards will be sent within current month (during May) to government and will be prepared for practical implementation according to legislation in power. We expect that our identity cards would be of European Union standards and practices. With regards to the Register and Address System a joint plan is under preparation in cooperation with ODIHR and the OSCE presence in Albania and we are about to sign a memorandum of understanding on this project which I am confident it would ensure even the EU support and that of other Donors.

It is imperative to increase consolidation of the status of locally elected, as a process requiring not only the exercising of the mandate of the locally elected officials but even that of consultation, in accordance with European Chart provisions, with regards to concerning problems of their communities and consolidation of efficacious local administration, in order to guarantee better qualification and information for public administration employees and locally elected people.
We would take special concrete measures on formation of a stable administration close to every local governing unit. Such a goal would be realized through support and technical assistance offered through training for technical staffs and locally elected, creation of flexible administrative structures in balance with the progress and results of in special sectors in each respective unit, involvement of commune administration in the status of civil servant, strengthening the process of bringing them to account and rule of law, against abuse of office, fight against corruption etc. We would try to empower the role of elected bodies through a functioning of the level of standards foreseen by law. We would stimulate inter communal cooperation, delegation of competencies to counterpart local units with better managing and realization capacities or to Regional Councils and cooperation with foreign counterpart bodies. A better balance in separation of responsibilities among different levels of government, would notably improve solution of institutional capacity problems. Local government units should join central government priorities for a small government, for allocations of more funds in service of citizens and infrastructure, in development of policies to guarantee efficient and long term investments.

CONSULTATION WITH LOCAL UNITS AND LOCAL ELECTED

As Decentralization from the strategic objective point of view aims the transferring of more competencies and possibilities to the locally elected people and their administration, the government considers a condition consultations held with locally elected people, either during the stage of legal formulation or in the process of finding out administrative solutions to better exercise their competencies. The sanctioning that ICD and GED should have an obligatory participation of locally elected people, is very meaningful. The Associations of local elected bodies are foreseen to have two representatives in the GED and the last ones should respect the same standards as representatives in the European Congress of Local and Regional Authorities, for political, geographic and Gender balancing of representation in GED. The GED would function as a major panel with some working groups conditioned even by priorities coming up. From the meaning of provisions in Constitution of Republic of Albania and European Chart of Local Autonomy consultations with local units and their communities are inalienable when it is a matter of organizational organization or a matter of alternations in territorial boundaries of local units. Our Government priority is to find out applicable models in the European Union countries which would be harmonized with standards of a democratic consultation process held with local government units. We would prefer and welcome that the positioning with a kind of criticism towards central government actions, be replaced or completed with a more active positioning of the locally elected even with regards to legal initiatives, compilation and processing of the legislation they themselves may identify and bring to the process of necessary participation of citizens. We should together improve the process of identifying problems, process the necessary legal solutions and guarantee the success in the process of decentralization.

DECENTRALIZATION, REGIONAL STRATEGIES OF ECONOMIC DEVELOPMENT

The Decentralization process creates conditions and possibilities that problems of local, regional and national become complementary to each other and move in same direction. The government is engaged in deepening the reform of decentralization and local autonomy, aiming at a real autonomy for local governing bodies, as a government that is closer to community and businesses with bigger possibilities for all inclusive cooperation for economic and social development. Favorable factors of increasing the weight of local governing units in processing and implementation of development Strategies are those factors that create direct impacts in economic and social development and promote employment like fiscal decentralization, increase of financial autonomy, increase of incomes from collection of local taxes, participation in joint projects with counterpart local units close to the borderline, in the region and wider areas.

It remains a priority, which is required even by law to have compatibility of regional Strategies of development with national priorities and those of municipalities and communes. We would like that development strategies suffer improvement and become documents to support financial planning and be equipped with concrete cost and we would like that local governing units try to rigorously implement them, some with intervention of central government and in support of activities of central government in this direction. Growth of the product in this direction might be another possibility of cooperation between Albanian government and donors as we are trying to do with project of SIDA and UNDP.

What is more, taking into consideration the big difference between demands and financing possibilities, I invite donors to contribute within their possibilities to support these projects. The financial support for rural and urban infrastructure is the most valuable service that could be done to decentralization process in Albania.

I would like to underline that for the monitoring of Decentralization process should be used time deadlines and instruments which are easily identifying and forums or manageable organizations of forecasts which should be a priority of Inter-ministerial Committee of Decentralization or the Group of Decentralization Experts so that we are able to continuously estimate the progress at every moment. On the other hand we aim that the monitoring ensure the needed transparency which is clear and able to offer to everybody at every moment, to the wide population, different monitoring organizations and bodies as well as to international organizations to make a real estimation at every moment for the level of implementation of this reform.

Honored participants,

Although politics is a leading power which stands behind decentralization in most countries, decentralization may be one of those nice moments when good policies and economies serve to the same final goal. The political goals of responsibilities and increased participation of policy at local level, may coincide with economic objectives of better decisions on the use of sources and the increasing readiness to pay for local services.
We are conscious that in order to meet the objectives on decentralization we would see a long and complex process. This is related to different aspects either with creation of coherent concepts, on the changes on the way of governing, bringing closer of legislation, even in development and empowering of the self operating capacity of local government units.

Thank You for your attention.