The realization of the local self-government system is one of the preconditions of the realization of democracy. According to European charter of local self-government “self-government is the right and ability of local self-government bodies to regulate and control most part of the state issues (within the scopes of the law) with its own responsibility and hence for local people’s interests[i]”.
Armenia is a democratic country which manifests the above mentioned state and local self-government properties. The basis of the formation of LSGB (local self-government body) is the Constitution admitted by the referendum in 1995. After it in 1996 the law “On local self-government” finally ratified local self-government institution in the Republic of Armenia.
Laws on Local Self-government (1996, 2002)
The Constitution and the law in 1996 formed independent self-government community in the RA. However the law in 1996 has “subtle issues” related to the utter autonomy. It is mentioned in the principles of self-government, that the leader of the community has two directions of operational role: autonomous governing body and representative of authority. As a representative of state authority the leader depends on the central body, which provides centralization element within the local self-government system. As a result, this description has been removed from the text of the law in 2002 more closely complying to the European Convention. However, one more point which proves the centralization is the correlation between state and local self-government bodies, when the head of the community can be relieved in the presence of regional governor (mayor in Yerevan). In spite of this, the possibility of making an appeal in legal form exists as a counterbalance, which is also an element of central authority and correlates with united governmental system.
European Charter of Local Self-government
The next phase of development has a direct relation with the already mentioned “European charter of local self-government”. In 2002 confirming the European charter Armenia was committed to implement the provisions of the latter’s articles[ii].
The content and the logic of the confirmed provisions are seen in the law of 2002 and in the Constitution. However, let’s stop to the provisions which the RA has not ratified. Particularly the 5th article of declaration provides the sovereignty of each community towards territorial changes, also with implementation of referendum if applicable. The implementation of the enhancement concept should be held with the participation of local bodies and population. As the RA has not ratified this point, the expediency of territorial changes is out of the jurisdiction of local self-government, which weakens the independence of the community and the integration of population in the solution of local problems.
A question may arise, whether local self-government bodies have enough knowledge for territorial changes and for making other kinds of decisions. The second point of the sixth article of the same declaration provides the LSGB’s personnel with the possibilities of improving the qualification, i.e. education, payment and promotion at work. Undoubtedly, these kinds of programs imply heavy expenses. In order to understand which resources to use for personnel reforms, it is necessary to review staff composition and number of employee, the effectiveness of the latter’s work, the possible ways of reduction. As a result it becomes clear how the qualification can be provided at the expense of inner resources. The above mentioned point also is not being ratified by the RA.
Constitution of the Republic of Armenia and Community Consolidation Concept
Recent constitutional reforms were one more step for the development of community’s economy. Especially the 182nd article of the Constitution is on “community residents can directly participate in community affairs by solving public issues which have community importance by means of local referendum”. The basis of this is as the principles of democracy, as well as the problem of increasing the effectiveness of the system of government.
With the new concept of consolidation (2011) by the government, the local self-government model finally has been ratified by the RA. It was directed to the fulfillment of the community economy, broadening of financial and resource base and using it more effectively through unifications. The following principles and indicators are the basis of enhancement- community distance from each other and from the nearby urban areas, the availability of transport infrastructures, their possibility, ethnic peculiarities of each community, the degree and history of cooperation between communities. As a result, the local self-government system as its core corresponds to a mixed-type model[iii], where communities have their authorizations and degree of independence, at the same time act inside the state system and are held accountable to the upper level.
Despite the legal prerequisites, which raise the degree of independence of communities, the actual independence is very week. Problems arise not in the process of drafting laws, but in the stage of realization of aforementioned rights and commitment. In this case we face the fact where is no public awareness on the issues of community government. What refers to the implementation, there is also indifference of the residents on the above mentioned issues. We can assume that these factors are interconnected and influence each other- the more the resident is indifferent, the less is the awareness and vice versa. Besides, community governing bodies (head of the community or counselor) in some cases do not have corresponding knowledge and skills to effectively manage community economy, which becomes reason for additional barriers.
Community Financing (budgeting) Peculiarities
Nowadays community budgeting is actually under state control by means of territorial government link, i.e. regional administration. Despite the fact that property tax and land tax are fully transferred to the community budget, the latter does not even cover half of the total expenditures. Local taxes provide 30-35%[iv] of the budget. There is also a problem of collecting the local taxes by the communities, which generates taxes, arrears[v]. The reasons for accumulating debts are of tax payment (both physical and legal), which can be interpreted as a result of wrong financial management. Large urban areas are somehow safe. These are cities where the taxation objects are concentrated, i.e. factories, billboards, commercial areas, etc. The latter however has a problem of state support. According to the law on equalization granting subsidies is based on the following indicators:
- Income tax, land tax and property tax per capita
- The number of population
- Necessity of state priority support[vi]
In essence the last factor carries specifying function. Besides, there is a minimum subsidy limit, i.e. 3,5 million AMD, the low subsidy from which is provided just within that limits. Subsidy does not have target and is directed to the financing of shortage of community budget.
There is also possibility of providing subventions, which unlike subsidies have predetermined aim and cannot be used for other needs. The delegated authorizations have small specific weight from the financial point of view for the implementation of which the state has to finance the community.
Besides local taxes and state grant, the budgeting law also envisages portion of some types of taxes to community budgets (income tax, profit tax), as well as determines local taxes. In the first case every year the amount of the portion is defined by the law on the state budget of the RA, which is almost zero per year. The reason is again the centralization of communities, especially in relation to the capital and other settlements. For example in case of local taxes, hotel tax does not have a clear legislative basis to serve as a source of considerable income. In addition to the latter, other local fees are determined such as payments for construction, reconstruction and demolition, fees for implementing commercial activities within the area of community, etc.
So, summarizing two main aspects of communities’ activities i.e. legislative and financial, we come to the following conclusion: despite the fact, that at the community level there are favorable legislative conditions both for the residents of the community and for community leaders from the point of view of solving the local problems and satisfying the needs of residents, however we have great gaps in terms of their implementation. One can assume that one of the problems is insufficient decentralization from both the financial and administrative point of view.
The financial independence of communities from the state level institutes are closely related to the implementation of legislative rights in communities.
If the financial possibilities of the LSGBs were not closely combined with a centralized system, then the management would not be more efficient.
The reason is than in community level it is easier to identify and satisfy the needs of the residents receiving immediate response for further corrections in management.
The discovery of potential of financial independence in communities can be considered a possible way for raising the degree of decentralization. The main emphasis must be on increasing its own income through the efficient use of property and land base. Besides, it is necessary to make some changes in the tax policy, in particular in case of commercial companies, supporting not only the legal registration of the subject out of Yerevan, but also the implementation of its main activities in the regions.
Positive and Negative Sides of Decentralization
Summarizing the current situation we come to the following conclusion that each community is independent in making administrative decisions, but financial support is left to the central authority. Besides, local authority bodies have low level of motivation and are not concerned to carry complete responsibility both in financial and administrative terms from the point of view of solving their own problems.
In order to understand the possible ways of development, let’s try to compare it with local self-government policy held in other countries. The 2014 research, which was directed to introducing new LSGB models of European countries, showed the following results.
|Model 1||Model 2||Model 3||Model 4||Model 5|
|Territorial division||Differentiated||Small communities||Middle communities||Big communities||Small communities|
Croatia Macedonia Moldova Romania Slovenia Ukraine
|Georgia Lithuania Serbia||Armenia
Generally, in the four model countries the communities have wide power of making both financial and operational decision (from the first model to the fourth, by the declining principle). Besides the scope of authority extends parallel to independence of implementing debt policy. The last model, which includes Armenia and Azerbaijan, has a financial and operational wide centralization.
In case of keeping current situation we will have not so developed, dependent communities, which will deepen the concentration around the capital. In addition to it, state centralized system will remain overloaded and less productive. The speed and unity of making decision can be considered a positive aspect of centralization. As a variant can be partial i.e. only administrative decentralization, which, however, is incomplete as making a complete decision must be accompanied by the availability of its own financial resources.
Otherwise, providing complete independence to communities, it will be possible to solve local problems and receive response by the population. This variant is accompanied by corruption risks, as well as with not sufficient knowledge of already mentioned community officials. The indifference of the population is another obstacle in the establishment of a completely independent community.
The solution of the problem can be done with the following variants. Let’s suppose that communities have financial independence, and there is an opportunity to set priority of solving problems. There must be a third body as a counterbalance for pressing corruption risks, which will represent the interests of the local population. Such subjects can be non-governmental organizations or the community council formed in the community, which will provide public awareness and protection of interests.
[ii] [ii] 2, 3.1, 3.2, 4.1-4.6, 7.1, 7.3, 8.1-8.3, 9.1-9.8, 10.1, 10.2 և 11 articles
[iii] There are three types of models- Alngo-Saxon, continental (European) and mixed
[iv] The analysis of the Ministry of Territorial Administration and Development (2007-2016)
[v] An unpaid, overdue dept
[vi] The RA Government defines the list, based on the relative index of the first two factors
Author: Hakob Hakobyan. © All rights are reserved.
Translator: Lusine Barkhoyan.