Local Authorities: Stability and controllability

Dzmitry Kukhlei

Summary

The year 2012 saw little change in the system of local authorities and self-government. Local authorities once again demonstrated their high effectiveness in securing social stability in regions. The parliamentary elections proved that local administrations fully support the existent public policy. Nevertheless, the overly centralization of local authority, which is actually incorporated into the presidential vertical and devoid of any features of European type self-government, hinders a balanced development of regions. The limitations of administrative tools in social and economic development of rural areas regularly puts the issue of promoting local initiative and self-government on the agenda for the highest authority.

In 2012 local budgets were forced to carry the major burden of the populist policies of the country’s top administration. Cases of corruption and ineffective financial activities are regularly registered on all levels of local and self-government. Unaccountability of the local authorities to the public and closed budget process create a basis for more frequent corruption schemes, which is a kind of payoff of the center to the local elites for their political loyalty.

Trends:
Local authorities: controllability vs corruption

The parliamentary elections in 2012 demonstrated a high level of loyalty and controllability of local authorities that are responsible for promoting current public policy in regions. Nevertheless, despite good results in securing social stability on the entrusted territories, local authorities demonstrate little effectiveness in developing their local economy. Over the last few years the Belarusian leadership has been stressing the importance of promoting local self-government.

After the parliamentary elections the country’s leader made several statements on stimulating and backing local civil initiative and increasing functions of the primary level of local government, which is least dangerous for the presidential authority and most loyal to the incumbent president. 1 Unfortunately, no significant changes have occurred. On the contrary, village councils are being stripped off of their economic functions. During the last year rural roads and technical communications were transferred to the books of specialized communal and state entities, which is a positive improvement. Among other positive changes is the increased role of village councils in allocating resources on road maintenance in rural areas. In 2012 local budgets allocated BYR 2.5 million per 1 kilometer.

In 2012 local and regional authorities focused more on improving the maintenance of law and order, especially in rural districts with their recent lack of district police officers. Local budgets allocated money for providing them with service accommodation and vehicles.

At the same time, cases of corruption and abuse of office are registered at all levels of local and self-government. In 2012 criminal proceedings were launched against both ordinary local council deputies, usually top managers of state enterprises and organizations, and heads of administrations of all levels. Criminal cases are frequent against ex-heads of the local power vertical, e. g. ex-chairpersons of Zodzina and Homiel city councils. The case of the ex-first deputy chairperson of Minsk city executive council Ihar Vasilyeu charged with large scale bribery received a lot of publicity in 2012. According to the corruption perception index of Transparency International, Belarus’ position in 2012 was 123 out of 176, which places it within the group of post-Soviet countries with a high corruption index. 2

Local budgets to sponsor modernization and social stability

In 2012, local budgets revenues and expenses saw a significant growth in real terms compared to the critical 2011. The revenues amounted to BYR 91.1 trillion, by 18.3% more than in 2011, and expenses – 88 trillion, by 25.8% more than in 2011.

The local budgetary surplus in 2012 accounted for 3.1 trillion, or 3.4% of the revenue part, whereas in the critical 2011 it totaled 4.5 trillion, or 9.3% of the revenue part. Despite the attempts of the central financial authorities to balance local budgets and transfer the earnings growth to lowering the debt ratio, Hrodna region executed the consolidated regional budget with a deficit of BYR 205.2 bn. 3 In 2011 all consolidated budgets had a surplus.

In the first six months of 2012 local budgets reached a significant surplus of BYR 3.15 trillion from unforeseen incomes, which was a good basis for the year budget surplus of 10%. Usually, the revenues from the first six months of the year make up less than 50% of the year plan.

Nevertheless, the central authorities decided to direct these extra revenues to curb rising costs of housing and communal services and transport, raise salaries and finance modernization projects.

The ratio of local budgets’ expenses on housing and communal services and residential construction grew from 7.9% in 2011 to 17.3% in 2012.

In 2012 the ratio of capital expenditure in the expenses structure of local budgets grew by 3.7%. This growth was based on transfer of modernization financing to local budgets. Last year saw a 13.8% reduction of investment into the basic capital whereas local budgets expenditure into it grew by 20%. 4 As credit financing of state programs was reduced, investments into the basic capital did not reach 2011 figures in any of the regions. Minsk and Hrodna regions showed best results, with investments into the basic capital of 98.1% and 94% of 2011 results respectively. 5

Expenses of local budgets in the consolidated budget 2012 amounted to 55.7%, almost equal to the 2011 figure (55.3%). Non-repayable proceeds from the national budget reduced significantly to 31.5% compared to 2011 (35.4%).

The unit weight of local budget revenue in the consolidated budget amounted to 39.5% in 2012 (36.5% in 2011), exclusive of non-repayable proceeds. This was possible because in 2012 local budgets received 71.9% of income tax (67.6% in 2011) and 34.1% of other taxes (32.4% in 2011). The ratio of tax revenue in the revenue structure of local budgets amounted to 63.3% compared to 59.6% in 2011.

Last year saw little change in the ratio of non-tax revenue of local budgets - it remained small. Despite the little growth (from 4.9% in 2011 to 5.2% in 2012) central authorities would not increase financial independence of regional elites and deregulation of small and medium enterprises.

The State Property Committee compiled a list of objects for sale three years ago but the plans for small privatization have been persistently shelved. In 2012, local authorities sold only 9 blocks of shares of total BYR 165.4 bn. The total revenue from state property that went to local budgets aggregated BYR 616 bn, whereas to the national budget – BYR 4.9 trillion.

Centralized taxation system

In 2012, the distribution of taxes between the national and local budgets saw little change. The fiscal policy of Belarus remains centralized and governed on the national level. Distribution of taxes between the national and local budgets is regulated by the law on the national budget passed every calendar year. The law on the budget of 2012 retained the principle of distribution of the income tax introduced in 2011. 6 Only the ecological tax underwent a slight change. 7

Local budgets received up to 21.2% of the income tax (compared to 19.2% in 2011), due to a rise in salaries and pensions. The ratio of the profit tax also increased from 12.1% in 2011 to 15.4% in 2012.

Optimization of administrative and territorial division on the primary level

Negative demographic tendencies in rural areas and limited functions and resources of village councils promoted discussions about enlargement of administrative units on the primary level. The country’s authorities stress the economic components of this enlargement.

Primary government bodies are to be enlarged to cover the territory that is occupied by the corresponding agricultural enterprises. Presently, the latter have more resources than village councils’ budgets do. Economic subjects can provide better help for the locals compared to village councils, which hardly perform their duties of providing services to the public.

In 2012, some cases of violent behavior toward chairpersons of village councils became known. In Sakalova, Biarozauski rayon, a 78-year-old man threw petrol onto the council chairperson; luckily he did not have time to set him on fire. Another incident happened in Kobryn rayon where a pensioner came with a machine gun to the council building. 8 Tension in rural areas is growing because village councils’ resources to provide services for the locals tend to be increasingly limited.

And locals are generally very negative about enlargement of primary government units, especially in Hrodna, Minsk and Viciebsk regions. Regional officials are very cautious in their attempts to liquidate underpopulated village councils. For example, in Hrodna region there are village councils with 500 to 700 people, and in one case the regional authorities blocked the rayon officials’ decision on enlarging the primary unit.

Association of local authorities and cooperation with European partners

Local authorities, especially in the frontier areas, are interested in cooperation with municipalities of European countries. But the highest Belarusian authorities are suspicious about institutionalization of their group interests in the form of the Association of local self-government bodies. Any local authorities’ union is hindered by tensions between Minsk and Brussels. After local elections 2010 chairperson of the Upper Chamber Commission on economics, budget and finance Vadzim Papou announced establishing the Association of local self-government bodies grounded on the so-called “European experience.” The authorities viewed the Association as a means of establishing partnerships with the European association of local self-government bodies. 9 Only a year has left until the end of office term of the councils of the 26th convocation, but the development of the association of local self-governments remains at the starting point. President Lukashenko is very cautious about any initiative of the functionaries to institutionalize their group interests.

Nevertheless, the Belarusian authorities maintained contact with European organizations of local authorities. In March 2012, chairperson of Viciebsk regional council and member of the Council on cooperation of local self-government bodies of the upper chamber took part in the 22nd session of Congress of local and regional authorities of the Council of Europe in Strasbourg despite tense relations between Belarus and EU officials. 10

The establishment of the Association of local authorities is likely to be renewed with another improvement of relations between Belarus and EU officials. The Belarusian side sees the association as a means of “attracting sponsorship and participation in international projects”, as well as promotion of its interests in Europe. 11

Conclusion

The main demand of the presidential power to the local vertical is promoting social stability on the entrusted territories and political loyalty to the incumbent state leader.

On the one hand, local authorities are susceptible for illegal activities due to the closed budget process and unaccountability of local authorities to the public. On the other hand, local elites often become the object of criminal persecution in corruption cases.

On the level of village councils systematic problems require reorganization of this chain of local authorities. Despite the fact that Belarusian officials realize the necessity of reforms in administrative and territorial division, the definite and consistent state policy in this direction has not yet been formulated. The only answer that the functionaries have is enlargement of primary administrative units. But locals are negative about village council reorganization.