LOCAL GOVERNANCE IN ESTONIA

1
LOCAL GOVERNANCE IN ESTONIA

• professor
• JUSSI S. JAUHIAINEN
• University of Oulu
• University of Tartu
• jussi.jauhiainen_at_oulu.fi

• INTRODUCTION
• MAIN CHALLENGES
• TERRITORIAL GOVERNANCE
• LOCAL REFORM INITIATIVES, 19972005
• CONCLUSIONS

2
INTRODUCTION

• Estonia is a small country with few resources
• For such a compact country (45,200 square km,
  population 1,351,000) Estonia has a too
  fragmented territorial administration
• the median amount of population for Estonian 15
  counties is 40,000 inhabitants.
• There are 241 municipalities (including 39 towns)
• on the average, the size of a municipality is 13
  x 13 km with 2,000 inhabitants

• The size of Estonia is 2/3 that of Latvia
• Population amount in Estonia is about one million
  inhabitants less than in Latvia
• In both countries the capital region has an
  overwhelming role over 1/3 of population and in
  many economic fields 2/3 of activities
• Both counties have a weak regional administration
  and a fragmented local level with many very small
  municipalities

3
MUNICIPALITIES 1999 / 2003

• Municipalities in Estonia, 1999 and 2003
• --------------------------------------------------
  --------------------------------------
• number of 1999 1999 share
  2003 2003 share
• Inhabitants municipalities of total
  municipalities of total
• --------------------------------------------------
  --------------------------------------
• 1 999 23 9.1 27 11.2
• 1,000 4,999 197 77.6 170 70.6
• 5,000 9,999 19 7.5 30 12.4
• 10,000 49,999 10 3.9 11 4.5
• 50,000 99,999 3 1.2 1 0.4
• 100,000 2 0.8 2 0.8
• --------------------------------------------------
  --------------------------------------
• Total 254 100
  241 100
• --------------------------------------------------
  --------------------------------------
• ? over four out of five municipalities have less
  than 5,000 inhabitants

4
ECONOMY AND DEMOGRAPHY AS MAJOR CHALLENGES

• Economy modernised 1990 2000
• 75 jobs lost in agriculture
• 41 jobs lost in industry
• 8 jobs more in services
• Economy from 2000 to 2003
• 4,700 jobs lost in agriculture
• 700 jobs more in industry
• 20,000 jobs more in services
• Modest size of Estonian economy
• GDP of 8,000 million in 2004
• Functional urban regions
• 10 with over 20,000 inhabitants
• 5 with over 50,000 inhabitants

• Estonia lost over 200,000 inhabitants (-14 )
  since 1990 and a possible loss of 200,000
  400,000 by the year 2030
• one third of the population are not ethnically
  Estonians and most of them speak Russian or other
  Slavonic languages
• 10 have not citizenship
• population declines in all towns but suburban
  growth takes place near to largest towns
• in Latvia similar demographic and economic trends
  
• Strong need for efficient local governance in
  both countries

5
POPULATION DEVELOPMENT OUTSIDE OF TOWNS 1989 -
2000
Population growth in the suburban areas around
three major towns Tallinn Tartu Pärnu ?
employment Decline in the north-eastern
region Narva Kohtla-Järve ? unemployment

• POPULATION DEVELOPMENT OF RURAL MUNICIPALITIES,
  1989 - 2000

6
GOOD TERRITORIAL GOVERNANCE

• Governance increasingly involves trans-scalar and
  interjurisdictional dimensions, which stress the
  limits of effectiveness of given geographical
  rationales for governmental and administrative
  activity (Gualini 2001)
• Good territorial governance is needed for
  efficient and transparent policies for local
  employment and economy
• Division of powers between supranational,
  national, regional and local administration,
  including public and private sector

• Territorial or local governance pertains to forms
  of management of territorial resources at
  regional and local scales.
• Governance is a dynamic process of
• hierarchies (idealised mode of democratic
  government and public bureaucracy)
• markets (arenas for economic actors)
• networks (self-regulatory structures within
  particular policy sector)
• communities (organisation of development without
  state government)

7

• Issues Central Government Local Government
• --------------------------------------------------
  ----------------------------------------------Defe
  nce Entire responsibility No direct
  responsibility
• Justice / Int. safety Entire responsibility No
  direct responsibility
• Police services National police No direct
  responsibility
• For. econ. relations Entire responsibility No
  direct responsibility
• Education All universities and research
  institutions Construction, operation and
  maintenance of
• Teacher training textbooks some inv.
  primary and secondary schools, kindergartens
• grants and art schools, sport facilities,
• houses of culture community centres,
• vocational and sport schools Teachers
• salaries and soc. security School transport
• Health Research medical institutes,
  special Capital investment and maintenance for
  municipal
• service hospitals and tertiary
  hospitals hospitals municipal doctor
• Roads Construction of national
  highways Maintenance of local networks and
  streets
• Maintenance of state highways and any
• other roads linking cities and villages
• Public Intercity buses by State
  enterprise Local public transport
• Transportation Airports railway subsidy,
  subsidy for
• local transportation

8
REGIONAL LEVEL COUNTIES

• the representative of the Government at the
  regional level is the county governor, appointed
  to the office by the Government for a term of
  five years. The county governors in 15 counties
  are the link between the Government and local
  governments. The main issues regarding local
  level (i.e. municipalities) are that the county
  governor
• represents the interests of the state in the
  county and care for the comprehensive and
  balanced development of the county
• co-ordinates the co-operation of regional offices
  of ministries and other agencies of executive
  power and municipalities in the county
• concludes, by authorisation of the Government,
  administration contracts with municipalities for
  performance of state obligations by them
• supervises the legality of secondary legislation
  of the councils and governments of municipal
  units and the legality and purposefulness of the
  use of state assets in the use or control of
  municipal units
• informs the Government and municipalities on
  regional policy and other issues concerning
  relations between the central administration and
  the municipalities

9
COUNTIES REFORM?

• Recently, the county governors have argued for
  directly elected and politically more autonomous
  councils of counties, but such concentration of
  power to the elected regional (county) councils
  would require a change in the Constitution.
• This argument has been put forward due to weak
  local level
• the need to establish a politically and
  economically competent subnational authority in
  Estonia, especially regarding regional policy
• In the formation of regional governance in
  Estonia there are different power interests
  between central, regional and local authorities.
• ? The collective demand by the country governors
  for more substantial powers over local
  authorities would mean a particular
  interpretation of subsidiarity that does not
  facilitate the formation of stronger political
  and economic governance and networks at the local
  level

10
LOCAL GOVERNMENT

• The Constitution indicates the separation of the
  tasks of the central and local authorities. Local
  governments resolve and organise issues assigned
  to them by law if not assigned by law to other
  persons for organisation and resolution.
• the decision-making power in local everyday
  matters is decentralised to local government
  following the European principles of local
  self-governance of the European Local Government
  Charter
• it is not clearly expressed whether the position
  of local government derives from principles and
  theories community or state-centrism
• Estonia inherited the autocratic Soviet model of
  public administration that only imitates the
  democracy.
• ? the amount of tasks undertaken by local
  government has increased despite the state
  funding for that has not increased in the same
  way
• ? tensions between the central and local
  governments in shaping local governance are rising

11
LOCAL GOVERNMENT revenue

• The share of local governments is about 69 of
  the national GDP.
• over two-thirds of Estonian municipalities have
  own annual revenues under one million euro.
• The average personal income differences per
  capita between the richest and the poorest
  Estonian municipalities are over eightfold
• 35 municipalities have over 50 loan burden of
  their total budget and 35 municipalities have
  between 40 and 50
• In eight municipalities the share of individual
  income tax was over half of the total local
  revenue

• Budget revenue of Estonian local governments in
  2002
• taxation (39 )
• financial support and revenue intended for
  specific purposes (33)
• loans and interest (8 )
• municipal enterprises (6 )
• municipal agencies and municipal assets (3 )
• other revenue (1 )
• ? the role of individual income tax has
  diminished from 48 to 35

12
LOCAL GOVERNMENT expenditure

• INVESTMENTS in 2000
• in Tallinn 99.7 of investment funds are from
  own incomes
• in towns with over 10,000 inhabitants 52.9 of
  investment funds are from own income and 24.7
  from ministries.
• in rural municipalities with less than 1,500
  inhabitants 27.4 of investments funds derived
  from own income and 49.4 from ministries

• Expenditures of Estonian local governments in
  2002
• education (44 )
• other (18 )
• economic services (14 )
• general administration (9 )
• social welfare (8 )
• culture and art (7 )
• Expenditure related to duties of the state
  imposed by law on a local government is funded
  from the state budget.

13
LOCAL REFORM ATTEMPT 1

• The first reform attempt towards new local
  governance took place from January 1997 to
  February 1999
• The Government indicated the need to reduce
  significantly the amount of municipalities,
  however, not to alter their political role.
• the number of local governments could be reduced
  to 100
• The more distant is a municipality from the
  capital, the weaker is its socio-economic
  development potential

• The Government argued that the expensive and
  ineffective administrative system was a problem
  for the development of Estonia.
• The public sector suffered from rigid
  hierarchies, inadequate professional training and
  administration, and lack of qualification,
  motivation and co-ordination
• studies, organised discussions and proposed
  models for administrative-territorial reform of
  local government under the PHARE Programme

14
LOCAL REFORM ATTEMPT 2

• majority (52 ) of municipalities was against the
  reform proposal and only 13 municipalities (30)
  directly in favour, 31 conditionally in favour,
  and 4 without opinion
• media debates indicated the administrative reform
  as necessary to be conducted slowly but in a
  radical way
• main argument was the size and the number of
  municipalities
• ? main weakness of the reform initiative was its
  poor design of organisational structure with the
  requirements and opportunities of the local
  government.

• The second reform attempt began with the new
  Government in 1999.
• In 2001, the Government approved the programme
  for territorial-administrative reform to achieve
  a novel, flexible, quality and efficient local
  government.
• the general minimum amount of inhabitants in
  municipalities would be 3,500 and near to larger
  towns 4,500.
• The immediate hinterland of municipal centre
  should belong to the same municipality.

15
LOCAL REFORM ATTEMPT 3

• The third attempt towards local governance
  started in 2002, currently in progress.
• The administrative weakness and economic
  inefficiency of local government was still the
  main argument
• The aim is to enhance the administrational
  ability and the efficiency of project
  applications of local governments, improve the
  availability and quality of public services of
  local governments and to develop their
  cooperation ability.

• In 2004, decree to co-ordinate and promote the
  voluntary merger of local governments
• financial premium for merging 100,000 to 200,000
  euro per respective local government
• an additional issue is the new regional policy
  guidelines, which consider specialised competing
  and co-operating urban regions and networks as
  possibilities for innovative regional development

16
CONCLUSIONS

• Estonia and Latvia have few human and economic
  resources ? need to use them very well
• current Estonian territorial administration does
  not support the organisation of such resources in
  appropriate way
• Need to make a reform towards local governance,
  but in Estonia there are three failed attemps,
  mostly due to inadeguate political organisation
  of the reform
• ? The full answer is not a simple substantial
  reduction in the amount of territorial
  administrative entities

• Co-operation and identification of initiatives to
  generate better economic and social development
• Professionalisation of administrative, management
  and leadership skills
• Decentralisation of decision-making in regional
  policy at subnational level
• Clear independence of local budgets from the
  state
• More intensive inter-municipal and inter-regional
  co-operation
• Territorial and public administration reforms are
  necessary but feasible only if they enhance local
  governance, subsidiarity and democracy
• combining territorial reform with new urban
  policy mean that local governance is taken
  seriously in Estonian regional and local economic
  policies, similar possibility exists also for
  Latvia