United Nations Development Programme
Integrated Local Development in Montenegro
Country: Montenegro
UNDAF Outcome 2.2: State and independent institutions with increased capacity to ensure the realization and monitoring of human rights, support empowerment of women, enable equal opportunities for all inhabitants, including access to efficient service delivery, through a transparent system of public administration at national and local level
Expected Outcome: Fostering a democratic society that fully respects, protects and fulfils human rights through rule of law, government transparency and accountability
Expected Project: Local government system further enhanced to deliver better quality of local services to the citizens in a transparent, accountable and cost-effective manner
Executing Entity: UNDP CO Montenegro
Brief Description:In the context of ongoing decentralization reform, local governments' responsibilities are becoming increasingly more important and versatile. While some progress has been made, the effective and accountable delivery of quality public services at the local level still faces considerable challenges in terms of limited capacity to design and implement integrated local development strategies, insufficient organizational development and financial management in line with the principles of good local governance and lack of understanding of benefits of intermunicipal cooperation.
The project will address these challenges through following components: 1: Developing prioritized and mature project pipeline that is aligned with strategic priorities at national and local level in pilot municipalities; 2: Improving transparency and accountability of municipal financial management, 3: Enhancing local service delivery through inter-municipal cooperation 4: Improving municipal and ministries’ management practices in order to deliver better quality of services to the citizens in a transparent, accountable and cost-effective manner.
Implementing agencies: UNDP CO Montenegro
Agreed by UNDP: ______
1
Integrated Local Development in Montenegro
Podgorica, October 2013
Table of Contents
I. SITUATION ANALYSIS 3
II. INTERVENTION STRATEGY 4
1. Developing prioritized and mature project pipeline that is aligned with strategic priorities at national and local level in pilot municipalities 4
2. Improving transparency and accountability of municipal financial management 5
3. Enhancing local service delivery through inter-municipal cooperation 7
4. Improving municipal and ministries’ management practices in order to deliver better quality of services to the citizens in a transparent, accountable and cost-effective manner 9
Gender Mainstreaming 11
III. PROJECT RESULTS AND RESOURCES FRAMEWORK 12
IV. MANAGEMENT ARRANGEMENTS 17
Institutional Framework 17
Project Roles and Responsibilities 17
Monitoring and Evaluation 18
Reporting responsibilities 18
Visibility 19
V. LEGAL CONTEXT 19
VI. ANNEXES 20
1
I. SITUATION ANALYSIS
The Constitution of Montenegro (2007) and the Law on Local Self-Government (2003) constitute the legal basis for a decentralized system of local self-government. Montenegro is not divided into administrative regions; it has a monotype organizational structure of local self-government with omnibus distribution of responsibilities. There are in total 22 municipalities. Mayors are not directly elected by the voters but by the municipal assemblies, however, the composition of the municipal assemblies is the result of the direct elections held every four years.
The government has an overriding goal of advancing European Union (EU hereafter) integration. Accession negotiations with the EU are now ongoing. EU emphasizes the need for further institutional reform, including improvement in the public administration. In particular, EU (2013) Progress Report on Montenegro highlights that there were no developments in the rationalisation and efficiency of local administration.
Several pieces of legislation related to local self-governance were adopted in 2011, including:
· the Public Administration Reform Strategy for 2011–16, which outlines ambitious objectives for local self-government reform, including further decentralization, strengthened administrative oversight of local governments, and enhanced local financing.
· the Law on Regional Development (2011), which defines legislation on coordinating efforts between local and central authorities for developing regional provinces.
· the Strategy for Inter-municipal cooperation for 2011–15, and its Action Plan, were adopted in June of 2011;
· the Law on Territorial Organization (2011), which determines which territories belong to individual municipalities and it was amended in 2013; and
· Amendments were introduced also to the Law on Local Self-Government (with a view to enhancing the transparency, efficiency and accountability of the administration at local level) and the Law on Local Self-Government Financing (to provide the municipalities with more stable sources of revenue; these sources include a tax-sharing arrangement and an extension of local tax bases).
In June of 2012 the government adopted an Analysis of the functioning of the local self-government which contains recommendations for further legislative amendments and an Action Plan for the Reform of Local Self Government (2012). The National Training Strategy (NTS) for Local Governments in Montenegro was adopted in 2008 and currently is under process of updating. Also, UNDP has prepared a comprehensive Functional review of the HR function and management capacities in Montenegrin municipal administrations.
In the context of EU integration and national level policy making, in order to build a solid ground for smart, sustainable and inclusive growth at the local level, there are some challenges Montenegrin local self-governments need to tackle:
• In most cases local strategic frameworks are not aligned with national strategic documents and policies, but also various strategies at the local level are not aligned among themselves (for example, Municipal Development Strategy, Municipal Gender Equality Strategy, Municipal Social Inclusion Strategy, Municipal Environment Strategy etc.);
• Inappropriate institutional set-up for evidence based policy making, strategic planning and for the implementation of the strategic and policy framework.
• Limited capacities to translate development strategies into practical development actions.
• And finally, insufficient communication between municipalities, lack of vision and plan on issues of inter-municipal interest (municipalities with advanced administrative capacities could provide services on behalf of those with insufficient capacities) and lack of knowledge on possible forms of interest-based municipal cooperation.
Taking all this into account and facing the significant regional disparities, the UNDP with its integrated approach to capacity development at the local level intends to support the efforts of the Government of Montenegro to ensure a coordinated approach to sustainable socio-economic development of all parts of the country, by linking needs on the local level with the priorities at the national level, in the joint activities of all social actors in order to achieve balanced development of the country and reduction of socio-economic differences.
II. INTERVENTION STRATEGY
The overall objective of the UNDP and its integrated approach to capacity development at the local level is to contribute to achieving the key national priorities on the way towards EU, related to smart, sustainable and inclusive development and continued growth at the local level, in order to deliver better quality of services to the citizens, in cost-effective manner. For efficient implementation of this objective the enhanced/good governance, increasing transparency, accountability and quality of institutions in the public sector is a precondition.
The project will address these challenges through following components:
1. Developing prioritized and mature project pipeline that is aligned with strategic priorities at national and local level in pilot municipalities
The local self-government units are considered as main facilitators of local development and one of the key beneficiaries of EU funds in Montenegro. Therefore, the importance of developing capacities at the local level is recognized as the driving force for “localization” of national priorities and goals. Development of strategic framework for local and regional and rural development goes in parallel with the development of a pipeline of projects in order to turn the strategic priorities into investment plans, project proposals, concrete initiatives, which will be funded through the state or municipal budget, IPA funds or donors. Freedom House report on Montenegro notes: “... local employees are often under qualified to handle their new responsibilities related to European integration and the decentralization process. Expectations are nevertheless high that municipalities will be able to apply for, receive, and manage significant financial resources from EU development funds”.[1]
Following the adoption of the Law on Regional Development, local self-government units took the lead in the preparation of local strategic development plans in a participatory manner, and so far majority of municipalities developed and adopted the plans according to the unified methodology. These plans were developed based on social and economic analyses and needs of municipalities, in the consultation procedures being involved the relevant stakeholders. Now it is critical to make sure there are clearly defined priorities, actions and timeframe in the action plans for the implementation of Strategic Development Plans and together with that a sufficient number of mature, bankable, projects, fiches and initiatives in the pipeline, based on in-depth analysis and feasibility studies.
In 2010 UNDP supported the Ministry of Economy in preparation of the Strategy for Regional Development (2010-2014). Following the adoption of the Law on Regional Development, UNDP assisted in local development planning and selection of strategic projects in municipalities of Žabljak and Kolašin. The Ministry of Economy has obtained very comprehensive Electronic Database of Development Projects, which can also be used as a tool for the project preparation and implementation. UNDP has organized introductory training and prepared the draft Rulebook for the usage of the database.
Experiences of other accession countries such as Bulgaria and Croatia show that integrated approach to regional and rural development and close coordination of relevant government structures with local authorities is needed in programming and implementation to secure absorption of funds and avoid overlap. At this stage in Montenegro there are legal, institutional and financial constraints and a more systematic and coherent rural policy fine-tuned with the local strategic development is highly needed. Having in mind that the greatest potential users of these funds in Montenegro – municipalities, private companies and farmers - are insufficiently informed on this process, a lot of work has to be done in this regard while some of the business clusters related activities may be relevant and complementary. Therefore, tailored technical assistance to the relevant ministries and municipalities in ensuring integrated approach to rural and regional development will be needed.
This will be reached through following steps:
1.1 Technical support in amending legal framework related to regional development;
1.2 Technical assistance for upgrading existing strategic plans and developing Action Plans for the Implementation of Strategic Development Plans in the pilot municipalities,
1.3 Targeted technical support to municipalities to develop project pipeline, mature bankable projects and project fiches in pilot municipalities;
1.4 Strengthen national and local capacities through trainings, exchange of experiences, regional conferences, study tours, mentoring including related to development and implementation of IPA project proposals;
1.5 Technical support to municipalities in populating the Electronic Database of Development Projects with the strategic priorities and projects identified in the strategic plans;
UNDP is currently discussing the possibilities for funding of these activities and the Ministry of Economy has included the 20,000€ (US$ 27,000 approximately as per October2013 exchange rate) in the plan for the 2014 budget. With regard to IPA 2011 project related to business clusters, UNIDO will be direct partner, whereas UNDP will implement part of the activities related to the project development and this funding will be in the amount of 55,700€ (US$ 75.613 approximately as per October2013 exchange rate). UNDP’s contribution will be US$ 50,000.
2. Improving transparency and accountability of municipal financial management
Since independence, Montenegro has been active in the area of institutional reform of the budget process, including the introduction of the single treasury account (STA in 2002). The introduction of PIFC and internal audit in accordance with EU standards is currently underway. As from the 2010, the budget classification was refined so as to apply more systematically the economic classification at the line-item level. Montenegro has started a reclassification of the budget on a more programmatic basis, thus providing a foundation for more systematic monitoring of policy results. With International Monetary Fund (IMF) support, the MoF intends to introduce a medium term expenditure framework (MTEF) as a basis for fiscal planning.
Municipal governments in Montenegro continue to be overstaffed and underfunded, with significant financial disparities among the regions. Local authorities do not have firm control over municipal finances. Given the fact that the process of decentralization (and fiscal decentralization in particular) is still work in progress in Montenegro, and given the growing training needs of the municipalities in the face if the EU accession and continued reforms in many areas, there will certainly be a need to invest additional efforts.
Financial discipline in terms of taxes and revenues collection and expenditures and more facts based planning must be enforced among municipalities in Montenegro. Also, the Law on Local Self-Government stipulates the obligation of the municipality which is in financial difficulties for more than 90 days, to prepare a recovery plan with the program of measures to overcome financial difficulties, within 30 days from the warning of the Government. These municipalities are also obliged to submit reports on the implementation of the contract and all relevant information related to the contract, but most of them are not doing so.
Also, municipal budgets should be prepared in a way which reflects local priorities, the mission and the vision of the municipality, as well as its strategic plans which have to be developed. More tailored-made trainings on EU funded projects implementation should be organized for local finance departments and detailed procedures for accounting, public procurement and spending of donor’s funds should be developed. For some projects, public-private partnership may be an acceptable solution. For the successful functioning of public-private partnership models, it is necessary to ensure that tax and other societal benefits are well-defined and inductive to potential private investors and partners.
Tax system in Montenegro has significantly improved over the last few years, especially following the independence in 2006. The fiscal system is decentralised with the significant fiscal revenue given to the municipalities as original sources. Municipalities were often given powers, but unfortunately the appropriate training and capacity building has not been foreseen. Taking all that under consideration local governments have performed rather well and have raised revenues. However, the local tax/revenue collections are still rather weak, with compliance in good cases being just over 50 per cent. Hence, it is necessary to provide additional capacity building and equip the local tax administration (or equivalent local bodies) technologically and operationally to be able to perform better. Equally, the central government does not share many of its registers with the local tax authorities, although local tax authorities can also be blamed partly, as they often wait for the central government tax authorities to provide full support and give them all the registers and information; without their own attempts to build solid databases themselves.