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Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal)#2(30), 2018
Ruben Hayrapetyan,
Armenian State University of Economics, Doctor of Sciences in Economics
PROBLEMS OF LOCAL GOVERNANCE IN ARMENIA
Summary: The efficiency of public administration is largely conditioned by the optimal division of powers and functions between the branches of power, which will enable to provide appropriate mechanisms for checks and balances between them. The efficiency of state government and local government is affected by extremely dynamic and mutually interrelated factors of internal and external environments, such as economic situation, political stability, or international relations. In these circumstances it becomes necessary to monitor and evaluate the effectiveness of the public administration and local government, and to implement reforms of the system. The goal of this paper is to analyze and indentify problems of local governance in Armenia that need to be solved, which can result in the further development of public administration. Within the framework of this research the problems of enlargement policies as well as opportunities and obstacles of the effective local governance have been unveiled.
PROBLEM STATEMENT
Many communities in Armenia do not in effect realize the most of authorities granted to them by law, the primary reasons of which are the insufficiency of real financial potential of communities and the huge number of small communities with very weak level of capacities. In such a situation the further decentralization of local self-government (LSG) system also becomes impossible. The decentralization cannot be set as the highest purpose by itself: its main result must be the more efficient execution of the authority to satisfy the needs of local population. The realization of authority is possible only in case of corresponding financial and other resources existing. With the strict limits of financial resources of the state budget, it will be difficult to
increase the subsidies paid to communities in near future. Besides, the increase of subsidies must not be considered as a long-term solution, as it may lead to wasting of budgetary resources in case of inefficient use. During the establishment of current administrative division system a huge number of communities were formed with significant differences among. These differences include the area, population, financial capacities, etc.
DATA ANALYSIS
The distribution of rural communities with different population numbers is shown below by regions (marzes).
Table 1. The distribution of rural communities in different regions by population as on January 1, 2016 (before the three consolidation pilots)13
Region Less than 100 inhabitants 101-400 inhabitants 4011000 inhabitants 10012000 inhabitants 20015000 inhabitants More than 5000 inhabitants Total
Aragatsotn 3 30 41 21 14 2 111
Ararat 0 4 15 32 36 6 93
Armavir 0 4 7 40 39 4 94
Gegharkunik 1 20 23 13 18 12 87
Lori 3 37 21 25 16 3 105
Kotayk 1 5 15 14 18 7 60
Shirak 3 32 35 31 13 2 116
Syunik 20 44 24 8 6 0 102
Vayots Dzor 0 16 9 11 4 1 41
Tavush 0 10 17 17 13 0 57
Total 31 202 207 212 177 37 866
As can be noticed, 233 of total 866 rural communities or 27% have less than 400 inhabitants, and 440 communities or 51% have less than 1000 inhabitants. The most populated rural community is Akhuryan in Shirak province with 10046 inhabitants, while the least
populated is Kashuni in Syunik province with 27 inhabitants, though the last was united within pilot program being included in Tatev community. So, the biggest rural community has 372 times more population than the smallest one.
13The table is composed by the author in result of calculations and comparison made on basis of data provided by RA National Statistical Service.
Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal) #2(30), 2018 &sLi 29
This issue, which has currently been arisen in our country, can be solved through the improvements of administrative division. Such improvements usually are of a high difficulty level and may not be identified with the redesign of local authorities. A set of different prospects must be taken into consideration to form new appropriate LSG units with efficiency and accountability [1, page 56]: Even in countries with developed and sustainable democracy the systems of administrative division are not permanent, but adaptive in response to current priorities, needs and resources. In such countries the changes of administrative division are based on economic efficiency, as well as on some principles of historical or geographical origin, and are not being transformed info assurance mechanisms for political processes.
For RA Government the most acceptable option of such reforms is considered the process of communities enlargement or consolidation, the establishment of intercommunity partnership as a widely used approach in international practice. There is an extensive research on that topic, "The Conceptual Approaches to Formation of Intercommunity Unions and Enlargement of Communities", carried out by the Ministry of Territorial Administration and Development of RA. According to the logic of that concept, the formation of new administrative division system is possible through legal reforms. About 300-350 communities are to be formed in Armenia as a result of enlargement, 22 separate urban communities with population above 15000, and 40-45 intercommunity unions with 15000-50000 inhabitants[2, page 23]:
The enlargement process must be based on detailed research of all the communities taking into account the specifications and current issues of each community. Only after such research it could be found out which communities are to be enlarged and which are to remain. Another important factor of successful implementation of enlargement process is the interpretative work with society, which must include NGOs and specialists capable to explain the idea, objectives and practical benefits of enlargement, as well as to provide comprehensive respond to the questions asked by the citizens. Also it is very important for the inhabitants of enlarged communities to realize the positive consequences of the process personally. The administrative way of community enlargement may face several barriers. Specifically, a perception may be formed among inhabitants of smaller communities, that by being united they will lose the chance to solve their local issues because of representatives of larger communities being elected for LSG bodies, and resources of the enlarged community will be mainly directed to the larger settlements. As a result a problem of undermining of interests can get arisen for smaller settlements.
The described issue becomes even more urgent if take into account the fact that the process of enlargement through administrative reforms has already been launched. Local referendums (to approve or deny the
three unions of communities) were held in Tumanyan, Lori province, Tatev, Syunik province and Dilijan, Ta-vush province groups of communities on May 17, 2015. The results show that continuity must be assured for the enlargement process, particularly, to develop legal regulations for its implementation. For that purpose in 2015 the corresponding ministry designed drafts of legal acts conditions by the specifications of formation of LSG bodies and authority distribution within new enlarged communities. It was legislatively set, that each settlement with more than 100 registered inhabitants (except for the administrative center of the multi-settlement community) must have one administrative representative, while corresponding activities for the smaller settlements are to be carried out by the staff [3, Article 10]: Moreover, the position of administrative representative is discretionary, and its the maintenance costs are to be reflected in community budget separately.
Acting in the settlement on behalf of the head of community, the administrative representative must control the delivery of public services and provide information to the head of community. Also the administrative representative must assist and organize the authority realization by the community council, head of community and staff secretary within the settlement14: However, the representative is naturally not a separate LSG body, and thus the head of community is responsible for the activity of administrative representatives [4, page 107]. Taking into account all the difficulties, multiple factors and possible consequences of administrative reforms, it can be summarized, that rush decision making is not justified in this case, leading to distortion of LSG fundamental idea as well as to serious complications for further implementation of the system.
The observation of international practice on LSG second level functioning shows the wider range of its functions (healthcare, local roads, infrastructures), that is to say, it fulfills the services typical for large economies. The two-level LSG system can provide several advantages, particularly the unified system of regional government in the country by clarifying the distribution of authorities between the two levels. Besides, extra financial capacities will enable involvement of more qualified human resources on regional level, and the specialists will prefer to stay in their regions. Lastly, it will become possible to benefit from the scale effect resulted by regionalization of public services previously provided by small communities separately. The regional scale will stimulate investments in public services and development of cooperation between private and public sectors. Unlike some big countries (France, Germany, Italy, UK, Spain, etc.), where multi-level LSG system is mostly used, the two-level administrative division is suitable for countries with communities too weak to realize authority appropriately and their regional enlargement is inexpedient. In other words, this kind of division can be advantageous especially for administrative reforms in RA.
14 Zmjmummh^ 2mhpm^hmni.pjmh opthp^ «Shqm^mh ^hphm^mnm^mpdmh Umu^h», 2,2, ^m2mnhm^mh mtqt^mq^p N 21 (196), bpUmh, 2002, hnq^mb 29.2:
30 Wschodnioeuropejskie Czasopismo Naukowe (East European Scientific Journal)#2(30), 2018
Speaking about the issues of regional government, it is necessary to note, that they are logically divided into three levels: first, issues of merely local nature relating to the local population only; second, citywide or regional issues; and third, state-level issues relating to the given region. Based on the above mentioned considerations, we think, that two-level LSG system and its convenience in RA become matters of deep research, as an alternative to solve the problems of RA regional government and assure its higher efficiency.
CONCLUSION AND RECOMMENDATIONS
Further development of local government system in Armenia is possible through the creation of a two-tier local government system with a corresponding division of powers and financial recourses between two tiers. New territorial-administrative division of Armenia for effective local government should include both large and small local governance units. It is necessary to develop some new mechanisms which will ensure the active participation of community residents in the development and discussion processes of the local budget. Being focused on the fact that here the main difficulty is the limited municipality staff and the inability to have individual meetings with all the community's residents, we stress the importance of finding new sectors and parties, which may be involved in this process. It is urgent to promote inter-community cooperation, which would enable expanding financial resources channeled to service delivery through economies of scale, as well as to provide municipalities with new financing sources and means with a view to enable them
to exercise their powers defined by law fully and completely. Meanwhile, there is a need to fix the proportions of state budget taxes shared with to the municipal budgets not in the law on state budget on an annual basis, but by RA laws on Local Self-Government or the law on Budget System of the Republic of Armenia.
Municipalities have to be introduced to capital markets and the issues related to borrowing from commercial banks and financial institutions should be legislatively regulated, to let the municipalities issue bonds, as well as develop and apply systems and tools to assess the creditworthiness of municipalities. Based on stage-by-stage results of municipal amalgamation and international experience, decentralization of powers from public (including territorial) bodies to municipalities should be implemented. Emphasizing the role of the economy in the development of municipalities, special attention must be paid to the support of small and medium-size businesses, creating joint enterprises with private sector (including with the support and / or participation of the government of the Republic of Armenia).
Literature
1. Analytical study on optimal administrative-territorial structure for Republic of Moldova, Center Analytic Independent, Chisinau, 2010.
2. Conceptual approaches on inter-municipal cooperation and communities enlargement http://www. gov.am/files/meetings/2008/213 .pdf
3. RA law on Local Self-government
4. Tumanyan D., Local governance in Armenia (2015.), Book 8, Yerevan, 2016
Бикташев Айнур Альфритович
Магистрант, Национальный исследовательский университет
Высшая школа экономики Biktashev A.A. Higher School of Economics
SIGNIFICANCE OF BUSINESS ENVIRONMENT GENERATED BY REGIONAL
GOVERNMENTS
ОЦЕНКА ЗНАЧИМОСТИ УСЛОВИЙ ВЕДЕНИЯ БИЗНЕСА, ФОРМИРУЕМЫХ
РЕГИОНАЛЬНЫМИ ВЛАСТЯМИ
The aim of this study is to compare the conditions of doing business generated by the regional authorities and identify their significance. To test the hypothesis that the development of business performance depending on the conditions of reference formed by the regional authorities have been used methods such as statistical analysis of data, correlation analysis, comparison, generalization, description.
The study found that none of the regions has equally good results on all indicators of the business environment. Correlation analysis, allowed to say that our hypothesis was confirmed. The fact that the link between the business environment and the results of its activities suggests that the regional authorities do have the ability to create favorable conditions for doing business. In addition, it can be argued that the results of the National rating of investment attractiveness of Russian regions are related to the actual results of business activity. This makes it reasonable to use in practice, the regional authorities, both in defining the problem areas, and while working on it.
Key words: government regulation, business conditions, quality of regulation, incentives, tools, factors, Russian regions.
В статье рассматриваются условия ведения бизнеса, формируемые региональными властями, а так же их влияние на фактическое развитие бизнеса в субъекте федерации. Для проверки зависимости
показателей развития бизнеса от условий его ведения, формируемых региональными властями, ис-
