Local Authorities: Struggle for the financial support of the center

Summary

In 2019, there were no institutional transformations in the local government system. However, the authorities are resuming discussions on the possible improvement of the system of administrative-territorial division, as well as on amendments to the legislation on local government and self-government.

The system of distribution of power competencies and budget funds among different levels of local government and self-government remains unchanged. At the same time, local authorities, e. g. agro-grandees of Viciebsk region and the ex-Soviet Directorate of Orša region are still able to lobby for additional support.

Nevertheless, the overall reduction in state support to regions across the country is actualizing the discussion about its compensation in the form of expanding the powers of local authorities, developing self-government and greater decentralization.

Trends:

• The share of local government funding in the distribution of public finances is decreasing;
• The lobbying weight of certain regional power groups remains greater than the measures taken by economic authorities to reduce state support;
• The reduction of the rural population, as well as the difficult economic situation in the regions, causes discussion about administrative and territorial reform and greater independence of local authorities.

Local government reform: regional power vertical vs central authorities

Last summer, the government resumed the debate on the possible reform that is connected with the system of local government. In the discussion of possible changes in the administrative-territorial division, the main task is to stimulate the economic development of the regions. Local authorities are still unable to cope with the demographic crisis, with a population decline in most Belarusian regions, and economic decline in the absence of large-scale state investments.

The pilot project in Orša region attracts constant attention of Minsk. However, even special control by the Belarusian leadership does not bring the efficiency expected from local managers. Their activities are constantly criticized by controllers from Minsk. Nevertheless, the strategic project for the development of Orša region continues to receive unprecedented state support, including budget funding.

Contacts with Western partners influence the updating of the topic of improving local self-government to a large extent. At the end of April 2019, the Chairman of the Congress of Local and Regional Authorities of the Council of Europe, Anders Knape, paid an official visit to Belarus. He also met with President Alexander Lukashenko. The relevance of European experience in expanding the independence of local councils of deputies and other self-government bodies was discussed at the meeting.

EU technical assistance also remains an important factor for the Belarusian authorities to express their intentions to reform, decentralize and develop local self-government.

The Belarusian leadership talks about the program of accelerated socio-economic development of eleven cities with a population of more than 80 thousand people that should become regional drivers of growth. Representatives of the State Belarusian Institute for Strategic Studies organized a discussion “Eleven centers of attraction – regional growth drivers”. Successful implementation of the program may entail administrative and territorial changes in the long term.

It is expected that the discussion on possible options for changes will resume after receiving data from the national census. However, most likely, if any changes are carried out, in the medium term they will not affect the system of the current vertical of power due to the conservative position of the head of state.

Local officials will resist the efforts of the economic and scientific bloc to implement the most ambitious reforms in the areas connected with the regional authorities. The position of local authorities will be supported by the head of the state. The argument for preserving the system that exists today is President Alexander Lukashenko’s concern that the entire power structure will become unbalanced. However, separate measures may be taken, including the integration of sparsely populated districts and village councils, as well as the transfer of certain social functions to inter-district structures.

Development of the local economy: conservatism of the local vertical of power and liberal measures of the government

The problem of unemployment is of particular importance for local authorities. According to official data, the number of districts with a tense situation in the labor market decreased from 52 to 28 units1 over the year. Nevertheless, the regions continue to gradually lose their demographic potential and human capital, as a result of which a shortage of labor can be predicted in some areas in the near future. Labor migration is a significant factor in this.

Local authorities show conservative approaches to the privatization of municipal property, which contradicts more liberal measures of the Belarusian government. For example, the head of the Minsk region Alexander Turchin criticized the chairpersons of district executive committees for the lack of initiative in the development of entrepreneurship.

The vertical of power in the regions seeks to maintain greater control and influence in the local economy by maintaining a high share of communal ownership. In particular, officials slow down the process of denationalization and transfer of even unprofitable enterprises and objects that are no longer used to independent businesses. Probably, in no small part this may be due to the anti-corruption campaign of the security forces.

This inertia of local management is one of the reasons for the lack of growth in personal income of local budgets. Thus, in recent years, personal income in the structure of local budgets has remained the same, at around 80% (see Table 1).

In 2019 the financial authorities failed to win over local managers on issues of denationalization. Nevertheless, at the end of the year, the Ministry of Finance prepared a draft regulatory document that has a clause on the abolition of the pre-emptive right of local executive committees to purchase shares owned by the state. Its public discussion is planned to be organized in 2020.

Local councils: clubs for coordinating the interests of local and regional nomenclature

Some of the power elites popularize the idea of decentralization and redistribution of powers to the lower levels of government, elective chairpersons of village executive committees and refusal to elect deputies of village councils. The most well-known public proponent of this is a former Prosecutor General and former President of the Constitutional Court Ryhor Vasilevich.

In rural areas, the number of deputies of 1,152 village councils is 13,225 people.2 However, the village population continues to decline and will soon equal the number of residents of Minsk. At the same time, the Deputy corps of Minsk City Council is only 57 persons, although the Council of deputies of the capital has the rights of the regional and basic level.

In a situation of reduced resources, the state no longer has sufficient funds to maintain social functions and administrative apparatus in rural areas. However, for the time being, the primary level of government and self-government retains its institutional structure. At the same time, social responsibility is increasingly shifted to agricultural enterprises.

Within the system of local councils, representatives of various groups of local and regional nomenclature coordinate their interests. In years of Parliamentary elections, the ideological function of local councils and deputies increases. The issue of representation or protection of the interests of voters is not even considered, as, for example, the problems of harmful production or compaction. The political leadership motivates local deputies to make more frequent contact with the population to explain state policy and relieve tension on problematic issues, which brings little fruit in relation to high-profile cases.

Attempts to reindustrialize regions in order to save jobs lead to a clash of interests between investors and residents on environmental issues. Local authorities are not able to completely stop the protest movements for a better environment, such as in Brest (Accumulator Battery Plant) and Mahilioŭ (Omsk Carbon) or Svietlahorsk (Pulp and Paper Mill). However, the local authorities in Brest were forced to terminate the contract with the ABP investor and put the owners to the dock because of the public pressure.

Regional associations of local councils of deputies are considered as an additional mechanism for attracting funds, including foreign donors. In 2019, in addition to Hrodna and Mahilioŭ, an Association was established in Viciebsk region. Moreover, the initiative to create this Association came not from the local councils of Viciebsk region, but from the Council of the Republic of the National Assembly. It is doubtful that the Association created in this way tried to lobby the interests of self-government to higher institutions.

Traditionally, the staff rotation of the vertical leadership continues, which replaces the institution of elections in the Belarusian power system. In all regions, new chairpersons were appointed in 23 districts out of a total of 118 district executive committees. A full staff renewal of the district leadership takes place within 4–5 years, although in some districts there are ‘long-lived’ chairpersons.

New heads of Mahilioŭ and Homiel regional executive committees were appointed. The change of the head of Mahilioŭ region occurred after a scolding that Alexander Lukashenko gave to the local vertical of power following his visit to the farm in Škloŭ district. The head of the state often uses for the rotation of regional and district officials certain obvious examples of failed economic activities after his demonstrative site audits. At the same time, the Homiel regional executive committee waited four months for the appointment of its chairperson.

It should be noted that the head of the presidential administration recognizes certain difficulties in finding appropriate candidates for the post of chairpersons of district executive committees. One of the main tasks of the personnel policy of the Belarusian leadership in the regions is to rejuvenate the vertical of power.

Lobbyists from the regions vs financial authorities

The consolidated budget allocation system has maintained its previous trend. The share of local budget expenditures continues to decrease every year, albeit slightly (see Table 2). Local authorities have a smaller share of the total “financial pie” of the country from year to year.

However, local authorities and lobbyists partially compensate for the reduction in their share of public spending through other mechanisms. For example, a major project to develop budget support is the program for the development of Orša region, which has been going on for several years. The Viciebsk leadership managed to further lobby for the creation of a super-large holding with state support. Although the authorities recognize the unprofitability of three of the four holdings that already exist, and the head of state has repeatedly criticized farmers for poor financial performance.

The high level of debt of local government bodies and agro-business, and mainly poor financial discipline caused harsh criticism by the President during his visits to the regions. The total amount of local government debt was BYN 5 billion, or 4.1% of GDP, as of 1 January 2019.3 The practice continues when local budgets have to repay loans on behalf of unprofitable agricultural organizations. At the same time, the local vertical of power remains hostage to the policy of the top management, which allocated financial resources and other support to farmers on preferential terms.

In some regions, managers largely ignore the approaches of financial authorities to debt relief and economic discipline. The largest arrears were in Viciebsk region (BYN 251.2 million), then in Minsk (BYN 96 million) and Brest (BYN 13 million). The most financially responsible were the authorities of Minsk and Hrodna region, which had no overdue debts.

Despite public criticism from the head of the state for the largest debts among other regions in the amount of BYN 3 billion, Viciebsk vertical of power retains a significant lobbying influence. The leadership of Viciebsk farmers lobbied for the creation of a super-large holding, and once again received numerous benefits, deferrals and installments, exemption from payments for all types of debts.

At first, the creation of the holding, first of all its structure, caused dissatisfaction with the chairpersons of district executive committees, as a result of which they lost influence on agricultural organizations on their territory. They were supported by President Alexander Lukashenko with a statement about the possible unbalancing of the power vertical in Viciebsk region. After the intervention of the head of the state, the agrarian lobby, together with the regional executive committee and the district leadership, whose interests were protected by the President, came to a consensus.4 The creation of a super-large holding is planned for early 2020.

Conclusion

Lobbying nomenclature from certain regions allows circumventing the measures of the financial authorities to limit state support to the unprofitable sector of the economy. The largest lobbying weight among other regions belongs to the authorities of Viciebsk region, who plan to start another major project in the agricultural sector at the expense of public funds in 2020.

In the year of the Presidential election, the authorities will not take any actions to change the system of local government and self-government, or reorganize administrative divisions. However, certain measures may be taken to balance the existing system of administrative-territorial division and a greater independence could be given to local executive committees.

Local authorities maintain full political loyalty to the Belarusian leadership and are fully controlled by it. It is doubtful that during the elections in some ranks and at any level there will be something out of order, and that the vertical of power will not provide the necessary results. At the same time, after the election, it is quite possible to see a reshuffle of personnel in those regions that showed the worst results during the Presidential campaign.