Completion of the Project “The Impact of Fiscal Decentralisation on Local Economic Development in Serbia and Montenegro”
The research project The Impact of Fiscal Decentralisationon Local Economic Development in Serbia and Montenegro analysed and evaluated financial flows between central and local governments, and assessed the impact of the existing fiscal decentralisation model on the local economic development in both countries.
During the course of this two-year project, EURAK has produced a number of important scientific outputs and earned international recognition. This achievement was facilitated through EURAK’s partnership with the London School of Economics and Political Science (LSE), which provided mentoring support to EURAK’s researchers within the RRPP. The significance of this mentorship has been twofold. Firstly, it has guaranteed academic rigour and excellence of our research. Secondly, it helped us increase our visibility by approaching international scholars and scientific networks.
EURAK’s project outputs included a book Fiscal Decentralisation and Local Government Financing in Serbia and Montenegro, published by the Faculty of Law of the University of Belgrade (in Serbian) and by Lex Localis Press of the Institute for Local Self-Government of the University of Maribor (in English). EURAK has also published an article on fiscal decentralisation in Montenegro in the highly ranked SSCI-listed Journal of Local Self-Government – Lex Localis. In addition, a comparative paper on the fiscal decentralisation processes in Serbia and Montenegro is currently in the process of being published with Springer. The second year studies on the impact of fiscal decentralisation on local economic development in Serbia and in Montenegro have been submitted to the LSEE Working Papers on Decentralisation and Regional Policy.
Materials were presented at several international scientific conferences (organised by universities in London, Nice & Moscow, Porto & Maribor, Graz and Vienna). Furthermore, EURAK has organised two conferences – in Belgrade and Podgorica, where we disseminated our project results and recommendations to policy- and decision-makers from the ministries in charge of finance, economy and local government and other relevant government institutions, representatives of local governments and local government associations, as well as to relevant representatives of international organisations and scientific community.
Decision-makers in both countries agreed that the decentralisation process and local government financing issues should be among the top policy priorities of the governments. They acknowledged the importance of having scientific input from the researchers, as a pathway to evidence-based policy-making. They recognised that the existing policy-making process in general is not informed and that it lacks expert dialogue and diversity of arguments in the process of decentralisation.
Four policy papers – two per country/project year, summarizing the major findings, conclusions and recommendations of our research studies, were produced during the course of the project. These papers have served to inform policy-makers at central and local government level in Serbia and Montenegro on how to improve current and future intergovernmental fiscal and regulatory reforms and local government financing.
The authors find that the arguments in favour of centralisation mostly stem from the fear of loss of macroeconomic or financial control, unwillingness to regulate the system properly and from the lack of commitment to investing in the capacities of local government authorities. When fiscal decentralisation is based on predictable, stable and strict rules on local taxation and spending, the use of transfers (grants) and bailout rules, local government borrowing and hard budget constraints, the problems of macroeconomic and financial instability can be avoided or alleviated.
The arguments in favour of fiscal decentralisation seem much more convincing and should thus be internalised by political and governing elites in both countries. However, our study shows that neither Montenegro nor Serbia can now benefit from fiscal decentralisation because of the current lowquality fiscal policy and legal framework. If these two countries want to reap the benefits of fiscal decentralisation, their central governments have to be strategically and practically committed to a stable, predictable and transparent system of local government financing.
Fiscal Decentralisation and Local Government Financing in Serbia and Montenegro
Fiskalna decentralizacija i finansiranje lokalne samouprave u Srbiji i Crnoj Gori