Macedonia - Financing Equitable Service Delivery for All Citizens (2008 - 2009)

Macedonia - Financing Equitable Service Delivery for All Citizens
Client:	UNDP
Funding Source:	UNDP
Type of Grant:	Research
Period Funded:	September 15, 2008 - June 22, 2009
Location:	Skopje, Macedonia
Amount:	$77,675

Project Summary:

The study on the design of a system of financing equitable service delivery for all citizens took place in the context of Macedonia’s Programme for Implementation of the Decentralisation Process in 2008-2010. Whilst resting on the foundation of a solid understanding of intergovernmental fiscal transfer design issues and a clear picture of the particularities of intergovernmental relations in Macedonia, the overall objective of this study was to assist the Government of Macedonia in introducing a higher fiscal predictability for local government units, while concurrently promoting resource equalization among the municipalities. This will in turn facilitate equitable service delivery for all citizens throughout the country.

More specifically, the project aimed to support development of several alternative options for the transfer distribution formula (e), based on an analysis of fiscal gaps of local authorities, i.e. the financial difference between expenditure needs and the potentially available resources, and application of feasibility constraints arising out of the current state of data collection systems. In particular, based on a preliminary analysis of the available data, the study proposed alternative proxy indicators for measuring expenditure needs for various decentralized functions. In addition, the Assignment is expected to contribute to building necessary capacity of central and local government officials by laying out an appropriate curriculum for strengthening their analytical skills in estimating expenditure needs and assessment of fiscal capacities of local government units.

The Inception Mission to Skopje by Dr. Timofeev and Mr. Cyan took place from October 20-31, 2008. In addition to data collection and review of critical issues, the inception mission provided an initial platform to key stakeholders for providing the study team with critical insights and valuable feedback on prioritizing issues and themes that should be addressed in the study. The Inception Mission also provided an opportunity to the team in sensitizing its counterparts in various stakeholder ministries to the “vocabulary” of fiscal decentralization and transfer design.

The study’s outputs, produced in a consultative manner over the period from October – June 2009, consist of three main deliverables:

1. Draft initial assessment

2. Draft feasibility study

3. Development of training curricula and organization of workshops

Draft initial assessment was circulated during the Interim Mission to Skopje by Dr. Timofeev and Mr. Cyan, which took place from November 24–December 8, 2008. During the Interim Mission, numerous stakeholders were consulted, including key central government officials as well as a number of local government officials. The main purpose of the mission was for the study team to begin the process of bringing stakeholders together and seeking consensus on the approach to designing the system of financing equitable service provision by local governments. In addition, a workshop was organized by the Ministry of Finance and UNDP on December 5, 2008 for key stakeholders, which was facilitated by the study team. The workshop allowed a forum for exchanging ideas and building consensus on the approaches to designing a new system.

Based on the background discussions and analysis performed as part of the initial assessment, a draft feasibility study proposed a set of options and specific policy recommendations for the development of an intergovernmental transfer system. The draft feasibility study was circulated during the Final Mission to Skopje by Dr. Jorge Martinez-Vazquez, which took place from June 1-5, 2009. The mission convened at a conference in Skopje to bring together all relevant stakeholders to formally present and discuss the draft feasibility study. The national conference is expected to function as the starting point for a specific policy to be formulated, agreed upon, and implemented. The final report compiles study outputs finalized following the Final Mission in June 2009.

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Project Publications:

Never Say Never: Implementation of Decentralization Reform in Macedonia. Forthcoming. Proceedings of the 101st Annual Conference on Taxation. National Tax Association

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Project Team:

Musharraf Rasool Cyan - Tax Policy Expert

Jorge Martinez-Vazquez - Tax Policy Expert

Andrey Timofeev - Tax Policy Expert

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