Report on local and regional democracy in Bosnia and Herzegovina - CG (8) 23 Part II

Rapporteurs: Christopher NEWBURY (United Kingdom) and Peter KITTELMANN (Germany)

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EXPLANATORY MEMORANDUM

INTRODUCTION

This is the updated version of the report on local and regional democracy in Bosnia and Herzegovina, originally prepared by Messrs Haegi and Martini and adopted by the CLRAE Standing Committee on 2 March 2000.

The original report was prepared following four visits to Bosnia and Herzegovina and a colloquy held there by the CLRAE. Details of matters discussed at the working meetings, as well as the experts' observations and assessments concerning the social, political and legal situation in BiH, are to be found in the successive reports drawn up following the above visits. The Congress's experts also prepared a legal appraisal of the local self-government laws of eight cantons of the Federation of Bosnia and Herzegovina and an opinion on the Republika Srpska's law on local self-government. The draft of the original report was primarily based on the above documents.

Following the proposal of the Institutional Committee, the CLRAE Bureau decided at its meeting of 31 May 2001 to update this report in connection with the imminent accession of Bosnia and Herzegovina to the Council of Europe, with a view to establishing criteria that could serve as the basis for post-accession monitoring in the area of local and regional democracy. The new rapporteurs, Messrs Newbury (UK, L) and Kittelmann (Germany, R) travelled to BiH between 2 and 6 Octber 2001 and held a series of meetings with representatives of State, entity, canton and local authorities (see programme in Appendix). They were accompanied by Mr Jørgensen, legal expert of the Danish Association of Local Authorities and Mr Bergou from the Congress Secretariat.

The present document, whilst retaining a significant part of the original report, adds a number of new considerations - especially on the functioning of local and regional democracy - based on these recent meetings. It also makes use of various texts published by other international organisations carrying out field research in Bosnia and Herzegovina, including the OSCE, the International Crisis Group and the Local Government and Public Service Reform Initiative of the Open Society Institute.

I. WEAKNESS OF THE COMMON INSTITUTIONS OF BOSNIA AND HERZEGOVINA

1. The complex structure of the State and the Entities in Bosnia and Herzegovina

The former Yugoslav Republic of Bosnia-Herzegovina disintegrated during the four years of war that culminated in the Dayton Agreement of October 1995. The Dayton Agreement established a cease-fire as well as demarcation lines and arranged for a new Constitution and set of laws. The agreement gave the former Yugoslav republic a new name: Bosnia and Herzegovina.

According to the Venice Commission's criteria, Bosnia and Herzegovina (the State, BiH) qualifies as a federal State consisting of two entities, the Federation of Bosnia and Herzegovina (the Federation) and the Republika Srpska (RS). Under the Constitution, the entities are constituent parts of Bosnia and Herzegovina, and rights and powers are shared between the institutions of Bosnia and Herzegovina and of the entities in accordance with the common principles of the federal State.

Bosnia and Herzegovina is nevertheless a very strange federation, in that any powers not expressly assigned to the federal level belong to the entities and the State depends on the entities for its finances. The two entities have independent budgets that then allocate funds upward to the State and downward to the cantons (Federation) and municipalities (RS). Thus Bosnia and Herzegovina has two independent budgets with a third budget, albeit a modest one, remaining for the “framework State”; two-thirds of the State’s funds are provided by the Federation, and one-third by Republika Srpska.

Bosnia and Herzegovina’s State Constitution was designed to derogate most powers to the entity level and below for the simple reason of providing as much ethnic self-rule as possible. In other words, a strong centralised State would have been unacceptable to all three dominant ethnic groups. What might even be termed excessive concern to guarantee multi-ethnicity has led to a multiplicity of rules designed to ensure the representation of the country's constituent ethnic groups. The risk is that the situation may not be conducive to the exercise of effective public authority, since a number of fundamental questions concerning the nature of the State of Bosnia and Herzegovina are left unanswered.

The Federation of Bosnia and Herzegovina is a federated entity which itself has a federal structure, grouping together ten cantons. The Constitution of the Federation is part of the Washington agreements signed in 1994, but it was amended in 1996 to bring it into line with the Constitution of Bosnia and Herzegovina.

The other entity is the Republika Srpska, whose Constitution was also amended in 1996, although no final solution to the problems of compatibility with the Constitution of Bosnia and Herzegovina was achieved. The Venice Commission considers, on the basis of certain elements of its Constitution, that the Republika Srpska has the structure of an independent State.

The lack of co-ordination between the State of Bosnia and Herzegovina and its constituent entities weakens the central authority. In addition, Bosnia and Herzegovina operates under the supervision of a UN High Representative, the OSCE, as well as the de facto military occupation by forces from NATO member countries and others (SFOR).

The institutional structure of Bosnia and Herzegovina and its entities is extremely complex, since the democratic systems which the country is attempting to establish are to a large extent being shaped by the specific requirements of multi-ethnicity.

For instance, Bosnia and Herzegovina has a collegiate presidency consisting of three members: one Bosniac, one Croat and one Serb. The Parliamentary Assembly has two chambers: the House of Representatives and the House of Peoples, which includes five representatives of each constituent people (five Serbs appointed by the National Assembly of the Republika Srpska, and five Bosniacs and five Croats, all designated by the House of Peoples of the Federation). The government is answerable to the House of Representatives, as is normal in a parliamentary democracy, but no more than two-thirds of all ministers may originate from the territory of either entity.

The presidency of the Federation of Bosnia and Herzegovina is held alternately by a Bosniac and a Croat. The Federation's parliament also has two chambers: the House of Representatives and the House of Peoples, the latter consisting of 80 representatives designated by the cantonal legislatures. The government is answerable to parliament.

The Republika Srpska merely has a President and a Vice-President. It has a single-chamber parliament, the National Assembly.

Cantons (and the entity in the RS) are responsible for the following public services: courts, canton (entity) public administration, executive offices, health care, education, culture and social services. The cantons, similar to the entities in their relationship with the State, are responsible for all other tasks not explicitly assigned to the entity by the entity Constitution. Thus, BiH has two levels of federalism. One level allocates almost all functions of the State to the two entities, and the process is repeated in the Federation with entity functions and implicit functions granted to the cantons. The cantons can assign varying degrees of rights and responsibilities to the municipal level within the framework of canton local government legislation.

The Constitution of the Federation Bosnia and Herzegovina defines the roles of each level of government, including granting all powers to cantons not expressly granted to the Federation, such as land use planning, local business development and local economic development.

The final layer of decentralisation involves the rights and responsibilities of local governments, called municipalities in both entities. Namely, the entity Constitutions grant municipalities “self-rule” in all matters delegated to them by the cantons or the RS entity. In the Federation, if the municipality has a majority population that is different from that of the canton as a whole, then education, culture, housing, public services, land use planning, et cetera must be allocated to the municipal level to protect the minority within the canton. In other situations each canton may determine the extent to which the municipality is responsible for such functions.

In essence, the Federation has ten different systems of local government using the framework provided by the State and federal Constitutions, local government legislation in the Federation and core local government laws (required by the Federation) in each canton.

Municipalities in the RS essentially operate in a parallel fashion to that of the canton-municipal relationship in the Federation. Without a middle level of public administration, the Republika Srpska maintains a Ministry of Local Government that is in daily contact with municipalities. The Federation, unlike most European unitary and federal states, does not have a ministry in charge of local government, as the cantons in essence regulate, supervise, finance and mediate local government in the form of municipalities. In Republika Srpska, municipal tasks mirror those performed by Federation municipalities; the entity level of administration performs tasks that belong to the cantons in the Federation.

During meetings with representatives of the legislature at both State and entity level, the CLRAE delegation found a clear acknowledgement of the problems caused by the highly complex institutional structures. There seems to be a strong wish - at least in the Federation – to harmonise the basic conditions of local self-government, also by introducing constitutional amendments to that end.

2. The lack of common standards in the Constitution of Bosnia and Herzegovina in matters of local and regional democracy

In view of the situation described above, it is not surprising that the Constitution of Bosnia and Herzegovina makes no mention of local self-government or of the existence of regions. Since the Constitution says nothing about such matters, it may be inferred that they come within the jurisdiction of the entities, given that all powers not expressly assigned to the institutions of Bosnia and Herzegovina under the Constitution are vested in the entities (Article III, 3).

This cannot in itself be deemed contrary to the European Charter of Local Self-Government or the draft European Charter of Regional Self Government. These texts provide that the principles of local and regional self-government shall be recognised in the Constitution "where practicable" (Article 2). This provision might be construed as permitting the distribution of powers in matters of local and regional democracy between the State and the entities.

However, although it is acceptable that the State's Constitution should say nothing about the principle of local and regional self-government, that does not exempt the entities from giving guidelines on such matters in their own Constitutions. Authority in matters of local and regional self-government is vested in the entities (the Federation and the RS), which must therefore ensure compliance with the relevant European principles and standards through their Constitutions and their respective legislation. The system is admittedly complex, but that does not mean that it may dispense with such important principles. What it does entail is a separate analysis of the laws governing local and regional self-government in the Federation of Bosnia and Herzegovina and in the Republika Srpska.

II. LEGISLATION OF THE FEDERATION OF BOSNIA AND HERZEGOVINA RELATING TO LOCAL AND REGIONAL DEMOCRACY

3. The cantons of the Federation as an embodiment of regional democracy

The Federation of Bosnia and Herzegovina consists of ten cantons: three are predominantly Croat (Posavino, Western Herzegovina, Livno), two mixed (Herzegovina-Neretva-Mostar, Tuzla-Podrinje) and the remaining five mainly Bosniac (Bihac, Zenica-Doboj, Gorazde, Central Bosnia, Sarajevo).

Each canton has its own symbol, flag and anthem. Cantons may enter into international obligations with the approval of the Federation Parliament. Section III of the Constitution of the Federation determines which powers are vested solely in the Federation and which are shared between the Federation and the cantons. All powers not expressly allocated to the Federation are deemed to belong to the cantons. The Venice Commission noted a number of gaps in the (exhaustive) list of the Federation's powers, from which criminal law, civil law, labour and social security law and environment law are missing. This shows the importance of the cantons within the Federation. The cantons have authority for the following matters, in particular (Constitution of the Federation, section III, Article 4): policing, education, cultural policy, housing, cantonal public services, spatial planning and land use, promoting economic activity, local energy production, cantonal radio and television, social affairs, tourism, cantonal taxation.

The cantons were established primarily according to political criteria, with the aim of permitting the co-existence of Bosniac and Croat communities within the Federation. Clearly, neither administrative efficiency nor traditional territorial boundaries were taken into consideration. It might therefore be said that there are too many cantons for the Federation's small area.

With regard to inter-cantonal relations, section V, Article 3 of the Constitution of the Federation provides for the establishment of "Councils of Cantons" representing cantons of the Federation having the same ethnic majority (Bosniac or Croat) in order to deal with matters of common interest. Relations have also been established outside this ethnic framework.

Within the cantons, public authority is exercised according to parliamentary principles: the cantonal legislature is elected by universal suffrage, and the executive is in turn appointed by and answerable to the legislature (Constitution of the Federation, section V, Articles 5-10).

The above-mentioned provisions make it possible to regard the cantons as constituent elements of regional democracy, as defined by the draft European Charter of Regional Self-Government.

4. Guarantees of local democracy under the Federation's law

The Constitution of the Federation of Bosnia and Herzegovina contains some very basic provisions on local government (section VI, Articles 1 to 6). It does not define local self-government, but establishes a number of what may be regarded as essential rules. These include Article 3, establishing Municipal Governing Councils elected by universal suffrage, Article 4, which delimits their powers, and Articles 5 and 6, which provide for a municipal executive appointed by the council.

A law of the Federation passed in 1995 lays the foundations of local self-government. This law (articles 3-4) contains a legal definition of local self-government, in line with Article 3 of the European Charter of Local Self-Government. At the same time, it lists those matters which come within the sole jurisdiction of the municipalities (article 8), defines the nature which legal supervision of municipalities may take, always following procedures defined by law (article 13), and specifies municipalities' financial resources (article 14) and other guarantees of local autonomy.

In any case, within the Federation the exercise of public authority is highly decentralised, since it is the cantons which have jurisdiction to legislate in the sphere of local self-government. The Federation can do no more than encourage the cantons to harmonise their constitutional and statutory provisions concerning the municipalities. The Ministry of Justice has, for instance, distributed a "model" law on municipalities, in line with the European Charter of Local Self-Government, which it has asked the cantons to incorporate into their legislation. As already mentioned, there seems to be a willingness to take further initiatives (legal or constitutional amendments) to remove obstacles from harmonising local government legislation within the Federation, in order to make it compatible with European standards.

5. Problems with local democracy arising from cantonal law

The Constitutions of the cantons of the Federation of Bosnia and Herzegovina contain detailed provisions on local democracy, establishing the principle of municipal autonomy, laying down the main rules governing local elections, defining the functions of the Municipal Governing Council, of its President and of the local mayor, and guaranteeing the status of local elected representatives.

From 1997 to 1999 eight cantons (Bihac, Tuzla-Podrinje, Zenica-Doboj, Gorazde, Central Bosnia, Western Herzegovina, Sarajevo and Livno) passed laws on local self-government. On the basis of the expert appraisal of this legislation carried out within the Congress, we can confirm that these laws comply with the principles of the European Charter of Local Self-Government. They contain general provisions on local democracy, provisions on means of direct citizen participation, rules on local authority bodies, local finance and municipal property, and procedural rules governing the decision-making processes and safeguarding rights of citizens to benefit fully from the advantages of local self-government. The Municipal Governing Council, which is elected by universal suffrage in all cases, appoints a mayor, who is answerable to it. Local authorities have direct responsibility for a significant share of public affairs (spatial planning, basic health services, education, and so on). It has also been noted that citizens are given a direct say in the management of public affairs through institutions such as the district councils or by referendum. The laws of the cantons of Sarajevo, Tuzla-Podrinje and Western Herzegovina provide for the existence, alongside the municipal authorities, of the city as a unit of local self-government, a form of urban area establishing territorial and economic links between municipalities.

The cantons of Posavina and Herzegovina-Neretva-Mostar have also managed to pass their laws on local self-government since the publication of the original report, although the CLRAE delegation was not in a position to study these laws in detail. Neither was it able to assess the changes in other local self-government laws during 2000-2001, even if interlocutors at the Federation Ministry of Justice indicated that some of these laws had been amended in accordance with the CLRAE proposals. A new expert review of the progress in cantonal legislation could be recommended in this respect.

The passing of cantonal legislation which is on the whole compatible with the principles of the European Charter of Local Self-Government is a plus, but should not cause us to overlook a number of problems that came to light in the course of the original expert appraisal. For instance, the supervision exercised by the cantonal authorities over the municipalities sometimes goes beyond the limits of the proportionality requirement of Article 8 of the Charter. Such supervision affects either local authority decisions, which may be suspended on the ground that they are unlawful without the local authority concerned being allowed a reasonable time within which to react, or municipal officials themselves, who may be removed from office by decision of the cantonal authority.

It should also be pointed out that none of the cantonal laws on local self-government makes provision for municipalities to enjoy a right of recourse to a judicial remedy, susceptible of reinforcing their autonomy, as required by Article 11 of the European Charter of Local Self-Government. The fact that local authorities' powers are not fully guaranteed by these laws constitutes a breach of Article 4.4 of the Charter. The lack of legal guarantees in this area results from the provisions of the cantonal laws making local authorities subject to a number of restrictions, sometimes contained in other legislation. Similarly, in far too many instances the cantonal laws on local self-government relegate the regulation of certain aspects of local autonomy to the municipalities' statutes, which in certain cases are adopted subject to a review mechanism which can undermine local self-government.

III. LEGISLATION OF THE REPUBLIKA SRPSKA RELATING TO LOCAL AND REGIONAL DEMOCRACY

6. Deficiencies resulting from the law on territorial organisation

The Republika Srpska has no intermediate tier of government between its central institutions and the municipalities. Article 11 of the law on territorial organisation and local self-government of 1994, as amended in 1996 and 1997, provides for the territory's division into 64 municipalities and two cities governed by special laws (Serb Sarajevo, comprising six municipalities, and Banja Luka, part of the municipality of the same name). Articles 4 to 9 of this law also regulate the urban districts which may be recognised within municipalities; these are administrative sub-units of municipalities that do not qualify as local authorities in their own right.

The rules on local self-government applicable under the law of 1994 raised serious doubts as to their conformity with the principles of the European Charter of Local Self-Government. Central government's general powers to establish, name and modify urban districts (Articles 7 and 8) could be deemed to be at variance with Article 6.1 of the Charter, which provides: "local authorities shall be able to determine their own internal administrative structures." Although described as means of monitoring the lawfulness of local authority decisions, the government's powers to take measures in the place of local authorities, to dissolve local authorities and to remove local officials from office (Articles 26 and 35) did not appear to comply with the proportionality requirement of Article 8.3 of the Charter, given that the municipalities concerned were deprived of all possibility of reconsidering or reversing a decision and all forms of preliminary or subsequent judicial review were ruled out.

This law also posed problems in that it disregarded many aspects of local self-government and hence did not afford the guarantees of autonomy required under the European Charter of Local Self-Government. It was possible to assume that many of these guarantees might have been written into the statutes of the municipalities, but that solution might in itself have undermined their autonomy, which should be secured within generally applicable minimum limits either by law or by the Constitution, in accordance with Articles 2 and 3.1 of the Charter.

The serious problems encountered with the law on territorial organisation and local self-government prompted the Republika Srpska to prepare a new law on local self-government. However, the successive bills tabled raised new difficulties, and the law finally passed in November 1999 can be seen to be the outcome of an attempt to solve these.

7. The law passed in November 1999

In co-operation with the legal department of the Office of the High Representative in Bosnia and Herzegovina and the Congress of Local and Regional Authorities of Europe, the National Assembly of the Republika Srpska made a number of amendments to the last version of the bill. Solutions were found to a number of problems, such as disputes as to jurisdiction between local and central government departments, the appointment of a commissioner by the government, and the requirement that candidates for mayoral office be nationals of the Republika Srpska not only of the State of Bosnia and Herzegovina. A number of problems nonetheless subsist, for which the law offers no solution.

a) The fact that municipal bodies are free to decide for themselves whether or not their meetings shall be public (Article 15) constitutes too general a restriction on the promotion of forms of direct citizen participation (Article 3.2 of the Charter). The general principle should be that sessions of municipal councils and their committees are open to the public, save in exceptional cases where overriding, tangible interests necessitate the holding of a closed session. It would also be desirable to allow the possibility of judicial review of decisions taken in this respect.

b) The requirement that municipal authorities comply with guidelines concerning their administrative organisation and the number of local government employees issued by the minister responsible for administrative affairs and local self-government (Articles 26 and 60) constitutes an interference with local authorities' freedom to "determine their own internal administrative structures" (Article 6.1 of the Charter). The unlimited extent of the State's powers in this area and the very fact that such powers are vested in a central government authority can be seen to run counter to the principle of autonomy in organisational matters laid down in the Charter.

c) Merely making mention of rules concerning the appointment, dismissal and suspension of local government employees (Articles 24 and 33) does not appear to satisfy the requirement that such employees be subject to staff regulations founded on the principles of merit and competence (Article 6.2 of the Charter). The need to establish the civil service system required by the Charter should be highlighted. This is all the more necessary in a highly politicised society (such as that of the Republika Srpska), in which no field of activity evades the influence of the political parties and their tendency to attempt to control all levels of government.

d) Failure to define the extent of the government's powers to take "necessary measures" to restore co-operation between local authorities and central government departments (Article 73) breaches the proportionality requirement concerning administrative supervision of local authorities (Article 8 of the Charter). The law should specify the measures which the government is empowered to take.

The government's authority to dissolve local councils (Article 75) also raises doubts as to its compatibility with the Charter. Strict conditions indeed apply, both from a substantive point of view ("where a local authority fails for a long time to deal with matters coming within its jurisdiction, as defined by law and its statute, and thus infringes citizens' rights and freedoms") and in procedural terms (the government must call on local authorities "to take measures such as to fulfil their obligations", and only where this has gone unheeded may the People's Assembly dissolve a council). However, to be deemed to comply with the principles of Article 8 of the Charter, the law would have to provide for judicial review of governmental decisions in such matters.

Similar observations can be made in respect of central government's power to take measures in the place of local authorities where they fail to deal with matters under their jurisdiction (Article 76). This appears acceptable on condition that the central authorities may in turn be made subject to judicial review, as required by the Charter.

Conversely, other government powers in relation to local authorities appear to be well defined by law, in keeping with the requirements of Article 8 of the Charter. The government's authority to suspend the enforcement of local by-laws and regulations is acceptable, given that the law provides that such a suspension must be decided on grounds relating to the lawfulness of the local legislation and that the suspension decision must be referred to the Constitutional Court within eight days (Article 74).

e) On the other hand, local authorities' right to associate (Article 10 of the Charter) may be deemed to be restricted, in that, in this connection, the law cites a specific existing association (Article 12), while admitting of the possibility of other forms of partnership. The law should not in any way stipulate the direction to be taken by local authorities in exercising their right of association.

These problems have not been addressed since the publication of the original report. During discussions with municipal representatives in the Republika Srpska, the CLRAE delegation was informed that the Association of Towns and Municipalities intends to propose a far-reaching reform of the law on local self-government.

IV. OBSERVATIONS ON THE FUNCTIONING OF LOCAL AND REGIONAL DEMOCRACY IN BOSNIA AND HERZEGOVINA

8. The contrast between the law and reality

The above description of the legislation might lead to the conclusion that Bosnia and Herzegovina is to a large extent applying the principles of the European Charter of Local Self-Government and the draft European Charter of Regional Self-Government.

It might be concluded that the municipalities of the Republika Srpska and the Federation of Bosnia and Herzegovina have authority for a "substantial share of public affairs" (Article 3.1 of the Charter), since, for example, spatial planning, economic development, basic health services and primary education all come within local government's remit under the legislation in force.

Another reason for satisfaction might lie in the fact that the legislation guarantees the fundamental principle of free election of local authorities (Article 3.2 of the Charter). It is true that this principle has been put into practice with the assistance of the OSCE, which organised the local elections held in September 1997 and in April 2000. Provision is even made for direct citizen participation in the management of public affairs through district councils or local referendums.

This positive impression as regards the state of local and regional democracy might be further reinforced if the existence of associations of local authorities was borne in mind. In the Republika Srpska an Association of Towns and Municipalities was founded in October 1997 and has a current membership of 59 municipalities out of a total of 64. Through the Association, RS mayors can exercise political pressure and negotiate for better allocation of revenues. In the Federation there is an Association of Municipalities and Towns of Bosnia and Herzegovina, which has its headquarters in Sarajevo. Contacts between the Association of the Republika Srpska and the Association of the Federation led to the signature of a co-operation agreement between the two associations during the 5th CLRAE Session in June 1999, which made it possible to overcome the difficulties encountered in designating the members of Bosnia and Herzegovina's special guest delegation to the Congress and its two Chambers.

A co-ordination body of the Associations of Towns and Municipalities of the two entities has been established to start discussing common problems and facilitate co-operation between their municipalities, and a project by the Dutch Association of Municipalities (VNG) aims at strengthening this process. The Congress should also promote this co-operation by all possible means.

Municipalities in the Federation are allowed and encouraged by the local government law and

Constitution to associate freely with other units of government—in most cases other coterminous municipalities—to perform public services. Implicitly, Federation municipalities may form functional associations or special purpose districts among themselves as long as their activities fit within the framework of the Constitution and body of law. These types of functional associations are entirely voluntary and are formed at the discretion of the municipalities involved.

Article 16 of the Federation Law on Local Government states the following: “In exercising its duties municipalities shall have the right to cooperate mutually with other municipalities in order to perform tasks of mutual concern and may associate in municipal associations... Municipalities may enter international associations of local government...” Significantly this provision in theory would allow cooperation with coterminous municipalities in the Republika Srpska, or even in Croatia and other neighbouring former Yugoslav republics, if the service provided requires or could benefit from a larger service area.

Yet the reality of the situation in Bosnia and Herzegovina is far removed from the letter of the law. Although the legislation should not be disregarded, other factors must be taken into consideration if we are to have a full picture of the state of local and regional democracy in BiH.

That Bosnia and Herzegovina continues to be ruled on ethnic terms is probably best demonstrated by the slow progress of cross-border co-operation. The only examples of co-operation are to be found in isolated political initiatives or joint training schemes sponsored by international organisations. There are also few instances of transfrontier co-operation with the municipalities of neighbouring States, although such co-operation is encouraged by the Dayton Agreement. Transfrontier co-operation between municipalities with a different ethnic make-up exists only in a few specific cases: mention might be made of the co-operation between Osijek (Croatia) and Tuzla (Federation of Bosnia and Herzegovina), two cities with a different ethnic make-up which have implemented many joint cultural, political and social projects.

Nor is there much co-operation between the cantons of the Federation. The horizontal lines of communication linking the ten cantons are weak, particularly between cantons with different ethnic majorities. In practice, their relations are confined to the political co-ordination that takes place through the proceedings of the House of Peoples. During the meeting with the representatives of the cantons, the CLRAE delegation had the impression that the governors belonging to the ruling coalition (Alliance for Change) have a strong intention to intensify inter-cantonal co-operation based on a spirit of consensus.

9. Persistence of serious ethnic problems

Under cover of the official arrangements and of declarations of willingness to co-operate in implementing the Dayton Agreements, the three main "mono-ethnic" political movements that emerged from the war are pursuing an at times fierce power struggle, a source of not insignificant impediments to progress, which are not always easily discernible. The political parties exercise complete control not only in political matters but also over social and economic affairs. As a result decisions are governed more by ethnic than by objective criteria. Compliance with the principle of multi-ethnicity is part and parcel of democracy: a country which votes on an ethnic basis, either in fact or by law, does not practice universal suffrage, which Article 3.2 of the Charter makes the foundation of local self-government.

Besides the fiscal-level disagreements within and among cantons and municipalities in the Federation and the entity and municipalities in the RS, the ethnic dimension pervades the management of local governments and contributes to distortionary behaviour. Municipal councils and the mayors they elect are responsible for appointing members of the administrative staff, including the chief administrator, financial officer and other key personnel, such as heads of departments and institutions operated by the municipality. Besides political considerations arising from the composition of the council, it needs to balance—from an ethnic point of view—the composition of the professional staff; hence, deputies reflect the ethnic group or groups with mandates on the city council. In practical terms, these individuals fulfil more than the role of deputies; they are equal partners who cannot make decisions without the informal approval of the other.

There are municipalities in the Federation that informally have three budgets: one that is presented to the canton and is part of the binding public record, and two that informally are agreed upon by the dominant ethnic groups. These informal budgets are the product of bargaining and negotiation and do not necessarily fully reflect the intentions of the legal and binding budget as passed by the council. This ethnically based informal budgeting and parallel public administration and management is less of a phenomenon in the RS, where these arrangements take place along party and ideological lines, as those communities have less ethnic diversity as a consequence of the war.

Administrative staffs appointed by the legislative body along party and ethnic lines may not be unique to Bosnia and Herzegovina. These arrangements are not primarily intended to make local government more effective but rather are part of the “wages of peace” into the indeterminate future.

The issue of the return of the refugees and displaced persons is clearly of essential importance. The international community has made this a priority, and a failure in this area would be a failure to apply the principle of local democracy to the full. However, the realities of the "system" in Bosnia and Herzegovina run counter to this objective. It may be asked whether the analysts are not right to say that, initially, the Federation of Bosnia and Herzegovina and the Republika Srpska showed themselves to be particularly adept at devising legal impediments to the return of "owners of property". Apart from imposing very short deadlines, an unbelievably complex procedure and impossible conditions, the administrative authorities, particularly at local level, engaged in obstructive practices. The law of 1998, which was instigated and revised by the international community, introduced a much improved legal framework, but partisan officials at different levels continue to raise obstacles designed to delay the return of members of the ethnic minorities.

A large number of decisions concerning public affairs continue to be based on ethnic criteria. It is unacceptable that new municipalities should be founded on ethnic grounds. It is true that in today's Bosnia and Herzegovina a municipality covers an average of 400 square kilometres and has a population of 20,000. This area is higher than the European average and leaves scope for an increase in the number of municipal authorities. But caution is needed to ensure that such a move does not lead to the creation of municipalities based solely on criteria of ethnic unity, which is not the case at present.

Ethnic tensions are the cause of countless political difficulties. In heterogeneous areas of the Federation, canton and municipal governments must balance various ethnic interests in city and canton councils. Mayors and deputy mayors, not to mention ministers and senior officials at the canton level, are appointed in duplicate to guarantee proportionate powers and de facto veto powers to each ethnic group. The city of Mostar offers a perfect example of the continuing difficulties in persuading representatives of the different ethnic communities to work together. It has a set of deputy mayors from the Bosniac and Croatian communities as well as parallel professional bureaucrats at each level to ensure that each ethnic group gets a fair share of resources and no official can make decisions or seek outside funding without involving the other dominant ethnic group.

However, the effects of the system of "partitocracy" that reigns in Bosnia and Herzegovina are to a certain extent offset by the High Representative. It can be seen that the international supervision to which the country is subject serves to curb the development of extremist tendencies. A political check therefore exists and can be triggered at any time as a factor for democratic stability.

10. Relationship between local government and higher levels of administration

The State of Bosnia and Herzegovina is virtually irrelevant regarding the functioning of regional and municipal government within the two entities.

In Republika Srpska, a unitary national administration consisting of the usual ministries of local government and finance sets regulations, revenue-sharing formulae and expenditure/task assignments. Since there are no competing regional administrative or political units in the RS, the sixty-four municipalities are in direct contact with the entity’s relevant ministries and the entity Parliament. RS municipalities face significant geographic barriers and lack significant scale economies. Given the RS’s shape—essentially a band covering the northern and eastern boundaries of the former Bosnia-Herzegovina—municipalities are isolated in terms of communications with Banja Luka, the entity capital. Official business is conducted after long journeys through Federation territory for both inhabitants and municipal officials.

A proposal to organise the sixty-four municipalities into geographically and functionally logical clusters was rejected by the municipal lobby. In an obvious reference to the problems caused by tensions among cantons, municipalities and the entity in the Federation, municipal politicians in the RS opposed the creation of regional centres, regional administrative units or a new layer of sub-entity government. Tensions centred on the inability of the smaller, isolated and poor municipalities to perform their allocated tasks. Such isolated municipalities often were part of a large settlement, the other half of which is now in the Federation. Given “self-determination” of neighbouring and even adjacent settlements and the lack of inter-entity functional co-operation, these isolated RS municipalities continue to lobby Banja Luka for emergency grants and additional funds to be able to meet payrolls and perform basic functions. Given the geographic disfunctionality of the RS entity and the isolation of some of its municipalities from the entity capital, the political and psychological barriers to co-operation with nearby Federation (non-Serb) municipalities eventually will have to be overcome unless the entity has funds to continue the subsidisation of insolvent communities far into the future.

In the Federation the entity government maintains little direct contact with municipalities, as there is no single ministry or department responsible exclusively for municipalities. The entity’s seventy-three recognised municipalities are divided up among ten cantons, each of which has its own local government law, as described above. The Federation government is bound only by a brief local government law and essentially delegates all matters—except for national-level fiscal and monetary issues, including the general sharing of revenues collected or claimed by the entity—to the canton parliaments. These parliaments in turn legislate to create departments (or ministries) of finance and local government affairs that in turn act as controllers, auditors, policymakers and ultimately arbiters of municipal issues.

Enterprise taxes that used to flow to cantons and municipalities from public utilities could be—and have been—rechanneled by the entity government to the Federation. Patrimony over formerly BiH State assets, municipal assets, public utilities and other forms of communal ownership has not been settled, in essence creating uncertainty regarding many sources of municipal revenue and economic development potential. Lobbying for and over the use and ultimate disposition of these assets shall continue until large-scale privatisation and corporatisation have taken place.

Points of contention between municipalities in both entities and the canton or entity government are the assets of national- or entity-owned utilities (water, gas, electricity, etc.) that must be reorganised into stock companies before privatisation or significant inflows of capital can take place. Patrimony over real estate and physical infrastructure inherited by the entities or assets still owned by the BiH State is an issue that has not been resolved. Not only are asset values, asset disposal and potential privatisation proceeds at stake over the long run, but in the short run, municipal budgets are affected by the tax and other fees paid by these quasi-governmental public entities.

Another clear tension between the larger municipalities and the entity government concerns responsibilities for certain expenditures. For example, entity institutions, such as theatres and secondary educational facilities, are operated with entity funds and form a part of the entity budget (the analogue would be canton institutions and canton funds in the Federation). However, mayors face pressure from citizens to “contribute” municipal funds to the capital improvements of these institutions. That is, a mayor cannot reject the demands of the directors of entity-owned facilities requesting capital improvement funds, given public pressure to see visible reconstruction take place. This implicit reassignment of capital improvement burdens from the entity level to municipalities is repeated in the Federation by canton institutions that place pressure upon municipal budgets for entirely the same reasons.

More important for defining the framework of potential and existing conflicts between municipalities and higher levels of government are articles 18 and 19 of the Federation Local Government Law. The former states that canton laws shall regulate the details of local government financing, its functions, direct participation by citizens, municipal administrative organs, municipal property, local taxes and other issues not covered in higher levels of law. (Temporary regulations, based upon the Federation Local Government Law, governed the tasks and responsibilities of local government in the 1995-99 period until each canton passed its own law.) The allocation of tax revenues designated by the federal budget law between the canton and the municipality is a continuing source of friction (see section 14 on local finances).

Cantons and municipalities tend to disagree on the adequacy of shared and transferred revenues, as well as on the appointment of staff members to canton and municipal institutions that are in essence financed by the canton. In addition, as in the Republika Srpska, canton institutions often lobby mayors for capital improvement funds for facilities such as secondary schools and hospitals. As to general capital improvement spending, canton legislation is varied, with some cantons assigning responsibility for major capital projects in the water, wastewater and solid waste sectors, to name a few, to the municipal level without providing additional funds. In other cantons, such responsibilities, though assumed by the canton, still place a burden on municipal budgets.

11. Control, audit and supervision of local governments

Canton parliaments, like State administrative offices in other transition countries, have the right to review ordinances passed by municipal councils. These parliaments can rule on the legality of local ordinances and regulations and have the right to overrule them. This power seems to be obtrusive but in practice actually can be used to protect minority ethnic groups within a municipality, if the canton deems that to be a priority. The State of Bosnia and Herzegovina and the entity government of the Federation do not otherwise meddle in or supervise the activities of municipalities.

The controlling, auditing and supervisory functions of local governments vary by canton and between the Federation and the Republika Srpska. The canton local government law identifies the ministry or department responsible for the technical, functional and financial supervision of municipalities. Generally these entities are the canton ministries of finance and local government. In the Republika Srpska, such supervision is conducted through the entity ministries of finance and local self-government.

The actual legal supervision of municipalities is still not clear: Representatives of local authorities told the CLRAE delegation that there was a lot of confusion in this field. Some Federation cantons have authorised themselves to dissolve local councils and appoint commissioners to run municipalities under specific conditions. The governor has the right to reject the legality or constitutionality of the municipal charter: the final decision is made by the Constitutional Court. This veto power on the part of the canton government, combined with its ability to allocate tax revenues, enables the cantons to exercise tight control over municipal governments, sowing the seeds for disagreements among municipalities that have an ethnic or political majority that is different from the rest of the canton. The situation is similar in the Republika Srpska, where the entity government reserves the right to suspend an executive board president (mayor), to reject local ordinances and to appoint commissioners to run a municipality that is in a grave financial situation.

The right of the cantons and the RS entity to review and overrule municipal decisions could lead to political manipulation based upon budgetary and other priorities of the canton or entity parliament. In other words, a party partial to the fiscal and other interests of the higher-tiered government conducts administrative and legal reviews. An important policy question for the Federation is whether intervention is properly a function of the canton or of the entity. If it is determined to be an entity-level function by policymakers, which ministry or agency should be charged with initiating intervention? Within the Republika Srpska, should it be the Ministry of Finance or the Ministry of Local Government that supervises and initiates the intervention process?

12. Division of tasks between the different levels of government

Real power in terms of task assignment and revenue allocation resides at either the canton level in the Federation or at the entity Ministry of Local Government in the Republika Srpska. In either entity there is no question that issues such as municipal performance standards, the sharing and collection of taxes and issues of funding both operations and capital expenses for tasks at the municipal level are settled by the canton budget law and local government law or at the ministerial level in the RS through administrative decisions, decrees, regulations and ultimately through legislation.

Mandatory tasks listed in the laws on local self-government passed by canton parliaments essentially repeat those assigned by Federation law. However, the wording and definitions of these tasks are not exactly precise, allowing great differences in interpretation. In addition, a host of sectoral technical requirements impose operational and capital improvement obligations on local governments that they cannot meet. There are overlaps concerning operational responsibilities, ownership, capital improvement and maintenance. Each canton is free to add to or clarify Federation-delegated duties.

According to Federation law, local self-governments, municipalities and, in a few cases, cities have a set of general functions. Canton local government laws assign additional or more specific tasks. The ambiguous nature of these responsibilities allows cantons to impose capital improvement requirements, and these provisions do not define who hires staff in health clinics, schools or social agencies. In practice these institutions mostly are financed and run by the cantons.

The distinction between mandatory and facultative tasks is not as relevant as the variation among cantons concerning what is expected of the municipalities and the unclear nature of the performance standards for each task. The imposition of capital expense burdens upon municipalities by cantons regarding canton-owned and -operated educational, social and health facilities adds another layer of uncertainty as to which layer does what in the Federation. In many cases ownership, operating responsibility and capital improvement tasks are shared by the municipal, canton and entity levels in the Federation, making a clear distinction difficult.

The pattern is repeated to a lesser extent in the Republika Srpska, in that there are no regional differences given the lack of a middle tier of self-government. Instead, due to the geographic distribution of municipalities, their small size and often divided nature (parts of settlements are in the Federation and vice versa), local governments suffer from an economy of scale that makes it difficult to apply the universal list of tasks to municipalities of any size. These general tasks are strikingly similar to those in the Federation local government law and in various canton local government laws that were passed by the end of 1999. Mayors and citizens often are hindered by the distance they have to travel to take care of business in the entity capital Banja Luka, and smaller municipalities hope to delegate certain functions back to the entity level. This is more justified in the Republika Srpska than in the Federation but more difficult, given the geographic realities of the entity.

While municipalities in each entity may consist of one or several settlements, there are only a few “cities” within the State of Bosnia and Herzegovina. The main cities like Sarajevo, Mostar and Banja Luka have “city” governments in addition to autonomous municipalities (districts) within their territories, but the city level in both entities is rather weak, being dependent upon transfers from its constituent municipalities. Furthermore, the status and competencies of cities and capitals are not sufficiently regulated and their relationships with higher-level authorities are unclear.

Almost without exception traditional municipal-, canton- and entity-operated institutions and utility corporations deliver public services. Alternative forms of service delivery, such as joint enterprises and private companies are still far from emerging as a true alternative to traditional institutions and public corporations.

Municipalities and communal service enterprises in Bosnia and Herzegovina are responsible for providing most local infrastructure. Although there is discussion of utility concessions to attract equity capital and widespread interest in the idea of municipal borrowing to attract debt capital, there are no clear State or entity policies as to if or how private investment should be identified to help fund local infrastructure.

13. Structures and operation of local self-government

In essence, municipalities in the Federation and the RS elect representatives of parties on a list, with seats allocated on a proportional representation basis to municipal “councils” in the Federation and “assemblies” in the RS. The number of representatives to the councils/assemblies depends upon the number of registered voters in the community. The councils/assemblies then choose a mayor in the Federation and a president of the municipal executive board in the RS (although the election law also permits a direct election). Each member of the council/assembly has the right to nominate a candidate, and a simple majority chooses the mayor/president. In both the Federation and RS, the candidate who receives the second most number of votes, usually from a different party than the mayor/president, is made the vice-president of the council or assembly.

The election of mayors or executive board presidents triggers a new set of appointments of municipal administrative officials and the selection of an executive board in the RS based upon proportional representation achieved during the municipal election (the process is similar at the city level in both the Federation and the RS). The newly elected mayor/executive board president appoints the managers of the municipal administrative bodies, with each party, list or independent retaining the right to nominate candidates for these administrative positions based upon proportional representation. In the mixed municipalities of the Federation, these party differences have an ethnic element as well.

The canton councils select a canton president and an assembly president in a fashion similar to municipal councils, with the significant difference that canton assemblies also appoint governments in proportions that reflect election results.

It is difficult to assess the structure and functioning of municipal offices in Bosnia and Herzegovina. The constitutional provisions and canton-enabling legislation of the Federation call for local councils to establish their own rules of operation, to appoint the appropriate type and number of public officials and to establish commissions, committees and other structures to conduct the tasks that are assigned by Federation law and specific canton legislation. The same is true in the Republika Srpska, where local assemblies are required to create operating rules and an organisation that matches the tasks assigned to it by the entity government.

At the same time there are strict central regulations on the administrative structures as well as on political appointment procedures, which seem to contradict the principles of Article 6.1 of the European Charter of Local Self-Government.

Personnel working in municipal administrations are either political appointees, who do not have permanent civil servant status, or civil servants, who work mostly in the support and administrative fields. Municipal corporations and public service utilities do not employ civil servants, but as the legal status of these quasi-public entities is clarified in terms of patrimony and regulation, the exact nature of their employees will become more similar to that of private enterprise employees.

Municipal departments and institutions perform authoritative, management and personnel functions similar to most municipalities in Europe. However, given that municipalities often are expected to cover the capital expenses of canton- or entity-owned institutions, their roles vis-à-vis the canton or the entity (in the case of the Republika Srpska) have not been clarified. In other words, teachers and social workers may be paid by the canton or the entity, and the building they work in is owned by the next tier of government; the respective municipal department is expected to engage in capital planning, maintenance and capital improvements.

These confusing situations will abound until all cantons have clarified the exact functional roles of municipalities and, in the Republika Srpska, until compensation for geographic distance and small scale economies through a regional administrative unit or a different allocation of funds and tasks has been evaluated thoroughly and established.

14. Local authorities' financial difficulties

Funding is a major obstacle to the development of local democracy. Local authorities' lack of adequate financial resources is ultimate proof of the serious deficiencies of Bosnia and Herzegovina's system of local democracy. At the same time, it is clear from the information below that the principle that local authorities shall be entitled to adequate financial resources, set forth in Article 9 of the European Charter of Local Self-Government, is not properly respected. Local authorities complain of major financial difficulties, in particular a serious imbalance between their responsibilities and the resources available to them.

When analysing the finances of the sub-national level in Bosnia and Herzegovina, one must keep in mind that in the Federation the ten cantons account for an overwhelming majority of public spending, and on a national level the cantons are the largest unit of spending. These figures reflect the constitutional reality that the entities—and within one entity, the cantons—dominate public spending and the performance of public functions, leaving the State with a small budget and few tasks to perform.

Sub-national revenues in both the Federation and Republika Srpska are the dominant public revenues since the State of Bosnia and Herzegovina depends to a large extent on taxes that are shared by the entities with the State. In other words, with the exception of certain minor excise taxes, the two entities make contributions to support the State budget. The Federation contributes two-thirds and the RS one-third of the cost of operating the State

The local government law of both RS and the Federation contain language that states in explicit terms that municipalities are “entitled” to “appropriate sources” of financing for their mandatory tasks, as well as to additional funds if other tasks are delegated to them from either the entity or canton level. In practice this means that in both entities, municipalities can lobby rightfully for deficit grants to cover operational and capital budget gaps. This extra-budgetary post facto lobbying consumes the efforts of municipal leaders and seems to be an arbitrary and politically sensitive procedure to outsiders.

In the Federation it is the cantons which hold most power in financial matters. As mentioned before, most canton local government laws date from 1998 and 1999. These framework laws operate alongside canton budget laws and decrees that allocate canton revenues between the canton and municipal levels. From the standpoint of equity and comparison, the varying degrees of expenditure assignments, deficit grant lobbying, under-funded capital projects and the general laissez faire approach of the federal government make generalisations about the nature of canton-municipal relations rather difficult and subject to distortion unless all ten cantons are described explicitly.

Many canton local government laws are as ambiguous as the Federation version, causing misunderstandings and creative interpretations. Laws as they are mutually—or sometimes one-sidedly—interpreted do not always reflect the literal intention of the text. The law of 1996 on allocation of public resources within the Federation provides that municipalities shall be autonomous in matters of local taxation, but in actual fact each canton has specific legislation determining what share of the resources collected in the canton as a whole will be transferred to the municipalities. Each canton has its own revenue-sharing formula that it can alter on an annual basis. By 1999 the typical split of revenues moved strongly towards an 80:20 share in favour of cantons.

Each canton sets its tax-sharing formula independently each year in its budget law, sharing changing proportions of the two major taxes allocated to cantons: that is, the income tax and the goods and services turnover tax. In some instances cantons also share a portion of the business profits tax.

Note that the municipalities are dependent upon transfers from the canton level and that the Federation itself relies on customs duties and excise taxes, a portion of which it passes upward to the State level.

Over forty-three percent of a municipality’s revenues originate in shared taxes flowing from the canton level. This of course is a national average, and depending upon the proportion of the three shared taxes that the canton passes down, the degree of canton leverage can vary greatly. Of importance are local fees and penalties, some of which could appear in the form of health facility user fees and the “other revenues” category, which covers a range of smaller local taxes on property, small business, etc.

In the Republika Srpska the situation is similar, with the entity government directly sharing certain taxes with the municipalities. The major contrast with the Federation is that the entity budget law fixes the share of sales tax allocated to municipalities at thirty percent, with a slightly larger share—thirty-five percent—for cities (with multiple municipalities within their boundaries). The remaining 70% (65% for the cities) goes to feed the State budget.

However, the percentage of local authority resources in the Republic's overall budget cannot be calculated since there are no global provisions for the municipalities and their sources of income are difficult to identify, given the large number of texts dealing with these matters. Taxes are collected and redistributed through a commercial bank under the supervision of the Ministry of Finance. There are no specific mechanisms for the equalisation of resources.

Municipalities “in crisis” are qualified to receive an additional five percent revenue sharing, though meeting the selection criteria is rather arbitrary and subject to political negotiation. Corporate income taxes stay with the entity, while self-employment taxes are allocated at thirty percent for municipalities. A tax on property also is allocated at thirty percent for municipalities, while personal income tax stays with the entity government in its entirety. Other smaller taxes and license fees are in most cases not shared but collected and used by the layer of administration that imposes them.

Municipalities in both entities are able to raise revenues in the form of fees, penalties, license charges and minor local taxes. Land and property taxes are not based on value but on square meters and the extent to which the land is used for residential or business purposes. Genuine local tax revenues in both entities have constantly been below ten percent of total revenues in recent years.

Municipal borrowing is authorised by budget legislation in both the RS and the Federation. They authorise borrowing by cantons (in the Federation) and by municipalities and cities in both entities, however these provisions and the policies underlying them are unclear. For example, it is not clear in some cantons if a canton, after reviewing a municipal borrowing proposal, has to approve such borrowing explicitly and if that approval means an explicit guarantee. Furthermore, the Federation budget law sets a limit on municipal borrowing at an amount equivalent to twenty percent of its annual budget. However, in practice, there are some indications that both municipal and canton officials mutually interpret a poorly worded Federation law as a debt service, as opposed to absolute debt limit.

Obstacles to genuine municipal borrowing for capital purposes (especially in the Federation) abound. Some cantons give substantial capital and operating responsibilities for infrastructure to municipalities without providing adequate revenues. And in some cantons, local shares of canton-controlled revenues have been falling. Uncertainty in municipal revenues, uncertainty about municipal responsibilities and large unfunded mandates do not bode well for municipal viability, let alone for municipal borrowing.

Despite massive external support, confidence in the long-term stability of the State and the economy are lacking. Although the horizon of confidence is broadening, an environment that is not perceived to be stable creates a poor context for long-term lending.

In Bosnia and Herzegovina, doubts about stability and management at the local level seem dwarfed by country risk concerns, but as the macroeconomic and political situation stabilises, stability and capacity at the local level are likely to become more important.

The current privatisation process could have a negative effect on the municipalities, since the proceeds of privatisation of municipal property will not find their way into the municipalities' coffers but will go to the privatisation agencies carrying out the operations.

CONCLUSIONS

If Bosnia and Herzegovina is to achieve genuine local and regional democracy, far-reaching changes must take place in political circles. An efficient, transparent, multi-ethnic administration should be established at all levels to implement the legislation already passed.

The laws should regulate the nature and extent of the supervision which the higher levels exercise over local authorities and the relations between the various levels of government, and this legislation should go hand in hand with legal structures for the settlement of any disputes between the different levels.

These conditions are vital to the development of genuine, stable democracy, and their attainment should be included among the commitments entered into by the country with a view to its European integration. The different bodies of the Council of Europe should support this process through their structures and technical, legal and administrative assistance programmes.

Bosnia and Herzegovina’s current status as a quasi-protectorate encourages the country’s democratic forces in this process, allows them to receive on-the-spot assistance and, to a certain extent, conceals the most serious repercussions of the domination of the political parties’ ethnic structure on the population’s political, social and economic life. The existence of an appeal procedure would nonetheless be desirable when decisions taken by bodies of the international community begin to have an effect on democratically elected local and regional authorities.

Furthermore, it must not be forgotten that the present situation is merely temporary and that the priority for Bosnia and Herzegovina is that efforts made by the country’s progressive forces and measures taken by the international community should be based on a durable process of democratic stabilisation and not on mere stopgap solutions to current needs. In this context, education – both formal and informal – seems to be the best means of spreading democratic ideas.

The primary challenge facing municipalities in BiH is reconstructing local civil society in a psychological and physical sense while providing basic services as required by law. Contracting out, privatisation, involving nongovernmental organizations (NGOs) in service delivery and other novel ideas that work in other counties of Central and Eastern Europe are premature in this context. Basic questions regarding patrimony, privatisation and the allocation of tasks, revenues and funds await more stable resolution. Hopefully, it will be the current four-year political cycle in which war reconstruction gives way to perfecting the involvement of citizens and NGOs in municipal service delivery.

In contrast to countries like Poland or Hungary, where decentralisation and municipal empowerment was embraced as a political antidote to the prior system, neither Bosnia and Herzegovina nor the two constituent entities seem to have a strong political commitment to genuine decentralisation to the local level. Although municipal budgets are said to be autonomous, there is not a widespread vision either of municipalities as independent actors that may decide on investment priorities and their financing (this is especially true in the Federation) or of private financial institutions that may compete for capital and for investment opportunities. There is a desire to attract private capital to fund local infrastructure, but little sense of what policy choices are necessary to do so.

Issues to be solved in the area of local finance are the clarification of performance standards for municipal functions, establishment of long-term commitments to certain revenue-sharing formulae, clarification of capital improvement burdens and introduction of transparency in the construction grant and deficit grant systems administered by the cantons. Of course, these decisions hinge upon maintaining delicate ethnic balances and transparency in the mixed cantons and in the municipalities where the dominant ethnic group differs from the canton majority.

Assuming that both entities in Bosnia and Herzegovina continue to recover from the war and that the Dayton-imposed political system persists in the longer run with the gradual withdrawal of UN administration and foreign military forces, local government policy will need to be refined continuously. An inter-authority policy dialogue could begin to solve some of these issues, with a gradual re-professionalisation of governmental elites, the emergence of NGOs and advocacy groups and the legalisation of the black and grey economies into the visible and tax-paying sector.

Bearing in mind all the points made, the inadequacies observed and the proposals put forward in this report, it seems necessary to require the authorities of Bosnia and Herzegovina to take into account a certain number of recommendations allowing the country to develop genuine local and regional democracy. This is indispensable if European standards are to be complied with and should be part of the commitments to be made in connection with Bosnia and Herzegovina’s accession to the Council of Europe. These recommendations should be implemented within time limits to be set by mutual agreement and their implementation should be monitored by the Council of Europe, as are all the commitments made by the country in view of its European integration.

Appendix

Visit of the CLRAE delegation to Bosnia and Herzegovina to update the report on local and regional democracy, 2-6 October 2001



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