Case 2: Increasing Funds for Municipalities (2005–2009)

Popular satisfaction with the effects of decentralisation, along with the increased capacities and resources for local government units, led to the rising significance of the local political elites in Macedonia. A sub-elite consisting of the mayors of all municipalities and leading local politicians, the local political elites had existed since independence, but because of the minimal power and influence they had over local political affairs in the centralised political context until 2004, their impact on politics had been limited. However, as decentralisation increased the resources and decision-making powers of local politicians, so did their profile and importance rise, not only in local but also in national politics. Soon, highranking party members were running in local elections as candidates for mayors
in the larger towns, as the post of mayor allowed them authority comparable to that of some executive positions. Moreover, after completing their initial terms as mayors, many local politicians rose higher in the ranks of their political parties, being appointed to high party positions. Zoran Zaev, a popular mayor of Strumica, became the leader of SDSM after their defeat on the 2006 elections and again after Branko Crvenkoski's resignation in 2013; Marjan Risteski, in his third term as mayor of Prilep, is also a member of the highest party body, the Executive Committee, of VMRO; while Nevzat Bejta, former mayor of Gostivar, became DUI's minister of local self-government in 2009. These examples illustrate how decentralisation empowered local political elites, by making local politics an important part of political competition at national level and opened another, local, route to gaining influence at central-level politics.

In addition to the increased political power and resources, the existence of a strong independent body that aggregated and represented the interests of local political elites before the central government further contributed to the empowerment of local elites. The Association of Units of the Local Selfgovernment (ZELS), established in 1972 as part of the Yugoslav efforts towards decentralisation, had been virtually powerless for most of its existence. But as decentralisation had become one of the most important and controversial political issues in the immediate post-conflict period in Macedonia, ZELS, with the help of foreign donors, became an independent forum where the mayors of all 86 municipalities regularly met to discuss the outstanding issues and build common positions. Funded mostly by membership fees of the municipalities, but also from foreign-donor project funds, ZELS became an active advocate of the interests of its members before the central government. Members of ZELS were able to shed their ethnic and political party 'hats' and join the discussion solely as mayors and local councillors. Most importantly, ZELS facilitated the creation of a local vs. central cleavage, an alternative to the ethnic and political-party cleavages that had hitherto shaped Macedonian politics.

According to a long-standing manager of ZELS, its success is largely due to its independence from government and its rules of procedure which favour consensual decision-making. Greater authority for local government is the only common denominator between the local political elites who come from various ethnic, political and geographic backgrounds, and ZELS makes that shared interest the most salient one in the interaction amongst local political elites.35 However, reaching consensus on some issues proved easier than with others. ZELS did not even discuss the draft Law on territorial organisation, as it was considered inappropriate to discuss the future abolishment of some municipalities in the presence of their current mayors.36 This tendency to structure issues pertaining to decentralisation policy along the local vs. central government cleavage has

35 High-ranking member of the management of ZELS: personal interview with the author, Skopje, 23 July 2010.

36 Ibid., Personal interview. narrowed the space for contesting them on ethnic or political-party grounds. This makes ethnic accommodation much easier, as local interests cut across party and ethnic group interests. The case with amending the Law on financing the municipalities illustrates how this is reflected in the policy process.

When the initial Law on financing the municipalities was adopted in 2004, along with the other major laws from the 'decentralisation package', little attention was paid to the sources of funds for municipal budgets, as the decentralisation debate at the time was highly ethnicised and dominated by the discussion over municipal boundaries. However, soon after decentralisation was implemented in 2005, problems with local-government funding became apparent. Municipal authorities had problems financing the activities that were devolved to them, which resulted in their running up debts that they could not service. By the end of 2006, when the start of the second, fiscal, stage of decentralisation was scheduled, only 13 of 86 municipalities had fulfilled the criteria to proceed.37 The majority of municipalities had insufficient human resources and capacity to handle budgeting, management, audit and reporting requirements, many had blocked accounts because of debt, and none had managed to realise their planned budget.38 The first set of mayors and councillors, elected on the 2004 elections, soon realised the financial limit to their capacity to benefit from decentralisation and in ZELS came up with a unanimous demand for increased funds for local government.

When the new Parliament convened after the July 2006 elections and VMRO and PDSh replaced the SDSM and DUI in government, ZELS tabled a proposal for changes and amendments to the law on financing of municipalities, demanding an increase in the percentage of Value-Added Tax (VAT) allocated to local government from 3 per cent to 4.5 per cent. The proposal was placed on the agenda by opposition deputies, which did not work to its advantage, since the opposition did not control enough votes in parliament for the proposal to pass. However, the parliamentary debate about the proposal revealed that the governing party was not entirely against the proposal and many government deputies expressed public support for the idea of increasing the funds available to municipalities.39 The proposal was not adopted, on grounds of insufficient financial analysis and justification for the proposed percentage increase, but the debate was surprisingly

37 Abdulmenaf Bexheti, 'Do kade sme so vtorata faza na fiskalnata decentralizacija?' [How far along are we with the second phase of decentralisation?], in Good Governance (2006). Available at: gg.org.mk/index.php?option=com_content&task=view&id=80 (accessed 20 November 2010).

38 Abdulmenaf Bexheti, 'Fiskalnata decentralizacija i predizvicite na lokalniot ekonomski razvoj' [Fiscal decentralisation and the Challenge of Local Economic Development], in Friedrich Ebert Stiftung (2006). Available at: fes.org.mk/pdf/ Abdulmenaf%20Bedzeti%20Fiskalna%20decentralizacija.pdf (accessed 5 November 2013). 39 Statements of Ristana Lalčevska, MP for VMRO-DPMNE 2002–2008; Silvana Boneva, MP for VMRO-DPMNE 2002-present, Transcripts from the 2nd sitting of the 23rd session of Parliament of R. Macedonia from 5 March 2007. Parliament of R. Macedonia,

Transcript Archives. Available at: sobranie.mk (accessed 20 November 2010). technical and revolved around tax rates and tax collection, while ethnicity and ethnic relations were hardly mentioned. Less than three years after the referendum over the territorial organisation, the debate over decentralisation was framed in technical terms and, apart from lateral references to opponents' past views, increasingly stripped from ethnic rhetoric.

The 2009 local elections were the first held under a VMRO-DPMNE government. As tradition dictated that the president of ZELS should be a mayor with a governing-party background, the elections resulted in a VMRO mayor taking over the position. Soon after, on recommendation by ZELS, the government prepared a proposal for changes and amendments to the law on financing the municipalities. The new proposal contained the same provision as the 2007 proposal, an increase in the VAT share allocated to municipalities from 3 per cent to 4.5 per cent. The new set of mayors retained the consensus over the need to increase their funds and used their unanimity and political-party influence to get the issue onto the government's agenda.40

The plenary debate was similarly technical and revolved around issues of fiscal performance of the government and municipalities, as well as the level of control the central government should retain over the fiscal activities of municipalities.41 On this occasion every political party supported the proposal, on the Macedonian and the Albanian side. Even the mayor of Aračinovo, one of the largest Albanian municipalities, who came from the opposition, phrased his criticism in terms of urban vs. rural municipalities, accusing the government of neglecting the rural municipalities which would not benefit as much from the VAT share increase.42 Thus, the Albanian opposition did not approach the issue through an ethnic lens; rather, they chose to frame their criticism of the proposal on the cross-cutting urban vs. rural cleavage, contributing to de-ethnicising decentralisation policy.

Upon adoption of the proposed amendments, they were duly implemented and local government units soon had increased financial resources at their disposal. There are still many problems and challenges with decentralisation policy in Macedonia, but very few of them are framed in ethnic terms. Party divisions between government and opposition parties are replicated at local level and that often leads to differential treatment of municipalities by the central government, as municipalities with mayors from government party background tend to have preferential treatment by the government in approval of projects, loans

40 ZELS, Systematized positions of ZELS, June 2009. Available at: zels.org.mk/Default.aspx?id=c55495aa-db99-41ef-84fb-be2a40fe178b# (accessed  20 November 2010).

41 Transcripts from the 2nd sitting of 83rd session of Parliament from 24 December 2009. Parliament of R. Macedonia, Transcript Archives. Available at: sobranie.mk (accessed 20 November 2010).

42 Bastri Bajrami, Mayor of Aračinovo, DR, in 'Increased VAT per cent for municipalities', in Radio Free Europe/Radio Liberty. Available at: makdenes. org/content/article/1917309.html (accessed 5 November 2013). and budgets.43 Local vs. central cleavage also remains important, as local and central elites negotiate the rights to dispose and manage public land and property in municipalities. Occasionally, there are attempts to re-ethnicise decentralisation and local politics. For instance, on the 2013 local elections the two Macedonian parties, SDSM and VMRO-DPMNE, decided to propose a join candidate for mayors in Struga and Kičevo in a bid to mobilise the local population to vote on ethnic rather than party preferences. Their bid was unsuccessful, but more importantly it was dismissed by many local voters and national commentators as bad practice, threatening to undermine the progress achieved in de-ethnicising local elections and politics.44 Although efforts at ethnic mobilisation in local politics tend to occasionally resurface, party and local vs. central cleavages appear to be gradually replacing ethnic contestation of decentralisation policy.