Instead of 556 Cities and Municipalities, Croatia Needs 140 Local Units

President Josipović recently presented his stance on the need to consider a different organization of the state, i.e., territorial structure, at the ’48 Hours’ conference in front of about two hundred mayors and entrepreneurs, effectively hitting the core of today’s local development problem, inadequate territorial organization.

To this stance, I add the previously expressed assessments of citizens, entrepreneurs, experts, as well as official assessments that public administration and the public sector are not sufficiently efficient and do not have developed capacities to respond to the demands of modern public administration. The general level of competencies is relatively low considering the specific requirements of such administration, the need for the application of best EU practices and models of good governance.

Concentration Average tax revenues in cities outside Zagreb per capita have fallen by about six percent in one year (from 1907 kuna in 2010 to 1788 kuna in 2011). Only in seven counties do cities have above-average tax revenues. In total, this is 65 out of 127 urban areas, including the City of Zagreb. In these urban areas, according to the 2011 census, nearly 45 percent of the total population lived. The logical consequence of these indicators is the concentration of entrepreneurs. The highest number is in the area of the City of Zagreb – 32,144, or 32.6 percent. In Zagreb and five other counties (Split-Dalmatian, Istria, Primorje-Gorski Kotar, and Zagreb County), more than two-thirds of entrepreneurs are located.   

From 2008 to 2011, business revenues decreased by 16 percent, and investments in fixed assets decreased by as much as 45 percent. It could be said that local self-government turned inwards during the crisis, with rising current expenditures, i.e., politicization, instead of innovation. The role of local self-government should shift from political to administrative and developmental to utilize local initiative, creativity, and autonomy in strategic development planning. Global trends, the European Union, the economic crisis, and increasingly difficult forms of business are directing local government towards seeking new solutions, mutual cooperation, and competition in creating their own identity in attracting investments. This requires engagement not only of financial capacities but also of organizational, administrative, and professional capacities. The tasks of local and regional development in light of Croatia’s entry into the EU and the importance of regional policy, viewed through absorption capacity, are too great for most units. Small units, those with fewer than 3,000 inhabitants, numbering 393, and another 89 with up to 10,000 inhabitants, are certainly not capable of this.

Dependence of Small Units According to the 2011 census, more than 70 percent of the population lives in cities. More than three-quarters of the total number of cities, 98, have up to 20,000 inhabitants, and approximately 29 percent of the total urban population lives in them. As many as 60 cities do not meet the population criterion for obtaining city status of 10,000 inhabitants. Thus, 47 percent of cities received their status exceptionally according to the criterion. Since fiscal capacity is linked to the number of inhabitants, the quantity and quality of services that units can provide, and employment opportunities are reasons for leaving small units and moving to cities or to units in their immediate vicinity.
Almost all small units provide most public services through public services of neighboring urban areas. Their needs (coverage and number of inhabitants) are not sufficient for a rational organization of public services. They also depend on financial assistance from the central government. Under these conditions, it cannot be said that the majority of local self-government has autonomy. Leaders are oriented towards the source of financial resources, the central government, the political structure in power, where all autonomy, creativity, and the role of citizens in participating in public policy cease.

The current system is characterized by excessive complexity of territorial organization, its insufficient stability, imbalance, insufficient efficiency, weak developmental potentials, and ensuring centralized management of the country. Only by creating such an organization that will enable the implementation of true decentralization can conditions be created for efficient and quality public administration, increasing the capacities of local units, greater involvement of citizens in creating public policy, and raising the level of transparency and accountability of local authorities. Such an organization at the basic level could consist of about 140 units with an average of 21 to 27 thousand inhabitants and five (planning) regions at the regional level, bearers of regional policy. By grouping, the revenues of units would increase to about 80 million kuna per unit and around one billion kuna per region. A clear distribution of tasks on a new territorial basis is a prerequisite for (continuation of) fiscal and functional decentralization.