Lessons for Other Developing Countries

Local Government Organization and Finance: Kazakhstan 291

anaccessory to corruption are merely appointed as akims ofother regions and bear practically no responsibility for the outcomes oftheir work.

The high level ofincome centralization reduces the autonomy oflocal authorities.Since 2005,only 3 of15 local budgets fulfill their expenditure obligations out oftheir own income. All other local budgets depend on subsidies transferred from the national budget.

The concept ofa local tax can relate only to the land tax,for which local authorities may reduce or increase the rates.But its share in receipts is insignificant (1 or 2 percent).

Allocation ofcharges between the levels ofthe budget system was decentralized in the mid-1990s.At that time the government,which had to strive to maintain budget deficits at the level demanded by the International Monetary Fund,was “throwing off”all social expenses to local budgets.As a result,a nonsymmetric fiscal decentralization took place— expenditures,but not income,were decentralized.But this does not mean local governments could independently determine how their budgets werespent.The system ofallocating charges between the levels ofthe budget system turns local authorities not into partners ofthe government (which ensure financing and perform important duties),but into clients petitioning for resources.

The system ofleveling income among the oblasts does not have clearly defined criteria that are based on financing a minimum standard ofsocial or other services.Thus,the system results in some disproportion:charges for one pupil or one patient can be very different in different oblasts.

The division ofexpenditures into operational and capital ones (the socalled developmental budget) is also questionable.In international practice,capital expenses are financed by raising loans or by issuing capital.In Kazakhstan,financing ofcapital expenses is possible only at the expense of government transfers earmarked for a special purpose.Efforts oflocal executive bodies to issue bonds failed.The Budget Code stipulates that local executive bodies have the right to borrow only from higher budgets.

Local agencies have sufficient expertise to ensure local public services. But effectiveness in ensuring such services has not yet been a paramount goal oflocal authorities,because such authorities do not depend on citizens’ good opinion about the quality ofservices provided.

Lessons for Other Developing Countries

Over the past 15 years,Kazakhstan’s budget system has undergone significant changes:sources offorming the national and local budgets have been

292 Meruert Makhmutova

determined,and directions for spending these funds have been defined precisely.However,the weak links in the budgetary process are as follows:

Inadequate planning and forecasting ofbudgets for all levels Lack ofstable income sources for local budgets Poor incentives for budget implementation at the local level Weak mechanisms for leveling through subventions and withdrawals Weak management ofcommunal property at the local level Inadequate monitoring ofimplementation and control oflocal budgets.

Kazakhstan has a highly centralized system oflocal public administration.Under this system,local executive bodies dominate the representative bodies.Representative bodies act as a democratic façade in the system of public administration.

The amount ofresources reallocated by the government increases annually.Such increases might have been justified during the transitional period from Soviet rule,when resources were exceedingly limited.But now local authorities must bear responsibility to the population for the inadequate level and quality ofservices provided.

The problem is that in Kazakhstan there are practically no mechanisms for ensuring the accountability oflocal authorities to the population: authorities do not depend on the good opinion ofcitizens regarding the quality ofthe work they perform.In other countries,local authorities are accountable to the local electorate by way ofdemocratic procedures.

In Kazakhstan,however,akims ofall levels are appointed from the top. Thus,akims are accountable to the people who appointed them.Although the constitution recognizes the right to establish local self-government,no adequate law concerning local self-government has been enacted in the past 11 years.Accordingly,no institution oflocal self-government is in operation in Kazakhstan.

The cardinal problem is that the constitution,having included local representative bodies in the system oflocal public administration,brought about a contradiction,which does not allow the establishment ofa fully accountable institution oflocal self-government.The maslikhats must be the local self-government authorities:they are elected by the population and they approve the budget.

Draft versions ofthe Law on Local Self-Government proposed by the government,the latest ofwhich was withdrawn from the parliament in 2000,provided for establishing local government at the level ofa public organization—without budget and ownership.

Local Government Organization and Finance: Kazakhstan 293

One ofthe key challenges is absence offull-fledged accountable authorities at the rural level.In accordance with the law,the akim is a representative ofgovernment authorities at the rural level.Establishing local representative authorities—maslikhats and also akimats at the rural level—is not provided by the law.Rural management does not have a budget—only an estimate, included in the rayon budget.However,the majority ofsocial and economic problems appear at the rural level.Many ofthem are a result ofreforms carried out in the 1990s.Given that 44 percent ofKazakhstanis live in the countryside,solving these problems is a task ofgreat importance for further development ofthe country.Rural akims,who enjoy only limited powers and do not have a budget,will not be able to resolve these problems alone.

Hence,it is necessary to provide rural akim with an appropriate budget. Experience shows that almost three-quarters ofthe problems related to improving local living conditions result from problems the authorities faced in the development ofthe territory.These problems can be successfully resolved jointly with the residents,who know the problems best and may take the most active part in resolving them.

The Budget Code has been signed.It employs a new mechanism ofreallocating taxes between the levels ofthe budget system,dividing obligations for expenditures between oblasts and rayons.On the whole,the Budget Code regulates the budgetary process.But it failed to resolve a matter ofprinciple— establishing an independent rural budget.

Worldwide,local government is a basis for regional development.To solve the problem ofstrikingly different regional development levels in Kazakhstan, policy makers must employ all possible mechanisms,including the constitutionally recognized right ofself-governing bodies to regulate a considerable part ofpublic affairs and to manage themselves,acting under the laws,on their own responsibility and in the interests ofthe local population.As world practice shows,only mechanisms for control and accountability ofauthorities and stimulation ofcitizens’activities can improve the provision ofpublic services.

In the case ofKazakhstan,the absence ofpolitical will needed to carry out real reforms at the local level impedes the establishment ofa legal framework capable ofensuring these reforms.The result is a vicious circle.We propose to create necessary preconditions for the development oflocal self-government in Kazakhstan by taking maslikhats out ofthe system oflocal public administration and recognizing them as local self-government authorities.At the lowest level ofgovernment,it is necessary to provide for the establishment of maslikhats and,later,for the election by the deputies ofthe akim,who will head the executive body oflocal government.We hope that this will break the vicious circle and allow discussion offurther steps to begin.