Best Practices in the European Countries Baltic Countries: Estonia

Transcription

1 Best Practices in the European Countries Baltic Countries: Estonia DRAFT

2 The views expressed do not imply the expression of any opinion whatsoever on the part of the United Nations and of Italian Department for Public Administration, and Formez 2

3 1 The Baltic Countries In Transition Following their independence in the early 1990s, the Baltic countries have achieved impressive progress over a decade of transition. They have liberalised and opened their economies to the international market, and have implemented a significant number of difficult and complex marketoriented structural reforms 1. The tremendous output fall of the early nineties reflected the extent of the economic distortions existing before transition and the degree of restructuring required. By positive growth had resurfaced, and by 1997 growth in the Baltics was amongst the fastest in transition economies. The Russian crisis of mid-1998 brought a halt to fast growth, but did not reverse the trend. On average over the period , real GDP increased by around 5% per year in each country, aided by a gradually more effective participation in international product and capital markets. A process of catching-up with more advanced economies thus is well under way, although the deterioration of macroeconomic indicators has raised concerns and suggests that the transformation process, even if relatively advanced, is not yet over. In fact, living standards are still much lower than in most OECD countries. Based on OECD estimates of purchasing power parities (PPP) for 1999, real GDP per capita in 2001 was only 37% of the European Union average in Estonia. The corresponding estimates for Latvia and Lithuania were around 30% of the EU average. Moreover, not all households have benefited fully from recent reforms. According to labour force surveys conducted by the OECD in 2001, the unemployment rates for the 15 to 64 year labour force were on average about 12, 13 and 18% in Estonia, Latvia and Lithuania respectively. In addition, around 15% of those employed in Latvia and Lithuania were engaged in agriculture and related activities, with usually much lower incomes than average. Partly for these reasons, the income distribution is relatively unequal with Gini coefficients of around 0.35 in all three countries, or more than in almost any other country in Europe 2. In Table 1 the main indicators for each country are summarised 3. The Baltic countries had similar starting points and, like other transition countries, the were offered roughly the same policy package in the early 1990s: a liberal approach towards economic policy under a rigorous macroeconomic framework 4. Nevertheless, they adopted a different management of the transition, creating some divergence in the economic situations up to the mid-1990s. Of course, differences are either more or less pronounced depending on the policy areas under consideration. For example, in the mid-1990s there was a relative convergence of policy in the area of macroeconomic stabilisation. Both Estonia and Latvia introduced tight monetary policies and new currencies. This enabled them to bring inflation down rapidly to about 35-36% by end The three Baltic countries also adopted similar policies on price liberalisation. They followed the same path as the more advanced transition countries. Between 1991 and 1993 price controls were removed on most food, industrial products and services. Finally,, they recently ( ) adopted new Laws concerning competition policy, in line with EU directives. Table 1: Main Indicators ( ) Estonia Real GDP growth rate 4,6-0,6 7,3 6,5 6 Inflation rate 8,8 3,1 3,9 5,6 3,6 Unemployment rate 9,2 11,3 12,5 11,8 9,2 1 OECD. Baltic States a regional economic assessment. OECD Economic Surveys, EU. Country Monitoring Reports Data taken from the EU. Country Monitoring Reports See note 1 3

4 FDI in flows (% of GDP) 10,9 5,8 7,6 9,6 4,4 Latvia Real GDP growth rate 4,8 2,8 6,8 7,9 6,1 Inflation rate 4,3 2,1 2,6 2,5 2 Unemployment rate 14, ,7 2,8 12,8 FDI in flows (% of GDP) 5,9 5,7 5,7 2,3 4,6 Lithuania Real GDP growth rate 7,3-1,8 4 6,5 6,7 Inflation rate 5 0,7 0,9 1,3 0,4 Unemployment rate 11,8 11,2 15,7 16,1 13,1 FDI in flows (% of GDP) 8,5 4,6 3,4 3,7 5,3 Source: Eurostat, National sources, OECD However, differences have been concentrated in the approach to structural reforms, both in terms of scope and timing. For example, while the privatisation of the state-owned banks proceeded rapidly and with the strong participation of foreign capital in Estonia, it was more prudent in the other two countries. The Lithuanian Government also showed a certain reluctance to accept foreign capital. As in the banking sector, enterprise privatisation in Lithuania followed a specific path, characterised by the absence of foreign investors and using a voucher scheme that favoured insiders. On the contrary, the emphasis in Estonia was on finding strong owners rather than fragmenting ownership through a voucher scheme. The approach has been to privatise and then restructure. Although these are different approaches to reforms, the prospects of EU enlargement stimulated convergence (this is consistent with data in table 1), and even emulation, across the three countries by creating a common policy framework and goals. Different paths of transition only came out during the Russian crisis, when the management of the reform process played an important role for the dynamics of recovery, favouring Estonia more than the others 5. Estonia is also favoured by its geographical position, so close to the well developed and modern Scandinavian countries, especially Finland. For this and other reasons Estonia is, among the three considered countries, the one that is performing best and growing at the fastest rate. Its capacity to modernize made it possible for Estonia to become a case of excellence in Europe in some fields, such as e-government. This is why in the following part of the paper I will go more in the details of the administrative reform in Estonia. 2 Public Administration Reform in Estonia 2.1 General Background 6 The Republic of Estonia, formerly a republic of the Soviet Union, regained its independence in The Constitution, adopted in 1992, provides for a unicameral parliament with 101 members, elected for four years. The President of the Republic is elected by a two-thirds majority of the parliament for a four year term. The Prime Minister is appointed by the President, subject to the endorsement of the parliament, and forms a government which must not comprise more than 15 members. The country is divided into 15 administrative counties, each headed by a county governor appointed by the government for a five year term. Estonia has one level of local 5 OECD. Baltic States a regional economic assessment. OECD Economic Surveys, EU. An evaluation of PHARE Public Administration Reform Programmes. Final Report,

5 government, the municipality and there are 42 cities/towns and 205 rural municipalities. The governing bodies of the municipalities are elected every three years they enjoy budget autonomy and tax-raising powers, but their work is overseen both by the county governors and by the Legal Chancellor. Counties as the intermediate level are part of central government administration in the regions. The first steps in Public Administration Reform took place at the end of the 1980s, before independence was re-established, and were driven by the necessity to adapt the Public Administration to the emerging market economy, to increase the independence of the Estonian administration from the Soviet Union and to develop a flexible administrative system which would support fast economic and political reforms. However, a framework for Public Administration Reform was not created until the adoption of the Constitution in The initial task was to rationalise the ministerial structure. The number of ministries was limited to twelve and the number of ministers was reduced to 14. Estonia had to create Ministries of Foreign Affairs and Defence, and to undertake extensive restructuring of the institutions of executive power. The Local Government Reform Act in 1993 introduced a single level of local government instead of two levels that previously existed, which clarified the relations between the central and local government. Until 1993, there were county self-governments with elected councils but they were abolished by the new Local Government Organisation Act. After that, there are no more directly elected bodies on the regional level. There are, however, regional co-operation units of local governments within every county. The county governor represents the central government and implements its policy at the regional level. The Government of the Republic appoints the county governor to office after approval by local government representatives. County administration serves as the administrative apparatus of the county governor. The latter fulfils the following tasks amongst others: co-ordination of the co-operation between the regional offices of ministries and other agencies of executive power and local governments in the county; giving his or her opinion on the appointment to and release from office of the heads of regional offices of ministries and other agencies of executive power located in the county. As there is no regional government level in Estonia, the co-operation of municipalities within a county is of great importance to municipalities both in their relations with central authorities and in co-ordinating their own activities. Local authorities have a constitutional right to form associations or establish joint institutions. The formation of associations is specified in the Local Government Organisation Act. The national-liberal coalition that came to power after the general elections of 1992 had, as one of their main slogans, A Clean Slate which expressed their clear aversion to the old soviet-style civil servants, preferring young and inexperienced people joining the public service rather than older civil servants, who were experienced, but largely incapable, and often unwilling, to re-orient themselves to the effects of the rapid changes. A Ministerial Commission on Public Administration Development was founded in 1995, headed by the Prime Minister, with the task of supervising progresses in Public Administration Reform. New impetus for Public Administration Reform came in the autumn of 1996 when three ministers published Public Administration Reform: Need and Thesis which contained proposals for Public Administration Reform designed to establish an efficient and citizen-oriented public administration that would meet the demands of membership of the European Union. This drew the attention of the society to the importance of reform. One result of the discussion was that the government assigned to the Minister without Portfolio in Regional Affairs the task of composing, with the help of the Expert Commission on Public Administration Reform established in the summer of 1997, a Concept of Public Administration Reform. The latter emphasised the decreasing the 5

6 size of government, increasing political leadership of ministries and the reform at the county level 7. The Public Administration Reform in Estonia was supported mainly by the European Union which is the main donor to Estonia providing over 30% of the total assistance. The main areas of support are: education and training, the financial sector, government and democratisation and the social sector. Other significant donors are the Governments of Finland, Sweden and Denmark (about 50m ECU each) and their priorities include environment, government and democratisation, but also strengthening of bilateral economic co-operation, the promotion of private sector development, etc.). Estonia has received valuable assistance in its Public Administration Reform from these governments and other organisations (e.g. SIGMA, British Council), but their assistance is focussed on small projects (e.g. civil service training, documentation translation) and is therefore not comparable to the assistance of Phare in extent. None of the work of the bilateral donors related directly to the project under consideration in this exercise. The bilateral donors are focussing increasingly on the Estonian accession to the EU, but on the other hand, the general assistance is decreasing because of the high level of development. 2.2 Local Government: Inter-Municipalities cooperation 8 As a result of extensive decentralisation from central state to local government level, Estonian municipalities have in recent years become responsible for an increasing number of administrative tasks and services. Due to the comparatively small size of most Estonian municipalities in terms of inhabitants around 50% of the 247 municipalities have less than 2000 inhabitants - many local authorities lack the sufficient economic, administrative and manpower capacity to effectively carry out the increasing number of tasks placed upon them. This development has highlighted the need for more extensive inter-municipal co-operation. Intermunicipal co-operation is an effective means to enhance the efficiency and quality of municipal services and administration. In particular for small municipalities it is a way to increase their capacity to be able to carry out their growing tasks and responsibilities. As a consequence of the developments described above, the Estonian Ministry of Internal Affairs and the Danish Ministry of Interior have organised a Local Government Administration Programme in Estonia. The focus of this project is on how to strengthen inter-municipal co-operation. The term inter-municipal cooperation is here used to describe both a joint local authority co-operation and an agreement between two or several municipalities in which it is stated that one municipality is responsible for the production of the service and the others make use of this service. As a part of this Local Government Administration Programme, PLS Consult Ltd. Denmark has undertaken a questionnaire among Estonian municipalities and carried out more than 20 interviews with representatives of the Estonian local government system. The results of these analysis serve as the outset of a Best Practice Manual which contains clear and systematic information as well as guidelines, examples and recommendations on how to implement and improve inter-municipal co-operation. An inter-municipal co-operation example, that came out from the above said analysis as an Estonian best-practice, is that realized in Vôrumaa with regards to a social development centre, that will be briefly described hereafter: 7 EU. An evaluation of PHARE Public Administration Reform Programmes. Final Report, PLS Consult ltd Denmark. Local Government administration programme Estonia. Strengthening inter-municipal cooperation: Best Practice Manual

7 The Social Development Centre in Võrumaa 9. In the end of 1997, a so-called Social Development Centre was established in Võrumaa as a result of a collaborative project between the municipalities in the county, the county government and the regional local government association in Võrumaa. The establishment of the centre was part of a wider social policy co-operation programme, , between the Estonian Ministry of Social Affairs and the Danish Ministry of Social Affairs. The intention behind the inter-municipal Social Development Centre was primarily to strengthen social work in the region by creating a centre of expertise, which could support municipal and inter-municipal efforts in the field of social policy and social work. The main activities of the centre are: to provide training to the municipal staff in Võrumaa to provide advice and consultancy services project development and inter-municipal co-operation fund-raising information services Initially the Social Development Centre should employ one social policy or social work expert, one expert on social administration and a part-time secretary. The centre is organised as an independent NGO in the form of a foundation. The decision-making authority of the foundation is the general meeting, which all legal members are entitled to attend. The general meeting elects a board consisting of 7 members. Concerning the financing of the centre, the establishment of the centre was financed through financial contribution from 12 of the 14 municipalities in Võrumaa (two municipalities decided not to participate in the project), Võru County Government and the Danish Ministry of Social Affairs. The municipalities paid EEK 4 (around 0,25 euro) each per inhabitant the first year. It is the intention, however, that the centre in the medium term will be able to rely solely upon contributions from its legal members (primarily the municipalities) and from funding raised by the centre. The centre is thus expected to raise money through the selling of services, advice and training to non-members (for instance municipalities outside Võrumaa) and through externally funded projects. The centre will therefore attempt to attract externally funded projects (e.g. EU projects), which will be to the benefit of all the municipalities involved. In the course of 1998, the centre has become fully operative and has so far carried out a number of courses for municipal staff and others. One the reasons for the apparent success of the centre is that all the relevant actors in the field of social work were invited to participate in the process from the outset. Although the municipalities are the primary, local stakeholders in the Social Development Centre, it was from the beginning important to involve a wider range of organisations and authorities with expertise in the field of social work and social policy. Hence, voluntary organisations, the regional association of municipalities as well as the County Government have all been involved, along with external Danish advisers, in the planning of the project and in the activities undertaken by the centre. Although the project to some extent was initiated from the outside (the Estonian Ministry of Social Affairs, the Danish Ministry of Social Affairs and Danish consultants), the local stakeholders have throughout the process been expected to deliver the main input to the project in order to ensure the long-term sustainability of the centre. 9 PLS Consult ltd Denmark. Local Government administration programme Estonia. Strengthening inter-municipal cooperation: Best Practice Manual

8 2.3 E-Government Within 10 years Estonia has changed beyond recognition. In 1992 Estonia was a country in ruins. Today, Estonia is one of the most successful transition countries, and is commonly referred to by experts as a "real success-story" or "the little country that could". Estonia is also one of the fastest growing economies in Europe with a balanced budget, flat rate personal income tax, and a 1.2% inflation rate per annum 10. There are a number of reasons behind these important developments. One of those is given by UNDP which attributes Estonia s fast growth to the effective use of modern technology and ITsolutions. An open mind and the high priority given to the idea of an "e-estonia" helped the country not only to modernize its bureaucracy, but also the attitudes of its people as well. It had frequently been expected, too, that Estonia would be the leading country for e-voting, introducing it already for the national elections this year.2 However, in the very last changes of the respective laws, the Estonian Parliament voted for e-voting, not for the immediate future, but only with a delay of implementation until the year Still, the Estonian is the first case world-wide of a country that has actually passed overall e-voting laws 11. Estonia understood from the beginning of its transition that it was not enough to deal only with its current problems, but that it must have the courage to look into the future as well. So it decided to turn a seeming disadvantage into an advantage - because Estonia was so underdeveloped it had an opportunity to do a real jump forward by embracing the most modern technologies. By giving the IT-revolution absolute political priority, and by guaranteeing continuous cooperation, Estonia is now ahead of most European Union countries in terms of Internet use. Estonians make their bank transfers through Internet and fulfil their tax declarations via the e-tax Department to declare their taxes. The Government uses no paper, and all members of the Government use computers during sessions. Government meetings are held via computers through the Internet. This has allowed us to significantly speed up decision-making and enable government to work more effectively. Estonia has made all of its documentation in the ministries accessible via the Internet. Prior to sending out draft proposals on new laws or decrees, ministries must publish them first on the Internet. This makes the work of government more transparent and has strengthened the fight against corruption. In Estonia, every person can now follow via the Internet every penny the state spends in real time. Another important benefit has been to create opportunities for citizens to deal with the government via the Internet - to have access to the necessary archives and documents, and to solve their problems electronically. More than half of Estonians use mobile telephones, many of them made in Estonia. Forty-four per cent of Estonia s exports are now in the electronics field. All schools are connected to the Internet, as is 80 per cent of the private sector and 100 per cent of public sector 12. It is also important to give to Estonians the opportunity to participate in decision-making processes. In Estonia everybody can get information on all discussed laws and decrees, and everybody can place their opinion and proposals on the homepages of the ministries, or make them directly to the parliamentary commission. There is a law that obliges people to respond to E- proposals with the same urgency as to the ordinary, paper proposals. And last but not least, we launched an interesting government portal project called "Today I decide". Through this portal, people can propose laws or decrees, discuss them, vote on them and relay positive results as official proposals to the government. All activities in the informatization area are centrally coordinated by the Department of State Information Systems. In 1996, a yearbook IT in Public Administration of Estonia has been published. 10 Laar M. E-Government in Estonia. Development Gateway Foundation, UNPAN: Nation in Transit 2004: Estonia Luth K. Reforming Government citizen relationship in the information age. Tallin Pedagogical University,

9 This booklet is a good representation of the development of Estonian public management. The topic of the government citizen relationship is discussed in multitude ways and include such aspects as 1) citizens involvement 2) development of civic society 3) the use of the information technology and interactive communication between the state and the citizens. Some interesting project in the e-government field is mentioned in the following part. The E-Citizen project is a nation-wide project that focuses on developing cooperation between Estonian citizens and the public sector through the Internet. The project has been started in October It started with the creation of an Internet environment, which enables the citizens to obtain information about provided by the stat services, the citizen's rights and obligations to use direct and procedural services. It is hoped that by the year 2004, all state and local government agencies will be providing services through the Internet. The citizen portal started its work in August 2002 and, though the idea was excellent, the portal has still very limited possibilities ( Crossroad ( is the modernization program of national databases with the aim of changing national databases into a common public, service-rendering resource, which would enable agencies, legal subjects, and individuals to search data from national databases over the Internet. At the same time, the system will ensure sufficient security for the treatment of inquiries made to databases and responses received. By the year 2003, the state should have access to the databases of an integral whole 7 days a week and 24 hours a day, which means better services both for citizens and officials. Digital Signature project came about the same time with the approval of the Digital Signature Law. It provides the possibility of usage the digital signature equally with the hand-written signature. It requires no special knowledge as most of the necessary operations are done by software. A document signed according to this act enables the receiver to ascertain the person behind the signature, the time of signing, and the alteration of the document after the signing. The purpose of the Estonian ID-program is to use the nation-wide electronic identity and develop a new personal identification card, that would be the generally acceptable identification document and would contain both visually and electronically accessible information. On the 28th of January 2002, the first ID-cards were issued to Estonian citizens. The ID-card functions on an electronic crypto-processor, based on a smart-card technology. It includes personal certificates and private keys of the card-owner. The card is compulsory in Estonia. In 1998, during the project Vahetu Riik (transl. direct government) a common web portal named riik.ee ( that united all executive and constitutional institutions of Estonia, has been created. Apart from the function of the state representative portal, it also has acquired the role of an integrator and coordinator of national information systems. Creators of that portal call it an inseparable part of Estonian e-government and the symbol of Estonia in the Internet. The portal is functioning well and is very helpful in finding information on public administration. Probably the most famous information age project in the governmental organizations is the Tiger Leap, administrated by the Estonian Ministry of Education and the Tiger Leap Foundation. Tiger Leap was the program of computerization of Estonian schools in ; Tiger Leap Plus deals with development plans for information and communication technology education in Estonian schools in The project has brought computers and Internet-connection to schools and libraries all over Estonia, and the IT training has been given already to thousands of citizens. The E-Tax Board application launched on October 2000 enables the taxpayers to communicate with the Tax Board quickly, easily and safely. Using the E-Tax Board application, the taxpayers or their authorized representatives can file, view and correct their VAT returns, their social tax and 9

10 withheld income tax returns, submit their VAT refund applications and so on. To access the data, one can use either the Tax Board's website or the Internet banks. The system is very convenient, as there is usually long queue waiting at the Tax Board, thus using the electronic device is easier, unless you leave your taxes to the last day of declaration the information technology can fail to approve thousands of report at the same time. A project that has been a matter of pride for Estonian government is called The Estonian Government of Ministers Session Information System. It is not in the direct use by the citizens, but it helps the government to work more efficiently, thus improving the governing in the state and citizens well being, at least in the theory. It is the support system for the organization of ministers sessions, and it automates the preparation processes and proceedings of the Estonian Government Cabinet meetings. The final objective of this system is to prepare all materials digitally and, thus, to reduce coping costs and delivery time. The evidence of the modern working environment of Estonian government can be seen at These were some examples of the projects developing and supporting the government citizen relations and openness of governance; in addition, e-services of National Land Information System, E-State Treasury, E-County, and E-Justice projects can be mentioned Luth K. Reforming Government citizen relationship in the information age. Tallin Pedagogical University,