Fiscal decentralization and the role of local government in local economic development in the Republic of Macedonia

Abstract

The process of decentralization in Macedonia brought many responsibilities for local governments. With the Law on Local Self-Government were established and transferred responsibilities of local importance, which were placed under the jurisdiction of state institutions and which local authorities should perform independently. In this paper the Local Economic Development (LED) is analyzed as one of the first obligations transferred to the local level. The focus is placed on local authorities as a significant role in LED and their impact regarding on their natural resources, municipal infrastructure, their fiscal autonomy, financial capacity, administrative capacity, educational structure of people, etc. We analyzed some aspects of LED such as the level of fiscal decentralization, the legal and institutional framework, the support of the central government, capital investments, etc. to conclude that the major units of the local government in Macedonia implement the responsibility for local economic development at a low rate compared to the other responsibilities that are delegated to the municipalities and that the municipalities are still dependent on central governments activities. In order to analyze the impact of local government, in this paper we included a study for the municipality of Ohrid as a main tourist center in the Republic of Macedonia. In the study, there are presented the effects from the budget policy on the tourism as a main potential of local economic development. Finally, taking into consideration the results of the survey, in the paper there are presented recommendations that can serve as a basis for policymaking aimed to stimulate and support local and regional economic development in the Republic of Macedonia.