Investment and local authorities

Regional authorities will be unable to fulfill the annual investment plan, as well, other tasks set by the government. However all the governors are in an equal situation, therefore their positions are not threatened.

The Government sets tasks for the regions regarding investment, privatization of enterprises, production growth, budget revenues from foreign economic activities, etc. Previously tasks were fulfilled with either direct budget financing or via state support programmes or using beneficial lending rates of the National Bank or other mechanisms. In the spring of 2011 the central government has lost access to the majority of these mechanisms, and was forced to cede part of the authority for the benefit of the regional authorities. First of all, it concerned the foreign currency earnings, which were left at the disposal of the local authorities. This allowed the local governments to keep afloat the most socially important enterprises.

However, the capabilities of the local authorities are restricted by the general state of the economy and by the unwillingness of the central government to assign more responsibility to the field, primarily with regard to the ways of filling the budget and to stimulation of production. For instance, all major privatization deals should be concluded by the central authorities. Local officials withstand it.

It is clear that by the end of the year the local governments will not cope with the tasks set by the central government. However the government’s failure to stimulate task performance and/or stimulate independent decision making by the local authorities implies the latter would become unaccountable.

Nevertheless, some efforts in terms of attracting investment and privatization have been made in the regions.