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publicationJanuary 17, 2023

Croatia Municipal Mergers and Associations: International Experience and Reform Options for Croatia

Croatia municipal mergers

The report provides an overview of international experiences in the promotion of local government mergers and municipal associations, intended to inform efforts to advance institutional reforms in Croatia, and address the problem of low local government capacity.

The study also presents insights into the incentives needed to encourage the voluntary association of local government units (LGU) for the common provision of certain functions and public services based on international practice. The findings build on the previous analysis, conducted through the Fiscal Decentralization in Croatia report.

Croatia’s high degree of municipal fragmentation has been consistently recognized as one of the main challenges to its intergovernmental fiscal system. This trend is also present globally and is characterized by a relatively large number of local governments with populations too small to take advantage of economies of scale in the delivery of public services, a lack of administrative capacity and specialized resources, and/or low tax bases and revenue potential. In Croatia, this has had negative consequences for the financing system, the efficient supply of local public goods and services, as well as the quality and quantity of services provided to local communities.

Croatia Municipal Mergers
The report argues that the problem of fragmentation is in essence a problem of capacity in terms of the administrative, managerial, revenue, and expenditure abilities that local government units need to have in order to successfully provide assigned services to citizens and firms. With this in mind, solutions are needed to tackle fragmentation and with it, deficiencies in local capacity. Specifically, this would entail facilitating subnational government cooperation and creating associations and joint projects at the municipality level, among counties, and between cities and municipalities.

In this context, the report looks at international practices, experience, and trends in addressing local government fragmentation and capacity shortcomings from Europe and OECD countries. Based on the international examples and considering local economic, social, and political contexts, the report proposes meaningful reform options. These lessons can complement already existing reform efforts by Croatian authorities and pave the way forward for further targeting of the policy mix and complementary measures that build independent, effective, and sustainable local governments, leading to optimal local service delivery across the country.

Municipal Mergers and Associations: International Experience and Reform Options for Croatia (download pdf) | Available also in Croatian (download pdf)