13 51. The suitability of services for decentralized provision may also differ among CIS states. The amount of decentralization appropriate for Russia with its 11 time zones, numerous ethnic groups and population of 150 million, for instance, may not be appropriate for Belarus with its more compact area and homogeneous ethnic composition, and population of only 10 million. The period of transition may provide an opportunity for Belarus to reconsider the assignment of responsibilities between levels of govemment. One smaller CIS state, Armenia, has, in fact, reassigned responsibilities for education to the center.

52. Whatever level of govemment is assigned responsibility for these social services being divested by enterprises, the means of financing assigned for the purpose need to be adequate to perform the function. In this respect, some observers have viewed the actual process of assigning "divested social functions" to subnational govemments as a form of buckpassing by central governments, in that the responsibilities have been transferred without assignment of adequate revenue sources. **37** 53. Another problem with the question of what level of government should be responsible for these functions in Belarus is that neither the allocation of functions between levels of govermment nor the financing of regional (oblast) and district (rayon) governments suggests that there really are fully autonomous local govemments in Belarus. Meaningful local govenmment requires some autonomy in its functions and financing. Although local and regional executive council members are elected in Belarus, these subnational levels of govemment are, in other respects, simply lower level branch offices of the central or republican level of government. They raise little revenue themselves and often appear to function as mere agents for the delivery of services such as health and education; the parameters of providing such services are set by the central government. In these regards, Belarus is typical of many countries in transition.

## _Responsibility for vs. Delivery of Divested Services_

54. We should note that it is the responsibility for functions that is in question here, and not their actual provision. Actual delivery of these functions can be accomplished by a number of altemative organizations, including private contractors, non-government organizations and even other levels of government under contract. Citizens of Belarus might be surprised by some of these alternatives; for example, fire services are provided entirely by voluntary organizations in Chile, and municipal and provincial police services are often provided by means of contracts with the federal police force in Canada. Nor is enterprise provision of these services simply a matter of replacing state-owned enterprises with private enterprises; as has been repeatedly shown, it is the presence of competition and not simplv state ownership that leads to efficient provision of these services.<sup>38</sup>

# **Local Government Finance: Problems and Possible Solutions**

_55._ If some of these "social" functions are to be divested by firms but continue as a governmental responsibility, it follows that they have to be acceptably financed. Existing sources of financing may not be satisfactory for this purpose. Alternative sources of finance include increased cost recovery from users.

> 37 See for instance Jorge Martinez-Vasquez, "The challenge of expenditure-assignment reform in Russia," _Journal of Environment and Planning,_ 1994, Vol 12, pp. 277-292; Christine I. Wallich, "Russia's Dilemma," in _Russia and the Challenge of Fiscal Federalism,_ a World Bank Regional and Sectoral Study, ed. Christine I. Wallich, 1994, pp. 38-43.

> 38 According to one examination specific to the efficient supply of local government services, "most of the efficiency gains from contracting out have resulted from an increased scope for competition rather than from the fact that the service was provided by a private contractor." Harry Kitchen, _Efficient Delivery of Local Government Services,_ Discussion paper No. 93-15. School of Policy Studies, Queen's University, Kingston, Ont., Canada, 1993, p.<sup>22</sup> .

In the context of Belarus, we note that Presidential Ukase No 351 of 4 September 1995 simply _orders_ the reduction of housing maintenance expenditures by 10-20% by the introduction of "contracts." These contracts do not reduce housing maintenance costs by encouraging competitive provision of communal services.