Administrative reform could take up 1% of GDP

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The proposed administrative territorial reform could cost up to 1% of GDP, said Environment Minister Juris Pūce appearing on LTV's De Facto February 17.

The costliest part of the reform will be related to investment projects. Pecuniary incentives will be used to encourage municipalities to merge with one another, e.g. money for road repairs or new buildings. Such measures would make up the bulk of the reform cost, estimated at around €300 million.

"About 1% of GDP [is usually spent] on such measures. They just carried out the reform in Estonia and have funneled about 1% of GDP to the municipal investment program," said Pūce. 

"At any rate, I don't plan to carry this out at the expense of other areas, stunting their development. We'll use EU funds, but if these won't be available yet, perhaps the government should decide on starting talks with the European Commission for the so-called reform derogation from the budget deficit limit. That's currently the case in, for example, healthcare," said the minister. 

Pūce conceded, however, that no estimates as to the cost have been carried out at government level yet. 

LTV concludes that about €800,000 is necessary for starting the reform, with about €500,000 coming from the ministry budget. About €220,000 is to be spent on an informative campaign, while the rest would be used for hiring employees, organizing meetings with locals and updating research data.

It is clear that disbanding republican cities will be among the reform's most contested points. There are nine in Latvia, and all except Rīga are to be merged with the surrounding municipality under the proposed reform. It is already clear that several municipal heads object to this. 

"This matter can be discussed, but the ministry thinks that all the large cities should be together with the municipal territory. But we also realize that this is a question that can be evaluated, i.e., whether cities and municipalities working together would help developing a region, or vice versa. But the ministry will put forth an offer which would see the entire concept of republican cities disappear from legislation," said Pūce.

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