Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

52 Chapter 3: Public Administration Reform
agencies operate at arms length from the Government and are able to have their own sources of
finance, often used to reward their staff beyond what is feasible within the civil service. There is
still no overall legal framework for establishment, management and dissolution of regulatory
agencies, which creates legal uncertainties in their functioning. Since the criteria for
establishment of different state administration bodies and regulatory agencies are not very clear,
his creates an incentive for establishing additional agencies (instead of ministries or policyimplementation
bodies), due to better pay and benefit opportunities.
3.35 A high level of fragmentation still persists within the State Administration because
the horizontal functional review envisaged by the PAR strategy has not been carried out.
Such a review would lead to abolishing unnecessary functions of existing bodies and merging a
number of small bodies which cannot justify their separate existence. Up to now the impact of
the Law on State Administration and the Decree on State Organization and Activities has been
limited because modern principles of public administration were superimposed on outdated
institutional structures. There was no effort to review whether the state administration should be
carrying out certain functions or whether the functions could be organized more effectively. 56
As a result, a relatively under-developed central apparatus of the state administration is
increasingly incapable of coordinating and managing a plethora of subordinated institutions.
This in turn weakens the overall governance process and adds an unnecessary administrative cost
to running government
3.36 Building new or additional capacity in areas required by the EU will necessitate
making trade-offs across functions of the public administration. As noted in chapter 2, the
government spends a very high share of GDP already on wages and salaries of civil servants and
other public employees. Despite the high cost, a number of core functions suffer from low very
capacity according to the EU’s progress reports and from the slow pace of reform
implementation. Highly skilled people are present within the public administration but not in the
numbers needed to sustain reform implementation. Several new bodies are below their
authorized staffing levels, while some long-established institutions/ministries have people with
the wrong mix of skills. Anecdotal evidence suggests that there are still overlapping and
inefficient functions because of the high degree of fragmentation in the administrative structure,
and that has yet to be addressed.
3.37 A few major sectors should undergo a vertical functional review in order to make
them more cost-effective. The PAR strategy had an over-arching goal to make the public
administration more efficient and effective. Moreover, to create fiscal space to expand capacity
in high priority areas, will require freeing up resources from activities that over-consume budget
resources. The vertical functional reviews could be carried out immediately after or in parallel to
the horizontal functional review. The choice of the institutions to undertake the review should
depend on the importance of the sector to the overall budget and on the EU accession. Data in
chapter 2 indicated that there are 3 or 4 sectors where the level spending is relatively high
compared to EU levels (as a share of GDP). The management of such a review would need to be
given to an expert team, comprised of both international and local experts, as well as government
representatives. If overall oversight of the review is assigned to the Ministry of Justice (because
56 The existing fragmentation may be a result of the relatively long period of coalition politics, during which
different parties have tried to secure their share in power by establishing new administrative bodies.