Content uploaded by Marina Tabatadze
Author content
All content in this area was uploaded by Marina Tabatadze on May 27, 2021
Content may be subject to copyright.
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
32
PRIORITIES OF SPATIAL ECONOMY AND FISCAL MECHANISM OF
DECENTRALISATION
Marina Tabatadze
Ivane Javakhishvili Tbilisi State University
Abstract
Decentralisation of the management system is a key feature of country's degree of democratization. It implies
delegation of rights, institutionalization of local self-government, access to public service, and involvement of
the population in the decision-making process. All this requires the separation of powers between levels of
government, the liberalization of these processes, and the expansion of local self-government functions. There is
no universal model of successful decentralisation as each country has its own structure and history of self-
governance. However, supranational institutions often propose generic guidelines of what should the optimal
decentralisation be. Fiscal decentralisation, as an important component of inclusive economic growth, is long
promoted by the European Union. Non-member states, like the Republic of Georgia, also have the possibility to
fully or partially apply the criteria advocated by the EU guidelines. The present article studies the main trends
and challenges of fiscal decentralisation and its main priority – spatial economy. To demonstrate the main
theoretical concepts of these processes discussed in the first part of the work, the article exposes some empirical
evidence from the European Union standards and analyses the reforms undertook by the Republic of Georgia in
regards with these standards.
This article covers the main priorities of effective spatial economy, such as optimal repartition of state
government’s functions, hierarchical principales of country’s territorial planning, fiscal mechanisms of
responsibility sharing and other particularities of spatial planning. The main findings of the research show that
rational mechanisms for the optimal organisation of spatial economy and financial decentralisation depends on
strengthening the territorial unity of the country and on European concepts of creating necessary conditions for
sustainable social-economic development.
Keywords - fiscal decentralisation, local self-government, inclusive growth, spatial planning, spatial economy,
transition economy, EU
INTRODUCTION
Economic growth in itself is not sufficient to develop a balanced and sustainable economic and spatial structure.
Economic growth must reach a broader population through increased employment and other key economic
figures. Necessary conditions for an inclusive growth are correct coordination of public sector management on
the one hand, and optimal repartition of functions among government levels, on the other hand. Besides being
one of the methods of society’s democratic organisation, decentralisation should be understood as the basis of
power delegation norms from government to society. That is why modern spatial economies are naturally based
on decentralisation processes. Economists argue that state’s correct fiscal policies can be assessed with the
indicator of optimal spatial planning and balanced development among regions. That is why, economic
researchers study closely the issues of relations between the central governments and administrative-territorial
units, especially in terms of determining the functional interdependence between budgetary levels.
As far as each country has its own history of self-government structure, it is impossible to create a universal
model of decentralisation. That is why, each country defines individually the powers and responsibilities of its
central and local governments and the level of decentralisation. However, supranational institutions promote
generic guidelines of decentralisation (still according to the particularities of each region). For example,
European Union encourages certain criteria for decentralisation policy for its member countries since few
decades. Non-member European countries can also be entitled to implementing these criteria. There are very
few studies which examine the decentralisation quality of post-soviet economies. The aim of the present article
is to examine one such case – decentralisation policy in the Republic of Georgia. However, it goes being a
simple situational analysis and compares the undertaken reforms in regards with the European Union standards
which, as claimed, influenced these reforms.
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
33
State regulators maintain an important function in the process of systemic transformation. The most active of
these is the mechanism for determining budgetary relations. The starting point for this relationship is that the
formation of municipal revenues is directly related to the financial support of the central government, its
targeted priorities and the strategy of maximizing the use of local resources.
Fiscal decentralisation has become an important topic in recent period in Georgia, as well as in the major parts
of developed and developing economies across the World. Significant efforts have been made in terms of budget
system of the country, financial relations between the central and regional governments, spatial structure of
country’s economy. The objective of the present article is to evaluate the level of fiscal decentralisation in
Georgia in comparison with undertaken reforms and European standards. This evaluation will allow determining
the mechanisms of optimizing country’s fiscal decentralisation for optimal organisation of its spatial economy.
Previous studies have demonstrated that despite the significant efforts of Georgia and other post-soviet states,
the level and the quality of fiscal decentralisation remains relatively low in these economies (Tabatadze, 2018,
2019).
Regionalism, as one concept of the country's territorial arrangement, is based on the idea of municipal
independence. Despite the benefits underlined numerous times, a full independence of local budgets may have
some negative impacts within the regionalisation process as it may lead to marked differentiation in the
development of regions and disproportionate socio-economic conditions. At the same time, equal financial
relations may create an asymmetric favourable environment for territorial units, which contradicts European
standards of regionalism.
With the aim to uncover these above-mentioned important topics of modern economics, the article consists of
four main parts. It starts with a literature review on the main theoretical foundation touching the decentralisation
process. Special emphasis is made on one type of decentralisation – fiscal decentralisation, and its main
principales are analysed at the end of the first section. One of the main priorities of successful decentralisation,
spatial economy management, is discussed in the following part. The main ideas of the concept as well as its
role in fiscal decentralisation, ends up the first conceptual part of the article. After these investigations, the two
following sections are more of an empirical nature: the third section of the article reviews the main principales
of spatial economy at the EU level and the fourth describes the case of Republic of Georgia, where important
reforms have been undertaken in this direction. The article is finished with the discussion of the main findings
and the recommendations for the governments of post-soviet economies based on these findings.
1. THEORETICAL FOUNDATION OF DECENTRALISATION
Decentralisation, in its wide sense, describes the process of redistributing functions, powers, people and/or
things from a central location or an authority to dispersed units. While centralization, especially from
governance point of view, is widely studied and practiced, there is no common definition or understanding of
decentralisation. This diversity of interpretation is due to many reasons: different ways the decentralisation is
applied, different traditions and specificities of each country in terms of self-governance structure, etc. That is
why each state proposes its unique way of differentiating local and central government functions and the degree
of autonomy of self-governing units.
Even if the decentralisation is not the end in itself, it can be used as a mean to create more responsible, open and
effective local government and to foster involvement of community-level in decision making. Those studying
the goals and processes of implementing decentralisation often analyse it from holistic or system approach.
According to the United Nations Development Programme the holistic approach is made operational “by taking
a whole systems perspective, including levels, spheres, sectors and functions and seeing the community level as
the entry point at which holistic definitions of development goals are most likely to emerge from the people
themselves and where it is most practical to support them. It involves seeing multi-level frameworks and
continuous, synergistic processes of interaction and iteration of cycles as critical for achieving wholeness in a
decentralized system and for sustaining its development.” (UNDP, 1997, p.7).
Monor classifies decentralisation into three major types: Deconcentration or administrative decentralisation,
Fiscal decentralisation, and Devolution or democratic decentralisation. For him, deconcentration refers to the
dispersal of agents of higher levels of government into lower level arenas. Devolution refers to the process of
transferring resources and power to lower level authorities which are largely or wholly independent of higher
levels of government. As for the fiscal decentralisation, it refers to “downward fiscal transfers, by which higher
levels in a system cede, influence over budgets and financial decisions to lower levels” (Monor, 1999, p.5-6).
Fiscal decentralisation stands for decentralizing revenue raising and/or expenditure of money to a lower level of
government while maintaining financial responsibility (Tabatadze, 2019). While this process usually is called
fiscal federalism, it may be relevant to unitary, federal and confederal governments. It actually can be seen as a
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
34
way of increasing central government control of lower levels of government, if it is not linked to other kinds of
responsibilities and authority. Within a fiscal decentralisation the authority may pass to local bureaucrats who
are accountable only to superiors at higher levels, or to unelected appointees selected from higher up. Such
fiscal transfers are linked to mechanisms which give people at lower levels some voice. There are no rules of
successful or correct decentralisation of fiscal relations. However, researchers and practitioners identify certain
principales that generally lead to effective results. We can list eight such principales illustrated in the table 1.
Decentralisation can play a guarantor for an inclusive growth for social and territorial cohesion. Inclusive
growth can be defined as an “empowering people through high levels of employment, investing in skills,
fighting poverty and modernising labour markets, training and social protection systems so as to help people
anticipate and manage change, and build a cohesive society” (European Commission, 2010, p. 16). As
mentioned by Tabatadze, it is essential for an inclusive growth to spread the benefits of economic growth across
all parts of the county in question in order to ensure access and opportunities for all throughout the lifecycle
(Tabatadze, 2018, p.33).
Table 1: Principales of effective fiscal decentralisation
Principal of effective
fiscal decentralisation
Explanatory notes
Autonomy
Local governments need to be autonomous when they set
their expenditure priorities. If priorities are given by
centralised structures then it is not considered as a
decentralisation.
Adequate revenue
Local governments need to have adequate revenues to meet
their objectives. Otherwise, local governments should be able
to locally generate resources. Central government should
share resources available for decentralized functions.
Equity
Central government must take a careful look
at revenue allocation in relation to the unique needs of
different local governments, namely by using an allocation
formula.
Predictability
Local governments must predict revenues
available to them from their own sources, from automatic
shares in taxes, and from transfers for specific purposes.
Resource Allocation
Efficiency will decline if the revenues do not allow
management flexibility or require excessive assessment of
their expenditure.
Simplicity
Revenue sharing should not be complicated and closed.
Central and local government and even citizens should
understand the process and rules.
Incentives
If local government does something positive, their efforts
should be rewarded.
Safeguards for
grantors
In order to ensure that local governments meet their
objectives, central government can set some safeguards.
Regional policy of a country is related with the organization of government. It ensures the optimal territorial
distribution of the country’s spatial structure and functions of the state government in order to protect the unity
of its internal structure. The territorial organization of the hierarchical principles and realization powers of
financial leverage is still subject of the priority areas of scientific studies and theoretical debates. Country’s
regional policy depends on the overall territorial organisation of its governance. It covers the issues of territorial
organization of the hierarchical principles and realization powers of financial leverage. Even though the
economic autonomy of territorial units causes socio-economic development, it can also contain certain threats in
case of active decentralisation, as far as it may originate a socio-economic conditions disproportion for certain
regions’ inhabitants. Litvack et al. argue that at the regional level, fiscal and administrative capacity may make
it easier to decentralize responsibilities only to some provinces or states. “In other cases, it may be feasible to
decentralize responsibilities directly from central government to the private sector rather than going through
local governments.” (Litvack et al, para. 79).
The equalization of financial relations creates an asymmetric preferential environment, which disagrees with the
European standards of regionalism, influenced by the fundamental principles of democracy. According to these
standards, the region’s financial support should be based on a strategic plan for the development of their main
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
35
priorities, differentiating their level of resources and economic growth. Development strategies should reflect
local conditions and development factors and must ensure the availability of resources, which contributes to an
increase in the maximum efficiency of the local government. Treating every region in the same way, under the
assumption of equal treatment, may this be an issue if the regions show different baseline on economic and
social conditions.
Other critical point to discuss here, is that different instruments may have different effects in different
circumstances, and different approaches may be needed to be undertaken for similar results. Litvack et al,
propose that in order to accommodate the need for such diverse approaches, “asymmetrical central policies -
treating different units differently - may be required to produce similar responses.” (Litvack et al, para. p.78).
The purpose of fiscal decentralisation is thus to divide functions and responsibilities between levels of
government and link them to the source of income not necessarily in the same way but in the way it satisfies the
best the interest of each self-government. Studying the basic principles of the country's budget system, its
structure and formation, identifying the functional and financial dependencies between the budget levels, should
be the top priority for optimal fiscal decentralisation. This issue is managed by a truthful spatial planning.
2. IMPORTANCE OF SPATIAL ECONOMY
One priority of decentralisation in modern democracies is a spatial economy. Spatial economic relations are
essentially influenced by historical, geographical, political and ethno-cultural factors (European Spatial
Development Perspective, 1999). While selecting mechanisms of decentralisation, the problems that best reflect
the idea of self-government rational forms and defining of quality, scales of territorial units, accumulation and
expenditure mechanisms for their budget revenues need to be taken into account. Number of studies review the
advantages of management decentralisation which should serve to implement an overall state strategy
(Williams, 1996, Van Assche, et al, 2013, Tabatadze, 2018). However, these advantages should be analysed in
terms of the necessary conditions for developing special planning of economy and some factors to restrict
unwilled actions (Tabatadze, 2018).
Optimal spatial planning requires studying and using effectively the comparative advantage of a region. It
should reflect the factors which determine its development, like the level of country’s socio-economic evolution
and trends, state governance type, objectives of running political parties, regional resources, climate,
entrepreneurial and living conditions, etc. The main role of the central government in spatial planning is
developing optimal legal norms and institutional mechanisms. A study realized by Tabatadze (2018) on the
benefits of optimal spatial planning, identified certain profits, like better identification of growth areas and
enhancement of quality and value, increased certainty and risk reduction, ensuring individual developments as
part of a broader picture, encouraging provision of collective goods, fostering inclusive growth, etc. (Tabatadze,
2018, p. 35).
At the European Union level, the spatial planning of the region’s economy is defined per cultural varieties,
concentrated in small areas. However, as the EU projected back in 1999, despite the diversity of cases, long-
term spatial development trends are influenced by three main factors: 1) progressive economic integration and
related increased cooperation between the member states; 2) growing importance of local and regional
communities and their role in spatial development; 3) anticipated expansion of the EU and the progress of closer
relations with neighbouring states. These factors can be influenced by unexpected global economic factors or
social and technological development.
Regional Disparities in GDP Per Capita (PPS) by Member State of the EU was underlined in many occasions
since 1990s. Up till today, the issue is one of the priorities of EU spatial planning. As demonstrated in the figure
1, 21 different regions within the EU show the regional GDP differences from 35% to 235% for labour
productivity (Eurostat, 2020).
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
36
Figure 1: EU regions with largest difference between GDP according to 2018 data
The spatial economic literature proposes a wide range of model specifications which can cope with the data
generation process (Elhorst, 2014). However, different spatial model specifications suggest different theoretical
and statistical justifications. That is why it is difficult to come up with a unique econometric model of assessing
the optimal formula for spatial economy. The EU guideline for assessing the quality of local fiscal decision
making independence uses the fiscal decentralisation standards of OECD – Organisation of Economic
Cooperation and Development. These standards advocate that the main condition of financial decentralisation is
giving the local governing units the power to establish local rules on taxation and to manage locally different
incomes in their budgets. The World Bank, on the other hand, proposes seven criteria on assessing the quality of
fiscal decentralisation, listed below:
• Percentage ratio of self-unit costs to the same parameter of the consolidated budget.
• Percentage ratio of self-government revenues to total budget revenues
• "Vertical imbalance" - the percentage of grants received from the state budget at the total cost of self-
governing units.
• The ratio of the costs of self-governing units to the volume of GDP
• Percentage ratio of self-government revenues to GDP
• Percentage ratio of tax revenues of self-governing units to total revenues.
• Percentage ratio of grants received from the central government to the total income of self-governing
units.
3. SOME EUROPEAN STANDARDS OF SPATIAL ECONOMY
According to the “European Charter of Local Self-government”, local self-government should be explicitly
recognised in domestic legislation. Their powers and responsibilities must be prescribed by the constitution or
by statute, without excluding the possibility that local authorities can define their responsibilities for specific
purposes. When given, powers attributed to local authorities must be full and exclusive. They may not be
undermined or limited by another, central or regional authorities except for exceptional circumstances.
The same charter advices local self-government to be entitled, within national economic policy, to adequate
financial resources of their own, which they may dispose freely within the framework of their powers. At least
part of the financial resources must derive from local taxes and charges of which, within the limits of statute,
they have the power to determine the rate. (Council of Europe, p.3). In terms of the budgetary relation with the
central government, local governments must be consulted, in an appropriate manner, on the way in which
redistributed resources are to be allocated to them.
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
37
There are number of international agreements in the European Union which aim to influence the community
policies on the territory of the region. The objective is to manage the impact of these policies on correct spatial
planning. Successive treaties have managed to ensure the implementation of territorially significant sectoral
policies and having a stronger influence on the elaboration and implementation of national and regional spatial
development policies and thus on spatial development in the EU region. We can list treaties such as Single
European Act, Maastricht and Amsterdam Treaties in this regards. The main topics of these treaties are:
• Trans-European Networks (TEN);
• Structural Funds;
• Community Competition Policy;
• Common Agricultural Policy (CAP);
• Environment Policy;
• Research, Technology and Development (RTD);
• Loan Activities of the European Investment Bank.
Even if most of these treaties do not have explicit spatial objectives, they still have significant impact on the
territory of the EU. “The spatial impact depends on the specific method of intervention - whether it is of a
financial (e.g. income support, regional and horizontal structural measures, sectoral measures such as research
programme financing), legislative (e.g. competition rules, market liberalisation, environmental legislation,
market-based instruments) or planning (e.g. trans-European transport and energy networks) nature (European
Commission, 1999, p.13).
European Union set three goals for successful economic development for 2020 horizon, which are to mutually
reinforce each other towards Europe's social market economy for the 21st century. The three goals are:
• Smart growth: developing an economy based on knowledge and innovation.
• Sustainable growth: promoting a more resource efficient, greener and more competitive
economy.
• Inclusive growth: fostering a high-employment economy delivering social and territorial
cohesion.
In order to achieve these objectives, European Commission proposed number of very clear interrelated targets.
To ensure that each member state tailors the Europe 2020 strategy to its particular situation, the Commission
proposes that EU goals are translated into national targets and trajectories (European Commission, 2010, p. 2).
Not exhaustive, these targets can be doubled with a wide range of actions at national, EU and international
levels in order to underpin their success.
• 75 % of the population aged 20-64 should be employed.
• 3% of the EU's GDP should be invested in R&D.
• The "20/20/20" climate/energy targets should be met.
• The share of early school leavers should be under 10% and at least 40% of the younger
generation should have a tertiary degree.
• Risk of poverty indicator should be decreased by 20 million people.
It is evident, that these targets apply to EU member states and are updated regularly. Thus, they cannot be
doubled to non EU, even associated states. However, this gives an idea of the main priorities that the EU
standards promote: investment in education, employment, social and ecological concerns.
4. FISCAL DECENTRALISATION IN THE REPUBLIC OF GEORGIA
The above stated observations can be demonstrated with the example of Georgia, where centralisation is still
relatively high and where the social system is fully integrated in the state budget. Georgia joined the “European
Charter of Local Self-Government” in 2004. By implementing the main principales of the charter, Georgia
engaged in international responsibility of reforming county’s local governance structure. Defining the main
directions of the regional policy within an appropriate legal framework is the prerogative of the President, the
Parliament and the minister of regional development. According to the charter, region’s financial support should
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
38
be based on a strategic plan for the development of their main priorities and should be differentiated by the level
of resources and economic growth of each region (municipality). Development strategies should reflect local
conditions and development factors and must ensure the availability of resources, which contributes to an
increase in the maximum efficiency of local governance.
Despite some limits which will be discussed later, Georgia undertook significant reforms to improve the quality
of its fiscal decentralisation. The major reform concerns the constitutional changes which determined the legal
framework of local self-governance, as an independent level of government. This change modified the financial
and other resource components of self-governments and their relation with other governmental agencies. Other
reforms include short and long term projects mutually realized with different international institutions. For
example, important changes have been made in terms of political system and democracy enhancement in
collaboration with USAID and the Urban Institute. The aim of these joint projects is to promote the
implementation of reforms at the legislative and local levels, to increase the capacity of the Georgian public
administration system, to establish a municipal management system in line with current realities and the
country's prospects, and to develop strategic mechanisms for municipal governments.
Georgia is using the fiscal decentralisation policy standards developed by the Organization for Economic Co-
operation and Development (OECD) to assess the degree of independence of local tax and budget decisions.
According to these standards the main condition for financial decentralisation in Georgia is that the self-
governing bodies have the right to impose local taxes and fees and control the local budget for any types of
revenue: local revenues, attracted funds and targeted, special transfers, subsidies, subsidies, targeted revenues
from donors, and the accumulation process.
2014 reform of the codex modified the transfer policy in Georgia. It introduced a new form – capital transfer –
which implies transferring funds from central government to local municipalities for target projects. The amount
of the transfer is linked with the increase of non-financial assets of the beneficiary and thus is indirectly
differentiated per the particularity of each municipality.
Despite promising engagement, the level of actual decentralisation still remains at its lowest. It is noteworthy
that the regionalisation process is limited with the article 2, section 3 of the constitution, which gives the
legislature the prerogative to regulate the territorial state arrangement of the county only after the full restoration
of the jurisdiction of Georgia over its entire territory. Other limits of the fiscal decentralisation can also be
identified, out of which the reform undertook in 2005-2006 had particularly negative impact. Analysis of post-
soviet states show that Georgia stands at the last position among 18 countries according to the number of powers
granted to self-governing units. This unfavourable situation was significantly conditioned by the reform of
2005-2006, which resulted in the expansion of municipalities. The list of competencies of the self-governments
has been greatly reduced, however, according to their capabilities, the number of powers granted to the current
municipal self-governing units is much higher than the previous local self-governments. The difficult situation
remains for the public services to develop and implement voluntary minimum national standards.
As mentioned above, there are number of ways for assessing the quality of fiscal decentralisation. These
standards are not mutually exclusive but propose complementary measures to evaluate the decentralisation level.
The method proposed by the World Bank can be applied to the case of Georgia as it covers a big part of the
picture. The table 2 proposes and assessment of fiscal decentralisation quality in Georgia according the World
Bank guidelines.
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
39
Table 2: World Bank criteria of assessing the quality of fiscal decentralisation
Fiscal decentralisation quality
criteria
The situation in Georgia as of 2019
Percentage ratio of self-unit costs
to the same parameter of the
consolidated budget
Currently, this indicator in Georgia is 17%, which shows the average
degree of fiscal decentralisation, it is noteworthy that this value is
characterized by a declining trend.
Percentage ratio of self-
government revenues to total
budget revenues
According to this indicator, the average degree of decentralisation in
Georgia is 10-17%. However, it should be noted that in 2019, this
parameter was significantly improved as a result of the reform on the
equalization transfer in the form of grants (27% of total revenues).
"Vertical imbalance" - the
percentage of grants received
from the state budget at the total
cost of self-governing units
The indicator was particularly high in 2018 – 60%. The reforms of
2019 will decrease it considerably.
The ratio of the costs of self-
governing units to the volume of
GDP
The result of 4-7% is supposed to be worsened in accordance to the
current trend decreasing costs.
Percentage ratio of self-
government revenues to GDP
The indicator shows 3,6% since few years and is marked by a stable
improvement trend.
Percentage ratio of tax revenues
of self-governing units to total
revenues
Local taxes do not have a large fiscal effect and municipal activities
still depend on state grants. The existence of various benefits in
municipalities also reduce the number of taxpayers and,
consequently, local budget revenues.
Percentage ratio of grants
received from the central
government to the total income of
self-governing units
This ratio has declined significantly since 2015, making it easier for
local governments to predict the amount of grants they receive, which
has a positive impact on their budget planning accuracy.
Strengthening local government and increasing the level of decentralisation is a challenge that will develop the
democratic process and the inclusive economic growth. It is the fundamental goal of Georgia's long-term social-
economic development strategy "Georgia 2020" (Tabatadze, 2019). There is a need to provide an in-depth
assessment of the quality of undertaken reforms in this direction, not only from a scientific point of view, but
also from policy assessment by the practitioners. New ways to improve the current situation need to be sought.
Analysis of resource allocation and other recent reforms and its impact on different municipalities of Georgia
need to be realized. In overall, various macroeconomic problems that prevent the effective implementation of
fiscal decentralisation need to be studied further. As for existing analysis, we conclude that the level of fiscal
decentralisation revenue-wise is at its lowest in Georgia, while tax-wise, it is characterized by the highest
estimates. VAT rules are important step towards fiscal decentralisation (Tabatadze, 2019). In this scenario, it is
important to implement additional reforms which will stimulate the local economic activities of regions and
support the cooperation between municipalities.
CONCLUSION
When applied at a national level, states need to reform their fiscal relations between central and local
governments by taking into account international, regional and national standards and particularities. As
mentioned above, there is not unique formula which can be applied to every case. However, post-soviet
economies which aim to reform their fiscal policy according to EU guidelines and standards, can follow similar
recommendations. Based on the research realised in this article, we can elaborate the following
recommendations:
• reform national innovation and research and development systems in order to foster excellence and
smart specialisation;
• reinforce cooperation between universities and between academic research and businesses;
• implement joint programmes and enhance cross-border cooperation with strategic partners;
• adjust national funding procedures according to international standard and national particularities, in
order to ensure the diffusion of technology across the territory;
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
40
• ensure a sufficient supply of science and engineering graduates across regions;
• focus education on entrepreneurship, creativity and innovation;
• prioritise knowledge expenditure. For example, using tax incentives and other financial instruments to
promote private R&D investments.
This list of recommendations is not exhaustive and needs to be treated with great precaution. National spatial
development authorities should work with close relation with European institutions in order to implement
suitable, tailored to them, co-operative measures and promote coherent practical application of local
decentralisation policies. In this regards we advise the governments of emerging European economies to broader
the knowledge by providing comparable data and indicators and analyses and research on cross-border,
transnational and Europe-wide tendencies influencing spatial development. Information sharing on the practice
of spatial planning should be done on constant bases and should track the major tasks to be carried in a long
term. These tasks should aim some issues such as: changing population distribution among regions, changing
the nature and location of different economic activities, changing traditional transport, telecommunication and
energy technologies and so on.
One of the most important challenges in the EU level as well as other emerging European countries still remains
high unemployment (Eurostat, 2020). Unemployment results in serious disruption in the life of individuals and
leads to a devaluation of qualifications and a loss of production and value added potential for the whole country.
Actions need to be taken for modernizing and strengthening education and training policies and social protection
systems by increasing labour participation and reducing structural unemployment, as well as raising corporate
social responsibility among the business communities of regions.
Following the EU triangle on Balanced and Sustainable Spatial Development while elaborating national and
local policies, we recommend governments to found their fiscal-decentralisation and spatial economy policies
on the three pillars: Society, Economy and Environment, dissociation of which may result in unintended
negative impacts and/or short term oriented investments (Tabatadze, 2018, p. 35). By doing so, spatial
development can contribute in a decisive way to the achievement of the goal of economic and social cohesion,
with the central aim of sustainable and balanced development.
REFERENCES
Council of Europe, (1985) “European Charter of Local Self-Government”, European Treaty Series - No. 122,
Strasbourg, 15th day of October 1985
Elhorst, J.P. (2014) Spatial Econometrics: From Cross-sectional Data to
Spatial Panels. Springer: Berlin New York Dordrecht London.
European commission (1999) “ESDP-European Spatial Development Perspective.Towards Balanced and
Sustainable Development of the Territory of the European Union”, Agreed at the Informal Council of Ministers
responsible for Spatial Planning in Potsdam, May 1999
European Commission, (2010) Europe 2020. A European strategy for smart, sustainable and inclusive growth.
Brussels, 3.3.2010, COM (2010) 2020
European Commission, (1998) European Spatial Development Perspective. Complete draft. Glasgow
Eurostat, (2020) “GDP per capita in EU regions”, Newsrelease, 38/2020 - 5 March 2020
Faguet, JP. (2011) “Decentralisation and governance, Economic Organisation and Public Policy Discussion
Papers”, EOPP 027. London School of Economics and Political Science, London, UK
Government of Georgia, (2017) The strategy of socio-economic development of Georgie “Georgia 2020“,
Tbilisi
http://pbo.parliament.ge/ge/budget/diagrams
https://matsne.gov.ge/ka/document/view/14638?publication=20
Litvack, J., Ahmad, J. and Bird, R. (1999) “Rethinking Decentralisation - A Discussion Paper”, World Bank
Manor, J. (1999) The Political Economy of Democratic Decentralisation, The World Bank, Directions in
Development
National Spatial Planning Agency, (1997) Spatial Patterns of Transportation,
Atlas on freight transport in Europe, The Hague
ISSN 2500-9656 Journal of International Economic Research Volume 6 (2020) No 1
41
Tabatadze, M. (2016) “Macroprudential regulation as a new methodology for macroeconomic policy makers”,
World science, № 4(8), Vol.3, p.24-28, April 2016 https://www.elibrary.ru/item.asp?id=25821857
Tabatadze, M. (2018) “Spatial Planning as a Good Governance Practice for Regional Policy in Transition
Countries”, Journal of International Economic Research (JIER), Volume 4, issue 1, p. 31-37, Publisher
https://irissymposium.wixsite.com/jier17 https://45eb95be-6154-4a8a-b1be-
7ac97217311c.filesusr.com/ugd/7ebfb0_c7583eda8b71447d85060bd50a9c4c4f.pdf
Tabatadze, M. (2019) “Optimal Structure of Pension System and Its Influence on the Social Policy of State
Budget”, Proceedings of the 13th International RAIS Conference on Social Sciences and Humanities, p. 18-26,
Publisher Scientia Moralitas Research Institute. https://www.ceeol.com/search/chapter-detail?id=785256
Tabatadze, M. (2019) “The economic strategy of decentralisation and the features of fiscal policy”, Ivane
Javakhishvili Tbilisi State University Press, p.366-370, URI: http://dspace.tsu.ge/xmlui/handle/123456789/546
https://dspace.tsu.ge/bitstream/handle/123456789/546/The%20economic%20strategy%20of%20decentralisation
%20and%20the%20features%20of%20fiscal%20policy.pdf?sequence=1&isAllowed=y
UNDP, (1997) The Global Research Framework Of The Decentralized Governance Programme, New York,
May 1997
UNDP, (1999) “Decentralisation: a sampling of definitions”, Working paper prepared in connection with the
Joint UNDP-Government of Germany evaluation of the UNDP role in decentralisation and local governance
Van Assche, K., Beunen, R., Duineveld, M., and de Jong, H. (2013) “Co-evolutions of planning and design:
Risks and benefits of design perspectives in planning systems”. Planning Theory, 12(2), 177-198
Williams, R. H. (1996) European Union spatial policy and planning, London Chapman ISBN 978-1-85396-
305-6
