Interview for the FES/APE Foreign Policy Bulletin

Mr Palihovici, what do you consider to be the main structural weakness of Moldova’s current local public administration system, and why is the reform model you advocate better suited than the available alternatives to address this challenge, especially in light of the country’s European integration ambitions and the need to align with European standards of local governance?

The main structural problem of the current local public administration system in the Republic of Moldova lies in the demographic, economic, and institutional erosion of the local governance base. Depopulation has a direct structural impact on local public administration. As communities lose population, the local tax base shrinks, economic potential declines, jobs disappear, and local administrations face increasing difficulties in attracting and retaining qualified personnel.

At the same time, the lack of employment opportunities accelerates migration, while migration further reduces the economic potential of local communities. As a result, a vicious cycle of local fragility emerges: depopulation reduces the workforce and the economic base; a weak economic base limits local revenues; reduced revenues undermine the administration’s ability to provide services and stimulate development; and insufficient services and limited opportunities, in turn, fuel further depopulation.

In this context, the IFAR (Integrated Functional Administrative Reform) model envisages: (1) the creation of a local governance system capable of supporting public service delivery and local development through a functional analysis of local public administration, the establishment of criteria that clarify the concept of “administrative viability,” voluntary and normative amalgamation based on this principle of administrative viability, inter-municipal cooperation, decentralization, and effective local self-government; (2) ensuring a balance between administrative efficiency and democratic participation while preserving the necessary and natural link between citizens and local administration; and (3) maintaining the social cohesion required for the reform to be accepted, to become irreversible, and at the same time to remain compatible with the country’s European path.

Local public administration reform inevitably involves a difficult balance between administrative efficiency and local democratic representation. Where do you believe this balance should be struck?

In the process of administrative-territorial reorganization (ATR), as part of the broader local public administration reform (LPAR), the choice of a particular scenario is never neutral or purely technical. Choosing between larger or smaller administrative-territorial units (ATUs) requires making trade-offs among the fundamental objectives of the reform: administrative efficiency, institutional capacity, local democracy, social cohesion, and political legitimacy.

In this context, international experience shows that larger administrative-territorial units tend to enhance administrative efficiency and the capacity to deliver public services. At the same time, however, they may generate significant risks for the proximity of governance and the level of democratic participation at the local level. Smaller communities provide a more favorable environment for direct citizen involvement, the preservation of community identity, and the strengthening of trust in local institutions.

The right approach is not “efficiency versus participatory democracy.” Rather, it is about ensuring the necessary balance between the two by choosing an institutional configuration capable of simultaneously providing administrative capacity, local self-government, and effective democratic representation.

What conditions are necessary for voluntary amalgamation to function effectively in the Republic of Moldova? Are financial incentives alone sufficient, or does there come a point when more assertive state intervention becomes necessary?

The IFAR model approaches voluntary amalgamation differently from existing reform models and concepts. Under the IFAR concept, voluntary amalgamation should not be understood as a one-off measure limited to the initial stage of local public administration reform and to the period ending in 2026.

Instead, it should be conceived as a permanent, continuous, and adaptive instrument of administrative consolidation that remains available beyond the 2027 local elections. This approach is important because the demographic, economic, and institutional realities of the Republic of Moldova are not static: some localities will continue to lose population, others will experience changes in their economic potential, and the administrative capacity of local public authorities will evolve differently over time.

Therefore, within the IFAR framework, voluntary amalgamation is not merely a method for the immediate reduction of administrative-territorial fragmentation. It is also a permanent mechanism for adjusting the administrative-territorial structure to the functional realities generated by ongoing social and economic developments.

It enables local communities to consolidate when they determine that they can no longer effectively exercise their assigned competences, attract and retain qualified personnel, generate sufficient revenues, or deliver public services efficiently at their existing administrative scale. In this sense, voluntary amalgamation should function as an “institutional safety valve,” allowing the administrative system to adapt progressively without requiring a new comprehensive reform imposed from the center each time circumstances change.

How realistic is genuine financial autonomy for local authorities under the current conditions in the Republic of Moldova, and what specific changes do you consider to be priori ties in the fiscal system and the redistribution of resources?

Under current conditions, genuine financial autonomy for local public administrations is limited and, to a large extent, formal. Today, 60.5% of the revenues of first-tier local public authorities and 73.4% of the revenues of district level authorities originate from transfers from the state budget. Effective financial autonomy is constrained by administrative-territorial fragmentation, depopulation, a weak local tax base, and a high degree of dependence on budgetary transfers.

Local public administration reform is inconceivable without a reform of local public finances. Under the IFAR concept, the priority measures should necessarily include: (1) the application of the principle that resources must be adequate and proportionate to the competences assigned to local authorities; (2) strengthening own-sour ce and shared revenues by revising the allocation mechanism for personal income tax based on the taxpayer’s place of residence, introducing a local share of corporate income tax revenues, increasing the share of revenues from natural resource taxes, and directing certain administrative fines to the local budgets of the administrative-territorial units where the violations were identified; and (3) reforming the current model of intergovernmental fiscal transfers.

The existing transfer system should be adjusted so that it does not treat localities facing fundamentally different structural conditions in the same way. The transfer formula should take into account factors such as population size, territory, the degree of depopulation, demographic vulnerability, fiscal capacity, the actual cost of public service provision, distance from administrative centres, the state of infrastructure, the number of constituent localities within an administrative territorial unit, and other relevant indicators.

Almost all participants in the debate organized by the Friedrich Ebert Foundation in partners hip with the School of Public Administration of Moldova State University emphasized the need for broad political consensus to ensure that the reform becomes irreversible. What compromises do you consider possible, and where do you see the red lines of your own reform concept?

I believe that broad political consensus is essential for the success and irreversibility of local public administration reform. A reform of this magnitude cannot produce lasting results if it is perceived as belonging exclusively to one political majority or if it risks being reversed after a single electoral cycle.

From this perspective, there is room for compromise regarding the specific institutional design of the reform: the number of administrative-territorial units, the pace of implementation, mechanisms for inter-municipal cooperation, the stages of decentralization, or the ways in which the administrative and financial capacities of local authorities are strengthened. International experience demonstrates that there is no single optimal model, and different options must be assessed in relation to the objectives pursued and the national context.

At the same time, there are several principles from which the IFAR concept believes no departure is possible. The reform must simultaneously ensure administrative capacity and efficiency, effective local self-government, democratic representation, and social cohesion. In this regard, a reform that sacrifices local democratic participation in favour of administrative efficiency—or, conversely, administrative efficiency in favour of preserving non-viable structures—would fail to achieve its intended objectives.

Therefore, IFAR does not view reform as a choice between efficiency and local democracy, but rather as an exercise in balancing these objectives. In a context where Moldovan society is subject to multiple pressures—migration, polarization, and economic and informational vulnerabilities— any structural intervention must be carefully calibrated in order to avoid backlash and strengthen public trust in institutions.

From this perspective, the fundamental question of the reform remains the same: what type of local public administration can simultaneously ensure administrative capacity and efficiency, local self-government, effective democratic representation, and social cohesion?

At the roundtable held on 26 May, many participants expressed the view that the current district (raion) level has become outdated and no longer responds effectively to today’s administrative needs. How do you see the future of districts within the administrative architecture of the Republic of Moldova?

Reducing the number of districts from 32 to 10 counties is a logical and foreseeable step within the IFAR framework. It is not about eliminating this level of public administration, but rather about reforming it. This reform of the district level is based, on the one hand, on the current limitations and dysfunctions of this tier of administration and, on the other hand, on the need to transform and preserve it as an intermediate level of governance organized in the form of counties.

Several arguments support this approach. (1) From the perspective of public service delivery, counties—with their larger territorial and demographic scale—can provide the critical mass necessary for the efficient management of complex public services of supra-local importance. (2) From the perspective of intergovernmental relations, counties can complement and support first-tier local authorities through their role in strategic territorial development planning, the provision of technical expertise needed to attract investment, and the capacity to design and implement funding projects that require a certain scale and an adequate level of expertise. (3) From the perspective of deconcentrated public services, their reorganization at the county level would allow for the standardization of territorial coverage, clearer allocation of responsibilities, and stronger coordination mechanisms between central and territorial authorities, thereby improving the effectiveness of public policy implementation.

Thank you!