LPSA Expert Working Group on Europe & Central Asia – Open Meeting – November 2025

The LPSA Regional Working Group for Europe & Central Asia (ECA) held its Open Meeting on November 12, 2025. The session, moderated by Mr. Gabor Peteri, LPSA ECA Co-Chair focused on examining how management and governance models, ownership structures of local utility and communal services are evolving across the region. Speakers explored the diverse intentions and outcomes of local corporatization globally, highlighting how institutional design can either enhance or undermine local autonomy and accountability.

Following the overview of an international comparative book an in-depth analysis presented the Austrian model of resilient public ownership, showcasing effective approaches to managing and financing local services of general interest. Further discussions addressed whether recent reforms in municipal solid waste management in Albania—including proposed legislation on local public enterprises—represent a strengthening or weakening of local governance. The meeting concluded with insights from Hungary on the changes of corporatization in delivering local public services, from municipal privatization through local to the present central corporatization and further on. 

Mr. Bart Voorn, Assistant Professor in the Department of Public Administration, Faculty of Management, Radboud University (Netherlands), opened his presentation by emphasizing that corporatization has become a core feature of modern local governance across Europe and globally. These corporations now deliver a wide range of services—from water and waste to housing, culture, and social programs—and in some countries administer up to 40% of local services.

Drawing on findings from the book Corporatization in Local Government, which covers 19 countries, Mr. Voorn highlighted that although corporatization is a universal phenomenon, its intensity, purpose, and trajectory vary widely, shaped by differences in administrative traditions, legal frameworks, degrees of federalism and political culture. In Northern and federal Central Europe, corporatization continues to support efficiency and professionalized service delivery; in Napoleonic legal-administrative systems, it is increasingly shaped by national development goals; while in parts of Eastern and Southeastern Europe have tightened state control and reduced local autonomy.

A central theme of his presentation was the delicate balance of autonomy and accountability. While corporatization aims to give service providers more flexibility and professionalism, autonomy is a “double-edged sword,” increasing efficiency but potentially blurring accountability. Municipal corporations, he noted, must navigate dual accountability pressures—meeting market-oriented performance expectations while simultaneously upholding public service mandates. This relationship is becoming increasingly complex as corporatization expands beyond utilities into areas such as social services, infrastructure and local development.

Mr. Voorn concluded that cross-country evidence shows that corporatization is not any more merely a managerial tool — it has become a structural feature of local governance. The central challenge is no longer whether to corporatize, but how to balance autonomy with accountability in order to sustain public trust. As municipalities confront complex issues such as climate transition, digitalization, housing shortages, and ageing infrastructure, municipally owned corporations remain vital instruments for renewing the public sphere.

Mr. Jeremias Jobst, Team Lead & Policy Advisor – Housing, Mobility, Economic Affairs, Sustainable Finance and Funding at the Association of Public Services and Enterprises- VÖWG, (Austria), shared insights on Austria’s approach to managing and financing local services of general interest. VÖWG represents over 120 municipal and public enterprises, advocating for the accessibility, affordability, and reliability of essential services such as energy, water, waste management, public transport, housing, public hospitals and educational institutions.

Mr. Jobst highlighted Austria’s federal structure, where power is shared between the national government and nine regional governments. Austria has 2,092 municipalities, most of them small, with fewer than 2,500 inhabitants with extensive powers, including property ownership, taxation, financial management, and business operation. These powers give them a high degree of autonomy which allows municipalities to operate local services either through in-house provision or fully owned municipal enterprises. Smaller municipalities often rely on inter-municipal cooperation to share resources and maintain service quality. While outsourcing and public-private partnerships exist, the Austrian tradition strongly favors public ownership. This approach reflects a long-standing belief that essential services should remain in public hands, retain autonomy, and serve the public interest. Municipally owned enterprises under the Stadtwerke model are typically limited liability companies or joint-stock companies held in 100% municipal ownership.

A key example of Austrian municipal service delivery is the Wiener Stadtwerke Group, integrated municipal service provider for over 2 million inhabitants in Vienna. This group integrates energy, public transport, digital, and social infrastructure under a municipal framework, employing around 18,000 people. It operates on a cross-subsidization model: profitable services, such as energy provision or parking management, support socially necessary but structurally loss-making services like public transport or swimming facilities. Mr. Jobst emphasized three main advantages of municipal enterprises in Austria: (1) prioritization of public value over short-term profit, (2) stable long-term infrastructure planning, and (3) the ability to balance profitable and deficit-generating services.

Mr. Jobst also addressed current challenges facing Austrian municipalities. The liberalization of the EU internal market introduces competition in profitable segments of public services, while municipalities remain responsible for providing unprofitable but essential services. Fiscal pressures—exacerbated by the COVID-19 pandemic, high interest rates, and climate-related investments—limit the flexibility of smaller municipalities.

To address these challenges, VÖWG recommends safeguarding local government procurement rights under EU law to preserve municipal steering capacity; providing legal and financial frameworks to strengthen inter-municipal cooperation; and maintaining and further developing cross-subsidization mechanisms to ensure long-term financing of socially necessary but deficit-generating services.

Ms. Valbona Karakaçi, Western Balkan Regional Governance Advisor at HELVETAS Swiss Intercooperation (Albania), provided an overview of the evolution and current state of municipal enterprises in the country. She emphasized that the debate on their future has intensified due to Albania’s accelerated EU integration process. With an estimated 70% of the EU acquis expected to be implemented at the local level, policymakers are questioning whether existing municipal enterprises meet the standards required for accession. This has opened a professional dialogue on the need for a dedicated law on local public enterprises, beyond the current regulatory framework for public services. During the transition, local governments faced growing responsibilities while service quality declined, largely due to chronic underfunding. One response was outsourcing services to the private sector, particularly in waste management.

Ms. Karakaçi noted that the 2015 territorial reform, which reduced the number of municipalities from over 360 to 61, marked a turning point. Today, around 54 local public enterprises operate under commercial or PPP frameworks, managing services such as waste collection, parking, sports facilities, and local markets. Despite these developments, accountability and efficiency remain major challenges. A new law on local public enterprises is now under discussion, aiming to address these weaknesses and align Albania’s local governance with EU standards.

Mr. Arben Kopliku, SWM Component manager at HELVETAS Swiss Intercooperation (Albania), highlighted the local challenges and issues such as weak governance, limited professional capacity, contract rigidity. Past cases of corruption have constrained efficiency and innovation, particularly in waste management. To address these challenges, the government proposed new law on local public enterprises to standardize governance, reporting, and accountability. It aims to align local enterprises with EU directives and to provide access to EU funds. However, removing municipal powers through recentralization—illustrated by the creation of a National Agency for the Economy of Waste and increased central control over water utilities—raises concerns about the future balance between local autonomy and central oversight.

Ms. Karakaci ended the discussion by exposing two current dilemmas in Albania: the relationship between local government autonomy and the design of municipal enterprises, and whether specific laws are needed to regulate public enterprises or commercial law suffices.

She explained that many municipal companies have financially underperformed, yet evidence shows that national companies are not necessarily more efficient. Limited municipal autonomy, rigid rules—such as mandatory waste disposal routes—and weak fiscal decentralization have constrained local innovation. At the same time, the national government faces pressures in the EU integration process, which drives reforms to improve accountability and governance.

Mr. Tamás M. Horváth, Professor of Financial Law and Public Management at the University of Debrecen (Hungary), contextualized the evolution of local corporatization in Hungary, emphasizing the significance of national political and economic context of highly centralized government.

He explained that the Hungarian local corporatization process unfolded in several distinct stages. Beginning from the late 1980s to the early 2010s state-owned enterprises were corporatized under private law. This transition from state socialism to a market-oriented, liberal system was characterized by privatization efforts in the 1990s.

Following 2010, Mr. Horváth emphasized the wave of re-municipalization and creation of large municipal holding companies, particularly in sectors such as water supply, sewage, and solid waste management. These holding companies were partly modeled after Western practices and responded to conflicts between local governments and private service providers.

From 2013 onwards, Hungary embarked on a deliberate process of centralization. The government introduced special sector taxes on utilities to limit municipal profitability and imposed central control over consumer fees, also moving beyond conventional regulatory mechanisms by forced amalgamation and central buyouts of these service organizations. This control was authoritative rather than regulatory, significantly reducing municipal discretion e.g. by introducing central control of service charges.

Nationalization of key services followed: in solid waste management, a central agency assumed service provision in 2016, while municipal companies became subcontractors, effectively transferring profits to central authorities. In water services, the National Water Works, established in 2021, partially took over municipal assets, company maintenance and operations.

Subsequent steps, involving a controlled return to private ownership closely aligned with central government objectives, created a form of politically influenced or “crony” privatization. The result was a cycle of municipalization, centralization, and centrally guided privatization, where political and fiscal objectives outweighed efficiency or service quality considerations. It shows that rather than the invisible hand of the market, it is the will of the state that becomes more detectable.

When questioned about the limitations of this model, Mr. Horváth stated that the primary motivation behind centralization was political rather than improvement of service efficiency. Empirical evidence shows that centralized models often produce financial losses and are less efficient than the pre-2013 decentralized municipal system. Local governments are constrained in their ability to innovate or experiment with service delivery, limiting responsiveness to local needs.

Overall, Mr. Horváth emphasized that the Hungarian case illustrates how centralization can serve political and fiscal goals but at the expense of municipal autonomy and operational efficiency. Hungary’s experience highlights the trade-offs inherent in centralized reforms and it serves as a cautionary example for countries considering similar approaches.

During the Q&A session, several critical issues were raised by participants to Mr. Jobst regarding the Austrian approach to managing and financing local services. The questions touched on the regulatory framework and affordability mechanisms that ensure equitable access to essential services, as well as the role of cross-subsidisation and the potential effects of privatisation on service quality and pricing. Participants also sought clarification on long-term planning practices and how democratic accountability is safeguarded in corporatised service models. Further inquiries focused on the nature of municipal oversight and performance monitoring, the investment responsibilities of municipal enterprises, and the financial structure and operational performance of the Vienna water utility. Finally, several questions addressed the system of fiscal transfers and financial relations between municipalities and higher levels of government, and how these influence the governance and sustainability of local public services.

A video of the meeting is available on YouTube. The links below provide access to the video recordings and presentation slides for each agenda item.

We need your help to make this meeting a success: If you have any updates about decentralization or local governance reforms in your country; updates about new research; or information about local government projects that you would like mentioned during the open meeting, please email the Working Group co-chairs at eca@decentralization.net so that a brief announcement can be made at the beginning of the meeting.

Reminder: You can join any LPSA Expert Working Group free of cost and receive reminders and updates by opting-in to one or more working groups as part of your LPSA Membership registration.