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Multi level Governance of Regional Policy

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Presentation on "Multi level Governance of Regional Policy" made at the Seminar on "Innovations and challenges in the management of a regional policy, held in Bratislava, Slovak Republic, 22 February 2017? Presentation by Dorothée Allain-Dupré, Regional Development Policy Division, OECD.

More information: www.oecd.org/gov/regional-policy/innovations-and-challenges.htm

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Multi level Governance of Regional Policy

  1. 1. MULTI-LEVEL GOVERNANCE OF REGIONAL POLICY Public investment and infrastructure development Seminar: "Inovácie a výzvy v manažmente regionálneho rozvoja“ Bratislava, Slovak Republic Dorothée Allain-Dupré Senior Policy Analyst Public Governance and Territorial Development Directorate OECD
  2. 2. What are the governance implications of effective regional policy and what are the typical challenges?
  3. 3. Infrastructure provision Policy responses Human capital formation Business environment Innovation Regional growth and convergence at regional scale When undertaken in isolation, infrastructure investment can yield poor results, and it seems to be subject to diminishing returns Key OECD policy messages on regional policy
  4. 4.  Public investment needs to differ across regions depending on their density, economic structure and distance from the productivity frontier ⇒ one size fits all or pure sectoral approaches to public investment are sub- optimal  Heterogeneity calls for differentiated investment strategies to tailor investment to local needs and the competitive advantages of regions ⇒ place-based approaches very demanding from a governance perspective  To generate such strategies, mechanisms and incentives are needed to prompt agents to reveal knowledge. This is likely to be local knowledge.  A match between top-down and bottom-up information and initiative is critical.  Public investment: a shared responsibility across levels of government – almost 60% of public investment done at the subnational level ⇒ Important governance implications Public investment and regional policy
  5. 5. 5 Source: OECD national accounts Share of public investment at subnational level (2014) 60% 59% 56% 55% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Subnational government Central government and social security Public investment is a shared responsibility across levels of government
  6. 6. Coordination challenges  Across sectors (sectoral priorities dominate over integrated approaches)  Across national & subnational governments (information gaps, lack of data on local needs) [vertical coordination]  Across jurisdictions [horizontal coordination] Capacity challenges  Often it is the main bottleneck for effective regional development  Most often concentrated in the planning/design phase: how to prioritise long-term investment needs? How to design a balanced investment mix that addresses local needs?  …but also financial capacity in a context of tight fiscal constraints National framework conditions  Administrative burden and heavy procurement rules  Fiscal relations across levels of government (lack of subnational fiscal autonomy)  Unclear assignment of responsibilities (infrastructure) 6 All countries face the same types of governance challenges
  7. 7. 719% 21% 25% 24% 25% 25% 24% 26% 32% 35% 34% 36% 33% 33% 37% 42% 50% 53% 34% 35% 40% 42% 40% 42% 45% 44% 40% 40% 42% 41% 45% 46% 41% 42% 36% 37% No relevant up-to-date data available at local level Lack of adequate own expertise to design projects Lack of long-term/strategic planning capacity Ex-ante analyses/appraisals not consistently used in decision… Insufficient involvement of civil society in the choice of projects Monitoring not used as a tool for planning and decision making Ex-ante analyses not adequately take into account the full life-… Lack of (ex-post) impact evaluations Multiple contact points (absence of a one-stop shop) Lack of joint investment strategy with neighbouring SNGs Lack of incentive to cooperate across jurisdictions Lack of political will to work across different levels of government Lack of coordination across sectors Co-financing requirements for central government/EU are too high Lack of long-term strategy at central level Local needs are different from those given priority at central level Lenghty procurement procedures Excessive administrative procedures and red tape Major challenge Somewhat of a challenge Typical problems reported by subnational governments in 255 EU subnational governments (for public investment)
  8. 8. 8 Red tape and regulatory burden  A large majority of respondents (90%) consider excessive administrative procedures, lengthy procurement and red tape as a challenge Designing and planning infrastructure in a long-term perspective  Lack of capacity to design long-term public investment strategies (65% SNGs)  Lack of sufficient in-house expertise to design infrastructure projects (56%)  Lack of coordination across sectors Coordination across levels of government & jurisdictions  Mismatch between local/regional needs and those given priority at central level (84%).  Absence of a joint investment strategy with neighbouring cities/regions (76%)  Lack of incentives (such as financial incentives) to cooperate across jurisdictions Performance monitoring  Though a monitoring system might exist, it is frequently pursued as an administrative exercise and not used as a tool for planning and decision-making (66% of SNGs)  Lack of (ex-post) impact evaluations (71%) Typical problems reported by subnational governments in 255 EU subnational governments
  9. 9. 9 Large variation in the quality of subnational governance for public investment  Large variation across SNGs at the EU scale, for the quality of sub-national governance of public investment. For the entire EU, 16% of SNGs have a very high score of governance, while 16% get a low score and a 38% a medium score (below average)  Variations are also very important across SNGs within countries. For example, in Germany 27% of SNGs have a very high score, 40% a high score, 24% a medium score and 8% a low score. ⇒ Need to target the efforts to the different types of challenges met by cities and regions
  10. 10. 10 Source: OECD –CoR Survey (2015) 26% 18% 12% 7% 39% 29% 22% 21% 18% 40% 17% 23% 18% 13% 50% 49% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Own revenues Grants Borrowing Private sector financing of infrastructure Increase Stable Decrease No opinion How have sources of infrastructure investment funding changed in your city/region since 2010? Typical problems: limited involvement of private actors in financing infrastructure
  11. 11. What are the recommendations and good practices?
  12. 12. • Invest using an integrated strategy tailored to different places • Adopt effective co-ordination instruments across levels of government • Co-ordinate across SNGs to invest at the relevant scale Pillar 1 Co-ordinate across governments and policy areas • Assess upfront long term impacts and risks • Encourage stakeholder involvement throughout investment cycle • Mobilise private actors and financing institutions • Reinforce the expertise of public officials & institutions • Focus on results and promote learning Pillar 2 Strengthen capacities and promote policy learning across levels of government • Develop a fiscal framework adapted to the objectives pursued • Require sound, transparent financial management • Promote transparency and strategic use of procurement • Strive for quality and consistency in regulatory systems across levels of government Pillar 3 Ensure sound framework conditions at all levels of government OECD Recommendation on Effective Public Investment across levels of government
  13. 13. 13 15 important sub-national capacities that correspond to the main stages of the investment cycle Planning & project selection Financing and budgeting Implementati on Evaluation Effective strategic planning Cross-sectoral coordination Cross-jurisdictional coordination Stakeholder involvement Rigorous ex-ante appraisal Linkage to multi-year budgeting Traditional & innovative financing Private sector financing Competitive procurement Sound monitoring systems Ex-post assessment Use of performance information Risk management Coherent regulation across levels of government Professional and technical skills Throughout Capacity needs and bottlenecks differ from region to region
  14. 14. 14 Supporting countries in sharing good practices: OECD Toolkit
  15. 15. 15 Supporting vertical coordination across national and subnational governments GOOD PRACTICES IN OECD COUNTRIES AND REGIONS Canada’s regional development model of Regional Development Agencies has been in place for almost 30 years. RDAs are similar to small federal departments with their own enabling legislation and mandate. The agencies build a bridge between federal/national priorities and regional and local needs. Finland: as part of the new regional development planning system, growth agreements between state and major cities have been defined, on competitiveness and resilience. France, use of contractual arrangements across levels of government UK: urban policy has been centred on a growing number of City Deals that allow a degree of “tailored” devolution of responsibility to English cities. They are agreements between government and a city that give the city control to take charge and responsibility of decisions that affect their area Why?  To bridge a series of fiscal, information, or policy gaps that may occur across levels of government  To identify joint investment priorities and minimise the potential for investments to work at cross-purposes  To draw coherent investment strategies at the national level
  16. 16. 16 Supporting horizontal coordination across jurisdictions Why?  To manage positive and negative spillovers among neighbouring regions  To reduce duplication of unsustainable investments due to inter-jurisdictional competition  To promote economies of scale  To pool resources and reduce investment costs GOOD PRACTICES IN OECD COUNTRIES AND REGIONS • National level: Incentives provided by the national government : ex: Switzerland: one third of sub- national funding from the central government is reserved for inter-cantonal investment; • Regional/local level: British Columbia (Canada) • In France, SCOT set the main orientations of the organization of a group of adjacent communes (for a 10-year period. City plans, local urban transport plans, and housing plans must be compatible with SCOT in order to be valid and enforced. The SCOT consists of a diagnostic dimension and orientation report as well as a project of development and sustainable development • Metropolitan level: London, Germany (Frankfurt), France 2014 law
  17. 17. 17 Assess upfront the long-term impacts and risks of public investment Why?  To identify social, environmental and economic impacts and ensure value for money  To explore alternatives to investment and assess long- term operational and maintenance costs in infrastructure investment  To assess long-term investment risks GOOD PRACTICES IN OECD COUNTRIES AND REGIONS • Australia : The Sustainable Planning Act was adopted in 2014. Local governments are required to develop a Local Government Infrastructure Plan from 2018 onwards. The purposes of LGIPs are to coordinate infrastructure and land use policies, increase transparency, and estimate the long-term cost of infrastructure projects, to assist in long- term planning. • Netherlands : The Ministry of Infrastructure and the Environment has several criteria for selecting infrastructure projects to be co-funded by national government. One of them is the National Market and Capacity Analysis (NMCA). The NMCA investigates infrastructural bottlenecks.
  18. 18. 18 Why?  To address the increasingly complex tasks linked to public investment  To develop institutional capacity and professional skills for better investment decisions, in particular in small sub-national governments  To enhance sub-national government access to skills and external support GOOD PRACTICES IN OECD COUNTRIES AND REGIONS • Chile : A specific body was created in Chile in 2007 to strengthen sub-national capacities (Academia de Capacitación Municipal y Regional). It aims to be a technical reference for sub-national staff and strengthen human resources (from both municipalities and regions) for a broad spectrum of knowledge of use to various territorial situations. It relies in particular upon strong ties with the academia. It provides free training for public servants, and relies on traditional classes as well as online training • Latvia also introduced specific funds to attract specialists for planning regions, cities, towns, and counties, in order to increase planning capacities at the regional and local levels. By the end of 2014, more than 200 specialists had been recruited Reinforce the expertise of public officials involved in public investment
  19. 19. 19 Focus on results and promote learning from experience across levels of government . GOOD PRACTICES IN OECD COUNTRIES AND REGIONS In Portugal there is an increased emphasis on strategic monitoring. The Composite Index of Regional Development is published by Statistics Portugal on an annual basis since May 2009, with the aim of providing a tool for monitoring regional disparities. It is divided into three components which reflect broader sustainable development concerns: competitiveness, cohesion and environmental quality. In 2015, a new version of the index was released with a regional breakdown according to the new NUTS level 3 which are in compliance with the inter- municipal entities as the relevant groups of municipalities for the 2014-2020 programming period. The Italian OpenCoesione web portal provides analysis and monitoring on the use of regional policy resources, offering information, accessible to anyone, on what is funded, who is involved and where. The web portal contains information about any single project carried out to implement regional development policy, and more specifically: funds used, locations and categories, subjects involved and implementation timeframes. Publication of data allows Italian citizens to evaluate if and how implementation projects meet their needs and whether financial resources are allocated effectively. Why?  To focus on investment outcome goals and pursue them throughout the investment cycle at all levels of government  To promote learning from experience and previous mistakes  To monitor the implementation progress of projects  To allow for some flexibility and reconsideration of initial priorities, to adjust to evolving priorities and context throughout the investment implementation.
  20. 20. 20 Limit regulatory burden in the field of regional policy/infrastructure investment RATIONALE: • Regulatory quality and coherence are important for sub-national public investment. In many OECD countries, SNGs face inflationary regulation, overlapping/contradictory regulation across levels of gov’t • Example: more than 55% of regulation applying to SNGs in France modified in <10 years GOOD PRACTICES IN OECD COUNTRIES AND REGIONS • Australia, Council of Australian Governments: common framework for benchmarking, measuring, and reporting regulatory burden across levels of government, and to set quantifiable targets for reducing red tape • Canada: A Federal, Provincial and Territorial Working Group on Regulatory Reform has been created as a forum to help build a shared approach to regulatory reform. Its work includes developing common regulatory principles, developing a consistent approach to regulatory impact analysis and sharing best practices.
  21. 21. 21 More than 60 indicators to assess strengths and weaknesses of public investment capacity in a multi- level perspective Supporting countries in sharing good practices: OECD Toolkit
  22. 22. 22 Multilevel governance indicators: OECD average
  23. 23. Focus on the Slovak Republic: what are the key recommendations from recent OECD work?
  24. 24. 24 Policies to reduce disparities with the east Policy priorities are to promote labour mobility, better match skills with labour market needs, enhance educational outcomes/skills, and improve infrastructure ⇒ These factors need to be somehow connected and well integrated rather than operating in silos.  For Eastern Slovakia, the density and quality of much of the region’s hard infrastructure lags behind other regions, creating bottlenecks to job creation and raising costs for firms that may wish to locate there.  Needs exist in terms of east-west connections to link Východné Slovensko and Bratislava, and north-south connections to link the region with Poland and Hungary.  Within VýchodnéSlovensko, Internet penetration is low in rural, mountainous and economically weak areas.  Eastern Slovakia has a relatively underdeveloped regional innovation system.
  25. 25. 25 Slovak Republic: a highly centralised country in OECD perspectives (measured by SNGs expenditure) AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ISR ITA JPN KOR LUX MEX NDL NZL NORPOL PRT SVK SVN ESP SWE CHE TUR GBR USA OECD34 OECD25 0 10 20 30 40 50 60 70 80 0 4 8 12 16 20 24 28 32 36 Subnationalexpenditureasashareoftotalpublic expenditure(%) Subnational expenditure as a share of GDP (%) Subnational expenditure as a % of GDP and public expenditure in 2014 in the OECD
  26. 26. 26 2015 Implementation case study in Slovakia A focus on the eastern region Slovakia: strongly affected by the fall of sub-national investment (compared to other expenditure items) Source: OECD National Accounts +0,2% -5,8% -19,5% +33,3% +3.6% 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP Total expenditure Total public investment Subnational direct investment Social expenditure Staff expenditure Sub-national public investment Social expenditure
  27. 27. 27 Municipal fragmentation in Slovakia is one of the highest in the OECD after France and the Czech Republic
  28. 28. 28 Indicators on MLG of public investment applied to Slovakia, with a focus on the eastern region OECD (2015) ⇒ Majority of challenges linked to place-based approaches, coordination across sectors, levels of government, jurisdictions; engagement of private actors 1-Investment strategy tailored to places 2-Vertical coordination 3-Horizontal coordination 4-Ex-ante appraisals 5-Stackeholders' engagement 6-Private sectors' involvement 7-Management capacities of SNGs 8-Performance monitoring and evaluation 9-Clear intergovernmental fiscal framework 10-Transparent financial management at all levels 11-Strategic use of procurement 12-Regulatory coordination across levels
  29. 29. 29 Main governance challenges to address: selected examples of recommendations (i) Top-down orientation of public investment ⇒ need to integrate regional differences and development priorities into national investment planning/subnational inputs (ii) High local fragmentation ⇒ need to consider functional areas and introduce robust monitoring arrangements (iii) Limited private sector engagement ⇒ need to strengthen subnational public procurement and reintroduce a national PPP unit (iv) Weak sub-national administrative capacities ⇒ need to develop comprehensive training, differentiated according to regional needs (v) Complex regulatory framework and procurement conditions ⇒ need to strengthen subnational public procurement and encourage greater uptake of e-government tools to enhance and standardize sub-national capacity
  30. 30. 30 Selected recent 2016 OECD publications on the topic
  31. 31. THANK YOU Dorothee.allain-dupre@oecd.org

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