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

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. What are the governance implications
of effective regional policy and what
are the typical challenges?

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.  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
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. 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. 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
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
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
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. What are the recommendations and
good practices?

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
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
Supporting countries in sharing good practices:
OECD Toolkit

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
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
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
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
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
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
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
Multilevel governance indicators: OECD
average

23. Focus on the Slovak Republic: what
are the key recommendations from
recent OECD work?

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
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
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
Municipal fragmentation in Slovakia is one of
the highest in the OECD after France and the
Czech Republic

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
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
Selected recent 2016 OECD publications on
the topic

31. THANK YOU
Dorothee.allain-dupre@oecd.org