Download - Multi level Governance of Regional Policy
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
What are the governance implications of effective regional policy and what
are the typical challenges?
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
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
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
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)
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All countries face the same types of governance challenges
7 19%
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)
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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
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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 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 sectorfinancing 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
What are the recommendations and good practices?
• 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
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15 important sub-national capacities that correspond to the main stages of the investment cycle
Planning & project selection
Financing and budgeting
Implementation
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
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Supporting countries in sharing good practices: OECD Toolkit
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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
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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
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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.
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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
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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.
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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.
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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
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Multilevel governance indicators: OECD average
Focus on the Slovak Republic: what are the key recommendations from
recent OECD work?
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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.
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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
NOR POL
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
Subn
atio
nal e
xpen
ditu
re a
s a sh
are
of to
tal p
ublic
ex
pend
iture
(%)
Subnational expenditure as a share of GDP (%)
Subnational expenditure as a % of GDP and public expenditure in 2014 in the OECD
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
Municipal fragmentation in Slovakia is one of the highest in the OECD after France and the Czech Republic
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 places2-Vertical coordination3-Horizontal coordination4-Ex-ante appraisals5-Stackeholders' engagement6-Private sectors' involvement 7-Management capacities of SNGs8-Performance monitoring and evaluation9-Clear intergovernmental fiscal framework10-Transparent financial management at all levels11-Strategic use of procurement12-Regulatory coordination across levels
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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
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Selected recent 2016 OECD publications on the topic
THANK YOU