implementing regional-policies-effectively
TRANSCRIPT
IMPLEMENTING REGIONAL
POLICIES EFFECTIVELY
MULTI-LEVEL GOVERNANCE ISSUES
Joaquim Oliveira Martins, Head, Regional development Policy Division Meeting of the High-Level Group of Macro-regional Strategies 3 June 2015,
Central Government Ministerial Departments
Sub-national Governments
Inter Governmental Council (ex. COAG, Australia)
Regional Agencies (ex. Canada, Brazil)
Contracts (ex. France)
Special Commission (Delta, Netherlands)
Whatever the type of system – federal, regionalised, unitary – there is
a strong need of coordination across levels of government
Wide range of governance mechanisms for
multi-level coordination
Conditionalities ( ex. EU programming)
3
The blockages of coordination/cooperation and
their governance solutions
A Tool of Diagnosis: Governance gaps
Administrative gap
“Mismatch” between functional areas and administrative boundaries => Need for instruments for reaching “effective size”
Information gap
Asymmetries of information (quantity, quality, type) between different stakeholders, either voluntary or not => Need for instruments for revealing & sharing information
Policy gap
Sectoral fragmentation across ministries and agencies => Need for mechanisms to create multidimensional/systemic approaches, and to exercise political leadership and commitment.
Capacity gap Insufficient scientific, technical, infrastructural capacity of local actors => Need for instruments to build capacity
Funding gap
Unstable or insufficient revenues undermining effective implementation of responsibilities at subnational level or for crossing policies => Need for shared financing mechanisms
Objective gap Different rationalities creating obstacles for adopting convergent targets => Need for instruments to align objectives
Accountability gap
Difficulty to ensure the transparency and integrity of practices across the different constituencies => Need for institutional quality instruments
Governance solutions to bridge the gaps Contracts
France, Italy, European Union, Canada
Performance Measurement & Transparent evaluation
Norway (KOSTRA) , United Kingdom, United States
Grants, co-funding agreements All countries: general purpose grants v. earmarked (ex.Norway), equalisation mechanisms
Strategic planning requirements, Multi-annual budget
Along with investment contracts
Inter-municipal coordination Mergers (Denmark, Japan) v. inter-municipal cooperation (Spain, France, Brazil etc.)
Inter-sectoral collaboration Finland, France … One ministry vs. inter ministerial mechanisms
Agencies (Ex-United Kingdom), Canada, Brazil, Portugal
Experimentation policies Sweden, United States, Finland
Legal mechanisms and standard settings All countries, but more or less implemented
Citizens’ participation A question of degree (specific challenges)
Private sector participation From strategy design… to vested interest
Institutional capacity indicators
Italy for sub-national level
according to the degree of:
• Benefitting from other agents’ actions without paying any cost
• Examples: tragedy of the commons; each ministry prefers to pursue its own agenda rather than cooperating
Free-riding
• Risk of being the only one to contribute to the common good
• Examples: big push; cooperation to attract funds; cooperation to establish transports
Strategic risk
A typology of coordination failures
Only Strategic
risk
Prevalence of strategic
risk
Prevalence of Free riding
The problem may arise from a different
degree of alignment of agents’ objectives
• Pure coordination problem: the objectives are perfectly aligned • Policy should favour contact and transmission of information among
the agents – policymakers can provide a platform for discussion, a focal point (standards)
• Free riding: objectives are not perfectly aligned. In this case, contacts and
transmission of information is not sufficient (it might be a waste of resources) • It needs an enforcement mechanisms that makes it not convenient for
the parties to free ride: binding contracts, institutional hierarchies, etc.
Contracts and beyond
• Strategic risk: focus on informative prescriptions • Free-riding: focus on verifiable prescriptions
contracts
• Strategic risk: temporary financial incentives are enough to ensure towards the risk
• Free-riding: the incentive should last longer (but problems of moral hazard)
Financial incentives
• Reciprocal trust can reduce the strategic risk but is not a panacea for free-riding incentives
• Trust in the institutions may increase the credibility of the enforcement mechanism
Building trust
Agree on targets
Provide incentives
Delegate responsibility
Share risks
Outcome Indicators in Contracts
Outcome indicators in contracts can be used to:
• Most important aspect when using indicators in contracts!
Make sure the right incentives are provided by the contract!
• Outcomes are not perfectly predictable and can be influenced by factors beyond the control of policy makers.
Take uncertainty of outcomes into account when designing the contract
• I.e. asymmetric information, moral hazard, incomplete contracts,…
Consider potential principal-agent problems
Key issues for the use of outcome
Indicators in Contracts
Building effective and sustainable urban-rural partnerships: a strategy
Matching ..the appropriate scale
Including ..the relevant stakeholder
Learning ..to be more effective
1. Better understanding of R-U conditions and interactions
2. Addressing territorial challenges through a functional approach
3. Working towards a common agenda for urban and rural policy
4. Building a enabling environment for R-U partnership
5. Clarifying the partnership objectives and related measures
Governance solutions for rural-urban
partnerships
Explicit rurban partnerships
Rennes (France)
Geelong (Australia)
Nuremberg (Germany)
Central Zone of West Pomeranian Voivodeship (Poland
BrabantStad (Netherlands)
Implicit rurban partnerships
Forlì-Cesena (Italy)
Extremadura (Spain)
Castelo Branco (Portugal)
Central Finland (Jyväskylä and Saarijärvi-Viitasaari) (Finland)
Lexington (United States)
Prague/Central Bohemia (Czech Republic)
Model 1 Model 2 Model 3 Model 4
Delegated functions No delegated functions Delegated functions No delegated functions
Rennes (France) Geelong (Australia)
Nuremberg (Germany)
Central Zone of West Pomerania Voivodeship (Poland)
BrabantStad (Netherlands)
Extremadura (Spain)
Forlì-Cesena (Italy)
Lexington (United States)
Prague (Czech Republic)
Central Finland (Jyväskylä and Saarijärvi-Viitasaari) (Finland)
Castelo Branco (Portugal)
13
Cross-border cooperation: the case of innovation
Different rationales for cross-border
collaboration
Economic
concept
Driver Explanation
Economies
of scale
Critical mass Larger labour markets; wider business and
knowledge networks
Political power Better compete for higher level government
resources
Specialised
services
Innovation support services of higher quality
Economies
of scope
Complementarities Diversity of assets (research, technology and
economic base); “related variety”; price levels
Public and
club goods
Regional identity Increase internal recognition; social capital
Regional branding International attractiveness (firms, workers,
etc.)
Specialised
infrastructure
Reduce costs and share risks
Externalities Border challenges/
opportunities
Day-to-day issues associated with flows of
people, goods, and services 14
15
Innovating beyond borders
Defining the functional area
• Devote more efforts to strategy development and policy intelligence
• Mainstream the cross-
border element, and if not, align or allow for programme flexibility
• Make greater use of opportunities created by the border
• Publicize success stories
of cross-border instruments
Governing cross-border collaboration
Aligning incentives and working together
Making cross-border instruments work
Learning from international lessons
• Look at what the data says, but don’t wait to start
• Only pursue the cross-border element when it makes sense
• Allow flexibility in the area definition so as to not create unhelpful new borders
• Don’t under-estimate the importance of other “hard” and “soft” factors beyond innovation
• Give politicians a reason to care about the issue
• Identify for supra/national governments where they can help local/regional efforts
• Understand different costs and benefits, and their alignment, for a long-term, trust-based collaboration
• Engage non-public actors in governance, with some form of secretariat
Insights from the OECD study on Cross-
Border innovation
16
Gains from improved Governance: the case of metro
areas
• Fragmentation of a metropolitan area into many municipalities reduces per capita GDP and productivity – A doubling of the number of municipalities per 100,000 inhabitants
reduces productivity by 6%
There is a link between governance and performance of functional metro areas
• Negative impact of fragmentation can be reduced through organisations that coordinate policies in functional metro areas
– Approximately half of the productivity penalty from municipal fragmentation disappears when governance bodies exist
• Metropolitan governance bodies are common throughout the OECD, but only 18% have regulatory powers
Improving the governance of functional metro areas
• Governance bodies also lead to better outcomes in several other dimensions
Other gains from governing functional metro areas at the relevant scale
Sprawl Satisfaction with Public Transport
20
Improving the governance of Public Investment
21
Governance challenges of Public Investment
are typically under-estimated
No straightforward link between interest rates and investment – many parameters come into play: fiscal rules, trust, currently “wait & see” mode, regulatory challenges that hinder investment
Public investment is intrinsically a very fragmented activity done essentially by SNGs (mostly municipalities)
Thus, greater focus on governance is needed (not just financing) Investment challenges go well beyond the financing dimension of
investment Not a problem of supply of capital, but a problem on the demand
side Under-estimation of governance challenges and capacity, notably
at the sub-national level
The collapse of public investment by sub-
national governments in the OECD
In volume, base year 2000 = 100
Change in 2013 (%)
+0,1%
-2,3%
-0,8%
+1,0%
-1,4%
+0,2%
100
105
110
115
120
125
130
135
140
145
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GDP Total expenditureDirect investment Social benefitsStaff expenditure Intermediate consumption
• Invest using an integrated strategy tailored to different places
• Adopt effective co-ordination instruments across levels of govt
• 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
The OECD Recommendation on the
Governance of Public Investment
Sub-national
governments are
often fragmented
and don’t match
functional areas
Example of Principle 3: Coordinate across sub-
national governments to invest at the relevant scale.
• Rationale: The small scale of sub-national governments and the potential mismatch with functional areas raises concerns for investment (e.g. insufficient scale, lower returns, competing investments, investments not adapted to the functional area)
According to an OECD survey, 2/3 of countries find that municipal views prevailing over regional/functional scale is a challenge in managing public investment
25
Example of Principle 12: Strive for quality and
consistency in regulatory systems across levels of
government.
POSSIBLE INDICATORS:
• The presence of formal co-ordination mechanisms between levels of government that impose specific obligations in relation to regulatory practice
• The use of regulatory harmonisation mechanisms, such as mutual recognition, regulatory harmonisation agreements, and/or strict regulatory uniformity agreements
• Share of draft regulations for which RIA was undertaken
• A methodology for assessing quality of RIA exists and indications of quality are available
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)
• 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.
26
The OECD is now developing tools to implement the
Recommendation and support peer-learning
• Recent development s and good practices in countries
• Country profiles with data & indicators
• Practical guidance
• Checklist and self assessment tools
• In-depth case studies or chapters in reviews
• Peer learning: Disseminate examples of good practices
• Capacity building: help all levels of government diagnose capacity challenges for investment
• Monitoring: Provide comprehensive picture of multi-
level governance of public investment in countries and follow reforms in this area
A web platform with:
What are the objectives?
27
Examples of good practices and recent
developments disseminated through the web Toolkit
28
Evaluation tools to measure the implementation of
the Recommendation on Public Investment
Initial indicators developed as a follow-up of the Recommendation
Over 70 indicators 20 for Pillar I, 24 for Pillar II and 27
for Pillar III Comprehensive multi-disciplinary
approach (multi-level governance, public finances, regional policy, public management)
Mix between factual indicators and qualitative indicators based on judgement
29
A pilot study for Eastern Slovakia
Indicators on MLG of public investment, Eastern Slovakia
OECD (2015)
Easy to identify key challenges: Principles 1, 2, 3 and 6 (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
30
Thank you!
www.oecd.org/gov/regionaldevelopment
http://www.oecd.org/gov/regional-policy/oecd-principles-on-effective-public-investment.htm