Regional economic policy review: paper 3 - international perspective

4. Regional Policy Governance

4.1 Institutional frameworks

4.2 The institutional frameworks of regional policy depend on broader governance structures and the allocation of responsibilities between administrative levels. The countries can be grouped into three categories (federal, decentralised, unitary), reflecting the distribution of regional policy tasks at national and sub-national (regional) levels.

Table 1: Governance of regional policy

	Unitary	Decentralised	Federal
	National, with minor role for sub-national entities	National level has main responsibility but regions have some tasks	Responsibilities mainly regional, with limited national coordination
Canada			X
Denmark		X
Finland		X
Iceland	X
Ireland	X
New Zealand	X
Norway		X
Sweden		X

4.3 In the three countries with unitary governance (Ireland, Iceland, New Zealand), regional policy intervention is designed and controlled by national ministries and implemented by national agencies and local authorities. Insofar as there are regional structures, they are largely for coordinating planning by local authorities.

• Ireland: responsibility for regional policy is not allocated formally to any single government department. The Department of Enterprise, Trade and Employment is responsible for regional aid, which is delivered through accountable agencies. Regional Assemblies identify regional policies and coordinate initiatives that support the delivery and implementation of national planning policy. There are 31 integrated local authorities, each of which has Local Enterprise Office, which are the main point of access for firms to Enterprise Ireland, and Local Community Development Committees enable devolved control over areas of local-level development.
• Iceland: at national level, the Department of Local Government and Regional Affairs at the Ministry of Infrastructure is responsible for strategic planning in local government and regional affairs, for regional and rural policy, and regional and development programmes. The Regional Development Institute contributes to regional development through implementing government policy via regional strategies. The Governmental Steering Committee for Regional Development provides support to regional associations of local authorities in preparing plans of action and in negotiations between the associations and ministries. A single-tier of subnational government is made up of municipalities. Regional associations of municipalities, based on regional cooperation between local governments, prepare and implement regional development plans for their regions, in line with the central government policy.
• New Zealand: at national level, the Provincial Growth Fund (key regional economic development policy) is administered by the Provincial Development Unit (within the Ministry of Business, Innovation and Employment), and is overseen by a group of relevant regional economic development ministers. Other relevant institutions at national level include the Ministry of Housing and Urban Development, and the Just Transitions Unit. National regional development policies are complemented by regional investment strategies aligned with them. The central government provides national direction through issuing national policy statements. Subnational level consists of 67 territorial authorities and 11 regional councils. Most regional authorities have action plans identifying specific economic activities to leverage regional opportunities.

4.4 Among the Nordic/Scandinavian countries, the policy frameworks for regional policy are set by national ministries, but with regional strategies designed and implemented to suit development needs and opportunities either by (deconcentrated) regional offices of the State or (devolved) regional self-governments.

• Denmark: regional policy is overseen by the national Danish Executive Board for Business Development and Growth and managed by the Danish Business Authority. There are five Danish regions, funded through grants from the state and municipalities, and each region is responsible for creating a regional development strategy. At sub-national level, six cross-municipal business development centres operate and seven Regional Growth Teams were recently created to address specific challenges in individual regions.
• Finland: the Ministry of Economic Affairs and Employment has overall responsibility for coordinating the planning, implementation, monitoring and evaluation. Policy goals are set at national level and provide the context for regional strategies and implementation. Regional councils develop and implemented strategic programmes on behalf of representative municipalities, operating alongside the regional State administration (ELY-centres) which carries out operational delivery of some national policies.
• Norway: regional development policy-making is led by the Department for Regional Development in the Ministry of Local Government and Modernisation. Policies are implemented principally by national agencies at county level (Innovation Norway, SIVA, Research Council of Norway), together with county and/or municipal authorities.
• Sweden: the Ministry of Enterprise and Innovation has overall responsibility for policy coordination, with the national agency for economic and regional growth (Tillväxtverket) responsible for implementation.
• At sub-national level, regions and the municipality of Gotland have the responsibility for regional development. The County Administrative Boards (the national Government’s representatives in the regions) promote the participation of other state authorities in regional development and represent the state at the regional level in various regional development issues.

4.5 Lastly, in Canada, as a federal country, regional development involves input from federal and provincial/territorial governments, along with a wide array of partners. The regional level is composed of 10 provinces and three territories. Long-term regional planning is undertaken by six regional development agencies (RDAs), which cover the entire country and are part of the Innovation, Science and Economic Development portfolio. The RDAs engage with strategic partners at regional level (including provincial, territorial, municipal and indigenous governments) on an ongoing basis and across the federal government. Their engagement ensures that regional perspectives are considered in national policy development.

Table 2: Regional policy governance: division of responsibilities

CA

National regional policy tasks

Regional development implemented in a decentralised federation, involving input from federal and provincial/territorial governments and a wide range of partners. Four flagship national platforms support the delivery of the Innovation and Skills Plan.

Sub-national regional policy tasks

Long-term regional planning is undertaken by six regional development agencies (RDAs), which implement federal priorities and engage with strategic partners at regional level.

The RDAs develop Regional Growth Strategy with an all-of-government approach (federal / provincial / territorial) for their respective regions.

DK

National regional policy tasks

Danish Executive Board for Business Development and Growth develops a national business development strategy and monitors conditions for decentralised business development. Danish Business Authority provides oversight of regional activities and facilitates strategic linking of regional and national initiatives.

Sub-national regional policy tasks

Six cross-municipal business development centres provide strategic input to the Danish Executive Board for Business Development and Growth. Seven Regional Growth Teams (introduced in 2021) develop strategies to address one of seven designated development challenges.

FI

National regional policy tasks

The Ministry of Economic Affairs and Employment sets national priorities, coordinates, monitors and evaluates programmes.

Sub-national regional policy tasks

18 Regional Councils (and Åland) manage strategic functions on behalf of the municipalities. 15 ELY-centres (regional offices of the State) carry out operational tasks and manage regional development funding.

IE

National regional policy tasks

Centralised economic development strategy-making, but responsibility for regional policy not allocated to any single department.

Sub-national regional policy tasks

Three Regional Assemblies, no executive powers, but coordinate and direct social and economic development activities, including through Regional Spatial and Economic Strategies.

IS

National regional policy tasks

The Department of Local Government and Regional Affairs (Ministry of Infrastructure) is responsible for regional policy. The Regional Development Institute implements government policy via regional strategies. The Governmental Steering Committee for Regional Development provides support to regional associations.

Sub-national regional policy tasks

No regional government; regional associations of municipalities, based on regional cooperation between local governments, prepare and implement regional development plans, in line with the central government policy, and serve as a central government deconcentrated body. In some cases, the regional associations have been entrusted with special tasks from municipalities.

NO

National regional policy tasks

Regional policy is led by the Ministry of Local Government and Modernisation (KMD), which undertakes analyses, frames the regional policy narrative and aims to influence the spatial dimensions of other policies.

Sub-national regional policy tasks

Policies are implemented by national agencies operating at county level together with county (largely autonomous locally elected bodies) (and/or municipal) authorities.

NZ

National regional policy tasks

Regional economic development policy is administered by the Provincial Development Unit (Ministry of Business, Innovation & Employment), and overseen by relevant regional economic development ministers. Central government provides national direction through policy statements.

Sub-national regional policy tasks

Subnational level consists of 67 territorial authorities and 11 regional councils. Regional authorities produce action plans identifying specific economic activities to leverage regional opportunities.

NO

National regional policy tasks

Regional policy is led by the Ministry of Local Government and Modernisation (KMD), which undertakes analyses, frames the regional policy narrative and aims to influence the spatial dimensions of other policies.

SE

National regional policy tasks

Ministry of Enterprise and Innovation provides overall coordination, while the Agency for Economic and Regional Growth (Tillväxtverket) has key implementation role.

Policies are implemented by national agencies operating at county level together with county (largely autonomous locally elected bodies) (and/or municipal) authorities.

Sub-national regional policy tasks

21 directly-elected regions (and the municipality of Gotland) have the responsibility for regional development. The national government is also represented through the regional state agencies, the County Administrative Boards (CAB).

Key trends in governance arrangements

4.6 The key recent trends in terms of governance arrangements underpinning the design and implementation of regional policy in the countries examined, among others, relate to:

• the strengthening of horizontal and vertical policy coordination;
• adaptation of governance structures to the demands of addressing regional challenges in a more targeted way, and growing relevance of partnership and agreement- based approaches to policy delivery;
• decentralisation and deconcentration processes;
• stronger emphasis on the quality and capacity of government structures and governance systems, and capacity-building.

Strengthening policy coordination and cooperation

4.7 Regional development policy addresses a broadening set of cross-sectoral issues and instruments across a wide range of territories and administrative levels, which brings coordination challenges to the fore. There is increasing recognition of the value of policy coordination in designing and implementing policies with relevant territorial dimension, including in order to enhance policy synergies and avoid overlaps. This is seen e.g. in a greater recognition of the regional dimension and regional policy objectives in other national policies, and a stronger emphasis on both horizontal and vertical policy coordination and cooperation, i.e. between different policy areas and sectors, policy instruments, and territorial levels. This is seen particularly relevant for effective design and implementation of place-based approaches and strategies.

4.8 Greater mainstreaming of regional policy priorities across various policy domains is an important way to promote synergies and success of policy measures. Stronger coordination of sectoral strategies in pursuit of regional development goals is also meant to support policy efforts.

• Ensuring that regional policy objectives are taken into account in the development of horizontal policies is a priority in Norway, where the new White Paper reflects a shift towards greater policy coordination.
• Ireland: the emphasis on more integrated investment and delivery is reinforced in the country’s National Development Plan, which sets out a commitment to more integrated regional investment plans, and stronger coordination of sectoral strategies.
• Canada: federal and provincial governments have collaborated to embed a regional or local lens in horizontal policies that cross different jurisdictions or departments.

4.9 Closer ministerial cooperation also aims to support coordination efforts.

• Norway: there is increasing emphasis on coordination with other ministries, trying to track and understand their activities more closely and proactively and to look for ways of increasing the impact and influence of regional policy objectives in other ministries’ thinking. The trend in recent years has been for KMD to step back from day-to-day policy implementation and to focus on strategic and coordination issues and influencing the actions of other ministries in various ways.
• Iceland: the Governmental Steering Committee for Regional Development ensures harmonisation between government offices (ministries) in the implementation of regional policy. It also ensures active consultation with local governments and provides support to regional associations of local authorities in negotiations between the associations and ministries.

4.10 In some cases, ministerial reorganisation has integrated regional policy alongside traditionally separate sectors to create internal coordination.

• Norway: the appointment of a new minister for ‘districts and digitalisation’ in the KMD brings together digitalisation and regional policy agendas.

4.11 The need for greater cooperation across administrative boundaries and levels of government drives shifts towards negotiated arrangements for coordinating instruments and resources from various policy sectors and administrative levels.

• Regional development in Finland recognises the importance of cooperation between different actors across the administrative boundaries as development efforts do not necessarily respect the strict boundaries of a region or a municipality (e.g. functional areas, growth zones). Cooperative practices and network-based approaches have therefore come to the fore in regional development.
• Canada: the Regional Development Agencies develop regional growth strategies following broad consultations with regional stakeholders, including other levels of government. The regional growth strategies aim to develop a common vision and identify areas for cooperative actions that leverage regional advantages to deliver long-term prosperity. Tri-partite agreements, which are formal contractual arrangements among federal, provincial, and local authorities for implementing policies, serve to facilitate strategic planning and delivery of programmes and projects.

4.12 Holistic approaches to coordination are concerned with both horizontal and vertical cooperation, and emphasise its long-term and strategic nature.

• Sweden: coordination is central in regional development policy, and is one of the underlying conditions underpinning the National Strategy for Regional Development. Its importance stems from the complexity of societal challenges and the opportunity to involve a wider range of actors who bring in new skills and thinking. Cooperation takes a broad perspective including different policy areas and sectors (e.g. between the state authorities), but also different territorial levels (local, regional, national, international), as well as different policy instruments. The national strategy underlines the importance of cooperation being long-term and strategic in nature and in which the state can provide the overall steering. Whilst cooperation has long been an important part of the policy delivery, there are higher ambitions for how this is to be carried out.^[17]
• Canada has developed a complex system to achieve efficient horizontal and vertical coordination. Regional Development Agencies play an important mediating role between the provincial and federal governments and across provinces. Two federal institutions, the regional federal councils and the minister regional offices, have been established to further facilitate the coordination of federal sectoral policies at provincial level, share information across government levels and represent regional interests in national decision-making. Furthermore, various sector-specific councils coordinate sectoral policies among provinces and territories. Most of the institutions created for coordination have the double mandate of both vertical coordination across levels of government and horizontal coordination across sectors.^[18]

4.13 In some cases, institutional reforms aimed at rationalising the territorial/governance structure support policy coordination efforts.

• Norway: recent regional institutional reforms merging some municipalities and reducing the number of counties, among others, pursued the goals of a more coordinated and rational approach to planning, e.g. to ensure that decisions on transport links and housing were not taken in isolation.

4.14 Adapting governance structures to place-based challenges and potentials, and promoting agreement- based approach to delivery

4.15 In order to respond better to different regional characteristics, opportunities and challenges, place-based approaches to regional policy delivery may require adaptation of governance structures, including development of models greater concentrated around specific thematic challenges, or more adaptable and collaboration-based implementation frameworks.

• Denmark: with the aim of unlocking the specific growth potentials of individual regions, the government has introduced new Regional Growth Teams. The teams combine private sector partners, local authorities, trade unions and HIEs, and are tasked with developing strategies to address one of seven specific challenges, individually set by government after consultation with the local business development centres. The creation of the Regional Growth Teams is a new and different place-based response to development challenges. While the more flexible business development centres focus on place in the sense of bringing together a wide range of activities within their area of spatial responsibility, the Growth Teams are focused on a single designated development opportunity.
• Finland: the delivery of regional policy is increasingly based on partnerships and agreements which address the specific traits and opportunities of each region. The new Ecosystem Agreements, the ‘regional city’ programme, as well as the new statutory regional development discussions are key examples of this approach to strengthening more agreement, partnership and network-based regional development and policy.^[19] This can entail agreements between the national level and the Regional Councils or cities, or agreements amongst the regional development actors within a region, and does not solely include ‘paper-based’ agreements, but also ‘physical’ agreement-based cooperation.
• Canada: through the six RDAs now covering the entire country, the federal government engages multiple policy-sharing partnerships implementing regional policy. The RDAs, which connect governments, businesses, academia and community organisations to inform and facilitate strategic planning and policy delivery, bring a regional lens to federal economic development policy and translate national goals into regional and community settings.^[20]

Decentralising regional policy competences

4.16 In some countries, decentralisation processes are reallocating regional policy competences, highlighting the role of sub-national (regional or local) levels in policy design and delivery.

• Norway: regional institutional reforms came into force at the start of 2020 which, among other things, reduced the number of counties while enhancing their role in economic development policy and merged some smaller and/or less populous municipalities. This is in the context of an increasing strategic focus of regional policy on the districts, or rural areas, rather than on the country as a whole.
• Denmark: six cross-municipal business development centres, established in 2018, replaced the previous five regional business development centres. The new system allocates a stronger role to the municipalities and ensures better coordination between business promotion efforts by municipalities and the state business development centres.
• The ‘Iceland 2020 – governmental policy statement for the economy and community’, which provides guidance for regional development, emphasises the need to strengthen municipalities, in part by transferring projects from the national government to the municipalities.

4.17 There are also efforts to decentralise specific functions or activities away from dominant territorial centres (particularly capital cities), by dispersing them more evenly across the national territory.

• Norway: the location of public sector jobs has become an increasingly prominent element of policy in recent years. A specific process involving criteria related to the type of change and a ranking of possible locations must be followed. This is a requirement to consider non-Oslo sites and, in practice this means regional centres outside the largest cities with the greatest local employment potential must be considered. Furthermore, in line with the High North policy, a northern Norway location should also be considered.
• Denmark: the setup of the new business development clusters involved some dispersal of headquarters and a significant degree of decentralisation of operational capacity. In addition, the Closer (Tættere på) initiative for the dispersal of HEI beyond the big university cities continued the line of reasoning behind the dispersal of central government institutions away from Copenhagen, namely that the benefits of government institutions should be dispersed throughout the country.

Administrative capacity building

4.18 The issues of institutional quality and administrative capacity continue to be high on the agenda, particularly given the prominent role of sub-national authorities in the ‘place-based’ model and the reallocation of competences as part of decentralisation processes.

• Sweden: capacity at the regional and municipal level is considered key in their ability to drive regional development. Capacity is understood as ‘the opportunity to work strategically and on a long-term basis with development questions which are based on learning, analysis, monitoring and evaluation work’.^[21] Given major responsibilities of the sub-national level for regional development, capacity building aims to strengthen capacities especially in those regions and municipalities that face the largest development challenges, led by Tillväxtverket. ^{[22] [23]}
• Norway: strengthening the quality and capacity of sub-national institutions has been made an explicit priority in new regional policy strategies. For instance, ‘capacity building and basic services in the districts’ is defined among the three key goals of district and regional policy in the 2019 White Paper.

4.19 The role of learning and knowledge, including through sound analyses, monitoring, evaluation and research on regional development issues, underpinned by high-quality data and indicators, is also emphasised in the context of the ongoing capacity-building efforts.

• Finland: the Regional Development Decision underlines the need to base decisions on data and up-to-date information on the development situation of the regions (e.g. via the biannual review of the Regional Economic Prospects, or the monitoring of regional development based on up to date statistics at different territorial levels under various indicators). There has also been an increasing focus on the use of a wider range of indicators to provide a better and more accurate picture of regional development.
• Sweden: learning through analyses, monitoring, evaluation and research is an important element in the delivery of regional development policy. As part of the commitment to learning, the regions are responsible for analysing, monitoring and evaluating their work across the three dimensions of sustainability (economic, social and environmental) and in consideration of the equality aspects. Different forums and networks are in place to support the learning and cooperation.
• Iceland: the Institute of Regional Development monitors and researches regional development. It performs an evolution and situation analysis report on each of the regions on a two-year basis.
• Canada: the RDAs have been active in policy research and knowledge mobilisation, which has involved partnerships with think-tanks to report on region-specific trends and priorities, working with educational institutions to promote scientific learning, and positioning regional firms in the global marketplace through international benchmarking of economic performance. Such intelligence gathering and environmental scanning, labelled ‘policy, advocacy and co-ordination’ (PAC), are integral to identifying and responding to opportunities and challenges in the regional economy. PAC provides economic analysis to support RDA priorities as well as federal ministerial decision-making about policies and programming. Increasingly, the RDAs are undertaking regional risk analysis in consultation with local stakeholders in order to better adjust programming and implementation to the challenges specific to the region or a sub-region within.^[24]