This chapter examines how Latvia's multi-level governance system can better support place-based regional development. While the country benefits from robust legislative frameworks, a solid strategy architecture, and a 2021 Administrative-Territorial Reform that produced larger and more financially viable municipalities, important governance gaps persist. At the national level, regional development remains a largely sectoral concern rather than a cross-cutting priority, limiting policy coherence across line ministries. Vertical co-ordination between national and subnational actors is intermittent, and subnational associations present a fragmented advocacy landscape. At the local level, municipalities lack sufficient comparable data to identify where inter-municipal co-operation could address shared service delivery challenges. The chapter also identifies specific capacity gaps within planning regions, particularly in outcome and impact indicator design. Addressing these gaps - through inter-ministerial platforms, stronger multi-level dialogue, improved subnational data systems, and targeted capacity-building - is essential to translate Latvia's governance foundations into tangible improvements in regional attractiveness.
Adopting the OECD Regional Attractiveness Approach to Enhance the Capacity of Local and Regional Governments in Latvia
Abstract
The OECD regional attractiveness framework provides an important foundation that can support more coherent, evidence-based regional development policymaking in Latvia. However, the attractiveness of Latvia’s regions and municipalities also depends on how effectively the country's multi-level governance system – i.e. the actors, institutions, frameworks and practices that support decision-making and implementation across and among levels of government – can support place-sensitive action based on the evidence the framework generates.
Latvia’s multi-level governance system has important strengths that enable it to support place-based regional development. For instance, robust legislative and strategic planning frameworks establish how responsibilities and resources to support territorial development should be allocated across and among levels of government. They also provide guidance on how policies and programmes can advance national-level territorial development objectives while addressing place-specific needs. Furthermore, the country’s 2021 Administrative-Territorial Reform produced larger and more financially viable local governments in order to deliver public services and invest in the development of their territories.
These strengths notwithstanding, there are opportunities to further refine Latvia's multi-level governance system, particularly as regards the vertical and horizontal co-ordination of regional development policy, and subnational data availability and capacity building support for planning regions that is available to support subnational action. Territorial development could be embedded more systematically as a cross-sectoral priority at the national level, in order to improve regional development policy coherence and encourage more place-sensitive decision making by line ministries. Additionally, strengthening the evidence base supporting decisions regarding inter-municipal co-operation could help municipalities better align their efforts an resources for territorial action. Furthermore, targeted support, including addressing specific subnational data gaps and bolstering certain performance measurement-related skills, could help planning regions strengthen their capacity to track progress towards their strategic objectives. This chapter addresses these issues in turn.
Latvia's current multi-level governance architecture is the product of the 2021 Administrative-Territorial Reform (ATR), one of two significant reorganisations of subnational governance since the restoration of independence. Adopted in June 2020 and in force from 1 July 2021, the reform has amalgamated 119 local governments into 35 municipalities (novadi) and 7 state cities (valstspilsētas), which, despite their separate formal categorisations in law, have the same tasks and resources (Saeima, 2022[1]; OECD/UCLG, 2022[2]). This reform was preceded by two other administrative-territorial reorganisations: a first, in 2002, which created five planning regions, and a second in 2009, which abolished the Soviet-era district tier and reduced the local map to 110 municipalities and 9 republican cities (OECD/UCLG, 2022[2]).
The ATR was introduced to address challenges stemming from long-standing municipal fragmentation in Latvia (OECD, 2026[3]), and was designed to create the conditions for more balanced territorial development. By amalgamating smaller units into larger ones, the reform aimed to establish economically viable local governments capable of delivering their statutory functions and public services in comparable quality and at reasonable cost across the country (Saeima, 2020[4]; OECD/UCLG, 2022[2]).
The ATR brought about significant changes to the local government landscape. The average population of a local government in Latvia rose from 15 909 to 43 757 inhabitants, far exceeding the OECD average of 10 494 or the EU average of 5 327 (OECD, 2025[5]). Moreover, the 2022 Cabinet of Ministers report on the reform's results suggested that consolidation has already strengthened local government financial capacity (Cabinet of Ministers, 2022[6]). The gap between the largest and smallest municipal budget revenues narrowed by a multiple of 34 before the reform to a multiple of six in 2022, and the share of municipalities with annual budget revenues below EUR 10 million fell sharply, from 60 before the reform to just one (Cabinet of Ministers, 2022[6]). In addition to administrative-territorial reorganisation, related reforms, including amendments to the Local Government Law, clarified and adjusted existing local government responsibilities and added new ones (Saeima, 2022[1]). Several existing competences were expanded (i.e. municipal policing, previously optional, became mandatory for all municipalities), while new local government responsibilities were allocated in areas such as climate change mitigation and adaptation and sustainable development (Saeima, 2023[7]; Reinholde, Stučka and Auliciema, 2025[8]). Table 3.1 provides a full overview of the current assignment of responsibilities among levels of government.
While the ATR consolidated the local government tier, it left Latvia's five, non-elected planning regions largely untouched (OECD, 2026[3]). These planning regions bring together municipally-delegated politicians for regional decision making and are supported by a professional administrative secretariat. They reflect a recognition by the national government that many development challenges transcend municipal boundaries and require co-ordination at a regional scale. Planning regions operate under the supervision of the Ministry of Smart Administration and Regional Development (VARAM), which leads regional development policy at the national level (Saeima, 2025[10]).
The ATR therefore represents an important step in supporting place-based regional development in Latvia. It has produced larger and more financially viable local governments, with the scale and resources to deliver public services and invest in their territories more effectively than the fragmented landscape that preceded it. The reform also complements the existing regional tier of planning regions, whose co-ordinating role across municipal boundaries is enhanced when the local governments they bring together themselves have sufficient capacity to engage as substantive partners in regional development.
At the same time, the ATR is one building block among several necessary ones. Achieving the reform's underlying ambitions, making Latvia's regions more attractive places to live, work and invest, also depends on other multi-level governance arrangements that organise how national and subnational-level actors operate. Another of these building blocks relates to co-ordination and co-operation: how effectively national, regional and local actors align their priorities, actions and resources around shared territorial objectives, both across sectors and between levels of government. A further building block relates to subnational capacity: whether planning regions and municipalities have the human, financial and technical resources needed to support the achievement of national-level regional development objectives while also addressing their specific territorial needs. The sections that follow examine each of these building blocks, identifying where Latvia's current arrangements work well as well as opportunities for further refinement.
Governments rely on a variety of mechanisms to co-ordinate and align inter-institutional relations, policy priorities, actions and resources. These can range from “harder” arrangements – such as laws and regulations, standards, and inter-ministerial agreements – to “softer” ones, such as inter-ministerial co-ordination bodies, working groups or other dialogue bodies. Strategy frameworks can also serve as co-ordination mechanisms (OECD, 2020[11]). Regardless of their type, a mix of these arrangements is essential for ensuring coherent national and subnational government action to support regional development and promote regional attractiveness.
Some of these governance arrangements are firmly in place in Latvia. The legislative framework for territorial development not only establishes the responsibilities and resources assigned to different levels of government, but also embeds the principle of cross-sectoral and multi-level co-ordination of regional development policy (Saeima, 2022[1]; Saeima, 2025[10]). In addition, the country has a solid strategy framework for regional development including a detailed national-level regional development strategy (i.e. VARAM’s Regional Policy Guidelines 2021-2027). National-level programming for regional development articulates clear territorial development aims, such as reducing regional inequalities and encouraging population retention and attraction in Latvia’s regions, providing a roadmap for territorial action that helps to guide both national and subnational actors. In turn, subnational-level programming sets out how regional and local governments will support the national-level objectives for territorial development while also addressing their own place-specific needs (Box 3.1).
Latvia approaches regional development through a structured strategy framework that includes its Sustainable Development Strategy, as well as national and subnational planning and guideline documents. This framework provides a basis for aligning national priorities for territorial development with the specific needs of individual regions and municipalities. The country’s highest long-term national-level development strategy was approved by the Saeima in 2010: the Sustainable Development Strategy (SDS) of Latvia until 2030. It includes seven national-level strategic objectives, including supporting “spatial development” and ensuring “equal life and work conditions for all [Latvian] inhabitants regardless of the[ir] place of residence.”
The National Development Plan (NDP) for 2021-2027 is the primary medium-term national planning document, the development of which is led by the State Chancellery in co-operation with all line ministries. The NDP defines six priority areas1, and 18 lines of action that support SDS implementation. One line of action is balanced regional development. Under it, the NDP sets out to increase the potential of Latvia's regions and reduce socio-economic disparities by strengthening their internal and external competitiveness, while providing region-specific solutions to improve the quality of the living environment and encourage settlement outside the Riga metropolitan area.
Furthermore, the Regional Policy Guidelines, developed by VARAM, provide information on how the NDP’s goal of balanced regional development is to be achieved by different levels of government. The Guidelines help clarify: a) the territorial approach to regional development in Latvia (e.g. greater support for territories with a lower regional GDP per capita) and b) priority areas for regional policy (e.g. bolstering regional economic development, service provision, and strengthening the capacity of planning regions and municipalities). They also outline a detailed list of priority measures for regional development.
At the subnational level, regional and local development programmes are prepared by planning regions and municipal governments, respectively. They are required to demonstrate clear alignment with national-level strategic priorities, and set out region or municipality-specific strategic priorities, lines of action, measures, actors responsible for implementation and potential funding sources, as well as performance measurement indicators to track progress towards implementation.
Source: (Government of Latvia, 2017[12]; Government of Latvia, 2021[13]; Government of Latvia, 2021[14]; Vidzeme Planning Region, 2022[15]).
Note: 1) The NDP 2021–2027 is structured around six priorities: (1) Strong Families, a Healthy and Active Population, focusing on healthcare, psychological well-being, family support, and social inclusion; (2) Knowledge and Skills for Personal and National Growth, covering science, education quality, and lifelong learning; (3) Business Competitiveness and Material Well-being, addressing productivity, innovation, export, and the business environment; (4) Quality Living Environment and Regional Development, encompassing the green deal, transport and digital infrastructure, balanced regional development, and housing; (5) Culture and Sport for an Active Lifestyle, promoting public participation in culture and sport and their contribution to sustainable society; and (6) A United and Open, Safe and Secure Society, addressing social cohesion, rule of law, governance, and safety and security.
This legislative and strategic planning framework notwithstanding, Latvia faces challenges related to the horizontal and vertical co-ordination of regional development policy, and to the local level that can help implement it. With regards to national-level (horizontal) co-ordination, regional development is typically regarded as a sectoral rather than a cross-sectoral issue by line ministries. This risks undermining policy alignment and outcomes. With regards to vertical co-ordination, the ability of subnational-level actors to engage national-level decision makers on territorial development issues is largely limited to VARAM, despite the important role of other line ministries in funding and financing regional development. Moreover, at the local level, municipal governments lack a sufficiently strong evidence base to be able to assess where inter-municipal co-operation may be beneficial. This limits their ability to collaborate where necessary to address shared challenges. Such challenges risks undermining policy coherence and/or leading to duplication and overlap between policies and programmes.
Reinforcing national-level co-ordination for regional development
A key challenge affecting regional development in Latvia is a fragmented approach to regional development. This is not uncommon, and arises when line ministries (e.g. economy, education, environment, transport) do not necessarily take regional development and regional development objectives into consideration when developing sectoral policies and programmes. The result can be spatially blind sectoral policies and initiatives that do not necessarily advance the government’s territorial development agenda and limit the ability of Latvia’s regions to realise their attractiveness potential.
Evidence of a fragmented approach to regional development is apparent in the design of national-level strategic plans. For example, the NDP identifies balanced territorial development as one of its 18 lines of action. Yet it makes almost no links between the regional development line of action and the other 17. This leaves unclear how measures taken in one sector, such as transport, will contribute to, or detract from, objectives in other sectors that also contribute to territorial development objectives, such as those associated with the Green Deal or housing (Government of Latvia, 2021[13]). Another example is found in the “quality, accessible, and inclusive education” line of action, which sets out commitments on pre-school quality, teacher training and vocational education (Government of Latvia, 2021[13]). However, it treats these as uniform national priorities rather than as commitments whose delivery will look fundamentally different across Latvia's territories. Rural municipalities facing falling school-age populations are likely to confront more severe accessibility challenges compared to their urban counterparts, while urban areas may face disparities in school quality based on neighbourhood or catchment area. Yet, the NDP offers no indication of how education commitments can be adjusted to meet local needs. Failure to systematically embed territorial development as a cross-sectoral priority across government risks encouraging line ministries to develop programmes and policies without a place-sensitive lens.
Additional evidence of a fragmented approach to regional development at the national-level is seen when comparing the priorities of VARAM’s Regional Policy Guidelines 2021-2027 with the sector strategies of other line ministries (Government of Latvia, 2021[14]). For example, the Guidelines, adopted in 2021, explicitly name the Ministry of Economics as a co-responsible institution for a range of regional development measures in the document's implementation matrix. These include establishing a co-ordinated support system for attracting investment to the regions and supporting the development of regional innovation and knowledge systems. By contrast, the Ministry of Economics' Industrial Policy Guidelines, adopted in February 2021, do not clearly translate these shared commitments into specific sectoral action. Of the twelve implementation tasks listed under the Guideline’s “innovation” line of action, none address the measures for which the Ministry is named as co-responsible in the Regional Policy Guidelines (Ministry of Economics, 2021[16]). In the limited cases where the Guidelines do engage with innovation at the subnational level, they do so by attributing responsibility for implementation to VARAM, rather than specifying what the Ministry of Economics itself will do to support implementation (Ministry of Economics, 2021[16]). This circularity suggests that co-ordination among line ministries could be improved to ensure alignment of actions and resources in a way that supports national-level territorial development objectives. Without such alignment, policy complementarities risk being lost, policy coherence limited, and resources not optimised.
These questions of policy alignment can arise from a lack of clarity on how regional development links with other policy sectors, and how other sectors can benefit from a more place-based or territorially nuanced approach. In this regard, interviews indicated that supporting regional development policy is largely seen as the responsibility of VARAM, and line ministries do not systematically consider the territorially specific impact of sectoral policies and programmes (OECD, 2026[3]). While VARAM has already developed information for line ministries on the different elements underscoring a place-based approach, this information could be further strengthened to provide more practical guidance on how to integrate these considerations into the design and implementation of sectoral policies and programmes (Interdepartmental Coordination Centre, 2016[17]; VARAM, 2023[18]). Questions of policy alignment can also arise from limited incentive for cross-sector co-ordination. In this regard, the Regional Development Law tasks VARAM with leading the design, implementation, monitoring and evaluation of regional development policy, as well as the co-ordination of support measures for territorial development (Saeima, 2025[10]). However, more could be done to provide VARAM with regular opportunities to proactively convene line ministries on territorial development issues, and secure the latter’s active engagement in supporting regional development policy.
Fostering greater inter-ministerial co-ordination of regional development
To further strengthen the national-level co-ordination of regional development policy, there are a number of approaches that the government could consider. One approach would be for the government to consider establishing an inter-ministerial platform responsible for co-ordinating regional development priorities across government. The platform could, for example, be chaired by VARAM, and include other ministries whose portfolios actively contribute to regional development. Other ministries and subnational-level actors (e.g. regional and local government associations, planning regions), could also be invited subject to need or agenda item.
A cross-sectoral co-ordination platform at a ministerial level in Latvia could help to guide the overall strategic direction of regional development and its supporting policies and programmes. It could guide priority-setting for regional development investment, and ensure that the regional-level operations and investments of line ministries are coherent and aligned. This would help reduce policy fragmentation and provide a forum to ensure that different policy sectors are systematically considering their regional impact, and that regional considerations are incorporated into national-level strategic planning and budgeting. Such a platform could be supported by an inter-ministerial working party entrusted with overseeing the implementation of the council’s decisions.
An alternative, or complementary approach to a cross-sectoral platform at a ministerial level would be for VARAM to work with line ministries to revise the guidance on how to integrate a place-based approach into the design of sectoral policies, programmes and initiatives. This could include, for example, refining and updating guidance on how to ensure that the territorial needs and priorities set out in Latvia’s national-level strategy framework for regional development are reflected in sector strategies, and ensuring that a place-sensitive lens is applied to sector programming and implementation. In other countries, such as Mexico, relevant line ministries provide practical online resources to help both national and subnational policymakers ensure that cross-cutting issues, such as regional development, are systematically taken into account in programming documents (Box 3.2).
Mexico’s federal planning law requires the formulation of development programmes at national, state and municipal levels. All of these must align with the overarching National Development Plan, which spans a six-year period, coinciding with the presidential term. The plan sets the country’s long-term objectives, strategies and priorities across economic, social, cultural and environmental spheres. Specifically, it requires the development of various programmes, as follows:
Institutional programmes are developed by each of the national-level public bodies. They highlight organisational improvements and specific actions each public body will undertake to contribute to national objectives.
Sectoral programmes are developed by various sectors of the public administration (e.g. health, education, energy). They outline the objectives, strategies and actions to be undertaken within these specific sectors.
Special programmes focus on specific thematic areas or target particular social, economic or environmental issues that cannot be addressed by individual public bodies and instead require cross-sectoral collaboration.
Regional programmes address the development needs and priorities of specific geographic areas (that go beyond the administrative boundaries of federal states) within the country.
In 2019, the Ministry of Finance and Public Funds organised a series of meetings for the planning staff of Mexico’s national-level public bodies to guide them through the programme-design process. The meetings included workshops on how to integrate various cross-cutting priorities (e.g. sustainable development, equality and non-discrimination, territorial development, interculturality, gender, the natural environment) into all institutional, sectoral, special and regional programmes.
With the support of different national government bodies and international organisations, the Ministry of Finance and Public Funds also created a website that enables policymakers to access supporting material on the different cross-cutting issues and how to integrate them into the different national-level planning instruments. This material includes factsheets on a series of key economic, social, environmental and governance indicators (e.g. education, healthcare, insecurity) that reveal relevant development gaps across population groups and regions, and are meant to be used to help design the diagnostic for each programme.
Source: (OECD, 2026[19])
In principle, existing national-level governance practices in Latvia offer a precedent that would allow both approaches to be adopted with relative ease. For example, modifications to Cabinet regulations in 2023 enabled the establishment of inter-ministerial bodies (known as thematic cabinet committees) by prime ministerial decree (Sustainable Governance Indicators, 2026[20]). Since then, the government has already established several such committees, to help line ministries to align their policies and investments in cross-sectoral areas such as energy, environment and climate, digital modernisation, and Eastern border security and development (Government of Latvia, 2024[21]) (Sustainable Governance Indicators, 2026[20]). Establishing a thematic cabinet committee for regional development, led by VARAM, or expanding the scope of existing committees to systematically focus on the co-ordination of regional development issues) – like the Eastern Border Committee, albeit a wider mandate beyond those region-specific issues would be needed – could help to embed the topic as a cross-sectoral priority that other line ministries take account of in their day-to-day decision-making.
Third, greater co-ordination at the ministerial level, can – and should – also be complemented by greater co-ordination at the technical level. Each line ministry within the Latvian government has experts with dedicated strategic planning expertise (OECD, 2025[22]). VARAM could draw on this existing capacity. In particular, its strategic planning experts could engage more systematically with strategic planning units across line ministries to provide the latter with practical guidance, and offer ongoing advisory support on how to apply a place-based lens to sectoral programming. Such engagement is more likely to succeed when framed as a joint exercise to identify areas where the priorities set out in in Latvia’s national-level strategy framework for regional development and line ministries' own sectoral objectives are mutually reinforcing. This could include, for example, VARAM convening dedicated working groups with the planning experts of the Ministries of Economics, Transport, Health, Education, Agriculture, and Climate and Energy to identify where their respective objectives converge, identify the measures that can deliver against both sets of objectives, and assess the territorial impact of proposed policies and programmes.
Expanding opportunities for the multi-level co-ordination of regional development policy
Effective vertical co-ordination of regional development can help achieve national-level territorial development objectives while also ensuring that unique regional and local needs are addressed. In Latvia, two different types of subnational actors support such activity. The first is planning regions. Latvia’s planning regions perform a vertical co-ordination role with respect to regional development objectives and priorities. This is accomplished primarily by ensuring that their regional development programmes are aligned with the NDP, Latvia’s national-level strategy framework for regional development, and other higher-level strategic planning documents, while simultaneously addressing specific territorial needs (Saeima, 2025[10]). Planning regions may also apply to provide official opinions on the draft strategic plans of line ministries (Cabinet of Ministers of Latvia, 2021[23]). The second is the four local and regional government associations – the Latvian Association of Local and Regional Governments (LALRG), the Latvian Association of Large Cities (LALC) and the Latvian Association of Regional Development Centres (LARDC) and the Riga and Pieriga Municipalities Association (Riga Metropole). They offer an established channel through which subnational governments can engage in national policy dialogue and receive information regarding legislative, regulatory or policy developments (LALRG, 2026[24]; LLPA, 2026[25]; RACA, 2026[26]; Riga Metropole, 2026[27]). Together, these actors provide a basis for aligning national- and subnational-level priorities and resources for territorial development.
However, vertical co-ordination arrangements in Latvia do not yet systematically embed a place-based approach to regional development policy among levels of government. There are several reasons for this. First, engagement between subnational actors and line ministries other than VARAM tends to be conducted on an ad hoc basis (OECD, 2025[22]). Many of the policy or funding decisions that most directly shape regional development outcomes, whether in transport, health, education or economic development, sit with line ministries whose contact with planning regions and associations is intermittent rather than systematic (OECD, 2025[22]). This limits the ability of subnational actors to communicate and discuss regional or local development challenges and priorities with the line ministry (or ministries) responsible for developing policies and programmes that could help meet these challenges.
An additional challenge relates to the voice of subnational associations in national-level regional development discussions. This subnational voice is diluted across multiple associations representing partly overlapping constituencies. LALRG’s (40-strong) membership includes nearly all of Latvia’s municipal governments. Alongside it, three smaller associations provide more targeted advocacy: the LALC comprises Latvia’s ten state cities, the LARDC composed of around twenty mid-sized municipalities designated as regional development centres, while nine Riga agglomeration municipalities are represented by Riga Metropole (LALRG, 2026[24]; LLPA, 2026[25]; RACA, 2026[26]; Riga Metropole, 2026[27]). Many municipalities hold multiple memberships – for example, all ten state cities belong to both LALRG and LALC (LALRG, 2026[24]). The practical effect is a landscape with uneven, and competitive, subnational representation at the national level. State cities and regional development centres benefit from both a big-tent voice through LALRG and dedicated, specialised advocacy through LALC or LARDC. By contrast, a number of smaller rural municipalities, many of which face the most acute demographic and fiscal pressures, have no equivalent specialised channel of their own. At the same time, the parallel operation of three associations with partly overlapping memberships can result in advocacy positions that may not always align. This places an additional burden on national government actors, who must reconcile multiple, sometimes conflicting, subnational voices on the same issue, each conveyed through a separate channel (OECD, 2026[3]). Combined with the intermittent engagement of line ministries with the associations, as described above, these challenges suggest that improvements can be made to ensure that vertical co-ordination mechanisms more effectively support place-based regional development in Latvia.
Expanding channels for multi-level dialogue and consolidating subnational voice
Policymakers could consider ways to ensure a more effective multi-level co-ordination between different levels of government on regional development issues. This can help line ministries to take better account of the distinctive needs, assets and priorities of Latvia's different territories when making decisions that shape their development. It can also enable national actors to more effectively highlight their priorities and work with the subnational level on how to meet these priorities based on their regional needs and capacities.
To strengthen vertical co-ordination, the national government could consider creating a multi-level co-ordination platform for regional development. Such a platform could take the form of a dialogue forum that brings together high-level political representatives (e.g. ministers or state secretaries) from line ministries whose sectors actively contribute to regional development, as well as representatives from planning regions and local government associations. Participation could be regular or ad hoc, based on the agenda and topic(s) for discussion. This could help better ensure that territorial development priorities identified by subnational actors are being systematically considered by different line ministries, reducing the risk of place-blind policy making or policy gaps (i.e. incoherence between subnational needs and national policy initiatives). It would also enable sectoral perspectives on regional development to be shared more systematically with the subnational level.
Furthermore, by convening the three local government associations at the same time, such a forum could help surface points of agreement and divergence on territorial needs with all relevant line ministries present. Where positions converge, this creates conditions for a more unified and influential subnational voice. Where they diverge, it forces those differences to be made explicit and substantively defended and debated. In either case, engaging these actors collectively and clarifying their respective positions would help to ease the burden on line ministries, which currently encounter multiple, sometimes conflicting, subnational voices through separate channels.
Strengthening the evidence base to support inter-municipal co-operation on shared territorial priorities
One of Latvia’s main regional development priorities is improving quality of life in all regions, while encouraging settlement in areas outside Riga and its surrounding municipalities. As noted, the ATR is an important reform that has sought to address this priority. By consolidating 119 local governments into 42, it aimed to create municipalities of sufficient scale to sustain public services and deliver larger-scale territorial investments, such as in infrastructure and transport (OECD, 2025[28]).
In addition to municipal mergers, inter-municipal co-operation is another way to build territorial scale. This can take various forms. For example, municipalities can co-operate to jointly deliver services, pooling administrative functions or address shared local and regional development challenges more widely (e.g. developing roads or public transport systems to support labour productivity) (OECD, 2025[28]). This matters because although the ATR substantially increased the resources available to individual municipalities, interviews indicated that certain municipalities still sometimes face challenges in delivering parts of their mandates, such as the provision of good-quality healthcare and education services (OECD, 2026[3]). There is a risk that these service delivery-related challenges could compound over time, given that many municipalities in Latvia are contending with sustained population decline, which can place strain on local budgets while increasing per capita service costs (Central Statistics Bureau, 2025[29]; OECD, 2026[30]).
Inter-municipal co-operation could provide an attractive option for municipalities seeking to improve service quality and reliability (OECD, 2026[3]). It also offers flexibility that municipal mergers do not, since co-operative arrangements can be scaled up, scaled down, or terminated in response to changing service demand and/or financial constraints (OECD, 2026[19]). This flexibility could be beneficial for supporting sustained service provision in the context of the demographic pressures that many of Latvia’s municipalities (especially rural and border ones) will continue to face (Central Statistics Bureau, 2025[29]).
Latvia’s municipalities have a right to co-operate, and the Local Government Law provides a clear, graduated framework for co-operation (Saeima, 2022[1]). In addition, Latvia’s municipalities can co-operate through a variety of different instruments with varying degrees of formalisation and different legal statuses, including co-operation agreements (sadarbības līgums), joint institutions (kopīgas iestādes) and joint commissions (kopīgas komisijas) (OECD, Forthcoming[31]). Municipalities have reportedly begun to collectively address shared territorial challenges through inter-municipal co-operation initiatives, in areas such as waste management, where 11 municipalities have a shared service delivery agreement. There is also ad hoc co-operation in areas such as transport, social care, and education (Reinholde, Stučka and Auliciema, 2025[8]). At the same time, interviews indicated that a majority of municipalities are not involved in any sustained co-operative arrangements (OECD, 2026[3]).
Expanding the uptake of inter-municipal co-operative arrangements in Latvia may require stronger enabling conditions to effectively assess co-operative needs. Critical among these is the availability of reliable and comparable data on access to and the quality of services being delivered in municipalities. Every three years, the Central Statistics Bureau surveys residents from nine of the ten state cities (i.e. except Riga) regarding their satisfaction with different types of municipal services (Central Statistics Bureau, 2025[32]). Additionally, certain local governments reportedly collect data on the services they provide on an ad hoc basis (OECD, 2026[30]).
In general, however, service-related data at the municipal level is limited in Latvia. There is no comparable, granular data that can capture the underlying determinants of municipal service performance, i.e. the quality standards to which services are provided, or the number of residents with timely access to the services they need within a specific geographical catchment area. Comparable, granular data is helpful to identify the sectors or services which could benefit from inter-municipal co-operative arrangements. Just as helpful for policymakers is data on how many such arrangements exist, in which sectors, and the territorial coverage of active arrangements. Currently, there is no systematic collection of information by public actors that tracks these types of arrangements (OECD, 2026[3]). As a result, it is difficult for municipalities to identify where inter-municipal co-operation is taking place, or pinpoint other municipalities that could share their experience on benefits, challenges and modalities associated with such arrangements.
In order to further build territorial scale through inter-municipal co-operation, the government could begin by taking two steps. First, it could consider boosting standardised and comparable data collection, particularly with respect to the cost, quality and accessibility of municipal services in different territories and it could share the data through a single, unified and publicly accessible data portal. Norway’s KOSTRA model provides an example (Box 3.3). Equipped with better information on service access, cost and quality, subnational governments would be better placed to identify where collaborative approaches to service delivery make financial sense.
Norway's KOSTRA (KOmmune-STat-RApportering) territorial development portal supports performance measurement and benchmarking at the subnational level. The portal provides regularly updated input and output indicators on subnational public services and finances, integrating data from local government accounts, service statistics and population statistics. It covers a wide range of indicators related to production, service coverage, needs, quality and efficiency, spanning sectors including education, health, social care, transport and technical services. Its user-friendly online platform makes this information easily accessible to a broad range of users, enabling detailed comparisons of subnational government performance across municipalities and over time.
KOSTRA data are widely used by municipalities themselves to assess their own performance, identify areas for improvement and benchmark against comparable authorities. Crucially, by making the performance of individual municipalities as regards, service access and quality, transparent and comparable, KOSTRA creates the kind of shared evidence base that can prompt difficult but necessary conversations about where service delivery models may need to change, for example by exploring new inter-municipal co-operation arrangements.
Second, the government could encourage planning regions to collect regular information regarding inter-municipal co-operation arrangements on their territories, including which services are being delivered, in which sectors and territories, through what financial arrangements and with the involvement of which actors. A comparable approach is seen in France, where the National Database on Inter-communalities (Base nationale sur les intercommunalites – BANATIC) portal provides detailed information on more than 5 000 inter-municipal co-operation arrangements in place nationwide (Government of France, 2025[34]). Doing so would offer local governments insight into where collaboration is already taking place and in which sectors. This would then help local governments not only identify, engage with and learn from peers with relevant inter-municipal co-operation experience, but also make more informed decisions about whether and how to pursue new or additional co-operative arrangements of their own. More broadly, a stronger evidence base for inter-municipal co-operation would also have a bearing on Latvia’s territorial attractiveness, given that the quality, range and accessibility of public services is one factor that can contribute to whether territories are attractive places to live or invest. Better information on service performance and on the co-operative arrangements already in place would equip these municipalities to identify partnerships that can preserve, and in some cases expand, their service offer at a viable scale, including in the face of demographic pressures.
Delivering on Latvia's regional development ambitions depends, ultimately, on the capacity of the subnational actors tasked with that delivery. Local governments, Latvia's sole subnational administrative tier, and the country's five planning regions can only implement their strategic plans, support economic development, deliver good-quality public services and build regional attractiveness if they have the human, financial and technical resources to do so in practice.
Latvia has a solid baseline in each of these areas, however the OECD evidence also points to specific areas that warrant attention. The sections that follow examine three dimensions of subnational capacity in turn: the fiscal resources available to municipalities to fund their tasks and responsibilities, the share of public investment that flows through the municipal tier, and the data and skills that underpin effective subnational performance measurement.
Ensuring sufficient financial resource capacity to support regional attractiveness in Latvia
A key question for policymakers is whether subnational governments have sufficient financial resources from which to support regional development and attractiveness initiatives in their territories. In this regard, the OECD evidence on Latvia presents a mixed picture.
On the positive side, municipal government revenue as a share of total public revenue was 25.4% in Latvia, above the OECD local government average of 23.9% (OECD, 2025[5]). Moreover, Latvian municipal resources are heavily tilted towards taxes (52.2%), tariffs and fees (9.4%), and property income (1%), with grants and subsidies accounted for 36.3% of revenues (OECD, 2025[5]). By contrast, among OECD local governments on average, taxes, tariffs and fees, and property income account for smaller shares (33.9%, 12.9% and 1.6% respectively)1 and grants and subsidies make up a majority share of municipal revenues (51.5%). In terms of spending supporting economic development, Latvia's municipalities already allocate an average of 17.6% of their budgets to economic affairs2, more than the OECD local governments average (14.2%) (OECD, 2025[5]).
This notwithstanding, evidence from the OECD Economic Survey: Latvia 2026 suggests that there may be certain areas where municipalities may need additional fiscal capacity to more effectively support their spending responsibilities. For example, when reviewing inter-governmental transfers to support road maintenance, the OECD report finds that additional funding for roads that has been transferred from the national government to municipalities is based on cost estimates that have not been indexed to inflation, leaving municipalities to absorb the difference from their own resources (OECD, Forthcoming[35]). The implications for territorial development and attractiveness are significant: local roads connect residents to jobs, students to schools and businesses to markets, and their condition shapes whether a municipality is an attractive place to live, work and invest.
Additional evidence regarding local fiscal capacity needs relates to the allocation of resources through the Local Government Finance Equalisation Fund, Latvia’s largest (non-earmarked) grant mechanism. Research from 2023 indicated that in one third of municipalities, the equalisation formula did not fully cover the costs of delivering local government functions to a minimum standard (Congress of Local and Regional Authorities, 2024[36]). Underlying revenue-raising disparities among municipalities reinforce fiscal capacity concerns. In 2024, OECD data show that the municipality with the highest revenue-raising capacity, Mārupe in the Riga Planning Region, registered approximately 70% higher revenues per capita than the lowest-performing municipality, Augšdaugava in the Latgale Planning Region, even after equalisation and other conditional transfers were taken into account (OECD, 2026[37]). If left unaddressed, the abovementioned challenges risk undermining balanced territorial development in Latvia. Smaller and less well-resourced municipalities are the least able to absorb funding shortfalls from their own resources, which risks affecting the quality and/or accessibility of public services on those territories as a result, and with it, their territorial attractiveness.
A periodic review of the equalisation formula could offer a useful starting point for ensuring that the allocation of resources through inter-governmental transfers continues to reflect the actual costs of the expanded range of functions allocated to municipalities following the ATR. The current equalisation system has not been amended since 2015, and the President of Latvia has called for a review of the formula’s underlying methodology to ensure that municipal needs continue to be met (OECD/UCLG, 2022[2]; President of Latvia, n.d.[38]). Issues worth exploring include the low weight currently assigned to territorial size in the formula. Specifically with respect to roads, it would be valuable to consider explicitly incorporating the length of local roads and streets as a cost factor, an approach already adopted in Lithuania (OECD, 2021[39]). Additionally, the formula should be revisited on a regular basis, to ensure that it can keep account for future changes in municipal costs. Australia, for example, updates its cost-equalisation methodology annually and conducts a comprehensive review every five years to ensure it accurately captures real cost pressures across its diverse subnational landscape (OECD, 2021[39]). Such steps can help to further strengthen the ability of all municipal governments to realise their attractiveness potential in a balanced manner.
Bolstering subnational investment capacity to deliver Latvia's territorial attractiveness agenda
Beyond fiscal capacity, OECD evidence also suggests there is room to increase subnational public investment capacity in support of regional development. Latvia’s local governments invested an average of 37.8% in economic affairs – higher than the OECD average for local governments alone (31.6%), and slightly more than local governments in Estonia (35.5%) and Lithuania (35.6%). Yet, overall, public investment by local governments in Latvia is lower than their OECD local government counterparts as a share of total public investment – 32.3% compared to 44.2%, respectively (OECD, 2025[5]). With local governments responsible for delivering substantial parts of Latvia's regional development agenda, from local roads and educational infrastructure to the green transition, a larger share of public investment, driven by local governments could more readily translate national, and subnational, development priorities into viable investment projects on the ground.
One option to build practical investment capacity is to use inter-municipal co-operation to share specialist roles within local administrations, particularly in areas such as strategic planning, project design and project management. Smaller municipalities cannot always justify full-time specialists on a standalone basis, yet such expertise is critical for designing high-quality investment proposals and mobilising EU Cohesion Policy funds and other external funding sources. Pooling these roles among co-operating municipalities can help provide individual local governments with access to expertise they would otherwise struggle to sustain alone. Such co-operation could also generate the possibility for local authorities to co-operate on larger scale projects with greater territorial development impact in their communities.
Further strengthening performance measurement for regional development in Latvia: subnational data availability and planning region capacity
In addition to the financial resources discussed above, subnational actors also need sufficient human and technical capacity to lead the design and implementation of regional development efforts on their territories. While Latvia's local governments form the country's sole subnational administrative tier, with responsibility and resources for delivering public services and investing in their territories, the country has also retained a regional layer to support the co-ordination of territorial action at a larger scale. Latvia is one of six OECD countries to have planning regions (OECD, 2022[40]). While Latvia’s planning regions have no formal administrative powers, they play an important role in supporting the organisation of territorial action at a regional scale. They are substantial contributors to designing, monitoring, and evaluating regional-level strategic and spatial plans, co-ordinating between municipalities and the national government, promoting economic activity in their territories, and mobilising EU funds (Government of Latvia, 2021[14]; KPMG, 2024[41]; OECD, 2026[3]; OECD, 2026[30]). Planning regions are funded through the state budget, voluntary contributions from municipal budgets, as well as competitively-awarded EU Cohesion Policy funds (Saeima, 2025[10]; OECD, 2026[30]).
However, addressing technical and human resource gaps that link to performance measurement, could better enable planning regions to perform their tasks and responsibilities more effectively. In addition, periodically reviewing whether specific inter-governmental transfer arrangements continue to reflect the actual costs of municipal service delivery, particularly in areas where mandates or responsibilities have evolved over time.
A pre-condition for the ability of subnational governments to achieve their regional development objectives is an effective performance measurement system. Performance measurement, in turn rests on two foundations: the availability and accessibility of good-quality subnational data, and the skills of the staff tasked with using it in their monitoring, evaluating, and reporting tasks. Gaps in either area risk undermining policymakers’ ability to assess the effectiveness of policy interventions, learn from what does or does not work, and improve their territorial development performance.
Latvia has already established a strong subnational-level database for measuring performance in regional development. The RAIM.gov.lv online portal and the Data.gov.lv portal consolidate regional-level and municipal-level datasets from a wide range of national-level public bodies into two unified, central hubs (RAIM, 2026[42]) (Data.gov.lv, 2026[43]). The former uses data visualisations to create territorial profiles for each Latvian municipality using a select range of data (e.g. focused on local budgets, economic development and entrepreneurship, as well as a limited number of social well-being indicators) (RAIM, 2026[42]). The latter is a broad subnational data repository covering a wide range of policy areas that are relevant for regional development and attractiveness (e.g. education, population, geospatial data). (Data.gov.lv, 2026[43]). Together, these portals are an important technical resource that promote subnational data availability and accessibility and can help planning regions track their progress in reaching strategic objectives.
The portals could be further strengthened by incorporating other subnational indicators relevant for measuring territorial development performance, and providing data by planning region or municipality. A number of indicators related to innovation, tourism and cultural amenities, land resilience and climate risk, as well as transport and digital connectivity that could support regional development planning and regional attractiveness initiatives are not broken down by region or municipality (Seunga Ryu et al., 2024[44]). For example, the lack of subnational data on internet download speeds within a specific territory makes it difficult to assess how digital connectivity varies across regions, and to understand where investment in digital infrastructure could most strengthen regional economic development and attractiveness. Moreover, where regional and local datasets are available, they often lack international comparability, which undermines the ability of policymakers to benchmark whether their territory is an attractive place to live, work or invest compared to other OECD territories (Seunga Ryu et al., 2024[44]). Closing these gaps would provide both national and subnational policymakers with a strengthened evidence base for identifying where regional attractiveness is strongest, where it is weakest, and where targeted action could make the most difference.
Latvian planning regions have a solid human resource base that enables them to fulfil their strategic planning-related responsibilities. However, there may be scope to further bolster the skills and knowledge of planning region staff to conduct tasks in support of effective monitoring and evaluation, such as selecting appropriate performance measurement indicators (Box 3.4). Doing so could help planning regions better, and more comprehensively, track progress in achieving strategic objectives set out in regional development programmes, as well as national-level territorial development objectives.
An indicator is a measure that can capture different types of information and provides insight for evidence-informed decision making. Indicators are generally divided into four categories:
Input indicators reveal what resources (e.g. people, money and time) are used in what amounts to produce and deliver goods and services.
Output indicators capture the goods and services that activities produce (e.g. number of local civil servants trained, the number of SMEs that received financial support, kilometres of roads built).
Outcome indicators capture the dimension that is expected to change as a result of an intervention (policy, programme or project). Outcome indicators show the real-world changes that practical outputs will produce (e.g. the percentage of people who have improved their situation in the labour market within a certain number of months after their participation in training).
Impact indicators relate to the expected impact of a policy intervention on the economy or society in general. They measure changes in the long term.
In determining what to measure, two factors are particularly important: the objectives of the performance measurement system, and the objectives of the strategy, policy, programme or project.
Source: (OECD, 2009[45])
A review of Latvia's regional development programmes suggests that while output indicators are commonly included to track progress towards strategic goals, outcome and impact indicators are not included with the same regularity. The Latgale Planning Region Development Programme 2021-2027, for example, outlines 44 measures across four priority areas, each with corresponding output indicators – yet outcome or impact indicators are missing in most cases (OECD, 2025[46]). Without the latter, Latgale Planning Region can measure whether activities are taking place on its territory, but not the real-world effect of these activities as regards improving regional development and attractiveness.
By contrast, the Kurzeme Planning Region Development Programme 2021-2027, which sets out almost 150 measures across eight priorities, includes outcome and impact indicators for many of its measures (Kurzeme Planning Region, 2021[47]). Even so, gaps remain in certain areas, including housing, social services, and climate resilience. The line of action on climate adaptation and crisis response illustrates this: indicators capture infrastructure delivery (e.g. the number of kilometres of coastal protection established) rather than outcomes (i.e. the share of the population living in flood-prone areas, or the share of critical infrastructure assessed as resilient to flooding risks) (Kurzeme Planning Region, 2021[47]). Even where relevant data exist, the indicators selected to track progress towards objectives are not always the most appropriate ones for assessing outcome or impact. Strengthening the ability of planning regions to identify appropriate performance targets would help policymakers better understand whether their actions are leading to desired results, or whether programming changes may be necessary to more effectively support efforts to make Latvia's regions more attractive places to live, work, and invest.
Addressing subnational data gaps and capacity-building needs
To further strengthen performance measurement practices for regional development in Latvia, policymakers could consider the following. First, further improve the availability of subnational data for territorial development, by enhancing the RAIM portal. One option is to integrate the OECD regional attractiveness compasses – and the full set of their underlying data – from the OECD regional attractiveness framework, developed for all Latvian municipalities and planning regions. This would have several benefits. For instance, it would improve regional- and local-level data coverage in areas where Latvian subnational datasets are currently lacking. For example, while high-quality digital infrastructure, such as high-speed internet, has been shown to be instrumental for attracting talent and investors (OECD, 2023[48]), this information is not available through existing government data portals. The OECD regional attractiveness framework includes it at both regional and local levels, including for Latvia. Moreover, as OECD regional attractiveness data are internationally comparable, it would also enable subnational governments to benchmark their territorial performance against each other and also against national and EU peers, a practice which is currently limited. Additionally, it would provide a richer evidence base with which to monitor progress towards the achievement of Latvia’s strategic objectives for regional development.
Second, the Central Statistical Bureau (CSB) could consider adopting a partnership-based approach to working with planning regions and municipalities to identify and address subnational-level data gaps. While integrating the OECD regional attractiveness data into RAIM will further bolster subnational-level data availability and accessibility in the short term, the data needs of subnational governments will continue to evolve as new policy priorities emerge. A partnership-based approach, whereby the CSB convenes periodic meetings with planning regions and local government associations to identify collective subnational data needs and uses the findings from these meetings to inform the development of new territorially disaggregated datasets, would help ensure that data availability at the territorial level keeps pace with evolving needs over time. The United Kingdom's ONS Local service provides a useful illustration of how such an approach can work in practice (Box 3.5).
The UK Office for National Statistics (ONS) established ONS Local in 2023 as an analytical advisory service for local leaders. With dedicated analysts based across all nine English regions and liaison officers in Scotland, Wales and Northern Ireland, the service helps subnational governments access and use national data, and identifies subnational data gaps that the national statistical system can then work to fill.
Regarding the latter element, ONS Local works in two complementary ways. First, at the request of individual or groups of local authorities, combined authorities and devolved administrations, it produces ‘one-off statistical analyses. Recent examples include analyses of broadband connectivity for the County of Oxfordshire and economic inactivity by reason for the East Midlands Combined County Authority. Second, ONS Local feeds data gaps identified through this engagement into the wider ONS workplan, where their relevance for regional development extends beyond a single or small number of territories. This ensures that demand from subnational government shapes the development of new statistical outputs over time.
Source: (ONS Local, 2026[49])
To further strengthen human resource capacity to conduct performance measurement exercises, moreover, it could be considered to expand the capacity building support provided to planning regions (OECD, 2026[30]). More broadly, in order to improve understanding of where different planning regions' future capacity-building needs may lie, it is important to assess their current performance in meeting their tasks and responsibilities, including how efficiently and effectively they deploy available resources to meet territorial needs. While regular information is collected on the capacity-building needs of planning regions, and training programmes are already provided, the evidence reviewed for this report suggests that planning regions may benefit from targeted support in specific areas that have not yet been fully addressed, such as identifying appropriate performance targets (OECD, 2026[30]). In addition to monitoring and evaluation, separate research has suggested that other areas where planning regions might also benefit from additional capacity-building support include investment planning and investment promotion, cost-benefit analyses of EU-funded projects, and navigating State aid regulations, among other needs (KPMG, 2024[50]).
It should be ensured that any diagnostic survey or capacity assessment of planning regions considers performance indicator design, alongside any other potential gaps identified through ongoing dialogue with planning regions themselves. Where gaps are identified, targeted, multi-year training programmes or other capacity-building initiatives could be developed in partnership with relevant providers (including the Latvian School of Public Administration, LIAA, and academic institutions) and designed around clearly defined learning outcomes.
Latvia has the foundations in place for an effective multi-level governance system to support place-based regional development. The legislative and strategic frameworks set out clear responsibilities across and among levels of government and embeds the co-ordination of regional development policy as a guiding principle. The 2021 Administrative-Territorial Reform has produced larger and more financially viable local governments, and the country's five planning regions provide a layer of co-ordination at a scale that exceeds individual municipal boundaries.
As this chapter has argued, however, the ATR is one building block among several to support balanced territorial development. Realising the underlying ambitions of the reform, making Latvia's regions more attractive places to live, work and invest, also depends on strengthening co-ordination arrangements for regional development and building the evidence base to support inter-municipal co-operation. Additionally, it depends on addressing subnational data gaps, while identifying and providing targeted capacity-building support to planning regions to aid the achievement of their strategic plans based on evidence collected on the evaluation of their current strengths and gaps in delivering their core functions. In each of these areas, building on the strong foundations already in place, the chapter has identified opportunities for further refinement.
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For each indicator, the Annex Table 3.A.1 reports a definition, identifies the primary data sources for Latvia and for EU-level comparison, and specifies the reference year.
Legend:
1. OECD’s LDP refers to the OECD Local Data Portal.
2. OECD refers to the OECD Data Explorer.
3. GISCO refers to the Geographic Information System of the EU Commission, GISCO - Eurostat.
4. Sources in the Latvian datasets are represented by “LV{Code},” where Code corresponds to the table code in the Oficiālās statistikas portāls.
5. OSM is the acronym for OpenStreetMap, mapping platform that provides freely accessible geospatial information.
← 1. The abovementioned data excluded a fifth revenue-raising category, social contributions, which in 2023 constituted 1.2% of local public revenues in Latvia, and 0.9% of local public revenues across the OECD on average.
← 2. Economic affairs is the COFOG classification most closely associated with general economic development.