Policy Pathways Beyond the Shoreline

8. Strengthening multi-level governance for island development

Abstract

The chapter argues that the success of island economies may largely depend on the quality of governance, and that multilevel governance can help turn the challenges of insularity into opportunities. Drawing on examples from Croatia, Greece, and Sweden, the chapter shows that islands often face fragmented responsibilities, weak co-ordination, limited administrative capacity, complex funding systems, and a lack of reliable data. To address these challenges, countries are adopting new approaches such as recognising the special situation of islands in law, assessing how policies affect islands, improving fairness in funding, strengthening data tools, and involving local communities in decision-making. Overall, the chapter presents a clear framework to help governments develop more co-ordinated, fair, and responsive policies for island regions.

Introduction: Governance as the bridge between geography and opportunity

Across the OECD and the European Union, islands act as microcosms of territorial governance. Their geography magnifies the challenges faced by many regions, which include limited connectivity, small and dispersed populations, and high service-delivery costs, while also concentrating distinctive opportunities in renewable energy, biodiversity, culture and tourism. Whether these assets translate into opportunity depends not on geography itself but on governance: on how institutions at national, regional and local levels collaborate to design and deliver coherent, place-sensitive policies.

The OECD–EU Technical Support Instrument (TSI) initiative on island economies, implemented with Croatia, Greece and Sweden, shows that multi-level governance (MLG) (e.g. the system linking national, regional and local authorities), is a decisive factor in island performance. When co-ordination works, insularity can become a source of innovation and resilience; when it fails, even well-funded programmes fall short.

This chapter distils lessons from these three countries to inform policy in all OECD and EU members. It demonstrates that islands, often considered peripheral, are in fact laboratories of governance innovation, revealing how co-ordination, evidence and participation can make national systems more cohesive and adaptive.

Diagnosing the governance challenge in island economies

Despite their diversity, islands across the OECD face a remarkably consistent set of governance challenges. Their common predicament stems not only from physical isolation but from institutional fragmentation (e.g. divided responsibilities, centralised control, and limited local capacity) that weakens policy coherence and delays implementation.

• Fragmented responsibilities often blurred accountability. Responsibilities for island development are often spread across several tiers of government. In Croatia, overlapping competences between island municipalities and counties create duplication and occasional gaps in responsibility. In Greece, central ministries, decentralised administrations and municipal authorities share mandates without clear accountability. In Sweden, islands are managed within larger municipalities, so island needs can be overshadowed by mainland priorities. This fragmentation leads to inefficiency, inconsistent delivery and lost synergies.

• Centralisation and limited local flexibility. Transport, infrastructure, education and energy policies are still predominantly designed and financed by central governments. While centralisation can ensure consistency, it limits adaptation to the specific realities of insular territories. In Greece and Croatia, subnational governments depend heavily on earmarked transfers, leaving limited fiscal room for manoeuvre.

• Weak horizontal co-ordination. Sectoral policies advance largely in isolation. Tourism, environment, transport and digitalisation strategies each affect islands but are rarely co-ordinated. Without inter-ministerial mechanisms, islands may receive overlapping or even conflicting initiatives.

• Capacity constraints. Small municipalities often lack technical staff and expertise to prepare projects, manage procurement or monitor EU-funded investments. Access to shared administrative services and training is uneven, reducing implementation quality and continuity.

• Data gaps and statistical invisibility. National data systems seldom capture island-specific indicators. This absence limits visibility in national analyses and funding formulas. New initiatives are starting to close the gap: Croatia’s 148-indicator island dataset, Greece’s Island Dashboard and forthcoming Island Barometer, and Sweden’s proposed island typology and improved data disaggregation are important steps toward evidence-based policymaking.

• Complex financing and limited citizen participation. Funding streams for islands remain fragmented across national and EU programmes, each with distinct eligibility rules. Meanwhile, citizen participation tends to be formal rather than participatory, although island communities’ small scale allows direct dialogue and collaboration.

Together, these issues form a systemic pattern: fragmented authority, centralised decision-making and limited capacity reduce agility. Overcoming them requires linking institutions vertically, co-ordinating them horizontally and empowering them locally.

Country pathways: Institutional architectures and reform experiences

The pathways of Croatia, Greece, and Sweden illustrate how diverse administrative systems can adapt multilevel governance to insular realities. Each has approached reform from a different starting point (e.g. centralisation in Greece, fragmentation in Croatia, and decentralisation without an “island lens” in Sweden), however all converge on the same conclusion: governance quality determines results.

Croatia: From fragmentation to integration

Croatia demonstrates how a small unitary state can integrate island concerns into its national development system. The Islands Act (2018) and the National Island Development Plan (2021–2027) legally recognise insularity, define institutional roles and align island policy with EU Cohesion Policy.

The Directorate for Islands within the Ministry of Regional Development and EU Funds co-ordinates implementation, supported by an Islands Council and a network of county-level island co-ordinators connecting national and local levels. The 148-indicator monitoring system offers one of Europe’s most comprehensive island datasets, and annual parliamentary reporting strengthens accountability.

Remaining challenges include overlapping mandates between counties and municipalities, limited local technical capacity and co-ordination that still relies more on formal procedures than on continuous collaboration. Strengthening feedback loops and linking evaluation results to policy adjustment could help transform reporting into a genuine learning process.

Greece: Co-ordination within centralisation

Greece’s governance remains among the most centralised in the OECD, even if recent reforms have improved co-ordination for island policy. The Island Policy Council (IPC) provides high-level political oversight, while the General Secretariat for the Aegean and Island Policy (GSAIP) serves as the permanent technical secretariat. This dual structure (e.g. political and technical) helps align objectives across levels of government.

Island policy in Greece also has a pronounced geopolitical dimension: many Aegean islands simultaneously constitute EU external borders, frontline entry points for migration and areas subject to specific defence-related spatial restrictions, which reinforces the need for a coherent, cross-government insular strategy.

Data-driven tools such as the Island Dashboard, Price Observatory and upcoming Island Barometer are enhancing evidence-based decision-making. Building on these instruments GSAIP is also preparing island-specific business monitoring tools, such as an Island Business Barometer and Island Business Observatory, to track cost pressures, access to finance, seasonality and labour shortages more accurately across island enterprises

In addition, adopting a detailed island typology that distinguishes large, medium, small and satellite islands, and draws on the typologies proposed in this report, would give GSAIP a common reference to prioritise interventions and monitor differentiated outcomes across the archipelagos.

Greece is also developing Territorial Impact Assessments (TIAs) and exploring asymmetric decentralisation, which would grant capable island authorities’ greater autonomy. The next step is to consolidate these innovations into a cross-government framework that mainstreams insularity across all ministries and policies.

Sweden: Integrating islands into a decentralised system

Sweden’s decentralised and well-resourced governance system provides a strong foundation for place-based development. National–local co-ordination works effectively through SALAR (the Swedish Association of Local Authorities and Regions) and the Forum for Sustainable Regional Development. However, islands remain partially invisible as a distinct policy category: they are not explicitly highlighted in the National Strategy for Sustainable Regional Development (2021–2030), and although the municipal fiscal equalisation system includes island-related cost components, stakeholders consider that these coefficients do not fully capture island service-delivery costs or systematically involve island territories in their design.

Reform efforts are now addressing this visibility gap, and the ongoing national inquiry on the future of rural and regional development policy (SVESAM), to be presented in June 2026, is expected to further clarify how territorial impact assessments, including those for islands, can be strengthened and integrated into national policy frameworks.

Comparative insight

Together, these trajectories reveal three complementary pathways to island-sensitive governance:

• Legal integration, embedding insularity in national legislation (Croatia);

• Institutional consolidation, co-ordinating central and subnational actors (Greece); and

• Policy mainstreaming, ensuring visibility within existing decentralised systems (Sweden).

All point to the same conclusion: governance quality determines results.

Emerging good practices and governance innovations

Across the three countries, several practices stand out as adaptable models for OECD and EU members.

• Legal recognition of insularity. Croatia’s Islands Act and Greece’s Sustainable Development of Greek Islands framework make island priorities visible and enforceable.

• Dual co-ordination mechanisms. Political councils (e.g. IPC, Islands Council) supported by technical networks (island co-ordinators or focal points) combine strategic guidance with day-to-day problem-solving.

• Data and monitoring systems. Indicator sets, dashboards and typologies make insularity measurable and inform targeted investment.

• Fiscal and financing reforms. Adjustments to equalisation formulas and differentiated funding, such as Sweden’s cost-equalisation review and Croatia’s dedicated island funding instruments, introduce fairness into intergovernmental finance.

• Participatory and learning-based governance. Sweden’s use of citizen feedback and public consultations, and Croatia’s feedback-oriented reporting, show how local dialogue strengthens trust and accountability.

• Integrated Territorial Programmes. Croatia’s island partnerships under the 2021–27 Integrated Territorial Programme exemplify how EU instruments can deliver co-ordinated, multi-sectoral investment.

Together, these innovations point toward governance that values data, dialogue and design as instruments of inclusion and resilience.

A framework for island-sensitive multilevel governance

Building on the evidence from the three case studies, five interlinked pillars define effective governance for island economies. They provide a coherent structure for connecting institutions vertically, co-ordinating them horizontally and learning continuously.

Table 8.1. A framework for island-sensitive multilevel governance

Pillar	Objective	Illustrative examples
Legal and Strategic Foundations	Ensure islands are visible in national strategies and legislation; mandate regular reporting to national assemblies or parliaments.	Croatia’s Islands Act and National Island Development Plan; Greece’s integration of island policy into the National Growth Strategy.
Institutional Co-ordination‑	Align political and technical structures; clarify roles and accountability across levels of government.	Island Policy Council (Greece); Islands Council and island co-ordinators (Croatia); SALAR and national–regional forums (Sweden).
Evidence and Impact Assessment	Ground decisions in reliable, disaggregated data and systematic evaluation of territorial impacts.	Greek Island Dashboard and Barometer; Croatia’s 148 indicators; Sweden’s proposed island typology and ICIA approach.
Financing and Fiscal Equity	Adjust equalisation and transfer mechanisms to account for insularity; simplify and harmonise access to funds.	Sweden’s review of cost equalisation; Croatia’s Integrated Territorial Programme; Greece’s initiatives to improve access to EU funds.
Capacity, Participation and Learning	Strengthen administrative capacity, promote citizen participation and embed continuous learning mechanisms.	Technical support teams and capacity partnerships (Greece); citizen feedback initiatives (Croatia, Sweden).

These pillars reinforce one another: better data improve co-ordination; co-ordination enhances financial fairness; and participatory learning strengthens capacity.

From framework to practice: Strategic policy directions for islands

To translate this framework into practice, governments can follow ten concrete, evidence-based actions grounded in the experience of Croatia, Greece, and Sweden:

A. Legal and strategic visibility

• Integrate insularity clauses into national law and prepare multiannual island development plans aligned with EU programming cycles.

• Institutionalise periodic public reporting on island development to enhance accountability and policy continuity.

B. Institutional co-ordination

• Formalise vertical and horizontal co-ordination through inter-ministerial councils, secretariats and networks of island focal points in key ministries.

• Encourage inter-municipal co-operation for shared services and joint planning among smaller islands, with particular attention to archipelagos facing double or multiple insularity, where co‑ordinating hub and outer islands is essential for cost-effective service delivery.

C. Evidence and evaluation

• Develop robust data ecosystems using dashboards, typologies and open data portals that integrate island indicators into national statistics.

• Apply island-proofing tools such as Territorial Impact Assessments or Island Community Impact Assessments, training officials and publishing results.

D. Financing and fiscal equity

• Simplify funding mechanisms by consolidating programmes, harmonising eligibility criteria and providing multiannual block grants linked to outcomes.

• Incorporate insularity coefficients into fiscal equalisation formulas, supported by periodic cost studies comparing island and mainland service provision.

E. Capacity, participation and learning

• Reinforce local administrative capacity through technical support, partnerships with universities and targeted training initiatives.

• Institutionalise citizen participation via island forums, public consultations and satisfaction surveys to ensure feedback informs policy adjustments.

These steps convert principles into practice, embedding insularity considerations across governance systems.

Box 8.1. Island-proofing of new legislation in Scotland, UK

In Scotland, Island Communities Impact Assessments (ICIAs), established under the Islands (Scotland) Act 2018, ensure that the specific needs and circumstances of island communities are systematically considered in policymaking. An ICIA is required for any new policy, strategy, or service likely to affect island residents. It evaluates potential social, economic, and environmental impacts, helping policymakers identify both positive and negative effects and adjust proposals accordingly. This process promotes equitable, context-sensitive development that reflects the distinct challenges and opportunities of Scotland’s islands.

Toolkit for conducting ICIAs

The Scottish Government’s Agriculture and Rural Economy Directorate has developed a detailed ICIA Toolkit to guide policymakers and stakeholders through this process. The toolkit provides practical resources and step-by-step guidance to ensure that impacts on island communities are fully assessed and addressed.

Key elements of the ICIA toolkit include:

• Guidance on legal requirements: Explanation of obligations under the Islands (Scotland) Act 2018, including when and how to conduct an ICIA.

• Assessment framework: A structured approach for evaluating social, economic, and environmental impacts of proposed initiatives.

• Data collection methods: Tools for gathering relevant evidence, such as surveys, interviews, and public consultations with island residents.

• Stakeholder engagement: Guidelines for involving local stakeholders to ensure their perspectives are incorporated.

• Impact analysis: Methods for assessing data to identify potential benefits and risks.

• Mitigation strategies: Recommendations to reduce adverse impacts and enhance positive outcomes.

• Reporting templates: Standard formats for documenting and sharing ICIA findings.

• Training resources: Educational materials to build policymaker capacity in conducting effective assessments.

Source: Further information is available on the Scottish Government’s official page: Island Communities Impact Assessments Guidance and Toolkit (Scottish Government, 2022[1])

Strategic cross-cutting agendas

Linking with the green and digital transitions

Islands are natural laboratories for climate adaptation, renewable energy and digital innovation. Programmes such as GR-eco Islands in Greece, and Sweden’s work on sustainable energy communities, demonstrate how environmental and digital priorities can be integrated with governance reform. Using EU and national funds for green and digital transitions to pilot new governance models can reinforce both territorial cohesion and sustainability.

Enhancing resilience through learning

Climate change, demographic shifts and economic volatility will continue to test governance systems. Embedding adaptive learning, such as regular evaluation, citizen feedback and flexible programme design, makes governance more resilient, not only for islands but for all regions facing similar challenges.

Conclusions

Islands embody the governance challenges of modern states: co-ordinating across sectors, maintaining equity across territories and engaging citizens under demographic and climate pressures. However, they also display remarkable creativity and resilience.

The experiences of Croatia, Greece and Sweden confirm that geography is not destiny in contrast to governance. When laws ensure visibility, co-ordination aligns institutions, data inform decisions, finance reflects true costs and citizens are engaged, islands can turn insularity into inclusion.

For OECD and EU members, the message is clear: islands are not exceptions but accelerators of governance innovation. Strengthening multi-level governance in island contexts improves public-sector effectiveness, transparency and responsiveness everywhere. By investing in governance, countries can transform insularity into a model of smarter, more inclusive and more resilient territorial development.

Reference

[1] Scottish Government (2022), Island communities impact assessments: guidance and toolkit, https://www.gov.scot/publications/island-communities-impact-assessments-guidance-toolkit-2/pages/1/.