Decentralised development co-operation (DDC), or development co-operation led by local and regional governments (LRGs), harnesses the unique expertise, resources and partnerships of subnational actors to address pressing development challenges across a wide range of areas, such as water, waste, mobility, gender equality and climate adaptation. Against the backdrop of a 23.1% decline in official development assistance (ODA) in 2025, understanding the strengths of DDC and the role of LRGs in development co-operation has become increasingly important. Yet despite growing recognition of its contribution, robust evidence on the impact of DDC has remained limited. This report fills that gap by providing an extensive assessment of how DDC contributes to local governance and sustainable development outcomes. It draws on the OECD Creditor Reporting System (CRS) data, 2 surveys of more than 180 LRGs across OECD Development Assistance Committee (DAC) and partner countries (hereafter “DDC impact surveys”), 16 in-depth case studies and an innovative methodology combining text analysis and artificial intelligence-assisted validation that localises DDC ODA flows in the CRS and links DDC aid to measurable outcomes in individual cities and regions. Together, these sources provide qualitative evidence covering all 17 United Nations Sustainable Development Goals (SDGs) and multiple dimensions of local governance, complemented by quantitative analysis of associations between DDC ODA, sustainable development and governance outcomes for which relevant data are available at the regional and local levels.
The Impact of Decentralised Development Co‑operation
Executive summary
Copy link to Executive summaryKey findings
Copy link to Key findingsDDC ODA has grown rapidly over the past decade, but current data capture only part of the contribution of subnational actors
DDC ODA more than doubled between 2013 and 2024, rising from USD 1.8 billion to USD 3.6 billion, growing around 46 percentage points faster than total ODA. Cross-border flows increased by 24% to USD 665 million, although they remain highly concentrated: Spain accounts for around half of reported flows, followed by Belgium and Switzerland. These resources are directed primarily to Central America and the Caribbean, South America and Sub-Saharan Africa. By sector, the largest share supports government, civil society and peace-related activities, followed by health and multi-sector programmes such as urban and rural development, research and training.
Despite this growth, existing CRS data provide only a partial view of DDC activity. Only 15 of 34 DAC members report on DDC ODA flows, and most reporting is aggregated at the national level, making it difficult to identify specific subnational providers or recipient territories. In addition, nearly 70% of cross-border DDC flows are channelled through non-governmental and civil society organisations rather than directly between governments. Data gaps are further compounded by the under-reporting (typically not reported at all) of non-financial forms of co‑operation, including technical assistance, peer-to-peer exchanges and capacity-building activities, despite the existence of relevant CRS reporting categories. As a result, the scale and distinctive added value of DDC are likely to be substantially underestimated.
DDC generates benefits for both partner and DAC countries, with non-financial co‑operation emerging as a key source of value
The value of DDC extends well beyond financial transfers. Among surveyed LRGs from DAC countries, 71% of partnerships include non-financial activities or consist entirely of them, with smaller municipalities relying particularly heavily on these forms of co‑operation. The most common modalities include peer learning, technical assistance, training, study visits and staff exchanges. Survey findings show that these activities create benefits on both sides of the partnership. In partner countries, they primarily enhance access to knowledge and innovation, improved service delivery, financing opportunities for sustainable urban development and institutional capacity. In DAC countries they contribute to knowledge and innovation uptake, and strengthened institutional capacity, highlighting DDC as a mechanism for mutual learning rather than one-way assistance.
Evidence from the DDC impact surveys and case studies points to positive and reciprocal impacts on governance and development outcomes. LRGs in DAC countries report improvements in multi‑level co-ordination, participatory governance and policy innovation, while partner-country LRGs identify the strongest gains in inclusiveness, citizen participation, accountability and strategic planning. Across both groups, the strongest perceived contributions relate to SDG 17 (Partnerships for the goals) and SDG 11 (Sustainable cities and communities), reflecting DDC’s distinctive position at the intersection of global partnerships and place-based development. DDC is also perceived to contribute to SDG 13 (Climate action). In addition, partner-country LRGs report important effects on gender equality (SDG 5), health (SDG 3) and clean water and sanitation (SDG 6), while DAC-country LRGs highlight impacts on institutional strengthening (SDG 16), education (SDG 4) and responsible consumption and production (SDG 12).
Quantitative analysis further suggests that DDC is associated with positive territorial outcomes. Within recipient countries, poorer territories tend to receive higher levels of DDC ODA per capita, indicating a degree of territorial targeting. Linking DDC flows to local outcomes reveals positive associations with income growth, increases in urban green space and decreases in transport-related carbon dioxide emissions. In LRGs in DAC countries, higher levels of DDC engagement and stronger governance performance are also positively associated. By examining selected SDGs and governance outcomes for which relevant data are available at the regional and local levels, this analysis represents an important step towards strengthening the evidence on the impact of DDC. Future work could expand to other DDC-relevant SDGs, including on gender, health and education, and additional dimensions of local governance, including peaceful societies and democratic institutions.
The impact of DDC depends on strong enabling conditions at the local and regional levels
DDC is most effective when it is place-based and rooted in the comparative advantages and expertise of LRGs. Partnerships are more likely to produce tangible and lasting results when they focus on policy areas in which participating LRGs have recognised expertise and operational responsibility, such as water and waste management, urban planning and climate adaptation. Survey respondents identify long-term programming, predictable funding and a stronger focus on areas of technical expertise among the most important actions to increase the SDG impact of DDC partnerships.
Institutional capacity and political commitment are equally critical determinants of success. Sustained political leadership, dedicated staff, cross-departmental co-ordination and effective collaboration with civil society all significantly enhance DDC outcomes. Surveyed LRGs identify strengthened co‑ordination and stakeholder engagement as the single most important factor for improving local governance results. At the same time, human resources constraints remain a major challenge, with only 19% of surveyed partnerships reporting adequate staffing levels on both sides.
National governments play an important role in creating the conditions for effective DDC
National governments can significantly strengthen DDC through conducive legal and institutional frameworks, financing mechanisms, capacity building, co-ordination arrangements and monitoring and evaluation (M&E) systems. These instruments can reduce fragmentation, enhance visibility and enable smaller municipalities to participate more effectively. Differences in national frameworks, including the degree of decentralisation, may also help explain variations in reported DDC ODA across countries. Survey evidence underlines their importance: 55% of DAC-country respondents report operating within a dedicated national DDC framework or law, 56% benefit from national co-financing schemes and 68% rely on national funding support.
Approaches to DDC governance vary considerably across countries. The report proposes an illustrative mapping of four broad models: centrally steered, where national frameworks and financing strongly shape LRG action; co-ordinated pluralism, combining strong subnational autonomy with active national co-ordination; organic dispersion, where autonomous subnational actors operate with limited national alignment; and case-based approaches, where DDC is small in scale and lacks systematic national frameworks. The mapping is intended as a starting point for reflection rather than a definitive classification, as countries may combine features of more than one model. Although no model is universally applicable, effective frameworks balance strategic coherence with local flexibility.
Key recommendations
Copy link to Key recommendationsPromote a renewed DDC narrative centred on impact and mutual benefit
Position DDC as a strategic response to today’s development challenges by highlighting the distinctive role of LRGs in advancing sustainable development. A stronger narrative should emphasise the demonstrable benefits generated in both DAC and partner cities and regions, including the value of financial and non-financial co-operation in addressing shared challenges. DDC actors should systematically capture and communicate how partnerships create value for their own communities as well as for partner territories, translating evidence into compelling messages and narratives for citizens, policymakers and local stakeholders.
Elevate the strategic recognition of non-financial DDC
Recognise peer-to-peer learning, staff exchanges, technical assistance, training and study visits as core instruments of development co-operation rather than complementary activities. Non-financial co-operation should be fully integrated into local development and SDG localisation strategies, with explicit objectives for mutual learning, institutional strengthening and policy innovation. Embedding these activities within existing planning and management systems would maximise their long-term impacts.
Establish conducive institutional frameworks for DDC
Develop clear national strategies and frameworks through legislation, policy guidance or master plans that define the objectives, scope and principles of DDC while ensuring alignment with broader development priorities. Such frameworks should provide predictability, strategic direction with sufficient multi-year visibility for subnational engagement, while preserving the autonomy of LRGs. Stronger multi-level governance arrangements and a place-based, bottom-up approach grounded in local development plans should underpin implementation.
Promote longer-term, more flexible and diversified financing arrangements
Move beyond short-term project funding by establishing multi-year financing cycles that allow LRGs to develop sustainable partnerships and invest in institutional capacity. Diversified funding models drawing on local and regional budgets, national co-financing, international grants and in-kind contributions can enhance resilience at scale. Particular support should be directed towards smaller municipalities through pooled initiatives, technical assistance and dedicated financing mechanisms that lower barriers to participation.
Strengthen DDC reporting and the measurement of non-financial co-operation
Improve the coverage, granularity and consistency of DDC ODA reporting in the OECD CRS, including the systematic identification of contributing and recipient cities and regions. In the short term, text analysis and artificial intelligence can help address data limitations while more standardised reporting systems are developed. At the same time, existing methodologies should be expanded to better capture the scale and value of non-financial DDC activities, including both the resources mobilised and the outcomes generated, to ensure that the full contribution of DDC is reflected in development statistics and policy analysis.
Promote the adoption of harmonised and proportionate M&E frameworks across and within DDC partnerships
M&E should be treated as a core element of DDC projects from the outset, not only as an ex post exercise, so that partnerships can generate more credible and policy-relevant evidence on their contributions over time. Shared M&E frameworks should combine a common set of core indicators with enough flexibility to reflect local contexts, institutional capacities and partnership priorities.