Across the OECD and the European Union, islands serve as microcosms of territorial governance, highlighting both the challenges and opportunities of managing remote territories. Their unique geography intensifies issues such as limited connectivity, small and dispersed populations, and high service-delivery costs, while simultaneously offering potential in renewable energy, biodiversity, culture, and tourism. Realising these opportunities, however, depends on governance: the ability of national, regional, and local institutions to collaborate in designing and implementing coherent, place-sensitive policies.
The OECD–EU Technical Support Instrument (TSI) initiative, implemented with Croatia, Greece, and Sweden, demonstrates that multi-level governance—linking national, regional, and local authorities—is critical for island performance. Effective co-ordination transforms insularity into a source of innovation and resilience, whereas fragmented governance undermines even well-funded programmes. Islands, often seen as peripheral, function as laboratories for governance innovation, showing how co-ordination, evidence, and participation can make national systems more cohesive and adaptive.
Islands across the OECD face a consistent set of governance challenges. Institutional fragmentation, centralised control, and limited local capacity weaken policy coherence and delay implementation. Overlapping responsibilities among different tiers of government create duplication and gaps, while centralised planning restricts local flexibility in key areas such as transport, infrastructure, education, and energy. Weak horizontal co-ordination between sectors further reduces efficiency, and small municipalities often lack technical expertise to manage projects or monitor EU-funded investments. Data gaps also limit visibility, although new tools in Croatia, Greece, and Sweden are beginning to address this issue. Finally, fragmented financing and limited citizen participation reduce accountability and engagement, highlighting the need for vertically and horizontally integrated governance that empowers local authorities.
Croatia, Greece, and Sweden illustrate distinct approaches to island-sensitive governance. Croatia has pursued legal integration, embedding insularity into national legislation through the Islands Act and the National Island Development Plan. The Directorate for Islands coordinates implementation across national and local levels, supported by a comprehensive 148-indicator monitoring system. Greece relies on centralised governance enhanced by dual co-ordination mechanisms, including the Island Policy Council and the General Secretariat for the Aegean and Island Policy, supported by data-driven tools and the development of territorial impact assessments and asymmetric decentralisation. Sweden operates within a highly decentralised system, where islands are partially integrated into broader municipal frameworks. Reforms are underway to improve their visibility in national strategies and fiscal policies, and to strengthen territorial impact assessments.
Comparative analysis of these countries reveals three complementary governance pathways: legal integration to make islands a visible policy priority (Croatia), institutional consolidation to coordinate central and subnational actors (Greece), and policy mainstreaming to ensure islands are considered within existing decentralised frameworks (Sweden). All three approaches demonstrate that governance quality is the key determinant of outcomes for island economies.
Emerging good practices include legal recognition of insularity, dual co-ordination mechanisms combining political and technical oversight, robust data and monitoring systems, fiscal and financing reforms tailored to island needs, participatory governance that strengthens local dialogue and accountability, and integrated territorial programmes that coordinate multi-sectoral investment. Collectively, these innovations highlight how islands can leverage governance structures, data, and citizen engagement to build inclusion and resilience.
Building on these lessons, effective governance for island economies rests on five interlinked pillars that connect institutions vertically, coordinate them horizontally, and facilitate continuous learning, providing a coherent framework for island-sensitive policy and administration.
