The objective of the paper is to evaluate opportunities of the Latvian variant of local governments’ bench learning system to facilitate sustainable growth of local and regional economy. The research is performed by applying several policy analysis methods. There are several obstacles for local governments to facilitate local economy: influence of neo-liberal approach on EU and national legislation, which minimize opportunities of flexible decisions, based on local circumstances; influence of normativism, which is expressed in over regulation of the majority of local government competences; insufficient motivation of local executives to be creative; insufficient performance capacity. Latvian variant of local governments bench-learning is under implementation by Latvian Association of Local and Regional Governments performing project “Smart Governance and Performance Improvement of Latvian Municipalities”. Model is based on the developing of the experience of the Norwegian Association of Local and Regional Authorities (KS) and the Association of Polish Cities, During the implementation of the project, a benchmarking data base is elaborated; the data base will enable application of quantitative methods and the best practice of the world in the governance of the municipalities, it further will be used for a range of additional activities with a positive impact on the social and economic development of the municipalities and the State. The second main activity – elaboration of cooperation network on the basis of bench-learning concept. In the cooperation network, the representatives of the municipalities help each other by giving advice, discuss different solutions known in Latvia and in the world. During project implementation, the skills of network coordinators to organise and serve the networks are developed. Main thesis: Bench-learning system is powerful instrument to facilitate local initiative to invent and implement innovative methods; suitable for diversification of local economy, therefore facilitates better developing and applying of local and regional human resources; useful for central government to co-operate for better regional policy and organisation of supervision on the basis of applying principles of subsidiarity and proportionality.