OECD Principles
for Effective Public Investment
across Levels of Government
Claire Charbit, OECD
claire.charbit@oecd.org
R...
Subnational governments are public key actors
in the OECD and in the EU
39.9%
63.3%
50.0%
72.2%
33.2%
19.6%33.6%
51.7%
45....
Priority sectors for subnational investment
Breakdown of subnational direct investment by economic function
in the OECD (2...
2000-2013 change in subnational governments
expenditure in the EU
In volume, base
year 2000 = 100
Change in 2013 (%)
+0,1%...
In some countries the adjustment of subnational
finances led to very strong reductions in investment
5
* Average annual
gr...
6
• Coordination challenges
• Cross-sector, cross-jurisdictional, and intergovernmental co-ordination are difficult in pra...
• Invest using an integrated strategy tailored to different places
• Adopt effective co-ordination instruments across leve...
In December 2013, Ministers asked the OECD: to enhance its
dialogue with sub-national governments, cities and regions, as
...
• OECD national accounts and Eurostat
• OECD (2013) Investing Together: Working Effectively across
Levels of Government, O...
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Principles for effective public investment across levels of government

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Presentation on Principles for Effective Public Investment Across Levels of Government made at the conference "New funding models for local governments: how to effectively mobilize resources?" held in Paris France, 3-4 July 2014.
Presentation made by Claire Charbit, Deputy Head, Regional Development Policy Division. For more information please see www.oecd.org/gov/regional-policy/recommendation-effective-public-investment-across-levels-of-government.htm.

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Principles for effective public investment across levels of government

  1. 1. OECD Principles for Effective Public Investment across Levels of Government Claire Charbit, OECD claire.charbit@oecd.org RE SOLUTIONS EUROPE CONFERENCE: NEW FUNDING MODELS FOR LOCAL GOVERNMENTS PARIS, 3-4 JULY 2014
  2. 2. Subnational governments are public key actors in the OECD and in the EU 39.9% 63.3% 50.0% 72.2% 33.2% 19.6%33.6% 51.7% 45.9% 65.8% 26.6% 15.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Expenditure Staff expenditure Public procurement Direct investment Tax revenue Debt OECD average Minimum Maximum European Union average % of general government - 2012
  3. 3. Priority sectors for subnational investment Breakdown of subnational direct investment by economic function in the OECD (2011) Economic affairs (including transport, communication, energy, construction, economic development) 37% Education 23% Environment 4% 12% General public services 9% Recreation, culture, religion 6% 9% Housing & Community amenities Other (health, social protection, etc.) Most of the subnational public investment goes to areas of critical importance for future economic growth, sustainable development and citizens’ well-being.
  4. 4. 2000-2013 change in subnational governments expenditure in the EU In volume, base year 2000 = 100 Change in 2013 (%) +0,1% -2,3% -0,8% +1,0% -1,4% +0,2% 100 105 110 115 120 125 130 135 140 145 150 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP Total expenditure Direct investment Social benefits Staff expenditure Intermediate consumption
  5. 5. In some countries the adjustment of subnational finances led to very strong reductions in investment 5 * Average annual growth rate 2009-2012 ** Average annual growth rate 2009-2011 Average annual growth rate 2009-2013 (% in real terms) Spain Ireland Korea** Portugal Greece Slovak Rep. Czech Rep. Australia* Mexico* Italy Slovenia Poland United Kingdom EU Iceland Austria Netherlands United States* Luxembourg Japan* Germany France Turkey** Switzerland* Belgium Norway Canada* Hungary Denmark Finland Estonia Israel* Sweden -30% -25% -20% -15% -10% -5% 0% 5% 10%
  6. 6. 6 • Coordination challenges • Cross-sector, cross-jurisdictional, and intergovernmental co-ordination are difficult in practice • There is a mutual dependency across levels of government • The constellation of actors involved in public investment is large and their interests need to be aligned • Capacity challenges • Empirical evidence suggests public investment and growth outcomes are correlated to the quality of government, notably at the sub-national level • Recurring capacity challenges (in terms of strategic planning, cooperation with private actors, assessment of long-term impact and risks, capabilities for public procurement, etc.) • Challenges in framework conditions • Critical pre-conditions for effective public investment in the areas of budgeting, procurement, and regulatory quality: if framework conditions are weak, efforts to strengthen coordination and (sub- national) capacities may miss part of their targets Rationale for the Principles The impact of public investment depends to a significant extent on HOW governments manage it Systematic challenges to the multi-level governance of public investment can hinder the achievement of best possible outcomes:
  7. 7. • Invest using an integrated strategy tailored to different places • Adopt effective co-ordination instruments across levels of govt • Co-ordinate across SNGs to invest at the relevant scale Pillar 1 Co-ordinate across levels of governments and policies • Assess upfront long term impacts and risks • Encourage stakeholder involvement throughout investment cycle • Mobilise private actors and financing institutions to diversify sources of funding and strengthen capacities • Reinforce the expertise of public officials & institutions • Focus on results and promote learning from experience Pillar 2 Strengthen capacities and promote policy learning at all levels of government • Develop a fiscal framework adapted to the objectives pursued • Require sound and transparent financial management at all levels • Promote transparency and strategic use of procurement • Strive for quality and consistency in regulatory systems across levels of government Pillar 3 Ensure proper framework conditions for public investment at all levels of government 7 An OECD instrument: The Principles for Effective Public Investment Across Levels of Government This is the first OECD Instrument in the area of regional policy and multi- level governance, with a key role for sub national governments
  8. 8. In December 2013, Ministers asked the OECD: to enhance its dialogue with sub-national governments, cities and regions, as key partners for local and regional development, as well as financial institutions and private operators. The principles for public investment will be enriched with an implementation toolkit: a platform which will gather good practices and identify relevant indicators at all levels of government. Please share your experience with us! TDPCprinciples@oecd.org http://www.oecd.org/gov/regional-policy/ Next steps 8
  9. 9. • OECD national accounts and Eurostat • OECD (2013) Investing Together: Working Effectively across Levels of Government, OECD Publishing • OECD (2013) Regions at a Glance, OECD Publishing • OECD (2013) Subnational government in OECD countries: key data, OECD Publishing • OECD (2014) Recommendation of the Council on Effective Public Investment across Levels of Government • OECD (2014) Regional Outlook (forthcoming) Additional information 9

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