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.

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. 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. 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. 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. 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
• 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. • 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. 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. • 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