PRINCIPLES FOR ACTION - OECD.org

1 DIRECTORATE FOR public GOVERNANCE AND TERRITORIAL DEVELOPMENTPRINCIPLES FOR ACTIONCENTRE FOR ENTREPRENEURSHIP, SMES, LOCAL DEVELOPMENT AND TOURISMThis brochure provides implementation guidance for the twelve PRINCIPLES contained in the Recommendation on Effective public Investment Across Levels of Government that was adopted by the OECD in March Recommendation is an OECD instrument approved by the Council that results in international norms and standards, best practices and policy guidelines. Recommendations are not legally binding, but practice accords them great moral force as representing the political will of Member Recommendation was developed by the OECD Regional Development Policy Committee (RDPC) and was submitted to an extensive consultation procedure within the OECD and externally.

2 The full implementation guidance with details for all countries is available on the Toolkit web site: of ContentsWhy the PRINCIPLES ?2 Principle 1 Invest using an integrated strategy tailored to different places6 Principle 2 Adopt effective instruments for co-ordinating across national and sub-national levels of government8 Principle 3 Co-ordinate horizontally among sub-national governments to invest at the relevant scale10 Principle 4 Assess upfront the long-term impacts and risks of public investment12 Principle 5 Engage with stakeholders throughout the investment cycle14 Principle 6 Mobilise private actors and financing institutions to diversify sources of funding and strengthen capacities16 Principle

3 7 Reinforce the expertise of public officials and institutions involved in public investment, notably at sub-national levels20 Principle 8 Focus on results and promote learning from experience across levels of government22 Principle 9 Develop a fiscal framework adapted to the objectives pursued24 Principle 10 Require sound and transparent financial management at all levels of government26 Principle 11 Promote transparency and strategic use of public procurement at all levels of government28 Principle 12 Strive for quality and consistency in regulatory systems across levels of government30 Examples of good practices for the implementation of the Recommendation

4 In OECD countries18 Table 1 Indicators to measure the implementation of the OECD Recommendation on Effective public Investment Across Levels of Government32 Effective public Investment Across Levels of Government: PRINCIPLES for ActionPrinciples for ActionCo-ordinate across governments and policy areassInvest using an integrated strategy tailored to different placesAdopt effective instruments for co-ordinating across national and sub-national levels of governmentCo-ordinate horizontally among sub-national governments to invest at the relevant scaleStrengthen capacities for public investment and promote learning across levels of governmentAssess upfront the long-term impacts and risks of public investmentEngage with stakeholders throughout the investment cycleMobilise private actors and

5 Financing institutions to diversify sources of funding and strengthen capacitiesReinforce the expertise of public officials and institutions involved in public investmentFocus on results and promote learning from experienceEnsure sound framework conditions at all levels of governmentDevelop a fiscal framework adapted to the objectives pursuedRequire sound and transparent financial management at all levels of governmentPromote transparency and strategic use of public procurement at all levels of governmentStrive for quality and consistency in regulatory systems across levels of governmentPillar 1 Pillar 2 Pillar 3 The PRINCIPLES group 12 recommendations into the 3 pillars representing systemic challenges to public investment: Effective public Investment Across Levels of Government: PRINCIPLES for Action2 Why the PRINCIPLES ?

6 public investment shapes choices about where people live and work, influences the nature and location of private investment, and affects quality of life. When done right, public invest-ment can be a powerful tool to boost growth and provide right infrastructure to leverage private investment. In contrast, poor investment choices or badly managed investment waste resources, erode public trust and may hamper growth 2013, OECD countries spent close to USD trillion in public investment which represents almost 3% of OECD GDP and 15% of total investment. These overall figures mask huge variation among countries and within them.

7 There is important regional variation both in terms of public investment as a percentage of GDP and public investment per capita. public investment is a shared responsibility across levels of government. Whether through shared policy competencies or joint funding arrangements, public investment typi-cally involves different levels of government at some stage of the investment process. It makes its governance particularly complex. Sub-national governments (states, provinces, regions and municipalities) undertook 72% of total public investment in 2012 across the OECD area in terms of volume.

8 Variations across countries are important, as the sub-national share of public investment ranges from 31% in Greece to 91% in Canada (see figure 1). Most of the sub-national public investment goes to areas of critical importance for future economic growth, sustainable development and citizens well-being. In terms of total invest-ment by sub-national governments across the OECD (see figure 2), 37% is allocated to eco-nomic affairs (transport, communications, economic development, energy, construction, etc.). 23% of public investment is used for education, which helps determine the quality of the future labour force.

9 A further 11% is dedicated to housing and community amenities (com-munity development, water supply, street lighting, etc.). public investment has been under pressure in most OECD countries following fiscal consol-idation strategies. Most OECD governments have moved from large-scale stimulus packages in 2008-2009 to fiscal consolidation in more recent years. Since 2010, consolidation strat-egies and the impact of slow growth on local budgets have reduced the resources for public investment. This trend has put public invest-ment onto a downward path, even as private investment in many countries has continued to contract.

10 Compared to 2007, public investment per capita in 2013 had fallen in 17 out of 33 OECD countries (see figure 3). The way public investment is defined and measured across countries varies. In general, it refers to invest-ment on physical infrastructure ( roads, govern-ment buildings, etc.) and soft infrastructure ( innovation support, research and development, etc.) with a productive use that extends beyond a expenditure: consists of investments ( gross capital formation and acquisitions, less dis-posals of non-financial non-produced assets) and capital transfers ( investment grants and subsidies in cash or in kind made by subnational governments to other institutional units).