Colombia

Launch of Making the Most of Public Investment in Colombia: Working Effectively Across Levels of Government

 

Remarks by Angel Gurría,


OECD Secretary-General

Bogotá, Colombia, 13 October 2016

(As prepared for delivery)

 

 

Minister Gaviria, Mayor Peñalosa, Ladies and Gentlemen:

 

It is a great pleasure to be with you in Bogotá to launch the OECD report Making the Most of Public Investment in Colombia: Working Effectively Across Levels of Government. I would like to thank the Government of Colombia for agreeing to conduct this review.

 

I would also like to say that it is an honour for me to be in Colombia today, only a few days after President Santos received the Nobel Prize for his unfaltering work to achieve peace in this country. The prize is also a recognition of all the efforts and progress made in recent years to build a more inclusive country.

 

Colombia: Investing to reduce poverty and territorial disparities

 

Colombia has made major progress in recent years in strengthening its economy and reducing poverty.

 

Despite the marked regional slowdown, between 2005 and 2015, Colombia recorded average annual growth of 4.5% and markedly reduced poverty from 49% to 28% in just over a decade. Since 2010, the country has also considerably increased public investment – it currently accounts for almost 4% of GDP, higher than the OECD average of 3.2%. Additionally, in 2012, a significant reform to promote more inclusive public investment by redistributing resource royalties more equitably throughout the country was undertaken.

 

However, Colombia still faces various challenges, including the major territorial disparities in terms of GDP per capita across regions. These disparities are compounded by significant infrastructure gaps. For example, the gap in transport infrastructure is greater than in other emergent countries, and the costs of domestic freight transport are among the highest in the world.

 

Improving governance to make the most of investment

 

In order to address these challenges, Colombia should maintain its level of investment. However, it should not lose sight of the fact that the quality of an investment is not just about money. It’s also about establishing priorities strategically, meeting local needs and, above all, improving people’s standard of living. This is what this report is about: how to build effective governanceto make the most of investment.

 

Governance matters because investment is no longer the sole responsibility of national governments. In Colombia, cities and departments are now responsible for 58% of all public investment, almost the OECD average. This new reality calls for new working methods to co-ordinate investment across levels of government and new capacities at sub-national level.

 

That is why, in 2014, the OECD adopted the Recommendation of the Council on Effective Public Investment Across Levels of Government, a legal instrument to help governments at all levels co-ordinate and strengthen their capacity for public investment.

 

The road to further improve investment outcomes in Colombia

 

The report we are launching today confirms Colombia’s commitment to improve investment outcomes and implement the Recommendation of the Council on Effective Public Investment. It also identifies various actions that take an approach in line with the three pillars of the Recommendation and suggests a number of measures to consolidate them. Let me share some of them with you.

 

First, Colombia has considerably improved its fiscal framework for public investment. In 2014, the budget balance of sub-national governments (SNGs) amounted to 1.2% of GDP, and financial debt has been declining. However, looking ahead, it will be important to maintain fiscal discipline in order to be able to manage volatile resource revenues. At the same time, SNGs should make better use of existing borrowing possibilities, while diversifying and increasing their revenue sources.

 

Second, Colombia has strengthened its planning and co-ordination instruments to guide investment priorities at both the national and sub-national levels.The Contratos Plan has been put in place to co-ordinate public procurement across the national and sub-national governments, and inter-municipal co-operation has increased since 2011. Additionally, major efforts have been made to improve local development plans following the municipal elections at the end of 2015.

 

However, a more systemic approach to the governance of public investment is needed to reduce the overall fragmentation of the system. Measures should also be taken to strengthen the link between strategic planning and budgeting at the sub-national level and to introduce incentives to enhance horizontal co-ordination across municipalities, especially in the country’s comparatively small and poorly connected urban areas. Another priority is to reduce even further the scatter-gunning of royalties, currently administered by over 1 000 entities (OCADs), in order to promote investment projects that are regional in scale.

 

Third, it is essential to continue to foster measures that strengthen sub-national investment capacities. Thanks to an innovative evaluation mechanism, the National Planning Department has found that the capacities of two-thirds of Colombian municipalities are low – which may be the most significant bottleneck for effective investment.

 

Colombia has made significant efforts to address this situation, and these efforts must be sustained. The report sets out several recommendations to that end, and I should like to draw your attention to two of them:

  • First, the recommendation for long-term policy continuity and stability to strengthen sub-national capacities in a sustainable way and enhance the role of departments, which play a key role in strengthening local capacities.
  • Second, the recommendation to develop a programme of “differentiated competences” to allow SNGs with greater capacities to administer additional competences and, at the same time, reduce the administrative burden on weaker SNGs.

 

Ladies and Gentlemen: reaching the Sustainable Development Goals requires effective and targeted public investment to promote more inclusive development. Improvements in multi-level governance will help Colombia to implement the New Urban Agenda, to be approved in Quito next week, and to build more sustainable and more inclusive cities.

 

Much of Colombia's work is on the right path. Let’s press on. You can count on the OECD to continue improving co-ordination across levels of government and design better policies for better lives.

 

Thank you very much.