Développement régional

Effective Public Investment at Sub-National Level in Times of Fiscal Constraints: Meeting the Co-ordination and Capacity Challenges workshop

 

Background l Objectives l Agenda l Further reading l Contact

The workshop was held in Paris on 21 June 2012, as part of the joint project with the European Commission which examines ways of stimulating growth and jobs at a time when fiscal resources are scarce. The project addresses the questions of how countries and regions can better manage and finance public investment strategies and which improvements can be made on past practices. The workshop provided a forum for countries and regions to exchange experiences.

Background

Growth and jobs: the perennial goals for policy makers are more urgent than ever. Countries throughout the OECD area continue to struggle with financial constraints, low growth, and in many cases stubbornly high unemployment rates. Many OECD regions are also struggling as the effects of the crisis have often been concentrated in particular places. The financial crisis and its aftermath have provoked a cascade of difficulties for sub-national governments (SNGs), including a serious deterioration of their financial capacity in some countries.

Public investment is used as an adjustment variable in many cities and regions. After the stimulation of 2008-09, public investment is now a target of cuts in many SNGs. This has an impact on aggregate public investment since SNGs are responsible on average for 66% of OECD public investment spending. Better governance of public investment has become a priority and a pre-condition for making better use of scarcer fiscal resources. Public investment, if well managed, represents a potentially important growth-enhancing form of public expenditure. But how could countries and regions better manage and finance public investment strategies? What improvements can be made over past practices?

The OECD is currently engaged in a project with the European Commission that addresses these issues. To invest public funds so that they yield maximum growth impact, it is necessary to identify and address the critical governance factors. The question then arises as to whether (and what) incentives attached to investment funds can improve the return on public investment and how sub-national capacities can be enhanced so as to improve the quality of public investment. The OECD seeks to improve our understanding of the multi-level mechanisms governing sub-national public investment, with a view to increasing efficiency and effectiveness of that investment. The approach is not limited to EU countries and covers all OECD countries.

Objectives

The objectives of this workshop were to: (i) discuss preliminary results gathered from this project, (ii) learn from the experience of regions in which case studies have already been organised and (iii) get input from experts on the issues addressed in this project. The information from the workshop will inform the remaining stages of the project and the preparation of the final report. The workshop was both an opportunity for regions to exchange experiences and a chance to establish a network of regions with which the OECD could further collaborate in the future. The discussions were held in a workshop format, with a limited number of participants and an informal exchange of knowledge among regions involved in the project, national representatives, experts, the OECD Secretariat and representatives of the European Commission.

Agenda

Overview

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Session 1: Creating conditions for effective public investment - national framework conditions and incentives across levels of government

This session focussed on national framework conditions and incentives across levels of government for public investment. In particular the session will address broad governance conditions required at the national level and ex-ante requirements/incentives (“conditionalities”) used by central and supra-national governments on sub-national governments (SNGs) for more effective public investment strategies.

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Session 2: Building regional and local capacities for effective public investment

This session focussed on the different levers of governance (capacities) that sub-national governments should possess to select, implement, and manage an investment mix that promotes endogenous regional (and national) economic growth in an efficient and effective way. The session will discuss in particular strategic and administrative capacities of SNGs for public investment.

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Session 3: Strengthening financial capacities of sub-national governments for public investment and mobilising banks and private actors

This session addressed the financial capacity challenges that sub-national governments face. Indeed, public investment tends to be used as an adjustment variable when SNGs face financial difficulties, which, given that SNGs represent two thirds of public investment, may have long-term consequences. The session will discuss the need to diversify sources of financing for public investment projects: the role that investment banks can play to support investment projects and how to mobilise private finance, in a difficult context for firms.

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Session 4: Investing together: rewarding results and learning - better enforcing public investment strategies across levels of government

This session focussed on governance instruments to better enforce and monitor public investment strategies across levels of government. It will address in particular performance monitoring tools and the coordination instruments to reward performance and promote learning. The good practices and challenges from contractual arrangements across levels of government will be discussed.

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Further reading

Contact

For more information please contact Dorothee.Allain-Dupre@oecd.org.

 

 

 

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