Remarks by Angel Gurría
OECD, Paris - 17 June 2019
(As prepared for delivery)
Minister Mahama, Mayor Abderrahim, Distinguished guests, Ladies and Gentlemen,
I am delighted to open the First International Conference of the World Observatory on Subnational Government Finance and Investment and to welcome so many leaders from different associations of subnational governments and institutions. I want to thank the Secretary-General of United Cities and Local Governments (UCLG), Ms. Emilia Saiz, for joining me to open this crucial meeting.
We are proud to be launching today the 2019 Report of the World Observatory on Subnational Government Finance and Investment. This is the largest international data repository on subnational government structure and finance ever produced.
Allow me to take this opportunity to also thank our partners, without whom this work would not have been possible: the UN Capital Development Fund, the French Development Agency, the development bank of the Council of Europe and the Network on Decentralisation & Local Governance (DeLOG).
We cannot dispute the growing importance of regions and cities today. At the OECD alone, we have over 137,000 subnational governments. Just a few months ago in Athens, Ministers came together for the OECD’s Regional Development Policy Ministerial Meeting to discuss how regions and cities today are on the frontline of many of the most pressing global challenges of our time – globalisation, digitalisation, ageing, migration, climate change and environmental degradation.
These so-called megatrends are already dramatically changing the way we live and work in our regions and cities. For example, we know that for the first time in history, over half of humanity lives in urban areas; and this number is expected to rise to two thirds by 2050! In the OECD, cities are also growing older, by 2020 one third of Europe’s population will be over 65 years old and many cities continue to attract large numbers of newcomers. In this respect, going ‘local’ with place-based policies is crucial in order to ensure that all places are able to seize the opportunities and mitigate the downsides of megatrends.
Subnational governments today are also the localised “face” of government that citizens interact with most directly and as such, they have an increasingly crucial role in responding to the general trend of declining trust. They therefore need to have the capacities – financial, human and strategic – to perform effectively and to work in partnership with national governments.
To do so, we need reliable and comparable data. We cannot manage what we cannot measure!
The report that we are launching today provides a wealth of financial and investment data about subnational governments. This allows policymakers and stakeholders to have a clear picture of the growing relevance of their regions and cities to be able to make informed decisions about the way forward.
Overall, 122 countries have been surveyed, representing 86% of the world population or 89% of the world GDP. Our work includes both comparable data and indicators, and for the first time, it allows us to look at the multi-level governance and finance systems, such as expenditure, investment, revenues and debt at the subnational level.
The report is presented in two volumes: an atlas of country profiles, and a synthesis of our key findings.
Let me highlight four key findings that we can draw from this work.
First, the data shows that, on average across the 122 countries we surveyed, one-quarter of total public expenditure is associated with subnational governments – in OECD this ratio exceeds 40%. Of course, there is a huge diversity in these figures with some countries, such as Canada or China, having more than one-third of their public expenditure spent by subnational governments, while others less than 5% – like Chile or Turkey. Subnational government revenues also represent one-quarter of total public revenue across the world.
Second, the data emphasises the key role of investors of subnational governments. For example, these actors are in charge of 37% of public investment around the world, and almost 60% in OECD countries. At the same time however, the data shows that public investment in subnational governments remains low in many countries. Subnational public investment is only 1.3% of GDP around the world. And it is even less in low-income countries. For instance, in Africa subnational public investment is just 0.9% of GDP and less than 20% of total public investment. While in the Asia-Pacific region, it is twice as high: 1.8% of GDP and 41% of public investment.
Third, in the OECD, subnational public investment was declining for eight years following the 2008 crisis. Investment cuts occurred in almost all sectors, and particularly in sectors such as housing and transport, which registered sharp declines. By contrast, health, social protection and education expenditures were overall spared. Since 2018, it has started to rise once again but significant catching up is needed, in particular in Europe, where the level of subnational investment remains particularly low at 1.2% of GDP. As such, exploring new ways to diversify funding will be crucial and I understand this is one of the key topics you will be discussing here today.
And fourth, the report provides a consolidated picture of the size of municipalities across the globe which varies considerably. For instance, Africa and Asia-Pacific have the world’s largest average municipal size, around 130,000 inhabitants, whereas in Euro-Asia, Europe and North America, the average size of municipalities is smaller. And there are huge variations within macro regions. In Europe for instance, the average municipal size ranges from less than 2,000 inhabitants in France, to more than 150,000 in the UK. This data is crucial for the design, the implementation and the monitoring of urban policies.
Ladies and Gentlemen:
This new report – and the amazing web platform and the data visualisation tool that accompany it – are more than just data and knowledge. This work is about building our collective capacity, putting in place informed, targeted and concrete actions and working together for the benefit of all.
So let’s continue to be bold and innovative, let’s be forward-looking as we design, develop and deliver policies for more inclusive, more sustainable, more human-centred regions and cities. Thank you.