Principle 3 - Invest at the relevant scale



Effective Public Investment Line 3



To reduce duplication of unsustainable investments due to inter-jurisdictional competition and promote economies of scale.
There are many reasons why sub national horizontal co-ordination is essential to encourage investment. The small scale of public investment projects can result in lower returns on that public investment. The fragmentation may also result in an insufficient minimum scale for the investment to even be considered at all. Sub-national horizontal coordination helps increase efficiency thanks to economies of scale through joint investments. It is likely to be easier, for example, to encourage co-ordination around investments in basic infrastructure and service provision (e.g. water, sewage) and more difficult around “strategic” investments where sub-national governments might find themselves competing to secure public facilities, to attract intergovernmental grants, or to attract private investment and qualified persons.

To manage positive and negative spillovers among neighbouring regions.
There is some quantitative evidence that benefits of public investment in neighbouring regions can be just as important, or more, than direct public investment in that region. For example, a rural region close to an urban region will strongly benefit from improved transportation infrastructure in the urban functional areas. In general, public investment externalities seem to be more relevant for regional growth than direct public investment in each region (Rodriguez Posé, 2012).


Provide relevant incentives to enhance cooperation across jurisdictions through mergers or collaboration such as:

  • establishment of joint authorities (all levels);

  • co-ordinated investment strategies (all levels);

  • Develop adequate governance systems for metropolitan areas (all levels);
    urban rural partnerships (all levels); or

  • platforms for cross-jurisdictional dialogue and co-operation (all levels), including cross-border mechanisms when adequate.


  • Invest without considering the investments in, or impacts on, neighbouring areas.

  • Create a mechanism for horizontal collaboration with duplicative functions with sub-national governments.

  • Force collaboration where fiscal incentives are not aligned.


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See real life examples on how countries have been putting this principle into practice. Read more


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Country profiles on how they have been using the toolkit to assess public investment capacity . Read more


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Indicators and self assessment questionnaire on this principle. Read more



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