Public investment accounts for around 3.5% of GDP on average in OECD countries. After a slight decrease up until the mid-2010s, public investment has picked up in recent years as governments respond to economic recovery needs and rising demands in areas such as defence and energy security. Drawing on responses to the RPF Survey, this chapter shows that ongoing savings measures in this area. These include reducing capital spending, strengthening prioritisation or selection mechanisms to improve value for money, and simplifying and streamlining capital investment frameworks. Savings can also be achieved through timely maintenance of existing assets and the optimised use of public infrastructure. Increasing user charges and ensuring strategic alignment with fiscal priorities represent other possibilities to relieve spending pressures.
Restoring Public Finances
Enabling Effective Government
Abstract
After a prolonged period of declining spending relative to GDP, public investments have picked up in the past few years, reflecting governments’ efforts to support economic recovery and invest in risk preparedness. Given the current fiscal context and the need for large investments in a range of public assets, the RPF Survey shows that governments are pursuing selective saving measures to ensure that investment expenditures are directed toward projects with the highest expected returns and are efficiently spent. In the area of public investment, respondents are using a mix of approaches to achieve savings, also mobilising procurement and regulatory tools through simplification.
Reform initiatives and savings measures
1. Reducing capital spending on public works and infrastructure
Postponing or scaling back planned projects in public transport or government buildings to create fiscal space.
Unspecified sectoral saving targets, allowing the detailed measures to be identified by line ministries or agencies and decided later.
2. Strengthening prioritisation or selection mechanisms
Improving appraisal frameworks to ensure only high‑value projects proceed and focusing budgets on strategic assets.
Ensuring life‑cycle costs are considered in project appraisal and selection.
Introducing “place‑based” business cases, assessing a package of interrelated investments within a specific area rather than appraising each project individually.
3. Simplifying or streamlining capital investment frameworks
Consolidating guidelines and documentation requirements, to reduce administrative costs and accelerate time-to-delivery.
4. Achieving savings through the optimised use of public assets
Efficiency requirements to reduce operating costs or space needs in public buildings.
Maximising commercial revenue from assets, e.g. concessions in train stations.
5. Achieving savings on maintenance of existing assets
Using new technologies to reduce maintenance costs and improve reliability.
Shifting from reactive to planned and preventive maintenance.
This chapter discusses savings measures in public investment, which refers to spending on capital assets including infrastructure and public works, and the costs associated with these assets. It covers transport infrastructure, office buildings, hospitals, schools, IT systems and other fixed assets (Box 10.1). In OECD countries, government spending on public investments averaged 8.3% of general government expenditure in 2024, ranging from 4.0% in Costa Rica to almost 15.9% in Estonia (Figure 10.1). This reflects a slight fall from the average of 8.4% in 2019, although several countries have seen notable shifts, in both directions.
Government investment, 2019 and 2024
Note: Data for Chile and Türkiye are not included in the OECD average. Chile and Indonesia data for 2023 rather than 2024. No data available for Türkiye.
Source: OECD Public finance main indicators - government at a glance, yearly updates, based on OECD National Accounts Statistics (database) and Eurostat Government Finance Statistics (database), OECD Data Explorer.
In this chapter, public investment refers to government spending on long-lasting capital assets, and the costs associated with these assets. It includes spending by central, state and local governments and social security funds. For government, it comprises assets such as transport infrastructure, office buildings, IT systems, housing, schools, defence systems and hospitals. Its main component is capital spending.
Capital spending is used to refer to expenditures in new fixed assets or improvements that increase the stock of productive capital. Operations and maintenance spending refers to current expenditures required to operate and maintain existing assets and services. Both of these are included in public investment.
The measure of government investment presented in Figure 10.1, Figure 10.2 and Figure 10.3 follow the definition of the System of National Accounts (SNA), as it allows comparative analysis of investment spending across countries and over time. This data includes gross capital formation and acquisitions, less disposals of non-produced nonfinancial assets. Gross fixed capital formation (also called fixed investment) is the main component of government investment. In the SNA 2008 framework, expenditures on research and development (R&D) are also included in fixed investment.
Source: Understanding National Accounts (Lequiller and Blades, 2014[1])
In OECD countries, government investment spending averaged at 3.6% of GDP in 2024 (Figure 10.2).
Government investment in the OECD area, 2007-2024
Note: Data for Chile and Türkiye are not included in the OECD average.
Source: OECD Public finance main indicators - government at a glance, yearly updates, based on OECD National Accounts Statistics (database) and Eurostat Government Finance Statistics (database), https://data-explorer.oecd.org/s/4gs.
The period of decline in government investment since the early 2000s has raised concerns about deteriorating infrastructure in some countries and sectors. Government investment represented on average 15.5% of total national investment in 2023 (OECD, 2025[2]), and plays an important role in providing transportation, energy and information assets. In recent years, the shares of public investment in energy, defence and healthcare have increased, while shares spent on transport and general public services have declined (OECD, 2025[3]). This reflects an observed trend of public investment increasingly being used to address megatrends and manage risks linked to energy security, ageing populations and geopolitical developments (OECD, 2022[4]). With more than half of government investment carried out by sub-national governments (Figure 10.3), their constrained fiscal situation could add to this. Sub-national governments often take on investments in local infrastructure such as public transport, roads and bridges or facilities for education, health and other public services (OECD, 2025[5]). While different regions face distinct challenges, the investments needed to support structural transformations and strengthen the resilience of physical and digital infrastructure to future shocks are expected to be substantial (OECD, 2022[4]).
Distribution of government investment spending across levels of government, 2024
Note: Chile data for 2023 rather than 2024 and not included in OECD average. No data available for Türkiye.
Source: Public finance and procurement by level of government - government at a glance indicators, yearly updates, based on OECD National Accounts Statistics (database) and Eurostat Government Finance Statistics (database), https://data-explorer.oecd.org/s/4gt.
In budget planning and oversight, public investments pose several distinct challenges:
Investment appropriations are often fragmented. They may appear in central government budgets, intergovernmental transfers, and across multiple line ministries and agencies. This can complicate strategic prioritisation, co-ordination, effective monitoring, and communication. The OECD provides a framework to support effective public investment across levels of government (see Box 10.2).
Large investment projects take a long time from conception to delivery, often extending beyond electoral cycles. This leaves them exposed to changes in government priorities, which can result in costly redesigns or cancellations. Major projects are also frequently subject to delays and cost overruns due to cost inaccuracy or optimism. As a result, projects are often completed later and at substantially higher cost than initially estimated in the budget process.
Public assets typically have long lifespans and intergenerational implications, requiring sustained maintenance and periodic renewal. Long replacement horizons can make underinvestment in maintenance attractive in the short term but costly over time (Blazey, Gonguet and Stokoe, 2020[6]).
Accounting rules and statistical conventions shape how investments are defined, recorded and timed in public budgets. Differences in capitalisation thresholds, depreciation methods, and the boundary between capital and current spending can affect internal budgeting incentives and limit cross-country comparability.
For large public investment, enhancing management and co-ordination across levels of government is essential, as reflected in the OECD Council Recommendation on Effective Public Investment Across Levels of Government. This recommendation serves as a guide to set priorities for enhancing investment by improving co-ordination mechanisms and capacities of sub-national governments for the effective management of public investment, and draws on the lessons learnt from the Global Financial Crisis. The basis for developing the Recommendation was the 2011 report Making the Most of Public Investment in a Tight Fiscal Environment: Multi-Level Governance Lessons from the Crisis. The Recommendation sets out 12 Principles grouped in three pillars that represent three systematic challenges to efficiently managing public investment at both national and subnational levels: i) co-ordination challenges; ii) capacity challenges; and iii) challenges in framework conditions. Chapter 12 of this report addresses fiscal transfers across levels of government.
Source: OECD (2014[7]) Recommendation of the Council on Effective Public Investment Across Levels of Government; and (OECD, 2025[8]) “OECD Effective Public Investment Toolkit”.
Figure 10.4 gives an overview of recent reform initiatives and saving measures related to public investment, drawing on the responses to the RPF Survey. Around half of respondents reported at least one saving reform in this area. In the context of tight fiscal constraints, measures to reduce capital spending on public works and infrastructure are most common. The savings measures reported in the RPF Survey are diverse but illustrate that governments seek to strike a balance between robust governance and the timely delivery of projects.
In addition to the saving strategies presented in Figure 10.4, several respondents reported continued or targeted increases in investment spending, sometimes as part of their budgetary strategies to stimulate long-term growth. Ireland, Slovenia and the United Kingdom are examples of respondents that prioritise spending on investments in regional development, transport, energy and housing to support productivity growth. Some countries, such as Canada and Mexico, are shifting spending from day-to-day operating spending to capital investments with the same rationale.
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses. Measures reported as “other” in the RPF Survey have been split into the following three sub-categories, based on the qualitative information provided by respondents: “Simplify or streamline capital investment frameworks”, “Strengthen prioritisation or selection mechanisms” and “Other measures in infrastructure and public works”.
Source: 2026 OECD Restoring Public Finances Survey, Question 10: Infrastructure and public works.
10.2.1. Reduce capital spending on public works and infrastructure
The majority of savings measures fall in this category. Several of the reported measures involve postponing planned investments. Austria, Hungary and Iceland are examples of respondents delaying railway projects, extensions to government buildings or other major projects. Postponements can create immediate fiscal space by temporary reducing capital spending. They do, however, require a holistic view of the stock of existing assets and upcoming maintenance needs, as well as the planned project pipeline, to avoid raising future costs.
Some respondents report planned savings on capital budgets without specifying which projects that will be cancelled or redesigned. This can reflect both portfolio management with ongoing reprioritisation, re-scoping and re-phasing of planned projects, and a top-down budgeting approach where saving requirements are set before the concrete measures are detailed by line ministries or agencies. This is the case in the Netherlands, where the government sets multi‑year expenditure ceilings and identifies the specific programmes or spending items that will achieve the required savings later. The Dutch government maintains this trend‑based framework across sectors and relies in part on expected underutilised funds from the ceilings.
There are some saving measures reported in this category that provide notable insights:
Belgium operates a school building guarantee fund in the French-speaking community that subsidises the interest rate on loans for schools, limiting the school's contribution to the first 1.25% of the interest rate. Under a recent reform, any rate of interest above this threshold must now be paid by the school or its organising authority, shifting more borrowing costs and interest rate risk to local decision makers while reducing public expenditure.
Finland is implementing a new management model to improve cost control and reduce the size of investment projects on government premises. By improving central management of government buildings by the Ministry of Finance and expanding a gross‑rent model (with all utilities and related bundled into one rental payment), agencies are incentivised to minimise space and optimise facility use. By moving agencies into shared working environments and prioritising the modification of existing buildings over new builds, this aims to reduce demand for some large‑scale capital projects.
Norway is actively shifting resources in its National Transport Plan from large-scale new builds to maintenance, thereby allowing a reduction of the investment budget. The Norwegian case illustrates that well-targeted maintenance can be a cost-effective strategy to delay capital expansion (Box 10.3).
The government of Norway is placing greater emphasis on shifting resources away from new large-scale transport projects towards preserving and maintaining existing assets. Due to variations in geographic and topographic conditions (driving up costs), and sparsely populated regions (limiting traffic volumes), many large transport projects in Norway fail to deliver socio-economic benefits exceeding their costs. The strategic shift set out in the National Transport Plan 2025-2036 is grounded in the recognition that maintenance and smaller scale interventions typically yield higher value for money in the Norwegian context. In the 2026 budget, transport‑sector spending is thus reduced by NOK 1.9 billion (equivalent to around 0.03% of GDP). This entails no initiation of new major infrastructure projects. In addition to the shift in the transport plan, the 2026 budget reduces broadband development grants, reflecting Norway’s already high broadband coverage and the high costs associated with further expansion.
Source: Ministry of Finance, Norway.
10.2.2. Strengthen prioritisation or selection mechanisms
Rigorous project appraisal and selection processes can help ensure limited public funds are spent on the projects that offer the best value for money. Several respondents are taking measures to improve prioritisation mechanisms and make sure capital budgets are spent on high‑return projects.
Bulgaria pursues efforts to optimise resource allocation and increase transparency in decision-making processes regarding the approval and implementation of public capital investment projects. The reform includes the development of a new bylaw on the assessment method and approval procedure of investment projects and a standardised methodology for the assessment and selection of public investment projects. Bulgaria also seeks to build capacity among institutions in public investment management.
Faced with tight fiscal constraints, Costa Rica has seen a gradual decline of its infrastructure budget in the period 2018-2024. Seeking alternatives to avoid limiting public investment, the country has explored Public-Private Partnerships (PPPs), public works concessions, and exploiting economies of scale. Recently, the Ministry of Public Works and Transport and the National Road Council have been given the mandate to concentrate resources on strategic projects.
In 2024, a comprehensive spending review was conducted in Lithuania. Based on its findings, all investments in infrastructure and other assets exceeding EUR 1 million are required to undergo an options appraisal, including an assessment of life cycle and maintenance costs and other underlying assumptions, in order to ensure spending efficiency, fiscal sustainability and value for money. The aim of the reform is to make sure decision makers select the most cost-effective option.
In 2025, the United Kingdom launched three major policy initiatives aimed at improving how the government designs, delivers and oversees infrastructure. A ten-year plan was set out for economic, housing and social infrastructure. The strategy includes measures to strengthen project delivery and appraisal, following a review of the government’s guidance on project appraisal (see Box 10.4). The new approach to project appraisal includes the introduction of place-based business cases, which can help help tailor public investment to specific regional or local contexts. In a context of constrained public finances, place-based investment frameworks can improve investment efficiency by better matching instruments and investments to targeted regions; and ensuring that complimentary policies and investments will be in place (OECD, 2025[9]). In this way, they can help save resources that might otherwise be used redundantly or allocated to lower-priority objectives. The two other initiatives from the United Kingdom involve measures to strengthen and accelerate project planning and delivery and are discussed in the following section.
In 2025, the United Kingdom reviewed its guidance on project appraisal – the Green Book – and implemented reforms to its project delivery and appraisal framework, including through the new 10-Year Infrastructure Strategy. The Green Book review responded to concerns that appraisal practice had become overly complex and too focused on benefit-cost ratios, with insufficient weight given to strategic objectives, regional outcomes and complementarities between projects.
The revised approach introduces “place-based business cases”. These bring together the projects that are needed to achieve the objectives of a particular place – as opposed to appraising single projects in isolation. Place-based cases are designed to ensure that complementarities between interventions (for example, between housing and transport) are properly accounted for, and that the strategic contribution of projects to regional economic and social objectives is clearly articulated.
The review also commits to simplifying and shortening the Green Book guidance, improving guidance on transformational change, reviewing the social discount rate to better reflect long-term impacts, and clarifying the role of benefit-cost ratios by moving away from rigid threshold tests. The updated framework emphasises balanced judgements of value for money, considering monetised and non-monetised costs and benefits, as well as risk, uncertainty and strategic fit.
Source: (HM Treasury, 2025[10]).
10.2.3. Simplify or streamline capital investment frameworks
Sound investment management frameworks help governments plan and deliver public investments in a way that maximises returns and controls risks (OECD, 2025[11]). However, overly complicated or fragmented frameworks and requirements can be a source of delays – and additional costs. As a result, some respondents see the need to simplify aspects of their frameworks guiding capital investments, by consolidating regulations and reducing administrative burdens. While such measures may not deliver sizeable savings in the short term, they can help minimise inefficient spending by accelerating project delivery and avoiding cost overruns.
Latvia is simplifying construction design requirements to accelerate the procurement and delivery of infrastructure projects. By reducing duplicate documentation and allowing project initiators to proceed with procurement based on a minimal initial design composition (refining technical details later), the measures aim to shorten early-stage planning, reduce administrative burdens and accelerate time-to-tender. Latvia is also reducing other administrative burdens in infrastructure management.
Mexico’s Guidelines for the Investment Project Management Cycle consolidate a previously fragmented set of regulations into a single, coherent, and integrated framework. The goal is to simplify pre-investment requirements and reduce bureaucracy. One of the most immediate impacts is the elimination of the mandatory hiring of external experts to conduct Cost‑Benefit Analyses (CBA) for certain categories of projects. The government estimates that this will free up resources that would otherwise be spent on consultancy fees. The aim of the reform is to streamline how public investment projects are prepared, assessed, and approved in order to redirect more of the investment budget toward actual physical works.
The United Kingdom has established the National Infrastructure and Service Transformation Authority as a central body responsible for improving how infrastructure is planned and delivered. By combining government strategy expertise with hands‑on project delivery capability, and linking different departments, the new body is intended to address issues such as project delays, cost overruns, and inconsistent delivery standards across government (UK Government, 2025[12]). Furthermore, a newly adopted Planning and Infrastructure Act is intended to streamline planning and accelerate large‑scale infrastructure and housing delivery. At the same time, the government maintains strong oversight of the largest and most complex projects (so-called “mega projects”) in order to mitigate fiscal risks (see Box 10.5).
From a public finance perspective, it is important to minimise the risk of cost overruns from large-scale investments, as this can undermine both fiscal goals and public trust. Yet, such investments are consistently prone to delays and budget increases. For high-threshold investments, independent and impartial expert assessments to test project costs, fiscal sustainability, planning assumptions and risk management can mitigate the risk of cost overruns. Such third-party assessments have been adopted in several countries. For example, in Chile, large infrastructure projects, particularly those involving private participation, are subject to central technical review and fiscal affordability checks before approval. A case from the United Kingdom illustrates the potential for introducing a bespoke approach to the governance and budgeting of the biggest and most complex investments undertaken by the government. Following a study conducted by the Office for Value for Money, the reform aims to improve cost control of “mega” projects by combining stronger strategic oversight with flexible budgeting arrangements. Key elements include the publication of a Strategy and Delivery Plan at key stages of the project – enhancing transparency and parliamentary accountability – while streamlined, project-specific decision processes and assurance plans are introduced to reflect each project’s complexity. Projects in development will receive staged, incremental financing as uncertainty is reduced, whereas projects entering construction will be granted a fixed capital envelope for their full duration, with limited flexibility to reprofile spending.
Source: Office for Value for Money, United Kingdom, (OECD, 2017[13])
Aside from the savings measures reported in this category, Ireland is adopting an “Accelerating Infrastructure Action Plan”. The action plan contains four pillars – legal reform, regulatory reform, co-ordination and delivery reform, and public acceptance. While not intended to deliver fiscal savings, the plan aims to tackle the systemic delays in infrastructure development and delivery. It focuses on modernising legal processes and streamlining regulatory frameworks, with better co-ordination between authorities. The actions are designed to foster a greater appreciation of collective societal benefits and promote a delivery-focused culture for energy, water, and transport infrastructure.
10.2.4. Achieve savings on maintenance of existing assets
Savings on maintenance are not frequently reported in the RPF Survey. Several OECD countries, such as Norway and Sweden, report, on the contrary, that they will prioritise maintenance to prolong the lifespan of existing assets and delay the need for new construction. This can be a cost-effective strategy to reduce replacement costs, limit service disruptions and avoid unpredictable emergency spending (OECD, 2021[14]). Once an investment has been constructed, extending its operational lifespan can add significant value, since the marginal costs of operating the asset tend to be relatively low compared to replacement.
Nonetheless, certain adjustments – such as the use of new technologies – could allow governments to save money without reducing the overall impact of maintenance interventions. Japan reports savings illustrating how costs of maintaining ageing infrastructure can be reduced by employing advanced technologies, enabling a shift from costly, crisis-driven repairs to planned and preventive maintenance (Box 10.6). Latvia is reducing expenditures related to the maintenance of road lights by replacing high-pressure sodium lamps with LED lighting technology in road lighting. The planned transition to full LED lighting will lead to lower electricity costs and improved operational reliability of road lighting systems. Latvia is also reducing expenditures for the maintenance of road markings through the introduction of more efficient materials. New technology can help better identify and target maintenance.
A large share of Japan’s national infrastructure is more than 50 years old, having been built during a period of rapid economic growth in the 1950-70s. This includes bridges, tunnels, water and sewerage systems, and river management facilities. As of 2023, the Ministry of Land, Infrastructure, Transport and Tourism projects that by 2040, the proportion of facilities over 50 years old will rise from 37% to 75% for road bridges, from 25% to 52% for tunnels, and from 9% to 41% for water pipelines. This ageing of assets increases maintenance needs and the risk of accidents in a country that is exposed to a mix of natural hazards, including seismic risks and extreme weather events.
To manage risks and stabilise long‑term costs, Japan is prioritising planned, preventive maintenance, and countermeasures against ageing, shifting away from ad‑hoc repairs after failures. A core part of this shift is the deployment of advanced technologies such as drones, sensors and robotics. The use of advanced technologies serves both to make inspections more efficient, and to compensate for declining manpower in civil engineering departments. The use of non‑destructive testing can enable early detection of internal structural damage, for example in a bridge, without invasive inspections. This can both reduce traffic disruption and maximise the effect of maintenance budgets. According to domestic estimates, preventive maintenance, supported by the above-mentioned technologies, could reduce upkeep costs by around 30% compared to reactive maintenance over 30 years.
Source: Ministry of Finance, Japan; (Ministry of Land, Infrastructure, Transport and Tourism, Japan, n.d.[15])
Beyond the specific saving measures reported in the RPF Survey, incentivising timely maintenance can help countries maximise the effect of limited maintenance budgets. Spending on maintenance and rehabilitation early in the life of an asset is usually cheaper and more efficient in prolonging life spans. For example, in the transport sector, infrastructure deterioration is not linear: after a long period of limited and often unnoticed wear, the condition of the asset can decline more rapidly. The United States Federal Aviation Administration has assessed that USD 1 spent on preventative maintenance early in the airfield pavement life is equivalent to USD 4-5 spent later (Blazey, Gonguet and Stokoe, 2020[6]). Timely spending on maintenance can also lead to sustained efficiency gains. In Peru, a large-scale rural road rehabilitation and maintenance programme initiated in the mid-1990s, led by local communities, reduced the cost of routine road maintenance from USD 1 200 to USD 750 per kilometre over the duration of the programme (Rioja, 2013[16]). Timely maintenance can also help mitigate fiscal risks related to hazards and disasters.
Budgetary strategies to promote timely maintenance can include earmarked user charges, dedicated budget allocations and the use of multi-criteria analysis (OECD, 2021[14]). In addition, keeping records of the age profile and quality of the asset base is necessary to enable appropriate budgeting for maintenance. Despite having elaborate financial and accounting systems, most OECD countries do not reflect nonfinancial assets in the government’s financial statements, and only a few countries, such as Estonia and Ireland, produce comprehensive asset registers.
10.2.5. Achieve savings through the optimised use of public infrastructure
Some respondents are reporting savings from optimising the use of existing assets. Denmark is seeking to optimise the use and management of the state’s building portfolio. Similar efforts are being pursued in Finland, as part of productivity and efficiency reforms in government operations (see also Chapter 11 on Government Operations for a discussion of countries’ initiatives to manage real estate in government). Based on a spending review of parts of the railway sector, Denmark has also implemented a solution that will provide increased revenue from advertising sales at train stations and platforms. Finally, some respondents apply annual efficiency requirements or under-indexation of operating funds, which could also promote adjustments to optimise asset use.
10.2.6. Other measures
Other measures reported in the Survey include relate to accelerating expropriation procedures in Costa Rica and to administrative savings in the Swedish Infrastructure agency.
In addition, Chinese Taipei is promoting the use of public-private partnerships (PPPs) in public infrastructure.
10.2.7. Relieving funding pressures through user charges and strategic alignment
The investment needs across OECD countries are significant and will likely increase in the coming years. Beyond the specific saving measures reported in the RPF Survey, earlier reforms in countries illustrate other options that exist to manage pressures on public investment budgets, including by expanding user charges and aligning spending with fiscal goals through strategic long-term planning.
Increasing user charges
Increasing user charges represents an option to relieve funding pressures, though it may not always be decided at national level, and may depend on the specific operators. Raising revenue from users, auxiliary business activities or recycling assets are some options that could help co-finance public investment.
Beyond the scope of the RPF Survey, many OECD countries already make systematic use of user charges, including tolls, tariffs, congestion pricing and various fees to finance, co-finance or repay infrastructure investments (ITF, 2023[17]). The design varies, but the common rationale is to strengthen cost recovery, signal demand, and reduce the reliance on public budgets. Beyond the pure revenue aspects, revising tariffs and user charges – from both end-users and indirect beneficiaries – can be a way to manage demand and maximise the use of existing assets (OECD, 2021[14]). Sweden and the United Kingdom are examples where major cities (Stockholm and London) have implemented congestion pricing with fees varying depending on the time (OECD, 2021[14]).
Asset recycling is a concept that can be adapted to different contexts and circumstances. The main idea is that owners of assets can sell or lease them, permit broadened ownership over them, or transfer revenue rights in order to raise capital for new investment elsewhere (OECD, 2021[18]). Australia successfully pioneered this model through its Asset Recycling Initiative (ARI). Under this initiative, States financed project development and construction, then sold the operational assets to private investors and reinvested the proceeds in new infrastructure. The central government supported participation with incentive payments equal to 15% of the sale value. Overall, the ARI generated more than AUD 17 billion for infrastructure investment (OECD, 2021[18]). In Thailand, a government-launched infrastructure fund – Thailand Future Fund – was initially capitalised with two expressways owned by the Expressway Authority of Thailand. Under a revenue transfer Agreement, 45% of net toll revenues from these assets were transferred to the fund, allowing the Authority to use the revenue to finance and develop new greenfield projects (OECD, 2021[18]).
Infrastructure assets often include land and other assets that are connected to but not directly used in providing the core services delivered. For example, airports generate significant revenue from commercial activities such as retail concessions including duty-free, car parking and real estate development. Although to a lesser extent, commercial practices for auxiliary business activities are used also in seaports, railways, and motorways. Optimising pricing and the design of commercial activities can increase the overall return from the asset and the funds available for maintenance. Denmark’s measure to increase revenue from advertising sales in train stations illustrates the potential, by providing estimated efficiency improvements of DKK 19 million (equivalent to EUR 2.5 million) yearly.
Aligning spending with fiscal goals through strategic long-term planning
Effective public investment spending requires alignment with fiscal objectives through strategic planning. A long-term infrastructure plan can support cross-sectoral and intergovernmental planning and be designed to favour fiscally prudent projects aligned with national policy objectives. This can be accompanied by a list of priority projects, where policy goals, infrastructure needs, budget constraints – and fiscal risks – are all taken into account (OECD, 2019[19]). In Australia, the independent body Infrastructure Australia prepares a 15-year rolling infrastructure plan (Infrastructure Audit) that outlines the country’s infrastructure needs. Based on the Audit, Infrastructure Australia maintains an annual Infrastructure Priority List of nationally significant projects. Potential investments from the priority list are independently assessed against criteria including strategic fit, economic benefits, and deliverability (OECD, 2021[18]). An infrastructure pipeline, supplemented by a priority list, can help support budget decisions in line with long-term national objectives and fiscal sustainability.
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