Public investment in local economic development: conceptual framework

Анотація

The article examines the conceptual foundations of public investment in local economic development and, on this basis, identifies the principles for establishing a public investment management system in Ukraine. Public investment has a positive impact on growth. Research by the Organization for Economic Co-operation and Development shows that countries with higher levels of public investment increase their productivity more rapidly than those with lower levels of investment. Therefore, establishing and ensuring the effective functioning of a public investment management system, particularly at a local level, is crucial for fostering local economic development. The author clarifies the meaning of the term “public investment” as used in OECD documents, the Roadmap for Reforming Public Investment Management, and the Budget Code of Ukraine, since the establishment of the desired public investment management system requires the adoption of a unified terminology, in particular a definition of the term “public investment”. A comparison above leads to the conclusion that public investment in Ukraine focuses on fixed assets rather than services, institutions, and systems (in contrast to the OECD definition cited above, which specifically includes both areas). This can be explained by the focus on post-war reconstruction projects, which will primarily target the restoration of damaged infrastructure; however, an array of institutions, services, and systems is no less important for ensuring the quality of life of the population during the post-war reconstruction. The article examines a number of concepts relating to public investment, including the concept of public goods, the concept of long-term development (capital formation), the institutional concept, the concept of investment as a tool for development, the concept of public value (creating public value, CPV), the concept of efficiency of public expenditure (value for money), the concept of a place-based approach, the concept of decentralization, the concept of multi-level governance, and the concept of participatory governance. Based on a study of the conceptual foundations of public investment in local development, the author concludes that public investment often acts as a driver of economic development in communities, provided that it is effective, well-managed, and coordinated, and takes into account the needs of the specific territorial community or region. The article suggests expanding the set of principles set out in the Roadmap (which should be ensured by the target model of the public investment management system) to include the following principles: expediency – to avoid diverting financial resources from other more valuable areas and to use public investment as a tool for development; creation of public value – public investment should focus not only on economic efficiency, but also on social justice, environmental sustainability, improving quality of life, and building trust; and effective coordination and management of public investment across different levels of government.

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