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Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing
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Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

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Page 1: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

Intergovernmental Fiscal Relations &

Local Financial Management Course

ISS - MDP - UMI - WBI

Local economic development

A.H.J. (Bert) Helmsing

Page 2: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 2

Overview

Topics to be covered

• Local economic development: why important?

• Local economic development approaches• LG policies and instruments• Networking for local economic development

Page 3: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 3

Local economic development

Why local economic development?• Growing unemployment and underemployment

• Rapid urban growth but declining urban productivity:– Congestion, crime, social discontent

– Unavailability of basic infrastructure (interruption in electricity)

– Rising urban transaction costs (cost of doing business)

• Lesson from Structural Adjustment:– market institutions and private sector investment response do

not emerge spontaneously

Page 4: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 4

Local economic development

• Liberalisation with globalisation:– exposes local producers to global competition

– also new opportunites (e.g. Ethiopean leather manufacturers on e-commerce)

• Growing recognition of importance of business environment

– externalities

– coordinating private and public investment

• Decentralisation to local governments: – need to develop local fiscal base

– public sector as a source of private sector growth

Page 5: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 5

Local economic development

Sources of local economic growth• Demand

• Supply– externalities

– learning

• Governance: economic institutions

Page 6: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 6

LED: Sources of growth

Demand• internal demand not enough to get out of low-

level trap• tap external demand both nationally, regionally

and globally• what do buyers want?• how to get entry to export markets?• how to overcome production and transaction

barriers?

Page 7: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 7

LED: Sources of growth

Externalities:• advantages from agglomeration

– concentration of labour skills

– specialised inputs at lower costs

– information and technological spillovers

• potential for collective efficiency– by joint actions local producers can:

* advance specialisation among them

* organise flexible specialisation and subcontracting networks

Page 8: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 8

LED: Sources of growth

• potential for collective efficiency (2)– joint action to create private support institutions

* garment manufacturers establishing a fashion information centre

* joint export efforts

* procurement of inputs

– joint action towards government * partner on policies

* lobby for infrastructure

Page 9: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 9

LED: Sources of growth

Learning• being low cost is no guarantee for success• acquisition of new knowledge is key• competences of firms:

– knowledge of inputs, products and processes

– knowledge of clients, suppliers and markets

How do entrepreneurs find out?• invest in learning• invest in research & development

Page 10: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 10

LED: Sources of growth

Entrepreneurs draw on other sources of knowledge

– employees, suppliers and clients

– universities and research centers

– business associations

– business support centers

Collective learning– creating an innovative milieu

Page 11: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 11

LED: Sources of growth

Governance:• bringing actors together: creating a supportive

business environment

• enterprises in a supportive business environment have a competitive edge over firms that do not

Only applicable to formal sector?

Page 12: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 12

Overview

• Local economic development: why important?

• Local economic development

approaches

• LG policies and instruments

• Networking for local economic development

Page 13: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 13

LED Approaches & strategies

LED actions

• to mobilise actors, organisations and resources

• to develop new institutions of LED

• to create greater rationality in the economic

system through dialogue and strategic actions

Page 14: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 14

LED Approaches & strategies

Attract external investment, firms and people

• selective inward investment (brokers of

knowledge)

• linked firms, export intermediaries

• knowledge professionals

Page 15: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 15

LED Approaches & strategies

Establish a basis for local collective action

• organise producers

• identify basis for collective action

• supply and demand for collective action and

support

Page 16: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 16

LED Approaches & strategies

Urban based LED strategies

• Locality development

• Enterprise development

• Community economic development

• Human resource development

Page 17: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 17

LED Approaches & strategies

LED strategies for rural regions

• agro-specialisation: product specific chains

• rural industrialisation: product chains

• natural resource exploitation & (eco-) tourism

Page 18: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 18

Overview

• Local economic development: why important?

• Local economic development approaches

• Policies and instruments• Networking for local economic development

Page 19: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 19

Locality development

Policies directed at:

• image building

• amenity improvement

• business improvement

Page 20: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 20

Locality development

• Improving physical environment of towns

• Infrastructure and site development projects

• differentiated supply of industrial and commercial

stands

• Housing & urban amenities

• Physical security

• Zoning regulations

Page 21: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 21

Locality: instruments

• Fiscal instruments

• tax holidays on property tax

• subsidies on utility charges

• sale of stands at subsidised prices

• fiscal competition

• reduced effectiveness

• prisoner's dilemma

• Locality marketing

Page 22: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 22

Locality marketingTarget markets

Investors

Firms

Tourists

New residents

Consumers Marketing factors

Infrastructure

Attractions

People

Trade

Actors

Source: kotler et al 1993

Manufacture

Administration

Education

Page 23: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 23

Locality marketing

What instruments are used?• Publicity campaigns

– leaflets, promo tours, presence at fairs,website

• Event based strategies– major sports or cultural manifestations

– trade or community fairs

• Urban design and place marking– Townscaping

Page 24: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 24

LED Strategies & instruments

Enterprise or business development

• client group

– new firm formation (start ups)

– attracting new firms

– expanding existing firms

– business innovation and graduation

• manufacturing and services

Page 25: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 25

Enterprise development

Fiscal incentives

Business support services

Infrastructure, land and buildings

Special LED programmes

Page 26: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 26

Fiscal incentives

• investment subsidies– x dollars per 1000 of investment (many countries)

– subsidised land or assets

– designated geographical areas (selective application)

• employment premium– x dollars per job (UK, South Africa)

• tax incentives– company tax

– profit repatriation guarantees

Page 27: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 27

Fiscal incentives

• in kind incentives– "advance" factories or free land

• effectiveness of fiscal incentives– incentive competition reduces effectiveness

– attracts mobile investors

Real or financial support?• Financial subsidies compensate for locational or

competitive disadvantage• Real support seeks to create new competitive

advantages

Page 28: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 28

Enterprise development

Real enterprise support services

• Sign posting

• Business skilling

• Business advice

• Business assistance

• Business support

Page 29: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 29

Enterprise support: signposting

sign posting & re-regulation• reduce institutional disconnect and insecurity

• simplify public regulation

new answers• one-stop enterprise centres

actors and organisations• Chambers of commerce

• Special public agencies (CG, LG)

Page 30: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 30

Enterprise support: skilling

business skilling• entrepreneurship

• financial management & business plan

• marketing incl. exports

• production techniques (quality management)

actors• enterprise agencies, BIAs non-profit and commercial

agencies

• examples: Partners for Productivity

Page 31: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 31

Enterprise advice & assistance

industrial extension services• differences with agriculture

• tailor made advice

• emphasis on extra mural or on site support

formal and informal sector demands

actors• enterprise agencies; BAs, non-profit and commercial

agencies

• Carvajal Foundation; Women's World Banking

Page 32: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 32

Enterprise: support services

finance

marketing

technology and R&D

training

Page 33: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 33

Enterprise development

Special LED programmes• growth points • industrial estates• special economic zones (incl. export zones)• incubators & science parks• innovative environment (or milieu)• cluster development programmes

Page 34: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 34

Special LED programmes

Strengthening (potential for) local clusters and industrial districts• attracting suppliers of inputs• attracting end assemblers• common services• importance of local demand or market potential

Page 35: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 35

LED strategies & instruments

Community economic development• targeted at poor communities

aims• to stimulate local sense of community• stimulate self help/empowerment• create (self)employment• improve living & working conditions• create public and community services

Page 36: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 36

Community economic development

importance of housing improvement

settlement & slum improvement (basic services)

commercial (re-)development • retail trade, services, industry

• high demand: private financing

survival based economic activity• small asset base (backyard or street activities)

• incremental improvements

Page 37: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 37

Community economic development

Creation of Community Development Corporations: CDC's in Sri Lanka• Multiple roles of CDCs• Community Resource Centres (Costa Rica)

Community construction contracts• (Sri Lanka, Ghana, Costa Rica)

Page 38: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 38

Community economic development

Savings & thrift societies (India, Kenya, Bolivia)

Community mortgage program (Philipines)Social funds:

• co-finance investment projects– with community groups– stimulates demand driven projects– facilitates community organisation, participation and

management

Page 39: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 39

CED: social funds

Role of NGO or private sector agency• provide technical assistance

– training in CO, CP and CM skills

• supports management of projects and funds– facilitation for community organisation and

planning– co-signatories for financial transactions

Page 40: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 40

Overview

• Local economic development: why important?

• Local economic development approaches

• LG policies and instruments

• Networking for local economic

development

Page 41: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 41

Actors and networks: firms

Firms/entrepreneurs• role in creating employment and restructuring• role in sustaining competitiveness of a cluster• role in developing enterprise common service • target of competitiveness policies• large firm facilitator of small firm change• social corporate responsibility

Page 42: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 42

Actors and networks: BAs

Business associations• different types• collective interest representation for members• intermediary organisation• intermediary towards support system• concertation at local and national level

(horizontal and vertical nexus)• private interest regulation

Page 43: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 43

Actors and networks: Banking

Banks and Development (Finance) Corporations• banks play key role in restructuring of firm and

sectors• cannot be ignored....• DFCs provide venture capital and investment

finance – local or regional corporations identify with

territory

Page 44: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 44

Actors and networks: IOs

Enterprise agencies (non-profit trust/foundation/corporation)• key provider of support services• can play role of lead actor in LED networking

Sources of finance:• donor/NGO contributions• CG subsidies• revenue generating activities• membership fees and donations

Page 45: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 45

Actors and networks: IOs

Sector specific support agencies• e.g. vocational training• marketing

Institutional modality• public (CG subsidies/enterprise levy)• partnership with private sector (joint finance)• commercial and non-profit (NGO) private

agencies

Page 46: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 46

Actors and networks: new civic actors

Community based organisations: types

Importance of 2nd tier organisation

Community enterprises (private law but community ownership) • to provide social services• credit and other services• own land• promote cultural heritage• train people in skills

Page 47: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 47

Actors and networks: LG

Shift in LG role• from service provider to supporting economic

restructuring (selective target groups)

• from hierarchical to entrepreneurial government

• increasing presence of local government agencies

Shift in LG role: use of public budget• co-financing private sector and community initiatives

• stimulating private sector development (contracting and privatization)

Page 48: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 48

Actors and networks: LG• Regulatory policies:

– reduce cost of inward and endogenous investment– reduce entry and exit barriers – reduce regulation compliance costs– land use planning is key instrument

• Tax policy:– taxation affects competitiveness

– business prefers benefit taxation

• Expenditure policy– co-financing private sector and community initiatives– stimulating private sector development (targetted expenditures,

contracting and privatization)

Page 49: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 49

Networks

Networks: purposes• to integrate vertical (and local) programmes• facilitate flow of information about

opportunities and resources• facilitate better attuning of decision making

among actors– thus preventing negative externalities

– generating positive externalities

• complement market institutions

Page 50: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 50

Network development

Network development is learning process

Network development stages

LED planning: strategies and actions• Concepts, Strategies and Projects (CSP)• Strategy• Projects: flagship and complementary

– implemented by different (sets of) actors

Page 51: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 51

LED planning: strategies and actions

Politics: how to create a basis for action• convincing politicians of importance of economics

• local community's own horizons and expectations

• openness of the political system to economic change

• can leaders, BAs, CBOs and NGOs agree on economic priorities?

• management and politics of change

Page 52: Intergovernmental Fiscal Relations & Local Financial Management Course ISS - MDP - UMI - WBI Local economic development A.H.J. (Bert) Helmsing.

16-11-2000 52

Local economic Development

a new course offered

by

MDP with ISS & WBI