LOCAL ECONOMIC DEVELOPMENT

Local Economic Development Agencies (LEDAs)

An instrument to promote Entrepreneurship and Decent Jobs at Decentralized Level

by Alfredo Lazarte Hoyle

Senior Expert in LED / ILO

I. BACKGROUND

The International Labor Office, according to its constitutional mandates and responding to the particular appeal of the international community during the Social Summit (Copenhagen, 1995), is working together with the UNDP, UNOPS and other development agencies on a Local Economical Development approach (LED). Generally speaking, the LED approach promotes and supports activities related to employment creation and income generation.

The past 6 years this approach has been successfully implemented in countries in a special situation like war affected countries, countries in transition, countries affected by natural disasters as well as countries affected by social conflicts. ILO is for example in charge of LED activities in Croatia, Bosnia-Herzegovina, South Africa, Mozambique and Ukraine. The LED approach was developed by ILO and its partners in Central America. ⁽¹⁾

II. LED: STRENGTHENING LOCAL CAPACITIES TO GUARANTEE A SUSTAINABLE PROCESS

It is today commonly accepted that the >local dimension plays a fundamental role in the sustain ability of different development programs. The involvement of >local actors' in the different stages of these programs has demonstrated to be crucial as they know the main characteristics, potential and problems in their territory. These actors coming from the public and private (profit and non-profit) sector, form the social, economic and institutional backbone of society. ⁽²⁾ They can therefore define priorities and the most suitable answers to locally felt needs. Participation in the decision making process by stakeholders in the local economy is an essential element of the LED approach. The LED approach promotes also dialogue between the different partners in order to minimize frictions and guarantee the sustainability of its activities.

The main objectives of the LED methodology are:

Consensus Building

Strengthening Local Human Resources

Search for Synergy Effects

Public Awareness Raising

Incorporation of local actions in a national framework

To reach these objectives, particular attention should be given to:

a) Rational use of local potential (including natural resources, access to markets and other facilities).

b) Extension of financial facilities, promoting access for micro and small entrepreneurs and producers.

c) Improvement of the quality of human resources in the area (promoting and supporting entrepreneurship, matching the offer of vocational training with the requirements of the labor market, offering incentives to keep and maintain a high-qualified pool of motivated human resources, etc.).

d) Development of infrastructures and services to improve the efficiency of the economic activities (roads, energy, stocking facilities, technical and managerial consulting services, diffusion of relevant information for enterprises, etc.)

All this requires an organized and coordinated effort through which knowledge of local reality and necessities will be transformed in an economic value.

III. RELEVANCE OF LED IN COUNTRIESIN TRANSITION

Most of Central and East European countries are currently undergoing a transition from a central planned economy to a market economy. As a result of this process and often under external pressure (Astructural adjustment") many central governments turn towards decentralization as an answer to the need to reduce their size and scope of activities.

The transfer of responsibilities to the local level is however seldom accompanied by the necessary transfer of resources and technical capacity, enabling an effective management of the new responsibilities.

Moreover, decentralization seems to be the magic word, which would "automatically" guarantee a higher degree of representation, participation and efficiency. But if these decentralization processes are not well guided, they could have opposite effects. Social and cultural differences between groups and regions may be reinforced and may result in a fragmentation of society. In the light of these risks, a highly participatory, transparent and comprehensive approach has to be promoted.

IV. LED AND RECONCILIATION PROCESSES IN WAR AFFECTED COUNTRIES

The reconciliation process between different groups which were fighting each other during civil war, is essential to sustainable peace. This supposes a progressive effort to rebuild the generally damaged social society. The LED approach offers an excellent opportunity to generate an enabling and positive environment where people define common interests and priorities to confront common problems. Experience has shown that in a relatively short period, people become convinced of the advantages the joint mechanisms bring about to promote economic development.

V. "LEDA" AS AN INSTRUMENT TO IMPLEMENT A LOCAL ECONOMIC DEVELOPMENT POLICY.

V.1. Mission

LEDA's main objectives are:

1) to respond to the need for local capacity to design viable, entrepreneurial projects and services promoting enterprises on the basis of democratically decided priorities.

2) to catalyze local economic initiatives according to the potentials and unfulfilled economic needs of the area.

V.2. Geographical coverage

One of the most important decisions in the promotion and setting up process of the LEDA is the determination of a appropriate geographical coverage. Homogeneity in physical-geographical terms, in political-administrative terms, in economic-productive or in social-cultural terms should be taken into account and are essential for LEDA's successful functioning and sustain ability.

V.3 Functions

Once the territory in which the LEDA will operate is defined, its personal will have to carry out a diagnosis of the area, to determine its potentials in natural and human resources, as well as its unsatisfied economic needs. On the basis of this diagnosis, the LEDA will carry out such tasks as:

i) orientation and stimulation of local economic initiatives,

ii) assistance in the preparation of feasibility studies for new enterprises

iii) intermediation and / or provision of credit

iv) training and technical assistance

v) maintenance of relations with national and international institutions for technical and/or financial support.

LEDA's activities will be essentially oriented towards the identification and implementation of profitable, efficient and organized entrepreneurial activities which will contribute to the local productive development. It will support those activities or projects which correspond best to the economic potential of the area. These projects should fulfil criteria like: use of endogenous resources, promotion of multiplier effects towards the local economy and provision of goods or services contributing to the local productive development.

Furthermore, gathering, processing and making available of information is an essential function of the LEDA.

In summary, the LEDA will act as a focal point (or liaison unit) for the economic development of a specific territory. In this way the LEDA will help to coordinate national and external technical cooperation efforts in the area, according to the problems and priorities identified by the organized population itself.

V.4 Structure

The LEDA should be understood as a networking service involving key actors in the local economy coming from public and private (profit and non-profit) sector. A light structure facilitates its consensus building capacity and the coordination of activities, including the provision of complementary services. LEDA's structure should therefore consist of an assembly, a technical team and eventually of specialized units.

It is essential that the assembly reflects a balanced representation of the public and private actors in the area. This democratically functioning body will define the strategy, the policy and the priorities of the LEDA.

The technical team is in charge of the technical assistance and services provided by the LEDA according to its functions as described above. The technical team should also contribute to the improvement of entrepreneurial projects already in the stage of execution.

For specific functions such as the creation and maintenance of a data base, administration issues, fund raising and public relations, specialized units may be set up when the LEDA develops itself.

VI. LEGAL STATUS AND SUSTAINABILITY

The Agencies have to be considered as independent bodies, having a legal status. Its continuity depends on the commitment of the different local actors involved. In order to promote its sustainablitly, it is important that the local actors assume responsibilities right from the start.

The promotion and setting up phase of the LEDA is an intensive and highly participatory process involving an ad hoc forum of representatives of public institutions, NGOs, local authorities, small producers organizations and community organizations.

In this way, the local representatives will not perceive the LEDA as something imposed on them from the outside, but will look at it as their Agency. They will defend the Agency and strive for its continuity over time, giving it social sustainability.

Furthermore, the LEDA has to fit in the existing legal framework in the country, and be accepted by national authorities as a complementary mechanism to the instruments which traditionally available to government. In other words, the LEDA, being a new figure in the national context, should gain its place and legitimacy in the eyes of government. This should be understood as political and administrative sustainability.

Talking about sustainability, the first thing that usually comes to mind is the financial /economic sustainability, meaning that the LEDA cannot expect to be financed continuously from external sources. Moreover, stressing the need for financial/economic sustainability also means stressing the need for efficient functioning and adoption of an internal business culture.

VII. POTENTIAL IMPACT

As has been said earlier, the setting up process of the LEDA is a joint effort involving representatives of public and private institutions and organizations. Especially in countries affected by war, countries in transition or suffering of social conflict, the action of bringing these people together to discuss the LEDA proposal can be considered as an achievement in itself.

Furthermore, the perspective of creating a mechanism for cooperation and coordination of productive efforts at the local level is felt as an opportunity by the organized beneficiaries. In many cases, they will gain access to services for productive activities, which were previously denied to them. At the same time, the social actors within the LEDA can expect to benefit from these coordination efforts, through synergetic effects of their cooperation.

Moreover, the LEDA should start its functioning with highly visible projects, which have direct impact on the quality of life of the local population. Resulting demonstrative effects will prove that the collaboration between the citizens, community organizations, business communities and the State will contribute to the development of the area. It will prove that "local energies" work.

1. Different international donors and sponsors were involved in these initiatives, for instance: the Italian Cooperation, the Netherlands Cooperation, US-AID and Peace Corps, GTZ, the Canadian Cooperation, UN Trust Funds, UN and EU programs and projects of different international NGOs. Financial agreements were established or are foreseen through joint ventures or loans with IDB-Inter American Development Bank, CABEI -Central American Bank for Economic Integration-, World Bank, GTZ, etc.

2. Local actors can be: local authorities, workers' and employers' organizations, cooperatives, NGOs, producers' associations, Chambers of Commerce, banks, etc.