Operational Guide
LOCAL ECONOMIC DEVELOPMENT IN POST-CONFLICT SITUATIONSAND
COUNTRIES IN POLITICAL, SOCIAL AND ECONOMIC TRANSITION
Post-conflict areas, as well as countries in transition, are in urgent need to mobilize domestic and external financial resources for their economic reconstruction. The needs to reconstruct the basic physical, as well as the economic support infrastructure, to jump-start the economy, to create employment opportunities, to create a stable and balanced economy and to restore the private investor's confidence come to the forefront among development approaches, strategies and rehabilitation programmes.
The 'local dimension', along with the implementation of the Local Economic Development (LED) approach plays a fundamental role in the sustainability of rehabilitation programmes aimed to re-launching the economic development process.
Local economic development is a process of transformation of local economy and broader society intended to overcome existing difficulties. It seeks to improve the living conditions of the population by means of consensus-based action among different social and economic local agents (public and private), to take advantage of the endogenous resources by promoting local business capacities, and the creation of innovative capacities in the territory.
The LED approach, within which the local population defines common interests and priorities to confront common problems offers an excellent opportunity to generate an enabling and positive environment. It also facilitates the identification of the advantages of joint mechanisms to pursue these interests.
The main reasons in favour of the LED approach (often referred to as the 'bottom-up' approach) in post-conflict areas and countries in transition are the following:
· the 'top-down' approach (implemented mainly from the central level) proved to be unsuccessful in solving complex developmental problems within rehabilitation Programs;
· the best knowledge regarding local problems, local needs, local resources, local development potential, as well as local motivation for promoting change, exist on the local level;
· it is of fundamental importance that the local community sees its place in the future, has its development vision and development goals and participates in their implementation.
The LED approach plays a catalytic role in the development of post-conflict local economies through:
a) Developing a culture of partnership (including different factions of the conflict and encouraging the participation of different actors in the decision making process) by promoting the definition of common priorities (consensus building), raising public awareness, strengthening local oriented capacities and searching synergies through networking practices (noting that solutions are not feasible in an isolated way).
b) Reinforcing forward and backward linkages in the most relevant economic chains, introducing local dynamics in the national and international scenario and vice versa. (Re-introducing confidence on the national level and introducing local priorities in the National Agenda).
In this framework, the LED process should give particular attention to:
a) The use of local natural resources and potential.
b) The generation of conditions to access financial opportunities (com-plementing and expanding its area of attention).
c) The improvement of the quality of human resources in an area (by promoting and supporting entre-preneurship, matching the offer of vocational training with the require-ments of the labor market, offering incentives to keep and maintain a highly qualified pool of motivated personnel, etc.).
d) The development of the infrastruc-ture and services to improve the efficiency of the economic activities. (Physical infrastructure: roads, energy, telecommunications, water supply, etc., but also the economic support infrastructure: technical and managerial consulting services, diffusion of relevant information for enterprises, etc.).
The implementation of all of this requires an organized and coordinated effort as well as technical capacities to promote entrepreneurial development, income generation and employment creation in order to provide alternatives to meet the needs of the local population. This will be feasible only if due attention is given to one of the main principles of LED, i.e. to the public and private partnerships, since they:
· Consolidate social stability in order to attract new investments.
· Result with a bigger impact, facilitating an even access of the whole population in post-conflict areas and countries in transition to the benefits of local economic development.
· Help to achieve a more appropriate framework at the local/regional level, that could express, in a legitimate way, the priorities and needs of the civil society.
· Modernize and improve the efficiency of the local public administration, in association with the private sector.
· Improve the speed and flexibility in both the decision-making process as well as in the implementation of LED projects.
· Stimulate innovation and initiative.
In this context, the 'regional integrated approach' also becomes an important issue, since it enables:
· the improvement of the territorial management of joint municipal services;
· the strengthening of the regional 'lobbying capacity', in order to mobilize additional resources to the post-conflict area/country in transition;
· efficient use of the available resources in the region.
See Tools 1.1.1., 1.1.2., 1.1.3. and 1.1.4.
The Local Economic Development (LED) approach initially identifies the local actors relevant to the economic dynamics of the territory.
Local actors are basically individuals or representatives from the relevant local governmental as well as non-governmental institutions and other regional and national bodies representing their territory. Generally, they are personalities with a high motivation, capability, initiative and knowledge related to local development issues which enable them to promote change and initiate local development actions - thus contributing to local economic development.
The involvement of 'local actors' in the different stages of Rehabilitation programmes is considered crucial, as they know the main characteristics, potential, problems and needs of their territory. They form the social, economic and institutional backbone, capable of defining the priorities and the most suitable answers to locally felt needs. Therefore, a wide involvement of these local actors with relevance in the decision making process is fundamental in Rehabilitation programmes of post-conflict areas, as well as in countries in transition.
Local actors come from the public as well as the private sector organizations. The public sector consists of the business sector as well as the non-profit institutions.
The following main categories of local (economic) actors should be considered:
Local Governments: in their role as political entities responsible for the following: identifying new development opportunities; defining the economic development priorities; managing the local resources: disseminating information, enabling coordination and cooperation on the horizontal (institutions on the local level) as well as vertical level (institutions on the regional and national level); lobbying for the needs of the territory; promoting initiatives aimed at attracting investments, as well as financial resources to the area; monitoring key development projects and other. They are also a democratic expression of the political orientation options of the territory.
Decentralized Representatives of the Central Government: as the voice of the local options of national politics and of their effective implementation ability in the territory in question. Particular attention should be given to their effective ability to mobilize resources, their role as the representative of the Central Government as well as their physical presence in the territory.
The LED approach should include many local organizations, autonomous institu-tions, national programmes and others.
Trade Unions: the LED approach should include their level of representation, organization and service capability. It should equally consider their connections to similar unions at the regional and/or national level and their effective presence in the territory they claim to represent.
Employers' Associations and Workers' Organizations: in their ability to express the problems and expectations in the process of invigoration of the economic process at the local level.
Grass-roots Community Organizations and Private Development Organizations: in their ability to voice the needs of the marginalized population (women, returnees, minorities, other) from the actual economic circuit and in their power to express their view of the conditions in which economic development can affect the general interests of the community.
Other additional categories that can contribute to economic development should also be considered, among which the following: the legislative representatives of the territory in the national and regional assembly, personalities from the social, political, cultural or religious sphere, but also representatives of entrepreneurial associations, women's organizations, farmer's associations, cooperatives, training institutions, universities, business support centers, employment offices and other public institutions (Chambers of Economy, Offices for Tourism, etc.) able to influence the economic tasks of the territory or programmes of national or international cooperation.
The primary objective of this LED approach - particularly in the first, 'diagnosis phase' - i.e. the collection of information - is to establish an institutional map of the territory's relevant local economic development actors. This will allow one to establish the LED strategy and methodology and facilitate the dialog with and among the proper actors, as well as to find an appropriate leader for the management of the LED promotion process. See Tool 1.2.1.: Terms of reference for institutional mapping and Tool 1.2.2.: Information to be gathered in the preparatory phase of implementing the LED approach.
The collection of information and analysis can be sub-contracted to a local or national institution. The LED approach should supervise the impartiality of the process.
Like all processes, the LED approach requires balanced conditions, since absences or weaknesses among the main categories of actors can de-legitimize the process. One to that reason, the LED approach will help to determine the suitability of initiating activities aimed at strengthening or promoting the organizations within a confidence-building process.
Participatory mechanisms which include local actors are a crucial element for increasing economic opportunities in post-conflict situations. This is important due to the fact that development models cannot be replicated from one area to another.
In this context, the participatory mechan-isms are mechanisms for implementing the 'bottom-up' approach, to local/ regional development, within which the local actors are a key factor.
If the local actors possess good knowledge of the area's characteristics, and are capable of determining the priorities for most appropriate actions, the solution regarding the development approach, strategy and model they should implement is viable.
However, since the processes of local economic development can hardly be left to spontaneous growth mechanisms, local actors should be supported in the previously mentioned following key elements:
a) Orientation towards production that values the local potential.
b) Creation of the conditions of access to financing opportunities.
c) Human resource development and training.
d) Development of a system of infra-structural support.
An organized and coordinated effort is necessary in order to support these elements and to transform local needs into economic value, technical capacity to encourage business, as well as opportunities of income generation and employment creation.
Support to increasing economic opportunities will be strengthening local actors and promoting their active participation in the management of the local territory.
Among the economic actors it is essential to distinguish two types of groups: 1) without organisation or ill-organised; and 2) governmental organisations that are institutionalised in different degrees. The first are the self-employed and in general we refer to them as the informal sector.
From the start of the programme, it is fundamental to foster participation not only among already existing private and public economic actors but also with the other group. This strategy of mobilisation of the different groups of actors has a double intention. On the one hand, it will strengthen balanced participation in the local economic projects. On the other, it will create the conditions so that each group of actors can adjust its role and expectations in the process of economic management of the local territory.
The previous strategy will translate in the emergence and involvement of new actors. It also helps to modify and to extend the supply of services of the local governments, and to strengthen interaction between the public and private sector. In this way, mutual adjustments, as well as the necessary modernisation of public administration and the organisations of the civil society will take place.
It should be stressed that the constitution of development mechan-isms should be based on a democratic consensus, provide access to economic opportunities and respond to the needs of the whole population, particularly to the most excluded groups. In this context, the consensus building process is of fundamental importance within the rehabilitation programs in war-torn regions.
Establishment of Local Forums
The consensus building process can be achieved by way of the Local forum - an instrument for enlarging economic opportunities and promoting consensus building for an enabling economic environment on the local level. It is composed of the most relevant actors of the economic process. This Forum should be the consultation and decision making instrument for promoting the LED process.
The first task of this Forum is to support the identification and strengthening of the different groups of potential actors, who could play a significant role in the implementation of the support activity (for example producer associations).
The second and most permanent task of the Forum is to raise a consensus vision. This vision should consider the main priorities necessary for promoting the economic environment. In order to mobilize complementary resources, the appropriate capacities to sustain compatibility with national priorities should be established.
To do this the Forum should develop a capacity to lobby and negotiate with relevant authorities and representatives from the local, regional and national government institutions.
In order to achieve wider representation of all key actors and representatives on all government levels, as well as the relevant non-government organizations, an intermediary role of consultation could be established. In this regard the Forum will play a key role in building the appropriate linkages between national policy and local economic development priorities.
On the other hand, the main tool and organizational form of the consensus building process on the territorial level is the Local Economic Development Agency (LEDA). The LEDA is the institutionalization of the Forum.
The LEDA as the crucial participatory mechanism
The LEDA, thus defined, is a central axis of the Local Economic Development strategy. By way of participatory mechanisms it promotes cooperation and networking of all key actors on the local level, coordinates planning, provides technical assistance and assures the mobilization and channeling of national and international financial resources necessary for supporting LED projects.
The LEDA is a non profit organization and has its own legal character that guarantees political and administrative autonomy. Depending on the legal framework and the particular conditions of each country, the LEDA can be established as an Association, a Foundation or Society.
Objectives of the LEDA
The main aim of the LEDA is to contribute to the economic development of an area. Its principal objectives are:
1) To facilitate decision making regarding proposals and initiatives aimed at promoting sustainable economic development.
2) To support the local regional planning process, in coordination with the activities of public institutions at the central, regional and local level.
3) To reinforce the local capacities and implement the development of projects in collaboration with the local actors and the support of the representatives from relevant national institutions. In this respect, the LEDA is simultaneously an instrument for attracting external investments for the economic development of the area as well as for resource mobilization for projects. Furthermore, its objective is to support complementarity and the development of synergies between the actions and duties of the local actors.
4) To create/strengthen productive self-sustainable enterprises able to promote permanent and decent jobs and to place their products or services in the market. These businesses draw on endogenous resources, the area's potential, the needs of the population, as well as the offered market possibilities.
5) To facilitate the harmonization between supply and demand on the labour market (with regard to training, employment policies etc.).
See Tool 1.3.1.:The Local Economic Development Agency and Tool 1.3.2.: Consensus building for economic growth.
Functions of the LEDA
The main functions of the LEDA are the following:
- Coordination of all ongoing activities related to the local economic development approach in its area of impact;
- Networking;
- Planning;
- Resource mobilization for local economic development projects;
- Direct service providing to all entrepreneurs;
- Management of local economic development projects.
Since the networking function is of particular importance for the LEDA, this concept is elaborated in more detail in the following separate Technical Brief.
Levels of intervention and activities of the LEDA
Generally, the three main levels of intervention of the LEDA are:
1) Broader economic environment through the support of initiatives to improve the policy and legal framework, lobbying for the inclusion of local priorities in regional and national policies, promotion of the participation of excluded groups in the decision making and planning process of LED and in economic activities, etc.
2) Local business, employment and productive management through the creation of mechanisms to match the supply and demand side on the labour market; the promotion of technological development and exchange, resource mobilization, etc.
3) Direct support to starting entrepreneurs through providing training, credit, market information, etc. According to the local context the LEDA could reinforce the efficiency of the delivery of business development services through close collaboration with existing business support institutions (business incubators, training institutes, business advisory centers etc.).
Activities of the LEDA
More specifically, the activities the LEDA could perform on the first level - the broader economic environment - include, among other, the following:
· Prepare the Local economic development plan.
· Mobilize all actors, including the political ones, around the LED plan.
· Intervene in the general development conditions (design of regional development schemes, assistance to local groups etc.).
· Valorize local resources.
· Support initiatives to improve the legal framework (eliminate complicated administrative procedures for starting entrepreneurs).
· Lobby on the national and/or international level for particular investments.
· Lobby for the inclusion of local priorities in regional or national policies.
· Promote local financing mechanisms.
· Establish partnerships between training and teaching bodies and enterprises.
· Promote the participation of excluded groups in the decision and planning process of LED, as well as in economic activities.
· Ensure the elaboration of sector-related studies.
· Advise local and regional authorities.
· Ensure the balance between economic development and the environment.
· Promote the regional support cooperation with national and international financial and developmental institutions, as well as other specialized networks and bodies, etc.
· Support and carry out economic and social surveys and observation (keeping statistics, surveying branches, prospective studies, etc.).
Activities of the LEDA on the second level - in supporting the local business, employment and productive environment could be, among other, the following:
- Support initiatives in favor of the development of the productive infrastructure
(markets, communication, roads, etc.).
- Design of projects to improve the efficiency and supply of economic support services (training, reinforcing information systems, business advice etc.).
- Support the creation or strengthening of entrepreneurial organizations.
- Promote technological development and transfer.
- Mobilize financial resources for projects.
- Create instruments in collaboration with other institutions, like vocational training (to improve the qualitative demand and supply on the local labor market).
In the framework of its activities on the third level - in order to support enterprise creation - the LEDA could, among other:
- Carry out research activities on investment and business opportunities in the region.
- Create databases on markets, technology, and financing systems.
- Prepare needs assessments and managerial and technical training and advisory services.
- Provide advisory services on business plans, marketing, feasibility of projects etc.
- Provide financial services.
See Tool: 1.4.1.: Outline of the Morazan Local Economic Development Agency.
Networking is one of the main functions of the LEDA, and is of strategic importance in the whole process of its establishment and functioning.
Namely, since LEDAs have a legal personality and are autonomous, they are well equipped to establish external relations with numerous partners at home and abroad. Considering that isolation, lack of information and lack of contact with new trends and technologies are decisive factors of poverty, this potential for opening up is crucial for an agency's success and efficient performance.
In order to be successful, a LEDA needs to enlarge its accessibility within its territory at minimal cost, at the same time guaranteeing its capacity to support demands in any part of its field of action. This can be achieved by way of strengthening the LEDA's networking capacities and by reinforcing roles of municipalities or township institutions. This can create a communication system where organizations at municipal and township level could function as a "window" of the LEDA. They can organize periodical meetings and be the link for the exchange of information between the population and the LEDA.
By making use of its networking capabilities, the LEDA could promote consensus building regarding the identification of the basic local economic needs and problems, as well as local economic development priorities (attention to vulnerable groups, renova-tion of natural resources, exploitation of strategic advantages, promotion of forward and backward economic linkages, etc).
In this context, two main types of LEDAs exist. First, in regions where there are many relevant institutions (Chambers of Commerce, Handicraft Chambers, producers associations, business support centers, etc.) a LEDA could be institutionalized in the form of a local network, relying on existing institutions and providing complementarity of services.
Second, in regions where these kinds of actors and institutions are not well developed, a LEDA would have a more direct relation with entrepreneurs.
In this regard the LEDA should be understood as a networking mechanism of the institutions and organizations associated with the Agency, with the common objective of organizing and leading the promotion of local economic development in their area. The LEDA promotes and is part of networks with other institutions, as well as programs involved in the local economic development process at the regional, national and international level.
Available instruments for a LEDA's international networking and exchange of experience
Particular attention has lately been given to the issue of international networking of the LEDAs - linking the agencies created within the framework of international cooperation.
The purpose of such international cooperation through networking is sharing experiences with their counterparts elsewhere. Knowledge of the problems faced by others and the solutions adopted is a valuable asset, even when the contexts are vastly different. Contact with other LEDAs gives access to practical know-how which consists of useful information for broadening the scope of opportunity. It may involve reviews of possible sources of funding information on the programs of international organizations, pamphlets on new opportunities and other.
With this aim, the International Liaisson Services for Local Economic Develop-ment Agencies (ILS-LEDA) was esta-blished. ILS-LEDA provides networking services to LEDAs in developing countries and/or countries in transi-tion. Commercialization programmes, twinning programmes and assistance with fund raising are part of its services. See Tool 1.5.1.: Internet references.
The needs and priorities of the participating agencies are:
· gaining experience through transfers of know-how
· making themselves and their activities known to others
· acquiring the technical support of industrial-country agencies to carry out local projects
· marketing of local firms' goods and services internationally
· increasing the funds available to provide credit.
An additional available instrument for the LEDA's networking is the European Association of Development Agenciess (EURADA). This association plays an important role in establishing linkages with EU programmes, exchange of experiences and market opportunities between Regional Development Agencies in West, Central and Eastern Europe, transatlantic networks and North-South cooperation.
Promotion
A further objective of networking is promotion. Namely, LEDAs have to make their existence and their activity known to as many relevant actors as possible, in order to strengthen their role locally and present themselves to other institutions that wish to cooperate. With these needs in mind, ILS-LEDA systematically promotes and publishes the work of its member agencies. A web site has been created for this purpose, which is a forum for dialogue and exchange of information among the members. The objective is to give rise to long-term relationships among all concerned to foster the transfer of know-how, supply technical assistance and promote practical development projects.
The twinning program
The ILS-LEDA has developed a twinning program, which funds feasibility studies for projects agreed on by the two partners that should form the foundations for lasting relationships.
The twinning program is intended to form permanent relationships between network agencies with counterpart agencies or other bodies in the industrial countries. The support consists in co-financing feasibility studies on projects of mutual interest.
The benefits of twinning are multiple. First, there is planning and imple-mentation of the practical initiative the
two parties will carry out together. Second, industrial-country agencies can help to secure new funding to develop
projects, expand them and amplify their impact. This interchange may permit the creation of joint ventures that can qualify for the abundant funding allocated to this speciific purpose by the industrial countries. Third, the two agencies, which ordinarily operate in quite different territories, can grow together in a process of horizontal exchange, learning from each other's experiences and capacities.
Summarizing, the concept of networking is a prerequisite for the efficient implementation of the LED approach and the process of establishing the LEDA. The mentioned available instruments could be very useful in all phases of the LEDA's setting up and its functioning.
The process of setting up the LEDA has the following main phases:
I SENSITIZING PHASE
II PROMOTION AND DESIGN PHASE
III ESTABLISHING PHASE
IV INTERNAL STRUCTURING AND STARTING PHASE
V CONSOLIDATION PHASE
I. SENSITIZING PHASE
In this phase it is necessary to do the following:
· Analyzethe acquired information - to review the general presentation of the Local Development approach and its mechanisms (including specific references to the referred regions, its potential, needs, and the socio-economic and political conditions).
· Make initial presentationsof the methodological approach and its possibilities in the region to some key national and regional institutions and local authorities.
· Organize a political consultation with the regional and local authorities (to facilitate their ownership of the process and to encourage their leadership).
II. PROMOTION AND DESIGN PHASE
The milestones within this phase include the following:
· Preparation of an outline for the setting up of the LEDAas an instrument to enable the promotional policies of the LED. The outline should include:
- A proposal of the geographic areathat the LEDA is going to operate in.
- A territorial diagnosis, in order to obtain information about the socio-economic situation of the territory in which the LEDA is going to operate.
- Identification of prioritiesin the economic and social area as well as other relevant aspects of intervention.
- A proposal of the structure for its functioning, that will be sufficient and self-sustaining.
- A budget proposalfor the initial investments, operation costs and capital for the projects to be promoted.
· Positioning of the interested parties regarding the following subjects:
- the integral development approach,
- the conceptual framework and operation of the LEDA,
- the organization and functioning of the LEDA.
· Encouragement of the disposition of national policies favorable to the establishment of the LEDA, which will guarantee the necessary political support.
· In addition to these steps, it would also be useful to initiate the following activities:
- To look into the financial and credit mechanismsand define the financing possibilities of the LEDA.
- To promote the organization of specific commissionsthat will be in charge of specific tasks, until the LEDA is operational.
- To look into the legal framework (Municipalities Law, Urban and Rural Development Law and other). A detailed study is required to know the "rules of the game", in order to facilitate the participation of local, regional, and central government institutions and others in the LEDA.
- To initiate the procedures of attaining a legal personality.In order to avoid the bureaucratic formalities that can restrain the process of establishing the LEDA, it is advisable to begin with this as early as possible.
- To establish an organizational flow chart of the LEDA(in order to determine the different decision-making bodies of the LEDA, their functions and responsibilities). Furthermore, it is necessary to define the decision-making levels, administrative and other experts, as well as their participation and effective coordination.
III. ESTABLISHING PHASE
Within this phase it is necessary to:
· Elect a transitional governing body from the Support Committee (to lay the legal foundation of the LEDA and, among other things, to discuss and adapt the statutes and rules).
· Prepare the statutes and rules of operation(The preliminary draft, to be analyzed and discussed by the provisional governing body, assembly and subsequently by the official governing body).
· Call a General Assembly of the LEDA. The General Assembly will be the highest authority of the LEDA. In this phase, its principal function will be the revision and discussion of the statutes, rules and elaboration of the constitution.
· Approve the internal statutes and rules, from the part of the Assembly.
· Negotiate, approve and sign a Technical and Financial Support contractbetween the Governing Council of the LEDA and the project, in order to define mutual obligations when the LEDA becomes operational.
· Strengthen the local organizations and government(through training workshops and seminars).
· Select and contract a technical team of the LEDA(which will review and give coherence to the policies and activities of the LEDA, with the goal of achieving its objectives).
· Train the technical teamof the LEDA and other specialists from the public and private member institutions and organizations of the Assembly.
· Arrange the support infrastructure (find the premises or building, acquire the necessary office equipment, as well as the secretarial support).
· Appoint the Advisory Council(a consultation body of the Governing body).
IV. INTERNAL STRUCTURING AND STARTING PHASE
As soon as the LEDA is established, the internal organization should be adjusted to its final form, including the logistic aspects. At the same time, the LEDA should identify its initial projects.
In this phase, it must carry out the following activities:
· Prepare and approve the Operational Planof the first months, as well as an annual Operational Plan.
· Organize the mechanisms to select project ideas, based on a participatory system, that uses the criteria and priorities established by the Assembly.
· Transfer technical expertisefrom the part of the Support Project to the LEDA team.
· Consolidate basic information for the dynamic diagnosis.
· Organize Banks of Informationon the following:
- Market opportunities
- Financing opportunities
- Training opportunities
- Technological exchange opportunities
· Define the General Strategy(short term), of the LEDA.
· Organize Internal Administration
· Establish and sign collaboration agreementswith public and private institutions.
V CONSOLIDATION PHASE
This last phase includes the following:
· Process of self-evaluation(allows the review of its strategic choices, criteria and priorities, and at the same time verifies the efficience of its operational structure and mechanisms).
· Preparation and approval of a Master Plan(able to guide the actions and institutional efforts with the aim to achieve the strategic vision and to guarantee the sustainability of the process).
· Promotion and management of initiatives in regard to the national authorities and/or sources of international cooperation.
· Establishing agreements with different sources of financing, in order to mobilize credit resources to support productive investment.
· Diversification of its Investment Promotion portfoliowith projects that serve a huge number of beneficiaries, and allow them "to appreciate" the direct benefits of the LEDA.
· Diversification of sources of financing, in order to guarantee their independence and economic sustainability.
See- Tool 1.6.1.: Setting up the Local Economic Development Agencies; Tool 1.6.2.: Instructions for LEDA commissions; Tool 1.6.3.: Instructions for the elaboration of a LEDA profile document; Tool 1.6.4.: Statute for the legal Establishment of the LEDA in the Croatian West Slavonia region, and Tool 1.6.5.: Organizational chart of a LEDA.
There are many forms of sustainability that are integral to rehabilitation and development initiatives. The continuity of rehabilitation and development initiatives should be viable on the basis of local capacities and resources, without allowing the degradation of the base of natural resources.
Sustainability also alludes to the permanence of the benefits that development projects bring to the local population and institutions. In this context, the LEDA, with its promotion and realization of the concept of sustainable human development, could carry out an important strategic role in the protection of the environment.
The possibility for the LEDA to operate in a sustained, continuous way depends on a number of interacting factors. The following main forms of sustainability can be distinguished:
· Political and social sustainability
· Legal sustainability
· Technical sustainability
· Economic sustainability
· Financial sustainability.
Political and social sustainability
Political and social sustainability depends above all on the extent to which local actors have made the LEDA their own. The member organizations, like the technical staff and the local population, have to feel that the LEDA is a tool for improving local life and living conditions. For this kind of sustainability, the founding and operation of the LEDA must feature the greatest participation of public and private local actors.
External recognition of the LEDA is also important in the sense that public authorities and international organiza-tions recognize its quality as a privileged interlocutor between actions oriented towards socio-economic development in areas pertinent to the LEDA. The LEDA should not be an alternative model to the economic policy of the government, but should arrive at being considered as a credible instrument for promoting development for a common interest. In this regard the role of the LEDA is of key importance in promoting cohesion among its members, as well as in consensus and confidence building - particularly between the non-governmental and governmental institutions.
From this point of view, inclusion as the local instrument of national economic policy programs is the most ambitious aim an agency can set for itself. The goal is for the LEDA to arrive at being a credible interlocutor for the state and the formal entrepreneurial sector, and this condition will allow for diversification of its financial sources, thus reducing its dependence on international coopera-tion. See Tool 1.7.1.: Interventions aimed at achieving sustainability of Acleda, Cambodia and Tool 1.7.2.: Achieving sustainability - lessons learnt through the PRODERE Programme.
A suggested strategy to be employed by the LEDAs to enhance their social and political solidity on the national level is the organization of nation-wide networks with the following objectives:
· To form the critical mass needed vis-à-vis national and international institutions - to serve as a channel for funds, projects and resources;
· To share experiences of others;
· To develop joint initiatives to the benefit of their respective territories.
Legal sustainability
Legal recognition is equally essential. Having legal personality from the outset is a prerequisite for operating as an economic agent and undertaking obligations, with full powers to enter into contracts. This is all the more important when the agency is set up in an environment of widespread illegality or the aftermath of conflicts and must serve to establish, or re-establish, the conditions of civil life.
In such circumstances a LEDA can promote positive actions, changes and national discussion to devise more advanced legislative instruments conferring full recognition on these significant development instruments. This is particularly stressed in countries where the LEDA is a new concept.
Technical sustainability
A LEDA's technical sustainability depends on its stock of knowledge, the know-how its operational units have built up, that enable it to expand its activities and provide its services autonomously. Obviously, autonomy is not complete self-sufficiency, i.e. possession of all possible skills, but chiefly the capacity to organize the resources needed, obtaining them from outside when necessary. This applies at the local as well as at the national and international level. The greater the agency's ability to develop and maintain external relations, the more sustainable it is.
Technically, the LEDA must be able to provide advanced, specialized services. This means training, the build-up of internal know-how; but also the formation of a network of relations with institutions, professionals, universities, on which to draw as needed. An agency has a small nucleus of technicians who must be able to take care of strategic activities themselves - planning, local resource coordination, economic animation, financial assistance and business creation, organizing the response to emerging needs.
Other more specialized, temporary tasks can be delegated to outside organizations and professionals under the agency's leadership. Typical instances are market surveys, feasibility studies, legal consultation and the like, for specific projects.
The contribution of technical services, besides providing support to the development of production, represents an opportunity for economic consolidation. In order to achieve technical sustainability it is necessary to:
· Reinforce the technical capacity of LEDA.
· Diversify the range of services and refer to existing institutions for specialized services.
· Offer innovative services to entrepreneurs.
Economic sustainability
Once an agency succeeds in generating a regular income that covers its expenses, it has achieved the final, decisive element in its sustainability. This aspect is crucial right from the planning phase. A LEDA is in fact an enterprise, and it must know from the outset where along the line it will reach economic viability and be fully self-sustaining. Viewing LEDA as an enterprise implies that its main source of income must be the sale of its services, i.e. the provision of services for payment. A compulsory way of increasing the likelihood of economic viability is to diversify sources of income. The most common ways are:
· The management of financial capital.
· Sales of services to institutions and companies that can afford them.
· Subcontracting on projects or services.
· Equity investment.
· Credit funds.
· Intermediation.
· Contributions from member organizations.
· Financial income on funds invested (a LEDA could be a share-holder).
· Direct participation in venture capital.
Financial sustainability
Since LEDA is an instrument whose conception is to offer economic opportunities to majority sectors of the population, in particular to the weak and emarginated, financing becomes a strategic element for the promotion of sustainable development. The difficulty of access to a formal financial system is one of the main reasons causing this marginality. In this context, financing becomes a strategic element for the promotion of productive activities propitious for a balanced and sustainable development.
A financially self-sustainable institution is one that is able to cover all of its operating costs and the imputed costs that are necessary to maintain the real value of its capital without subsidies. There are two hurdle points to overcome in reaching financial self-sufficiency:
(1) Operational (internal) self-sufficiency that requires the programme to cover all non-financial expenses (administrative costs, salaries, depreciation and loan losses) out of the programme fees and interest charges.
(2) Full self-sufficiency that requires the programme revenues to cover both non-financial and financial costs on a commercial basis so that subsidies are no longer required.
The financial mechanisms used by a LEDA are very heterogeneous. However, it is possible to identify the following three principal methods for channeling resources:
· Direct channelling of resources
· Channelling of resources through member intermediary financial institutions
· Channelling of resources through non-member intermediary financiers.
It is important to stress once more that a LEDA's income or profits should be invested into projects for disadvantaged groups.
The most original feature of a LEDA is the financial management of the credit fund granted to them, generating interest income that covers their costs. This innovative approach is only possible if the national or international promoters of the LEDA endow it both with a fund for initial expenses and a fund for credit activity.
A LEDA can also conduct more sophisticated operations by providing seed capital. These funds are recovered when the enterprise reaches an appropriate stage of development.
Full self-sustaining capability for an agency can only be the fruit of steady growth of the operative structure and technical legitimacy. See Tool. 1.7.3.: LEDA's indicators of success.
Economic Stimulation is a package of different tools and services oriented towards facilitating the economic actors. It enables them to understand and recognise different investment opportunities and guides them in their decisions.
Traditionally, the economic actors in post-conflict areas and countries in transition are excluded in the development of basic economic activities due to a combination of different factors:
· Lack of information about alternative market possibilities.
· Lack of knowledge about appro-priate technologies to develop some activities.
· Absence of opportunities to access financial mechanisms.
· Weak management conditions.
· No access to pre-investment facilities that could be of help in their decision making.
In the territories where LEDAs operate, many of their potential "clients" among the more disadvantaged social strata face insurmountable barriers in starting up a business of their own, however modest. This is a kind of activity far outside their range of experience and existing possibilities. Thus, besides supporting already existing small enterprises, an essential task is precisely eliciting the demand for LEDA's services, expanding the number of potential entrepreneurs and promot-ing the entrepreneurial culture.
Economic Stimulation should include the promotion of entrepreneurship within the following conceptual framework:
· The entrepreneur should apply business rationality to any economic activity.
· The entrepreneur should be capable of taking risks, participating in a competitive scenario and having initiatives in the decision making process.
· The entrepreneur should conduct his business in a flexible manner, according to changing business scenarios.
· Although the tools of entrepreneurship could be acquired, the spirit of entrepreneurship should be self-made.
· Any program or advice should be complementary to the decision making of any entrepreneur or "potential" entrepreneur. They should be made aware of all the possibilities and risks related to their decisions.
Economic stimulation means calling into being a well-defined and structured complex of activities, chances and opportunities that constitute a proper strategy of local "economic animation". There are two kinds of services: information providing services and practical support to economic activity. They are simultaneously the precondition as well as the necessary support to the development of local entrepreneurship.
Information providing services
Information services involve the gathering, processing and dissemination of data to entrepreneurs starting an economic activity as well as to those engaged in expanding an existing business. The information base covers markets, techniques and technologies, the area's resources and potential, laws and regulations, as well as consumption. This activity goes beyond its obvious applications within the LEDA's activities and produces benefits for the area as a whole.
In practical terms the information function may include the following:
· Creation of a bibliographical reference center at the LEDA's headquarters.
· Creation of data banks on markets, the socio-economic characteristics of the area, local resources and other.
· Link-ups with international data banks.
· Seminars.
· Elaboration of or the sponsoring of specific studies and surveys.
· Link-ups with research centers and universities.
· Creation of initial contact offices.
The management of appropriate information is one of the most powerful tools in the hands of successful entrepreneurs. The implementation of this methodology is principally focused on:
how to gather the required information?
how to make it "friendly" to large sectors of population?
how to disseminate the information?
how to develop advisory services? and
how to encourage and disseminate entrepreneurship?
The most relevant groups of information are:
· Market opportunities.
· Financial opportunities.
· Technical and management training opportunities.
· Appropriate technologies.
Practical support to economic activity
The second set of support functions consists of initiatives to stimulate the entire economic environment, directed especially towards potential entrepreneurs. Namely, the lack of a culture of individual initiative is a crucial limit to development. The entre-preneurial culture means inclinations and capabilities, such as the capacity for initiative, the willingness to take risks, to think ahead, to make decisions. These abilities cannot be transferred as such, since they cannot be reduced to a set of techniques and conveyed in a specific training course. Economic animation is designed to create opportunities for these capabilities to emerge and take root. This activity comes before that of business promotion, especially when, as in the case of LEDAs in post-conflict areas, one's target population has traditionally been relegated to subsistence activities.
See Tool 1.8.1.: Main activities in Economic stimulation.
The production process depends on a number of phases - from Economic Stimulation, through Investment Initiatives, Projects' Pre-Feasibility, Projects' Feasibility to Project's Execution.
The main support activities for the productive process are the following:
· Design of projects to improve efficiency and supply of economic support services.
· Identification of financial resources that can support these projects.
· Promotion of marketing services and activities.
· Exchange and promotion of technological development.
· Support to the creation or strengthening of Entrepreneurs' Organizations.
The LEDA as a key tool for supporting productive development on the local level should play an important role in providing these support activities in post-conflict areas.
A specific trait of LEDAs is that they provide integrated service to the business life cycle of the products of small and medium sized enterprises. As we know, even in the industrialized countries small businesses have trouble surviving. Their "infant mortality rate" averages 70 percent. This often depends on an ill-considered or hastily planned idea, on credit bottlenecks and high interest rates. But it may also depend on perfectly ordinary problems that the small businessman, alone, may not be able to resolve. Only continuous assistance, from the original identification of the business to its concrete realization, can reduce business mortality.
To provide this kind of effective assistance, a LEDA must be equipped to perform a series of functions:
· Integrate the business in the lines of production that are the linchpin of endogenous local development. Relations among the businesses within the same line fuel a virtuous circle of demand and supply, reinforcing the local area's ability to generate value added and its competitiveness. For instance, in an agricultural and food-processing area, investment in a company that makes farm equipment is certainly preferable to investment in one that manufactures cameras, which would have no impact on the rest of the local economy.
· Assist the entrepreneur to find a good idea and develop his or her business plan, ascertaining its feasibility. This means providing information on business opportunities and offering specific technical assistance.
· Assist businesses both during start-up and in their initial period of activity. Here one must supply support in organizing production, perfecting technology and administration, managing markets and marketing.
· Provide financial support, facilitating access to credit on reasonable terms.
· Facilitate technical and business training, gathering all available resources at the local and national level and channeling training resources from international cooperation programs.
See Tool 1.12.2.: Chain of value for fruit and vegetable products. Also, Tool 1.7.1.: which refers to the case of Cambodia, is a very good example for activities for stimulating the labour market.
A further role of the LEDA is the coordination of projects and fostering of the socio-economic and institutional environment conducive to productive activities. The services involved include the following:
· Territorial development plans, include-ing sectoral plans, in collaboration with other interested institutions.
· Studies and surveys directed to local planning and territorial organization.
· Specialized technical assistance for local institutions.
· Efficient coordination of actions of the different actors' engaged in the area, by arranging meetings between the national and international organizations present, encouraging the creation of committees, avoiding overlapping and the duplication of efforts.
· Orienting international cooperation and national development programs.
· Formulation of territorial and business development plans, locating potential sources of funding, applying to the appropriate bodies for finance and following through on the applications.
· Local marketing campaigns to foster the territory's external relations (marketing, trade, joint ventures) and attract outside resources, illustrating all the area's attractions.
· Encouraging the creation and spread of other specialized services, such as financial and commercial services.
Territorial marketing programs have also been proven highly effective. They are conducted by means of local meetings with potential investors, brochures, study tours abroad, as well as more modern technology (e-mail and the Internet).
A good territorial marketing program illustrates the opportunities the area offers to potential investors in terms of natural resources and economic activities. It also sets forth the advantages that flow from the presence of the agency itself, with its logistical and technical support and participation in investment. For the local area it is important that the agency, as development harmonizer, tend off outside investors who are attracted only by raw materials or cheap labour or those interested in unrestrained exploitation of virgin territory, as well as those who will generate no value added for the local economy and will spoil the natural environment. A local organization helps to attract and realize, possibly with local co-investment, only projects that contribute to the development plans devised under the agency's auspices, bringing additional funds and new skills.
The LEDA is also a vehicle for marketing products outside the local area, assisting small producers who lack the capacity to find outlets on their own. This involves the development of publicity materials, marketing activities, participation in fairs and electronic commerce. At the same time the agency provides guidance and stimulus to bring local products up to the quality and quantity standards that outside markets demand. This might involve helping producers to organize a consortium or association, offering technical assistance to upgrade quality or seeking to foster a policy of local brands.
A LEDA's functions are not always performed directly by the agency's own operational structure. As necessary - and feasible in given local conditions - a LEDA can spin off specialized service organizations. In El Salvador the LEDAs have turned their financing operations over to their member local financial institutions, which ordinarily handle other financial flows as well. In Nicaragua, the Neueva Segovia agency has formed a company to manage the Department's roads that provides services to all the townships there and to the private sector as well. In Mozambique a provincial marketing organization is being designed. In such cases the agency takes care of planning and promotion, and, in the start-up phase, holds a majority stake in the new company alongside other public and private shareholders. As the company grows, the agency recovers its investment and reduces its stake. The territory thus develops a richer fabric of qualified, specialized services, and the agency retains its role of coordination and harmonization.
The promotion of local economic development calls for the management of the whole production/consumption process for each product (Commodity System) and a coordinated strategy for all those participating in the system: seed suppliers, accumulators, transporters, traders, banks, etc. However, the production/consumption process is put at risk by the presence of numerous bottlenecks which limit their potential. The task of LEDA is to analyze in depth the processing of each product, by identifying its weak points and intervening where necessary to find feasible and successful solutions.
The action to resolve bottlenecks constitutes a very valid instrument in bringing a high aggregate level to the whole system of local production. In fact, the bottleneck problem is complex and deeply rooted as regards multiple aspects like commercialization, transport, tech-nology transfer, sources of finance and others.
See Tools 1.9.1: Framework of the Infrastructure to support Production; Tool 1.9.2.: Improvement of the economic Environment and Tool 1.9.3.: Actors and Phases of the Economic Preinvestment Process at the Local Level".
Definition of the strategy
The process of designing and implementing the local economic development strategy is particularly important for the rehabilitation programmes of post-conflict areas. We can define the local economic development strategy as the proposal of guide-lines and plan of action which will lead to the defined goal.
The strategy helps us to focus on the policy, activities and projects related to specific priorities, to channel energy, resources and efforts. The words 'strategy' and 'strategic' refer to a (mid-) long term orientation, as opposed to tactical and operational issues which have a short term orientation.
In the process of designing the local economic development strategy it is important to adhere to the following scheme. First, it is necessary to define the following:
- what is the present situation in the locality or region;
- which course of development the area wants to take, and
- how to achieve that.
Based on this, the strategy design is not an isolated process: it is preceded by the Socio-economic analysis and followed by a concrete Programme of actions and the Implementation phase. We consider these phases as an integral part of the planning process. Without these phases the strategy would remain no more then a concept on "paper". Namely, one must bear in mind that most of the strategic plans, be they mediocre or excellent, after a period of time disappear in the archives.
Phases of the strategy
In order to design the local economic development strategy, the following phases are important:
| Regional
Analysis |
® | Strategy
Design |
® | Action
PPrograme |
® | Implement-ation |
1. Regional Analysis
Regional analysis includes the identification of all the relevant factors that describe and evaluate the present condition of the regional economy.
The analysis of a certain region is necessary due to two reasons:
- the basis for the strategy design; strategy and action programmes must be based on regional characteristics;
- communication with internal and external subjects (e.g. central authorities, foreign investors, sponsors), as well as internal subjects, stakeholders, (organisa-tions, companies, citizens) has a decisive role in the programme implementation, due to which they have to have at their disposal an extensive review of the given region. The analysis serves as a data base of regional information.
Regional analysis can be designed using various methodologies. One of the adequate ones is the SWOT analysis. Its results are:
- a clearly defined region,
- a socio-economic profile of the region containing the following elements:
- natural and demographic conditions
- economic structure
- labour market
- business environment,
- analysis of the external developments relevant for the success of the regional development,
- overview of the strengths and weaknesses of the region, as well as its threats and opportunities. Strengths and weaknesses are mainly the consequence of the socio-economic profile. On the other hand, threats and opportunities are mainly the consequence of external developments.
The result of the SWOT table is an overview used as a basis for this strategy.
2. Strategy Design
This latter definition explains clearly the position of strategy formulation in the regional development plan: there are backward linkages to the regional profile and forward linkages to the action programme. The Strategy design is an intermediate step in the following planning process:
a. Linkages to the regional profile: the strategy must be based on:
- the strong and weak points of the region
- the opportunities and threats coming from the outside world.
b.- Linkages to the action programme: the actions as proposed in the actions programme should be based on the strategy.
The strategy is based on the SWOT-analysis, the main problems (or challenges) that follow from this analysis and the objectives of the regional development plan.
In this phase it is necessary to reach the following output:
- identification of problems
- identification of objectives
- formulation of the guidelines and policy measures.
- identification of problems
On the basis of the previously explained SWOT overview - a selection has to be made with respect to the most important problems of the local/regional economy. Eventually, this will lead to the identification of the main bottle-necks for local/regional development, which are considered as priorities by the parties involved.
- identification of objectives
The objectives are specified from different levels of abstraction. On the highest level of objectives' formulation it is necessary to review the problems from a 'helicopter point of view'. Accordingly, it is then possible to propose the main directions towards "problem solution". Next, it is possible to distinguish between some essential sectors and some central policy fields, etc. We end up with some more specific objectives.
The 'negative' approach of the preceding step - identification of problems - is now converted into a 'positive' one: for each identified problem we can define positive achievements or objectives. These objectives describe the situation in the future once the problems have been solved. Again, it is possible to distinguish a hierarchy of objectives, varying from the general ones for the end-goals of the programme (e.g. decrease of unemployment) to more specific objectives (e.g. support to small business). In this regard the construction of a hierarchy diagram might be illustrative. The SWOT-analysis helps to identify the objectives. Generally, the objectives relate to a large extent to the strong points and opportunities of the region.
- formulation of the guidelines and policy measures
Guidelines and policy measures are a tool and means for changing the "negative approach" i .e. the weaknesses and threats - which have been identified by the SWOT analysis - into a "positive approach", i e. into strengths and opportunities . They are also a means for achieving the previously defined goals - from the general ones to the more specific ones.
The importance and priority should be defined for each guideline and policy measure. It is also necessary to define the level (national, regional or local), as well as the according institutions and actors which will be implementing them. It is particularly important to specify clearly the role of the local actors in the process of proposing and implementing these measures. The elaboration of a matrix within which the guidelines and policy measures are structured according to the mentioned elements would be of great help in the process of designing the strategy and implementing the planning exercise.
Strategic Planning Exercise
The strategy's basic goal is the output design in the form of guidelines and measures for supporting of the local/regional development and defining the roles of specific actors - particularly the stakeholders, as well as strengthening their motivation to implement these measures.
In order to obtain such an output, during the process of strategy design the following goals must be achieved:
- identification, analysis and establishment of relationships between the relevant elements of regional development,
- organisation and stimulation of communication, as well as support to the exchange of different perspectives of the development plan,
- informing the actors of the problem complexity, as well as enabling the creation of a multi-perspective, common view of the problem;
- communication among the actors, stressing the communication dynamics,
- orientation towards the future, i.e. the ability to create sophisticated answers to the question "what if",
- enabling the actors to clarify and widen their perception of the development problem,
- motivation of local actors in the implementation of regional development goals.
The adequate output, the purpose of the strategy, should be designed within the framework of a whole group of activities, realised thorough a series of workshops. These workshops should bring together a group that includes all the key actors of local/regional development. The key actors are:
- the direct economic actors (producers, entrepreneurs, workers) - the interest groups;
- the services providers - the facilitators; and
- the local and national institutions, policy makers and decision makers.
Preparations should focus on:
- generating ideas that identify various parameters of the regional development problem,
- defining and clarifying the basic development problems,
- articulating the specific aspects and specific goals of regional development.
Based on this is the design and progress of the following activities:
- selecting and defining the priority components (parameters) of local/regional development and their environment,
- designing of a matrix of elements and components of development, their goals, guidelines and measures.
3. Action Programme
The Action programme is composed of a number of practical activities which are related to the Strategy and form a realistic framework for implementation. This action programme should at the same time be based on concrete projects, as well as on the whole set of measures. The projects are of key importance because the concrete actions should be undertaken according to very precisely defined goals, a time framework and expected results. It is also important to implement regional policy measures.
4. Implementation
Implementation is the last phase in the process of strategic planning of local economic development. This phase represents the realisation of the strategy.
Training is of strategic importance within human resource development (HRD). In the context of HRD it benefits individuals, enterprises and the economy and society at large. It is one of the key elements of local economic development. The needs for training in the framework of LED are recognised in the sense of meeting existing and new employment opportunities.
With the aim of promoting the entrepreneurial environment and thus supporting LED, the rehabilitation as well as the transition process, it is necessary to provide sustainable and cost effective training methods in order to reach large numbers of small-scale entrepreneurs. They should be provided with practical management skills needed to enhance the competitiveness, profitability and growth of their enterprises.
In the transition countries and those undergoing rehabilitation, the capacity of the existing training infrastructure is basically poorly developed and needs to be strengthened. There is an urgent need to reform and develop the delivery system of existing training centers in order to train and retrain the unemployed, based on identified skill competencies and employment opportunities.
The target groups for training are:
unemployed adults and youth
business starters
existing entrepreneurs
master trainers
labour office staff
LEDA staff and staff in existing business support centers and institutions
women and other special target groups
disabled groups, returnees, immigrants and other.
The most common forms of training are:
- basic management skills for business starters
- business extension and follow-up training
- vocational training and retraining
- continuous education and training
- small production trainin
- fee for service courses
- specific tailor made courses.
See Tool 1.11.1. as an example of a successful project implementing training in the Razlog region, Bulgaria, and Tool 1.11.2. which provides information on the SIYB programme of training packages.
Particular attention should be given to vocational training activities, which represent one of the most effective undertakings needed for employment programmes and industrial infrastructure development - a crucial element within rehabilitation programmes.
See Tool 1.11.3. for achieved results within the Vocational training project in Biha , which is also an example of achieved economic and financial sustainability of a training programme.
Also, refer to ILOs document Training for employment: social inclusion, productivity and youth employment General Discussion ILO 2000, January 2000, for more full information on continuous education and training (CET).
In the provision of training, a LEDA can be a very useful tool, among other, through:
· Assessing the needs for training on the local level.
· Identifying the existing local capacities providing training.
· Identifying the main target groups needing training.
· Identifying labour market needs and, accordingly, supporting the design of specific training courses.
· Supporting employment promotion on the basis of implemented training courses.
· Promoting training among local target groups.
· Enabling the transfer of experience and know-how related to new approaches and tailor made training programmes.
· Supporting the implementation of training courses.
A LEDA may activate local and national training institutions to organize specific courses, or it may seek to match the training being offered locally with the needs of local businesses.
An interesting source of training programmes is decentralized cooperation, i.e. cooperation between agencies or more generally between the local communities and their counterparts in the developed countries. The initiatives have included formal technical-managerial courses and training of businessmen by businessmen.
Furthermore, the role of the LEDA can be important in developing and implementing monitoring and evaluation of the training programmes as well as in establishing networks with other training providers on the local and regional level.
ILO has developed a community based approach to training the rural and urban poor for employment and income generation. The methodology consists of a set of procedures for systematically identifying employment and income generation opportunities at the local level, designing and delivering appropriate training programmes and providing the necessary post-training support services. These services include credit, technical assistance and market information, with the aim of launching and sustaining income generating activities.
The approach differs from conventional vocational training programmes in three main ways:
i) by identifying potential income generating activities and related training needs before designing the content and duration of specific training programmes;
ii) by involving the local community directly in each phase of the identification, design and delivery process;
iii) by facilitating the necessary post-training support services, including credit, to ensure that individuals or groups can initiate and sustain the income generating activity for which training was provided.
Refer to "Community Based Training - for Employment and Income Generation", Vocational Training Systems Management Branch, Geneva and International Training Centre, ILO Turin for more full information regarding this approach.
Also, see Tool 1.11.4.: Vocational training - proposals for implementation; Tool 1.11.5.: Policy recommendations for human resource development schemes and training activities and Tool 1.11.6.: ILO Training Centre-LedLink Programme Required Skills.
Significant investment resources are normally mobilized in the reconstruction process of war-torn regions. "Where to invest" and "How to invest" are two questions that could have fundamental consequences for the local economy.
Where to invest?
Serious damage to the physical infrastructure (roads, telecommunications, communal infrastructure etc) could raise questions as to whether it is more convenient to rebuild or to reconstruct the infrastructure with the same characteristics. Even the question as to whether to rebuild in the original location could be raised.
For example, a destroyed industrial facility could be reconstructed as an incubator for small enterprises, which could incorporate environmentally more friendly technologies, or could be resized or split in different facilities to achieve better cost-benefit conditions. Likewise, a road destroyed during a war could be reoriented, linking new strategic economic sites, thus facilitating access to new markets, improving the supply of inputs and raw materials, and reducing the cost of transportation.
The same consideration should be given when studying a de-mining process. It is important to recognise that survival needs urge people to take many unnecessary and serious risks in mined areas.
How to invest?
The critical questions related to the improved impact in local economies should be:
· Local or international contracting companies?
· Local or international inputs for materials?
· Labour intensive production or high technology?
· Salaries, free employment or food for training?
All the possible answers could have positive arguments in terms of the quality of the job, cost effectiveness, etc. However, it should be considered that in each case one of these could have a significant impact on revitalising the local economy and then facilitating the process of economic recovery.
What do we need?
The existing conditions may not facilitate the location of local contractors, construction material suppliers or qualified labour. In this case part of the reconstruction programme should consider technical assistance, training and eventually financing in order to facilitate this process.
Reconstruction of the transport infrastructure means new resources to be invested in local markets. Local contracts to construction companies or suppliers of construction materials could be the appropriate means of supporting the consolidation of the market.
On the other hand, skilled professionals in the construction sector could find opportunities for their involvement in the maintenance activities as well as in the subsequent housing rehabilitation activities.
Focus on small enterprise development
One must not forget that small and medium sized enterprises (SMEs) are a key factor of local and regional economic development and have a strategic role in the revitalization of the local markets of war-torn areas as well as economic restructuring in the countries in transition.
Namely, SMEs can provide an immediate boost to the supply of critically needed consumer and other goods in post-conflict areas. This service takes place before larger production units can be restarted and before foreign suppliers are willing to work in the area.
Local entrepreneurs will have a good idea of what is most in demand. In most instances, the first response is overwhelmingly to supply these needs through trading activity. However, once political and economic stability is achieved, the SME sector begins to favor small scale production, which can trigger the process of employment creation on the local level. In this regard the SMEs are a very rapid way of "bottom-up" employment generation in the immediate aftermath of a war - fostering the initiation of the economic development cycle once more.
Furthermore, along with economic benefits, there are important social ones to be gained from SME development in the local war-affected communities. Local entrepreneurial activity also avoids the emergence of a "culture of dependency". Further, encouragement of community participation through small enterprise development is vital to the process of developing an entrepreneurial business culture and a stronger democratic political culture. In this regard, this sector is also of key importance for the transition economies.
Also, small enterprises can provide the critical supplier base, around which eventually the medium sized and larger enterprises can develop and expand. Moreover, large-scale domestic, and in due time possibly foreign investment too, will more likely be attracted into the post- conflict and transition areas if there exist small enterprises in the region, able to provide quality small-scale inputs, services and other. Namely, larger-scale investments in such regions will be discouraged until there exists a fabric of small enterprises, able to take maximum advantage of the associated business opportunities.
This is also related to the controversial issue of clustering of enterprises. However, one cannot expect the spontaneous development of clusters in the war-affected regions in developing countries, since experience elsewhere has shown that clustering is more immanent to regions already endowed with a network of basic economic activities and services.
However, in countries in transition, the LEDA, with its crucial role in fostering the entrepreneurial culture and promoting networking on the local level, could potentially have an important role in triggering inter-firm linkages among the local small enterprises - thus paving the way for the complex and long-term process of developing horizontal information, production and technological flows and linkages among local small enterprises. This can be done by way of organizing fairs, shows and seminars; disseminating information to local entrepreneurs on the local, regional, national and foreign market opportunities,; organizing study tours for entrepreneurs to regions where clusters are developed and other.
Even if the conditions for clustering are not viable, the promotion of cooperation among the local firms in war-torn areas and countries in transition will in due time substantially contribute to the revitalization of their local markets.
See Tool: 1.12.1.: Example of the CARERE case and Tool. 1.12.2.: Chain of value for fruit and vegetable products
Environmental concern should be one of the key issues within rehabilitation programs - in ensuring the sustainability of social rehabilitation and reintegration efforts. However, the fact that it requires the promotion of long-term measures in a context of immediate short-term social and economic needs makes environ-mental protection and recovery a complex task.
The local economic development approach has an important role to play in harmonizing local economic initiatives in line with environmental protection and improvement. In the context of land and natural resource planning strategies, the LED approach within the rehabilitation programmes should:
· Introduce the criterion of environ-mental sustainability into project activities, including the conduct of environmental impact studies prior to any economic or infrastructural sub-project.
· Foster the establishment of institu-tionalised mechanisms for monitoring environmental management, as a condition of "good governance".
· Promote and support environmental organizations in their efforts, so that they may ensure sound environmental management through dialogue with the local administration.
· Provide for the collection of environmental data to be used in project design.
· Facilitate the adoption and implementation of environmental guidelines by both public and private companies, through regional and local governments.
· Ensure the inclusion of an environmental component in local government information and monitor-ing systems for the planning of strategic investment projects.
In implementing such an approach, the LEDA, with its promotion and realization of the concept of sustainable human development, could have a strategic role in the protection of the environment. Its role should be stressed in coping with different partners on the local level, all of whom with different functions.
These links are of key importance and will enable the LEDA to raise the general awareness, to influence the opinion of the local community related to strategic environmental issues, and to achieve consensus of the key local actors in regard to environmental protection and improvement issues.
In this context, the LEDA should:
- Promote a policy to protect the environment in harmony with the requirements of sustainable economic development.
- Organize environmental training courses.
- Organize the population to control the preservation of the environment.
- Introduce an environmental approach in the analysis of entrepreneurial projects' feasibility.
- Promote projects related to the reconstruction and rehabilitation of war-torn areas (clearing of mines, clearing of war damages to housing, physical infrastructure, landscape etc.).
- Promote entrepreneurial projects with a direct positive impact in the recovery of the environment.
- Promote the diffusion and application of soil conservation techniques.
- Promote alternative energy usage.
- Promote reforestation programs, mainly with a utilitarian vocation.
- Organize and promote unified actions with public and private institutions.
Two issues within which the role of the LEDA is of key importance are:
- Training - since the primary actions for safeguarding and protecting the environment should be carried out at the prevention level. In this regard the initiatives taken by the Morazan LEDA are interesting. See Tool 1.4.1.
- Provision of technical analysis related to the prevention of environmental degradation.
The key partners of the LEDA in the process of harmonizing local economic
initiatives in line with environmental improvement should be the following:
- the municipal, district and provincial authorities and leaders
- the local public services
- the local actors
- the municipalities and other.
Coordination with public and private institutions is particularly important. Both with governmental and private organiza-tions on the local level, as well as with the private sector, the LEDA could prepare, organize and promote unified actions. Environmental consequences of local development projects are often not perceived from the part of the local leaders and population. Gradually, the LEDA can promote this awareness building and help the authorities and local population recognise and prevent these dangers, not only to the environmental, but also to the social and economic sustainability.
The criteria used by the LEDA to measure the environmental impact of projects, concerns the protection and restoration of the different environmental elements - (water, atmosphere, soil, etc.). If the project has a very limited negative impact on the environment, it is possible to adopt alleviating measures.
The financing of the LED support programs must be implemented within an integral approach that assumes the following basic criteria:
- Appropriate modalities for the nature and scale of the economic activities were given priority as potentially stable alternatives for an adequate generation of revenue.
- Reconciliation with the objectives of technological transfer and training in management, in order to be considered as an efficient development alternative.
- Strict connection to organizational modalities, focused on the identification of priorities and planning of the development action within the region. This would provide for a rational allocation of the available resources.
- Capacity of institutionalization and connection within a conditioned Financial System, to optimize access to diverse local areas or opportunities for better use of their own or/and national resources.
Identification of the mechanisms
A Rehabilitation program that supports local economic development must consider the necessity of designing its own mechanisms or interacting with already existing mechanisms with the following options:
- Correcting the distortion of a restrictive financial system, with high guarantee requirements and ineffective small loans.
- Facilitating capacity building of those economic units that require it, until they reach an efficient level of techno-economic management that would allow the incorporation of a permanent supply of financial resources.
- Supporting the reorientation of deficient economic activities and others that respond adequately to the availability of resources and markets.
- Supporting informal units in enhancing complementary strate-gies to generate employment and revenue.
See Tool 1.14.1.: Financing the local economic development and Tool 1.14.2.: Micro finance in local post-crisis situations.
Steps to consider in the design of financial mechanisms
In this context a Rehabilitation program must take the following steps to identify and design its financial mechanisms:
1. Identify the segment of the population that benefits from the program.
2. Analyse the limitations of access to the sources of financing of the concerned population.
3. Design a promotional strategy to overcome existing limitations and direct the corresponding segment of the population, within permanent financial mechanisms and objectives.
3. Identify and design transitory financial tools - ad hoc instruments - and/or - permanent alternatives - that would make the defined strategy viable.
The LEDA has an important role in the management of financing within the LED support programmes.
As previously mentioned, the LEDAs have experimented with several different lending arrangements, namely:
· direct disbursement of credit;
· indirect channeling through member financial intermediaries;
· indirect channeling through non-member intermediaries.
Direct disbursement is the arrangement most likely to satisfy the social dimension of development. The absence of intermediaries allows credit to be granted at moderate interest rates, enabling the LEDA to serve the neediest in the population. On the other hand, the combination of low interest rates and relatively high operating expenses means that LEDAs adopting this approach may find it difficult to expand their credit fund.
The second arrangement - indirect channeling of credit through financial intermediaries that are members of the LEDA - also has several advantages. It allows the agency to widen the geographic coverage of its credit activities, fosters local saving and enhances participation by the member intermediaries. This procedure involves higher interest rates than direct disbursement, but also lower operating expenses for the LEDA.
The third arrangement - indirect channeling through non-member financial intermediaries - is effected by such instruments as the guarantee fund. In some respects this approach combines the previous two. The LEDA uses its funds as a guarantee to back the loans that a bank grants to borrowers, so that the bank puts up resources of its own without taking on the credit risk. Most arrangements provide for the guarantee fund to be leveraged. This approach implies that the agency is able to place its relations with the bank on a firm and professional footing, keeping their very different respective aims in mind. See Tool 1.14.3.: Checklist of the local financial market, Tool 1.14.4.: Checklist for the selection of financial intermediary and Tool 1.14.5.: Bank - NGO Relations: Key Issues for Guarantee Agreements.
The experience of the LEDAs has shown that involving a financial institution is by far the best solution. This option implies the reinforcing of the existing financial institutions in the country - in important aspect if you want to promote change, including the ones in the local financial climate. Furthermore, such a solution enables LEDA clients to become ordinary users of bank services and potential bank borrowers, once they establish their creditworthiness by regular repayment. By contrast, where all credit arrangements are managed directly by the agency, the beneficiaries risk remaining trapped in a marginal circuit with no prospect for integration into the local development process. Second, agencies can avail themselves of banks' specific skills and experience in managing credit. Finally, separation between the functions of technical assistance and those of financial assistance is an extra safeguard, ensuring that the LEDA will not divert the credit fund to other uses. Furthermore, it also permits the job of credit recovery to be assigned to a competent institution.
The agreements between a LEDA and a bank obviously call for the bank to disburse loans according to the priorities established by the agency. In order to ensure that the bank is fully involved in all phases of credit management, it is recommended to set up a joint credit committee. The LEDA should assist in the preparation of projects, establish their priority and propose them to the credit committee. It can also negotiate with the bank and establish the most suitable procedures for collaboration. See Tool 1.14.6.: Fund operations: the contract between ILO and the bank.
Generally, as is the case with many interventions in the financial sector, one needs a proper understanding of the financial landscape. A proper "map" of the financial landscape should demonstrate that the target group concerned has sufficient demand for credit at a price that covers both the cost of the lender and enables the (potential) borrower to invest the loan profitably.
Guarantees should be temporary as they are supposed to "bridge the gap" between lender and borrower, particularly in terms of information on each other.
See Tool 1.14.7.: Checklist on conditions for successful intermediation in guarantee programmes and Tool 1.14.8.: Recommendations for setting up a credit guarantee programme.
A possible comparative advantage of guarantee funds concerns the leverage of capital, which is probably an important reason for the popularity of guarantee schemes. Guarantee funds usually lead to a guaranteed loan portfolio several times the value of the guarantee fund capital. One "cost" related to guarantee leverages entails the opportunity cost of using the guarantee capital for a direct credit line. A cost-benefit assessment should determine the extra cost of a guarantee scheme as compared to the cost of direct lending without the credit guarantee.
Generally, three different types of guarantee schemes are distinguished:
- the Individual Model,
- the Portfolio Model and
- the Intermediary Model.
If it is impossible to set up a guarantee fund, the LEDA can use the classic form of guarantee or simple current accounts. Here, again, the LEDA negotiates the interest rate on the credit fund, which will necessarily be lower than in the previous case. See Tools 1.14.9., 1.14.10. and 1.14.11.
One of the most significant challenges presented immediately in a post-conflict situation is the attention to be given to certain groups of the population particu-larly affected by the conflict.
Among the main groups to be attended to within the rehabilitation and local development programs are:
1. Ex-combatants of the normal or irregular forces.
2. Returned population stemming from external refuge.
3. Returned population originally displaced by the conflict.
4. Resettled population in new locations.
5. Persons disabled by the war and woman headed households.
6. Other affected groups.
The need for developing specific programs for these target groups is supported by several criteria, within which the most important are:
1. Conditions of the peace agreements.
2. Search for a social stability that facilitates the consolidation of the peace process.
3. International pressure for humanitarian causes and economic costs of refugee programs.
These programs are characterized by:
· The availability of financial resources stemming from international aid.
· Very short periods for the implementation and achievement of objectives.
· Short-term vision.
· Strict external monitoring.
· Execution through international institutions with significant participation of international personnel.
· A certain duality in some cases between a militarized action (e.g. housing the combatants, disarmament and demobilization) with civil actions (e.g. psychological care, return to places of origin, education and/or professional training).
· Use of certain tools of economic promotion, such as, professional training, more as a way of redirecting the attention of these groups from the conflict and offering them a transitory source of revenue (e.g. through grants for training) without the appearance of it being "welfare".
Most of these programs are faced with the following problems in the economic field:
1. An economic foundation blocked or seriously diminished by the effects of the conflict, that did not offer greater opportunities for the development of the economic activities prior to the conflict and in worse condition for the new opportunities it attempts to foster.
2. An overall lack of experience of the young population in the performance of economic activities.
3. An attitude of mistrust or feeling of inequality from the part of other population equally affected by the conflict, in contrast to the groups targeted by the reintegration programs. This hinders social integration, maintains tension in the territory and destroys a favourable economic climate for the development of economic activities.
In order to reach the target groups and to foster their inclusion in local economic activities, the economic reinsertion programs will have to be strictly tied to others of a more social character, like those of psychological care, rehabilitation of disabled persons, as well as to those which address the concerns of women.
It is equally important to incorporate these programs within the agenda of priorities that work with the local coordination mechanisms. Their execution will have to be very institutionalized - incorporating local entities and encouraging actions in co-operation with the diverse institutions involved.
The LED approach can be of fundamental importance in the implementation of these programs. Namely, this approach is on the one hand complementary to the program related to the mentioned target groups. On the other hand, LED can be perceived as the transition from social and humanitarian aid towards economic development - grasping the goals of all the above mentioned target groups.
In order to illustrate these processes, see Tool 1.15.2.: ILO Bibliography of experiences in the attention to different groups affected by conflicts.
One example of implementing such an approach is the application of the LED approach in supporting women entrepreneurs.
Namely, the LED approach can particularly benefit the addressing of the concerns of women. Women have a very important role in the LED process and their contribution to the rehabilitation process of post-conflict areas should be supported in the framework of the LEDA. This is particularly stressed when considering the potential contribution of women entrepreneurs to the development of the entrepreneurial environment and economic revival in post-conflict communities and as well as in countries in transition.
However, in most countries, women encounter more barriers (both tangible and psychological) than men in establishing, consolidating and expanding their businesses. Along with being confronted with policy, regulatory and institutional environments that are unfriendly and have a scale-bias to small enterprises; they also face gender-specific obstacles and barriers, which limit their power relations in comparison to men. This can be seen in:
· women's unequal access to finance, assets, technology and services;
· their relatively lower educational attainments and restricted access to vocational training opportunities;
· the culturally and socially-rooted perceptions which are negative towards women in business;
· their conflicting role demands and time constraints;
· their lack of assertiveness and self-confidence.
The majority of women working in micro and small enterprises are still concentrated in a limited range of low profit sectors, with poor working conditions, which are most vulnerable to economic downturns. Most of the time these enterprises operate in the informal sector of the economy.
The content and models of delivery of business development services and financial support in existing small enterprise development centers and similar promotion bodies in post-conflict and transition countries are often either gender-blind or - as is often the case with women-specific programs - they tend to restrain women to traditional, low productive sub-sectors and to reinforce their lack of power and influence in the marketing and distribution chain, thus accentuating gender inequalities in small
enterprises. Further to providing business development services, the LEDAs can support women's contribution to local economic development in post-conflict areas and countries in transition through the provision of microfinance services.
In recognition of the actual and potential contribution of women entrepreneurs to job and wealth creation, as well as poverty alleviation on the local level in post-conflict and transition areas, the LEDAs should implement programs to support women's entrepreneurship in particular.
See Tool 1.15.1.: Promotion of job creation for women in the Center for Entrepreneurship, Devin, Bulgaria.
Notes:
1. Main sources: LedLink Programme, LED Working Papers 1), ILO, Turin, 1996; ILO Action Programme on Skills and Entrepreneurship. Training for Countries Emerging from Armed Conflict, ILO 1998, SIYB brochure - Practical Management for Small Business, ILO; and other ILO documents.
2. Sources : ILO and UNDP documents ; Milford Bateman, 1996, Development of SMEs in the Croatian areas affected by the war (Know-How Fund project).