Local economic development: Difference between revisions

Local Economic Development (LED) is an approach to economic development, of note in the developing world that, as its name implies, places importance on activities in and by cities, districts and regions. This involves added micro-economic measures at the local level to complement macro-economic measures at the national level. LED encompasses a range of disciplines including physical planning, economics and marketing, all with the goal of building up the economic capacity of a local area to improve its economic future and the quality of life for all.^[1]

According to the International Labour Organization (ILO), national and local governments, as well as enterprises and other organisations have to rethink development strategies to cope with ongoing events such as globalization. In contrast to traditional development policies, Local Economic Development strategies promote local dialogue and enable people to be more proactive; help to make local institutions better contribute to development; make economic activity dependent on the comparative advantages of a specific territory, generating development by firms more capable to withstand changes in the global economic environment rather than top-down development imposed by national planners.^[2] Economic development activities in developing countries tend to be unidisciplinary, initiated and implemented by just one ministry or agency. An advantage of LED approaches is that they facilitate a multidisciplinary approach. South Africa has been particularly active in promoting the concept.^[3]

Many LED interventions in South Africa have taken a direct pro-poor intervention, leading to questions regarding whether this approach is more effective in terms of poverty relief than the spin-offs of more pro-growth focused endeavours.The Microeconomic Reform Strategy is a central component of the 2005 policy guidelines for implementing LED in South Africa.^[4] This strategy seeks to address the inequalities in the country and to build on the RDP (Reconstruction and Development Program), by focusing on issues of the geographical spread of activity, integration, black economic empowerment, knowledge-led growth, skills development and state responsiveness.

In addition to the laws and policies directly supporting and encouraging pro-poor LED, other instruments, such as Integrated Development Planning, provide additional support for implementation. Integrated Development Planning is a key process used within LED, which looks toward the use of planning to situate pro-poor development and LED specifically.^[5] The South African Forum for Effective Planning and Development in 1995 defined Integrated Development Planning as, ‘A participatory approach to integrate economic, sectoral, spatial, social, institutional, environmental and fiscal strategies in order to support the optimal allocation of scarce resources between sectors and geographical areas and across the population in a manner that provides sustainable growth, equity and the empowerment of the poor and the marginalised’(DPLG, 15).^[6]

In terms of what an 'Integrated Development Plan' (IDP) should include, the Municipal Systems Act clearly brings out the pro-poor dimensions of government thinking. The Act states that an integrated development plan must reflect:^[7]

• The municipal council's vision for the long-term development of the municipality. Special emphasis is to be placed on the municipality’s most critical development needs
• An assessment of the existing level of development in the municipality. This should include the identification of any communities which do not have access to adequate basic services
• The council's long-term development vision and should consider the need for social and economic advancement of disadvantaged sections of the community
• The IDP must describe in detail how the municipal council will realise its development objectives and the time frame within which those objectives will be realised
• The council's spatial development framework, which should guide the way in which the physical area will be developed

It is suggested that IDP can assist in the promotion of socio-economic development in at least three ways; first, in helping to attract funds from other spheres of government, donor organisations and investors through defining and packaging attractive projects and programmes; secondly in helping to create an environment that is conducive to private sector investment and the general promotion of LED; and thirdly, by proposing direct interventions in the economy through, for example, providing incentives, developing economic infrastructure, and buying, developing and leasing/selling land,(DPLG 2000, 25).^[8]

A participatory approach to LED involves the inclusion of different stakeholders so that their views, concerns and issues can be included in the planning process. This is important because it is here that networks, partnerships and information sharing occur that make better, more practical, strategies possible.^[9]

Variables to be considered when conducting this inventory should reflect the components of a functioning economy, such as human and social capital, financial capital, physical capital and natural capital (UN Habitat,10).^[10]

In South Africa, municipalities are specifically required to involve communities in the affairs of the municipality, to provide services in a financially sustainable manner and to promote development.^[11] For instance, public participation is a key element of the Systems Act, and municipalities are obliged to establish mechanisms for public participation and participatory governance.

There is entrenched policy support for pro-poor development in South Africa – often being the primary focus of municipal vision/mission statements. In many cases it is treated as the partner of pro-growth/economic growth interventions. This situation is to be welcomed and reflects both local imperatives and responsiveness and local adherence to nationally identified objectives.

Given the dual challenges faced by South African society of needing to address both chronic poverty, yet also to achieve economic growth and global competitiveness, from a policy perspective it would seem that the approach adopted by Mangaung, Cape Town and eThekwini is most appropriate. These municipalities took a middle of the road approach, focusing their LED strategy on addressing both issues of poverty and growth and the fundamental linkages between the two (World Bank, 2005, 75).^[12] The following case studies present pro-growth endeavours that have led to tangible pro-poor driven growth:Johannesburg’s Fashion District; eThekwini's regeneration projects; Ingwe's rail-based tourism initiatives.^[13]

These case studies show that pro-poor, community-based initiatives that are market linked, providing a viable product and operating in an economically effective fashion, can help disadvantaged community members to effectively participate in the market economy. Similarly, community-based service provision and labour-intensive employment is an effective mechanisms to extend services and create employment and business opportunities for the poor (World Bank, 2005, 78).^[14]

Land-use planning and development control serve as measurable tools for LED. The assignment of property rights in land and third party enforcement are essential for the efficient operation of markets. Public intervention ensures the separation of incompatible land-uses, integrated planning and development of synergistic land uses, and the 'public goods' aspect of necessary public facilities, open space and infrastructure investment (Lai, 1994, 78-80).^[15] Land use planning and development control are essential for the existence and operation of land and property markets (Alexander, 48).^[16] For instance, the assignment of and control over land uses will generally reduce transaction costs and can create or enlarge markets (Lai, 1994, 91).^[17]

The following are a list of public land use and development controls that the Ontario Ministry of Municipal Affairs and Housing lists as useful methods in promoting economic development.^[18]

Zoning by-laws

Zoning by-laws are used to specify matters such as density, uses of land, parking requirements and form-related standards – including building heights, lot coverage, setbacks, minimum lot sizes, and other building envelope specifications. To keep pace with market conditions and to create higher-quality built environments, flexible and context-relevant standards can be implemented to support economic development goals.

Height and density exchange

Municipalities can require that facilities, services and matters, as set out in an official plan and by-law, be provided in return for an increase in building height and/or density. This exchange might include streetscape and design elements – for example, protected bicycle parking, outdoor seating, non-slip pedestrian surfaces or public art – in support of municipal placemaking and economic development objectives.

Minimum and maximum standards

More efficient built forms can be achieved through by-law standards for minimum and maximum building height and density. Community resources such as nearby services, public transit, utilities, and existing road and sidewalk networks and greenspaces, can be used more effectively while expanding the number of potential customers for area businesses.

This article has an unclear citation style. The references used may be made clearer with a different or consistent style of citation and footnoting. (March 2013) (Learn how and when to remove this message)

• Observatory of Rural and Local Development www.observalocal.com
• [1] http://www.ledknowledge.org - Global Local Economic Development Site
• [2] http://www.ledna.org - African Local Economic Development Site