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International Link and Services for Local Economic Development Agencies for a fair, human, sustainable and inclusive development

State of  the  art  review  on   Local  Economic   Development  Agencies     Giancarlo  Canzanelli    

20 October 2010

ILS LEDA paper n° 12


Introduction Despite Local Economic Development Agencies (LEDA) are spread structures in all the continents, there are many people who do not know yet and other ones who do not understand their role or activities. On the other side an unique LEDA model does not exist, provided this depends on the characteristics of the local and national context, but a differentiated net of solutions, and it makes more complicated and confuses the acknowledgement of how many promote and manage the LEDA. A recent publication of the OECD has identified the organisms involved internationally in the production of knowledge and the promotion of Local Economic Development Agencies and the OECD itself, Eurada (Association of European Development Agencies), ILS LEDA (the program that promotes and supports the LEDA for human development), the World Bank, the IEDC. These would be added the ILO and the IADB (Interamerican Bank for Development). This document summarizes the thinking and experiences of each of these organisms, providing a framework rather exhaustive the state of the art as to the LEDA, and hoping this could better clarify its role, objectives, functions, organization, and services, based on the current practices.

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OECD1 Local leaders must find a means to engage themselves in local economic strategies, despite having no mandate to represent them or lead them, and local leaders must seek to reconcile their interests with one another through visioning and agenda building, as well as aligning their needs and interest with those of residents. Reconciling the needs and aspirations of residents with those of economic stakeholders is not usually straightforward, especially in a context where economic growth and quality of life are perceived to have major tensions and trade-offs between them. Given all of these factors, it is highly desirable that local development is orchestrated as: •

A partnership activity between public, private, and institutional sectors, with substantial vertical and horizontal collaboration on the public sector side, and where stakeholder engagement is both effective and efficient;

a long-term effort that will also produce important progress and milestones within short time pans;

an activity that is customer- and investor- facing and utilises appropriate organisational vehicles to deliver this (such as a development agency);

an activity that gives rise to its own organisational forms and models, and is able to invent new tools for intervention.

If this is accepted, it becomes clear then that there are two roles for public sector organisations and governments: (1) attending to the fundamentals of delivering economically sensitive public services in a robust and effective way (including infrastructure, education, planning, amenities, etc.). This would also include ensuring that there is the necessary co-ordination of public sector endeavors in place, such as co-ordination of investment in different types of infrastructures or the co-ordination of regulatory regimes; and (2) government should collaborate extensively, and foster co-operation, at a broad regional level with private and public sector actors, to ensure that market sensitive development interventions are delivered in a professional and supported manner. This would include planning and development, branding and promotion, support for businesses and investors, investment facilitation and financial engineering. Acknowledging that local development is a specialist activity, many local governments now understand that it requires additional expertise, and new structures and arrangements, beyond the usual activities of municipal government and administration. This book explains and introduces the role of development agencies, and locates them within the idea of a "local development system", as we shall explain. Development agencies have become an increasingly popular organisational vehicle for shaping and pursuing local economic strategies. However, there is no precise common understanding, or rigid formula, of what a development agency is. No global census of development agencies and companies has been undertaken, but there are                                                                                                                       1

The following paragraph is an excerpt from “Organising Local Economic Development, the role of development agencies and companies” ( OECD, 2010)  

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currently more than 15 000 such organisations world wide, with more being created every month. Given their increasingly important contribution to local urban development, there is a requirement to better understand the factors which underpin their performance and share best practice. Across the breadth of literature reviewed there is convergence around the view that development agencies represent a powerful tool for the planning and delivery of local development. Academics and practitioners have both confirmed development agencies as: “Active entrepreneurs, achieving more with less funding, promoting economic development on broader scales geographically, and collaborating creatively within and among organisations" (International Economic Development Council IEDC, 2006); "Excellent vehicle[s] [that] should enjoy strong support from both the public and private sectors" (Blakely and Leigh, 2009); "One of the most successful results of the Inter-national Links and Services for Local Development Agencies' activity" (LS LEDA, 2009). The most significant literature is represented by: •

Regional Development Agencies in Europe (Halkier, Danson and Damborg, 1998)

Training Manual for Managing Economic Development Organizations (IEDC, 2006)

Planning Local Economic Development: Theory and Practice (Blakely and Leigh, 2009)

Setting Up a Development Agency (EURADA, 1999)

Local Economic Development Agencies (ILS LEDA,2003)

ILS LEDA defines development agencies as "legal, none profit structures, generally owned by the public and private entities of the territory" which act as a mechanism through which "local actors plan and activate, in a shared way, initiatives for territorial economic development; identify the most convenient instruments for their realisation; and enhance a coherent system for their technical and financial support" (ILS LEDA,2007a). Though slightly outdated, this accepted definition captures the essence of what development agencies are as well as their broad purpose. It also introduces a series of significant messages, which are developed well by other authors. The World Bank, Blakely and Leigh, the IEDC, and Halkier, Danson and Damborg ali see development agencies as alfiuistic, business-facing and arm's length vehicles operating in collaboration with other key stakeholders in a wider system of local development and to facilitate local development strategy delivery (World Bank, 2009; Blakely and Leigh, 2009; IEDC, 2006; Halkier, Danson and Damborg, 1998). Effective collaboration between key stakeholders is seen as fundamental to both the purpose and success of development agencies. Canzanelli and Del Bufalo, for instance, explain that "partnership at the local level gets concrete responses" (Canzanelli and Del Bufalo, 2005).In particular, they argue for public-private collaboration as a means to good local development governance. They suggest that the temporal mandate of government is "absolutely insufficient to assure the necessary continuity" and that development agencies as apolitical, "stable" organisations with "strong time and resource engagements" with business are required (Canzanelli and Del Bufalo, 2005). Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


The requirement for collaboration and development agencies to facilitate partnership working is an established conclusion across local development literature. In their book, Planning Local Economic Development: Theory and Practice, Blakely and Leigh suggest that "economic development is an institution-building process. As a result, it refers the establishment of planning systems and institutions that can manage the local development process over an extended period of time Many contributions make it clear that development agencies are flexible bodies, capable of performing a range of tasks depending on requirements. According to the texts, development agencies provide several services to local residents, businesses and institutions. A number include: business services and support, entrepreneurial training, territorial marketing, poverty reduction and social initiatives, research, project management and co-ordination, credit provision, innovation support and visioning (Canzanelli and Loffredo, 2008; Canzanelli and Del Bufalo, 2005; Blakely and Leigh, 2009). It should be noted, here, that development agencies in the developing world undertake activities which differ in their focus to those of development agencies in the developed world. Their projects without doubt reflect a more specific concentration on human development and social concerns. Much of the work in relation to developed world development agencies, on the other hand, describes these organisations as having an economic bias. Productive economic growth is seen as the engine which drives and delivers development. In the developing world, however, both social and economic methods are seen as the means to deliver sustainable local development. ln his paper, "The Contribution of the Local Economic Development Agencies Promoted by United Nations to Human Development", Canzanelli outlines a number of the objectives of developing world development agencies which are specific to human development. These include for instance the reduction of poverty and marginality, the improvement of capacities in planning and actions, the safeguarding of the environment, and the empowerment of women capacities in participating to the economic development (Canzanelli, n.d.). The World Bank provides more precision, describing development agencies as: (1) having their own legal structure; (2) being functionally autonomous; (3) not-for-profit; and (4) often multi-stakeholder in their board composition. The organisational designs of development agencies are business-like in their form and should reflect the role the organisation will play in the local development system (Blakely and Leigh, 2009). The requirement for development agencies to reflect local conditions is highlighted by Blakely and Leigh (2009) who explain that "after the type of structure is selected, civic leaders can then 'tailor it' to local circumstances. "They go on to suggest that development agency review and evolution is critical. None of these forms is set in concrete", they argue. “They can evolve in time, with components being added and deleted as the need arises”. Whatever the form the development agency adopts, Blakely and Leigh (2009) conclude that "the essential point is that it should have sufficient authority and resources”. In one previous publication2 OCSE states “the first strategic choice for the creation (or redefining the role) of an agency has to do with the demarcation of its field of action and its mode of insertion into an often dense institutional environment (consultive organisations, , public services, local administrations,...)”                                                                                                                         2

Ocse: Les agences regional de developpement (2005)

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A choise should be taken between: • The focus on a clearly identified " business core ", for which the agency may have a operational and exclusive capacity of intervention (from upstream to downstream); • The choice of a much more extensive missions in order to cover the different dimensions of territorial development, which will impose the agency to coordinate the internal and external more important efforts. The first option (specialization on a business core) will increase the visibility of the agency and its legitimacy in a particular policy area (eg perspective visions, finance, technology transfer ...). This approach may have the effect of encouraging the creation of other dedicated tools (possibly in the form of additional agencies) to cover unmet needs. This segmentation of tasks between various agencies or operators will require the creation of a network and the definition of appropriate forms of coordination. In the second case (extensive missions) the regional development agency can effectively respond to a need for integration of regional policies and a multiplicity of instruments for economic promotion. Mandated to "put on music" a full range of interventions, the agency model is part of a logic of "transversalization" of policy and deregulation of sectoral tools. One can distinguish two particular ideal Agency types: •

The model "operator" means the agency is delegated to directly implement and use the public resources. In this case, the agency convoys programs and public funds into a single entity as it is delegated by one or more public authorities. Featuring a wide margin for the best combination of these different instruments, in this case the agency can demonstrate a highly responsive actons and provides a comprehensive offer. His speed in implementing actions and decisions making represent the advantage vis-à-vis private actors that identify it a "one-stop-shop". The agency budget (operating + intervention programs) may be extremely high.

The model "animator" agency is a "coordinator" dedicated to animation features and general preparation of the decision. Designed with a logic of "mission”, the agency acts primarily to support the definition of strategies and policies implemented by others. Being tool for decision support (diagnostics, guidelines, evaluations ...) or assistance to the client, the agency may eventually incorporate the tasks of pretrial or analysis of action on behalf of its constituents ( French model of urban planning agencies or territorial committees). The agency's budget is then influenced essentially by its operating resources.

It is naturally conceivable to combine, according to the treated themes, these different functions within the same agency, but one can wonder about their compatibility, including the duration. i) The model "operator" is by definition more involved in the management and implementation of programs. The profile of the agencies concerned will suffer necessarily in terms of staff and expertise. ii) A model multi-business "operator", with very wide fields of expertise, is very specific. In fact the model "operator" may look more appropriated for social purposes or limited-term: specialized competence, territory targeted intervention (eg, area conversion). Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


It appears, subject thereto, as the effective way to gather skills and resources from various sources (co-proxying) when it appears necessary to overcome the balkanization of expertise and stakeholders. However, we can wonder about the political acceptability of an operational tool with extremely broad competences when it coexists -on the same geographical area- with a collectivity of services.

ILO In local economic development processes3 implementation structures are needed for making effective the realisation of the objectives, strategies and plans shared by the local actors, enabling their transformation into concrete projects, and into business proposal or orientation. This function needs, indeed, the organisation of competent resources, which, networked with the other territorial organizations and institutions, make the projects feasible and compatible with the objectives. In absence of such structures the management of the local networks and coordination is difficult and risks being chaotic. Different models of such structures have been experienced either in developed or developing countries, and countries in transition. Differences consist in specific aims, type of delivered services, level of involvement of the local actors. The most comprehensive structure, established in the framework of local economic development initiatives, is the Local Economic Development Agency (LEDA). It is not a case that OECD in its recommendation for promoting local economic development processes gives priorities to the establishment of such structures. Initially local development structures need to be created, possibly involving the a leading actor or group, the recruitment and training of managers and development operators and the establishment of partnership mechanisms with other local organisatrions and institutions. This should be done within a supportive national and regional framework. The creation of a functional structure, or Local Economic Development Agency, is likely to contribute to success. Such a structure will help establish an identity and visibility for the local development initiative and act as a vehicle for dialogue between partners and interest groups. This structure should be tasked with drawing up a long-term overall strategic plan and helping access finance for the implementation of projects. The structure should have stability and permanence, since few tangible results are achieved in less than five years and fundamental transformation requires at least ten years. It is also helpful if the structure has a degree of autonomy from political pressures so that it may develop a long-term strategy rather than be forced to respond to short term priorities.                                                                                                                       3

ILO-Universitas Program: Overview and learned lessons on Local Economic Development, Human Development, and Decent Work (2001)

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The secret of their success is in relationship among productive local priorities, and a joint service of technical assistance and credit, which allow the most vulnerable people to access to the economy, and the business growth according to the identified priorities. Generally they: • •

• •

help elaborating strategic plans for the territorial development, choosing priorities, and creating a favorable environment for businesses. provide a comprehensive service system addressed to the needs of the population without resources, for creating new businesses and reinforcing the existing ones. organise the local competences to make the best use of the endogenous resources and add value to local economy. reinforce the local business and workers organisations, the cooperative movement, the civil society to take advantage of the economic opportunities.

EURADA

4

A RDA is an operational structure that identifies sectoral or overall development problems, chooses a range of opportunities or methodologies for their solution and promotes projects which can maximise the solutions to the problems. The attempt to define a development agency at the European level is a very risky exercise and that even Mr. Roberto Velasco, in a document on the role of the regional development agencies in the promotion of the economic development of the Objective 1 regions (the less developed regions in Europe), written up at the request of the European Commission, limits himself to stating: "Maybe the only common feature of all the regional development agencies is that their activities always relate to the development of the endogenous potential of a geographic area, even if some of them, as additional activity, or even as their main operations, try and attract foreign investment. Another identifiable feature is the very wide meaning given by the agencies to the notion of development, and the growing importance of the social component given to this concept". In order to structure a European development agencies network, EURADA has based itself on the following definition : "Any organisation which carries out a mission of collective or overall interest for an area. In this regard, the development agency must have a significant association with a local or regional authority, as regards its management, financing or assignments. Furthermore, it must have a sufficiently large operating area, being less than a country however". Another definition has been developed by UNOPS which sees RDAs as " organisations in which the local actors, in an autonomous and participatory way, take decisions on self-sustainable economic development, assuring the technical conditions and the resources to perceive it". Where to establish a RDA?                                                                                                                       4

The following paragraph is an excerpt from "Eurada: Creation, Development and management of RDAs (Regional Development Agencies)" (2005)

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According to a study published by the European Commission, the conditions for the successful operation of an RDA would be as follows : •

local support structure for the initiatives, possessing the following qualities: stability and permanence;

variable structures of partnership, promoting cooperation between public and private;

refocusing the various levels of public administration beyond the local area and around functional relations and facilitating the interchange between territorial and sectoral policies;

promoting a comprehensive approach to development to draw up a long-term overall strategic plan;

finance encouraging risk-taking;

channeling savings into local investment;

facilitating the contribution of public finance to the local area;.

meeting the needs of the productive businesses;

introducing service centres according to business requirements, particularly of small enterprises, the development of which seems essential to recreate the productive development. These integrated points of access are necessary to strengthen dissemination, innovation, vocational training, expertise and reduction of administrative procedures (often a difficulty for small-scale entrepreneurs).

Netwrorking exemplary practices and experiments. Indeed, the success of any local work requires cooperation and incorporation in exchange and transfer networks;

We can consider two major classifications for RDAs: By origin: •

Agencies established by Central Governments

Agencies existing inside local and regional authorities

Agencies established by local and regional authorities

Independent agencies established by public/private partnership

By activities: •

Strategic agencies

Global operational agencies

Sectoral operational agencies

Inward attraction agencies

As far as the activities are concerned, one can also try to classify the RDAs according to whether that they offer traditional or rather innovative services. When local or regional authorities establish an agency, independent from their own structures, these can make quicker decisions and can also be closer to the regional executive bodies and less dependent on political attitudes. Public/private agencies have, in most of cases, the ability to combine public and private points of view, both for methodologies and for objectives. They seem to be, in Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


view of actual economic, political and social trends, structures that will increase in the future. In fact, the combination of the institutional capacity of the public sector with the operational skills of the private sector can be a real alternative model to implement and promote local and regional economic development policies. Strategic agencies have as their objectives mainly the establishment of information data banks, research studies on sectoral and general social and economic factors, promotion of the region in national and international terms, supportive information to SMEs and promoting awareness of endogenous potential. General operational agencies have as their main objectives the establishment, promotion and management of inter sectoral development projects. They are creators of projects for economic restructuring, involving SMEs and the public sector. Nevertheless, they have to take in account the function of the strategic agencies, and that is why, in many cases, both of them act together or inside the same organisation. Sectoral agencies are established to promote a specific sector or activity of a region, such as employment or culture, or retailing, or ceramics etc. They promote, implement and manage specific projects in a specific area. Often the single but most complex objective of development agencies is the economic development of a pre-determined territory. This assignment involves territorial and country planning objectives on the one hand, and assistance to enterprises on the other, and leads to the creation of wealth in the region or to success for the region. The achievement of these assignments generally implies : • • • • •

economic objectives; environmental objectives; social objectives; need for an operational level; a catalyst mechanism in order to focus local/regional, national/international and companies' objectives to the creation of wealth for the benefit of the region.

These objectives lead to the following two essential activities of the agencies : •

regional programming;

supporting enterprises, that means provision of advice, finance and infrastructure.

With regard to the services to enterprises, it appears that a combination of financial services and other services is necessary if one wants to achieve the long-term survival of enterprises after their third year of existence. One may consider that the development agency is the main local body for defining and implementing a regional development strategy. The duties to be taken up by the agency will also relate to : •

preparing the strategy;

mobilizing all actors, including the political ones, around the strategy;

mobilizing the funds which have a leverage effect;

identifying pilot or demonstration projects and granting financial support (since micro projects often offer quick return on investment, they may have a considerable training and demonstration effect, enabling the local population to regain confidence in its capacities); Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


providing small scale infrastructure;

attracting private sector investment;

maintaining quality levels.

The two essential activities of the agency will consist in obtaining a political consensus around the strategy and ensuring that the public and private funds will be available for implementing this strategy. In the context of the functions of the development agencies, which served as the basis for its Development Agency Directory, EURADA has classified the roles of its members in five major activity groups, themselves divided into several sub-groups (in total 61 activities). The five major groups considered in this nomenclature are as follows: • • • • •

Endogenous development Services to enterprises Services to local and regional authorities Training International actions (participating in transnational networks).

Community

programmes

and/or

The analysis of the activities of the development agencies on the basis of the EURADA nomenclature shows that a certain number of activities are common to all agencies, while a certain number of other activities is specific to a few development agencies only (i.e. agency operations to be found in only one or two Member states). The activities most commonly pursued by the development agencies are: •

Counseling and assisting existing enterprises

Counseling and assistance for the creation of enterprises

Economic or sector-related studies

Data bases on local enterprises

Files concerning available land and buildings

Data bases on the assistance available to enterprises

Advice for participation in trade fairs and shows

Counseling in relation to the transfer/take over and cooperation of enterprises

Restructuring enterprises in trouble

Advising territorial communities

The least generalized activities are: •

Granting export subsidies

Granting tax advantages

Granting rent subsidies

Hire-purchase of industrial real estate

Managing sub-contracting exchanges

Managing residential real estate

Managing recreation parks

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Managing technology houses

Environmental protection activities

Granting interest subsidies

Providing guarantees / sureties

It is more and more thought that the role of RDAs must not only concentrate upon the economic regeneration process, but has also to take social development and local democracy accountability into account. So in the future, RDAs will probably have to fix as their objectives : •

to create a competitive business environment;

to stimulate a world class workforce;

to improve the infrastructure;

to lobby for a supportive governmental attitude for the region;

to improve health and environment;

to build effective institutions.

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World Bank

5

The first Local Economic Development Agencies (LEDA) were set up in Europe at the end of the 1950's. LEDAs are promoted by various European governments as well as by the United Nations. They objectives generally are:: •

Foster the economic development of the territory where it works; tap the endogenous potential of a territory.

Capitalize on endogenous resources and concentrate on support for those groups with the most difficult access to regular economic and financial circuits.

Foster integration and coordination of local institutions and associations around a shared vision of local economic development.

Promote local small and medium sized business; create entrepreneurial culture.

Plan and bring into being a system of services to public and private organizations that can support local economic development.

Pay special attention to identifying the most vulnerable social groups and identifying poverty traps.

A Local Economic Development Agency sets up, runs, and supports an endogenous network able to catalyze development. The essential mission of LEDA is to: •

Create jobs.

Promote and support small and medium-sized businesses in the various branches of production.

Improve the economic context and opportunity of the territory.

Promotes free competition among healthy businesses.

Provides tools for economic development that include the weakest and most vulnerable.

Uses businesses as a weapon in the fight against poverty.

Develops relationships of collaboration and cooperation across sectors.

Allows the local government to be the direct actor.

Several core characteristics of a LEDA are: •

It is an organized structure. o LEDAs have their own legal structure and functional autonomy; it has a legal framework. o They involve local actors from both the public and private sector; consortium of public and private sector groups. o It is a non-profit association.

                                                                                                                      5

The following paragraph is an excerpt from www.wbg.org “The World Bank approach on local economic development” (2006)

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Bundles services together: financial services, technical assistance, training of potential entrepreneurs, territorial service. o It is an institutional entity: it plays a role in the local and national political picture. o It is a contractual entity: independent access to funding, to subcontracts and services, to national and international programs. o It is an administrative entity: implement projects and provide services and credit. It is a territorial structure. It means it is: o a tool for development policy in decentralized states; o a support for national policies concerning the decentralization of economic development decision-making and services; o a forum for social dialogue, where local actors can promote and determine their own processes of economic development. o an autonomous and democratic entity, where public institutions and local associations can take joint decisions, o an entity, which coordinates local economic development planning and implementation, and o assembly all the actors in order to design local economic development strategies It is a service provider. It means o it indicates the most promising sectors, priority interventions and their configurations; o it provides technical assistance to the local administrations responsible for planning; o it assists the entrepreneur to find a good idea and develop his or her business plan, ascertaining its feasibility. o it assists businesses both during start-up and in their initial period of activity. o it helps to finance business plans. o it provides credit on the basis of business plans. It is a weapon against poverty. It means: o it makews the credit accessible to all: LEDAs act as guarantors with the banks, providing collateral for the poor. o it enables all territorial organizations to participate and play a role in the decision-making process. o it ia a vehicle for small producers to market products outside the local area. It gives social benefits, as, for instance: o it protects and enhances the environment, prioritising business plans that capitalize on environmental resources and introduce new environment friendly businesses and projects. o it Is an additional resource for women, i.e., dedicating special attention to the women oparticipation to local economies. Has links with national and international networks. o

Who belongs to a LEDA? •

All the local public and private-sector entities that want to participate are involved in the decision-making bodies: community groups and civic associations, trade unions, producer’s organizations, business associations, service centers, city governments, the local offices of ministries, specialized public structures, vocational training institutes, banks, universities, etc.

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This actors participate to the governing structures (assembly, amnagement board) and decide upon the operational structure (the technical unit, with high level resoure persons)

What a LEDA do? •

They integrate the business in the lines of production that are the center of the endogenous local development.

They assist the entrepreneur to find a good idea and develop his or her business plan by providing information on business opportunities and offering specific technical assistance.

They assist businesses both during start-up and in their initial period of activity ( Supply support in organizing production, perfecting technology and administration, managing markets, and marketing).

They provide financial support, facilitating access to credit on reasonable terms.

They prepare a consolidated plan for local economic development that constitutes a reference point not only for its members but also for national and international organizations interested in investing in the territory.

They launch key lines of production for the territory, by creating a significant number of new enterprises and financing and reinforcing existing ones.

They introduces Special Training Programs.

Programs that LEDA implement are like the following ones: •

Territorial development plans.

Studies and surveys directed at local and territorial organization.

Specialized technical assistance for local institutions.

Enhanced coordination of different actors engaged in this area.

Orienting international cooperation and national development programs.

Overall business support: 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.

Providing information on area’s resources and potential, laws, regulations, and consumption.

Encouraging the creation and spread of other specialized services, such as financial and commercial services.

Research and education of entrepreneurial activities.

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IADB

6

A Local Economic Development Agency is an instrument through which the main public and private institutions of a certain territory seek to maximize its economic potential, using existing natural, human and institutional resources. Its ultimate objective is to enhance the innovation capacity of the territory, understood in a broad sense, i.e. including not only product and process innovations, but also management and organization innovations. Local Economic Development Agencies (LEDA) are, therefore, intermediate agencies, owned by the local public and private actors, which show the new ways of production development policies in the different territories. This is to make an advanced technical infrastructure available to the local micro, small and medium enterprises and cooperatives, in order to provide a set of solutions and services which are usually difficult to achieve for themselves independently, given their small size, remoteness, low predisposition to cooperation, and the insufficient support by the central state level. They are no profit entities with their own legal and operational autonomy, and they are legally recognized in the field of private law with a legal form that allows the participation of both public and private actors. The issue, therefore, is to facilitate access to financial services, technical assistance, training in business management, strategic information about markets, technologies, products and production processes, among other crucial services for these smallscale enterprises in their respective regions. One of the features of Local Economic Development Agencies is the autonomous nature which "allows them to be, at the same time: (1) an institutional subject with weight and presence at local and national level; (2) a subject which is able to access to financial resources, contracts for supplies and services, national and international programs; and (3) an administrative subject capable of performing projects and providing credit service without excessive bureaucratic requirements" (Canzanelli and others, 2002) In some cases, beyond the LEDA, the innovative local environment may include other components such as Local Employment Offices, Sectorial Technology Institutes, Business Innovation Centers, Business Information Network, Business Parks and Industrial Estates, Business Incubators Centers or Social Economy– Based organisations, etc. According to the principle of proximity to businesses, LEDA services must be distributed throughout the territory, close to the significant economic groupings or to the local relevant "clusters". This territorial approach, toghether with the autonomy and the participated LEDA governance as decentralised flexible system, assures the interacción and the continue dialogue among the various socio-economic actors. In addition to the work to be undertaken with the various entities constituting the innovative territorial environment, the LEDAs should work with the Business and Professional Associations, Chambers of Commerce and Industry, Fairs, Training                                                                                                                       6

The following paragraph is an excerpt from “BID-FOMIN: Guía de aprendizaje sobre integración productiva y desarrollo economic territorial” (2009)

Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


centres, Universities, Local Trade Unions, Non-governmental Organizations of Development, Institutions of International Cooperation, etc. With regard to the success factor of the LEDAs it is useful to underline “The Local Economic Development Agencies are effective because they do not reproduce a rigid model, but adapted to the specific needs of each territory. In fact, the secret of their success consists of three key elements: (1) The partnership among different local actors, which normally operate independently and sometimes in conflict with each other; (2) a strategic vision of development; (3) the mobilization and valorization of the locally available resources. Indeed, a LEDA is able to articulate, in a comprehensive matter, the local economic development strategy, the plans that make it operational and the services needed to sustain it, such as the business creation and support, training, studies, seeking fund raising, and coordination between public and private resources " (Christian Saublens, EURADA Director). For the design of a territorial development strategy is required, as noted, monitoring capacity on businesses and local labor market, which are functions usually in charge of the LEDA, or specific observatories (such as the Local Employment Observatory, the Sectorial Technological Institutes, the Business Innovation Center, among other figures) created as a part of the new territorial institutions to promote economic development and local employment. In any case, there is a clear need to establish specific territorial information systems, given the scarcity and limitations of traditional statistics relating to the local level. Another important task of the LEDA is the coordination of sectorial programs (education, employment, agriculture, innovation, industry, tourism, trade, health, etc.) through playing an intermediary role for achieving the maximum synergies. This shows the importance of intermediation for taking into account different positions and different actions and achieving more coherence among the various interventions in the territory. The LEDAs perform an important intermediary role by facilitating the creation of local environments favorable to the incorporation of innovative products. These services include: •

Training of human resources according to local needs.

Services to support local production.

Strategic information on suppliers, markets, products and technologies.

Information on the legal, fiscal and tariff regulations.

Support to associations and business cooperation.

Intermediation to facilitate access to credit for local micro-enterprises and SMEs.

LEDAs, indeed, facilitate the creation of a local supply of strategic information services, technical assistance, training in business management and project management, and financial assistance. They also try to ensure coordination between strategies and local, regional and national interventions, also encouraging the international openness of local production systems.

Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


ILS LEDA

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One of the most effective tools8 for the sustainable promotion territorial development processes is the Development Agency. Local Economic Development Agencies (LEDA) are legal, non profit structures, owned by the public, private and social entities of the territory. Through the LEDA the local actors plan and activate, in a shared way, initiatives for territorial economic development, identify the most convenient instruments for their realization and enhance a coherent system for their technical and financial support. 60 LEDAs with these characteristics are currently operating in many Latin American, African, East European countries, and they are gathered into the ILS LEDA network. The LEDAs will help to create territorial added value and social inclusion: industrial products from raw materials, tourism and industry from natural resources, economic activities from local culture and environment and they help the most disadvantaged people to enter into the economic mainstream. The story of the LEDAs promoted by United Nations since 1991 has passed through at least three stages up to day (see fig.1), when this experience has been adopted by the UNDP ART initiative, with common and different evolutionary characteristics. The common characteristics are: •

• •

The public-private partnership, aimed at including all the local administrations, the government local delegation, the associations of civil society, and other public or private important institutions (universities, financial institutions, research centers, NGOs, etc.), although is some cases the participation of the public institutions was realised through special arrangements, being forbidden by the national laws. The “territoriality” correspondent to an over-municipal area, (with only some rare exceptions), for taking into account a critical-mass of resources for development and the scale economy of the service for economic development. The attention to the most disadvantaged and marginal people, being either unemployed people, displaced o refugees, marginal producers, farmers, micro entrepreneurs, artisans, women, disabled, etc. The provision of comprehensive services, although this means the inclusion of a differentiated set case by case. The self-sustainability, due in the majority of the case by the special use of a “Fund for credit”, whose interests constitutes an important income for the LEDAs.

As far as the evolutionary different characteristics, the “First LEDA Generation” is dated in the period from 1991 to 1996, correspondent more or less to the United Nations Prodere program and the following “PDHL” period in Central America. These LEDAs are characterized by a strong commitment for reducing the poverty in the rural areas, combining formation of capacities, technical assistance to the                                                                                                                       7

ILS LEDA is an international program aimed to support United Nations in promoting creation, startup, and accompaniment of LEDAs, and their coordination in a global network. ILS LEDA in particular supports the UNDP ART Initiative, UNOPS, UNIFEM and ILO. 8

The following paragraph is an excerpt from “ILS LEDA: The contribution of LEDAs promoted by United Nations to human development” (2009); and “ILS LEDA: Radiografía de una Agencia de Desarrollo Económico Territorial” (2010)

 

Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


population for their inclusion in the economic circuits, and credit (at the beginning with dominance of microcredit). The impacting results are measured on the number of new jobs created, of the new small businesses and cooperatives, the increased capacities of the population in participating to the economic life, the number of projects realised through channeling new resources from the national and international institutions. The Morazan, the Ixcan, the former Nueva Segovia, the Ocotepeque LEDAS achieved excellence among these LEDAs, and they can be pointed out for interesting best practices in the financial sector, in the combination of intervention in the economic, social, and cultural sectors, in the reduction of poverty. The “Second LEDA Generation” corresponds to the period from 1998 to 2004, promoted by different United Nations programs in Mozambique, Albania, Serbia, Colombia, El Salvador, Honduras. In this case the LEDAs , above the tasks referred before, start assuming a more incisive role in the local and even national planning, and they start supporting not only isolated producers, but value chains linked to the local resources for strengthening the possibilities of sustainable and long term economic initiatives. In particular in Mozambique the LEDAs became reference for the national policy, in Colombia in many cases they were supported also by the national government. In Albania (specifically in the Skhodra and Vlora cases) and Serbia (specifically in the Kragujevac case) they supported the local and regional government in the planning, In Colombia (excellent the Velez case, and the initial Nariño) and Serbia, the constitutions of value chains allowed a more vigorous and sustainable territorial economic development. In any case the success can be measured again through the number of the jobs, enterprises, and projects generated, but also in the empowerment of the collective capacities (value chains, local partnerships) in promoting and supporting the local economic development with focus on human development. Velez (with the famous “Bocadillo Veleño” value chain), Oriente Antioqueño, Manica, Sofala, Teuleda, Auleda, and Kraguyevac produced interesting best practices: Velez with the comprehensive support to the actors of the Bocadillo Veleño chain of value (from the constitution of the chain and its management, to the improvement of quality and image, plantation health care, empowerment of marginal producers, and territorial marketing, etc.); Sofala and Manica induced the national government to establish e specific LED structure and to consider the LEDA as the instruments for enhancing provincial economic development; Teuleda and Auleda in Albania experimented successful territorial partnerships with similar structures in Italy; Kragujevac is a good example of the support to the local actors in a permanent partnership for good planning and governance. The “Third LEDAs generation” is under construction in Lebanon, Uruguay, Sri Lanka, Ecuador, Bolivia, and Albania in correspondence to the new UNDP ART Initiative. Here the mission and the objectives, always shared among the local actors refer explicitly to facilitate sustainable long term harmonic and balanced development in accordance to shared strategic plans, through favoring public and private partnerships, and valorising the human, social, economic and environmental resources, with the final aim of overcoming the economic marginality, the social exclusion, and the cultural fragility. UNDP ART program is a very important initiative for LEDAs, either because since 2006 it promoted new LEDAs and strengthening those that already exist in many Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


countries (Ecuador, Bolivia, Uruguay, Colombia, Dominican Republic, Sri Lanka, Mozambique, Albania, and Lebanon) by the systematization of practices, promoting links with the national policies, and supporting the international network.

Fig. 1: The evolution of UN-promoted LEDAs

ILS LEDA defines LEDAs as legal, non-profit organization consisting authorities, public or private. Through the LEDAs local actors plan and initiatives for local economic development, identify the most suitable tools implementation and establish an adequate system of technical and financial for people and institutions.

of local activate for their services

The services provided include at least four typologies, in a comprehensive way : Strategic services: •

Continuous Diagnosis of the territorial resources potentialities.

Guidance to members' for development strategic initiatives.

Project development and financing.

Support to local networks, support to the inclusion of the most disadvantaged people in the economy.

Supoport to local government for planning

Business Support: •

Assessment on market opportunities..

Technical assistance.

Access to credit.

Facilitation of research and innovation. Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


Facilitation and support to social and cooperative economy.

Territorial Marketing: •

Internal and external marketing.

Support to unions, associations, consortium.

Promotion and support to brand policies.

Data base and information on market trends.

Human resource development: •

Empowerment of capacities of local institutions and associations, skill development, entrepreneurial development.

A very special case is the MYDEL Program in Central America, where the LEDAs (Sonsonate in El Salvador, Valle in Honduras, Chiquimula in Guatemala, and Leon in Nicaragua) put a great effort in the gender equality, through opening up offices specifically targeted to support women entrepreneurship.

These LEDAs are integrating – above all in collaboration with the UNDP ART Program - governance components (public-private partnership, local-national relationship), strategic components (coordination between planning and action), human development components (social inclusion, instruments of support for vulnerable groups, relationship between center and suburbs, environmental protection), territorial promotion components (project management and international marketing), services components (technical assistance, professional training, marketing and credit). The LEDA pursues and provides specific solutions for poverty reduction, gender equality, development of micro and small enterprises, exploitation of local resources, local economic revitalization and reconstruction after conflicts, links with the national context and policies, and internationalization. An agency usually serves an area immediately above the municipal one, and it is equivalent to an intermediate level of governmental decentralization. In fact, the territorial coverage must meet certain requirements, such as stable public-private relations, corresponding to a decentralized administrative division of the Country, the availability of a critical mass of resources suitable for a sustainable and competitive development, and participation in making decisions. Most LEDAs associated with ILS LEDA cover an area corresponding to a province, or region (departments, provinces, districts, according to the country), and in regions where large areas or poor communication infrastructures constrains effective coverage of remote areas, the LEDA provides decentralized offices or branches, to allow the participation and the direct support . All LEDAs of ILS LEDA network are self-sustainable. This sustainability is ensured by different types of income such as membership fees, sale of services to public and private territorial bodies, income derived by the execution of contracts with partners or donors, intermediary services, and interest rates from a Guarantee Fund deposited in a bank or other credit related mechanisms. Experience shows that in the first five or six years of a LEDA, the interest income related to the credit fund represents a 50-70% of total income, income for the projects execution represents a 20-40%, and the rest comes from services and membership fees.

Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  


After this period and in accordance with the learning curve of a LEDA, the income from lending activity progressively decreases by 30-40%, while sales of services and projects revenue increase. The availability of a fund to facilitate access to credit for small entrepreneurs, farmers, cooperatives, and in general, all people unable to access business financing through traditional channels is very important. In fact, there are many restrictions for this category of people: lack of economic or financial guarantees, lack of bank references, difficulty in accessing information about loan programs and opportunities, complicated bureaucratic procedures, lack of trust by the banks about the solvency of customers. It is then important that the LEDAs have a capital available to form the credit fund and to sustain the business. The sixty LEDAs members of the ILS LEDA network reported a credit return rate of more than 90% during the last 15 years. According to ILS LEDA, the 10 good principles for the success of LEDA are: 1.

The LEDA is participated by public and private actors, including economic, social, cultural, and communitarian sectors. 2. The LEDA relies on an active and proactive executive board, which represents in a balanced way the different members’ sectors, and with strong internal cohesion. 3. The LEDA works for enhancing a territorial development, and its final aim is human development 4. The LEDA is a reference for the local and national government in the implementation of their strategies and plans 5. The LEDA provides services, realizes initiative and projects including economic animation and support, business support, territorial marketing, project implementation and financing, and social inclusion. 6. The LEDA has sufficient human resources to implement its activities. 7. The LEDA is able to provide services using its own human and technical resources and the resources of the local actors. 8. The LEDA provides services first of all to the disadvantaged people and micro, small, and medium enterprises, but also to local government, and local NGOs 9. The LEDA has a medium term financial plan that assures the self-sustainability, through diversified sources of income: contribution of members, contracts, projects, service sales, and credit management. 10. The LEDA is networked at national and international level with similar structures.

Ils Leda  PAPER  N°  12   State  of  art  review  on  Local  Economic  development  agencies  

State of the art review on Local Economic Development Agencies  

Giancarlo Canzanelli 20 October 2010

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