What is Local Economic Development?
Defining LED is no easy task. One way of trying it anyway is by saying what it is not:
- LED is not industrial policy. It is also not SMME promotion (though the latter may be part of LED).
- LED is not regional planning. Planning can make an important contribution to LED. But while there is often economic development without anybody having planned for it, the process of planning does not secure that there is subsequent economic dynamism.
- LED is not community development. Community development is about solidarity – it is about self-help groups, mutual assistance and voluntary work to help the disadvantaged and solve health, education, housing and other problems. LED is about competitiveness – it is about companies thriving in competitive markets and locations thriving in a competitive, globalised world.
So what then is LED? Let us first to describe it by giving a few examples of LED projects:
- Different stakeholders from one sector, for instance tourism, come together to discuss, formulate and propagate a joint image initiative for a location (e.g. municipality, district).
- Private business and council join forces to attract a foreign company which happens to process the products manufactured by a major local company.
- The council streamlines regulations and sets up an office which assists businesses in understanding and complying with regulations (e.g. how to obtain a permit, how to fill out forms, etc.).
- The local Business Chamber organises a scheme where experienced businesspeople dedicate two hours per fortnight to coach emerging entrepreneurs.
- Council and business associations organise an annual fair for local products.
These examples lead us to a more analytical definition of LED: it is about local activities to make markets work better. It is not about distorting markets, and it is not about substituting them. LED aims remedying market failures such as barriers to entry, information problems and high transaction costs.
Yet another way of defining LED is by formulating a few guiding principles:
- LED aims at creating favourable locational factors, i.e. qualities which make your place a good place to do business. This includes obvious elements such as improving the infrastructure and training workers, but also less obvious elements such as the business-mindedness and efficiency of local administration.
- LED aims at promoting business. This can be existing businesses, start-ups or external companies coming into your location. You would also look at linking things: promote and support spin-offs and subcontracting, attract investors which fit nicely into the local economic structure, and consider franchises as a source of new local businesses.
- LED aims at making local markets work better. It aims at creating places and opportunities to match supply and demand, as well as to discover, propagate and promote new business opportunities.
- LED aims at making better use of locally available resources. Instead of complaining about the difficulties of finding adequate advisors for the Local Business Service Centre, why not involve experienced businesspeople and managers in coaching both entrepreneurs and advisors?
It is important to note that LED involves very different target groups. A multinational company which may invest in your location is as much a target of LED activities as is the young black unemployed with limited skills who has some entrepreneurial talent. LED is about small and big things, and it includes everything from very modest to very fancy activities. What all this must have in common is business thinking. LED is not social work. The guiding principle of LED is competitiveness. You want to make sure that your location has qualities which are competitive with those of other locations, so that companies choose your place rather than going elsewhere. And you want to make sure that local markets work, so that manifold business opportunities arise.