Local Economic Development; A Deeper Understanding Part II.

In case you missed Part I of the article be sure to catch it here. Today, we wrap up with Part II of the article.

The Ugandan LED Policy was launched in 2012 with its overall goal as; “A transformed local government system linked to stakeholders at local and national levels that facilitates effective business-oriented locality development with a focus on poverty reduction and sustainable wealth creation.” Its purpose is to establish an operational framework for effective coordination and implementation of LED Initiatives at National and Local Governments levels. It establishes a framework for promoting partnerships in local economic development to increase household incomes, generate more revenues for Local Governments and improved service delivery to local communities

LED enables the private sector to take center-stage in economic growth and equitable development, realization of MDGs and employment creation with Local Governments playing active complementary role. This will enable the country to attain economic development, private sector development, global competitiveness, enhanced infrastructure, leading to meaningful social and structural transformation and effective decentralization.

In effect, implementation of Local Economic Development is centred around increasing decent employment opportunities for all women and men in a selected locality. A wide range of stakeholders particularly the local governments and some private sector players are keen to participate in the joint design of locally tailored development strategies that commit to opening up dialogue and also encourage partnership between themselves. The so-called partnerships seek to enhance the voices of the traditionally vulnerable and marginalized groups in the labour market (disabled, informal workers, non-skilled and even young people).

As part of the key implementation cornerstone for LED, decentralization advocates for participatory processes. The problem is, though, that there are problems linked to decentralization and participation. The main problem is that decentralization of responsibilities is not necessarily accompanied by decentralization of funds or of taxation. The problem is that local authorities tend to be overwhelmed with new responsibilities and to top it off are underfunded. In most if not all cases, local authorities tend to focus on immediate, pressing problems, such as lack of physical infrastructure and inadequate social infrastructure.

LED typically costs money, not only for the training courses of local officials, but same too for the consultants who are invariably hired to elaborate the strategic LED plan. However, more often than not no money is left for these activities. LED takes a backseat, since it does not appear as a quick-fix. In fact, the ‘strategic’ approaches reinforce this perception since they emphasise the need of lengthy mobilisation, research and planning processes before any payback can be expected. Things are even less appealing in places where local government does not have any tax authority as it is in Uganda with the abolishment of Graduated Tax. It is not too difficult to ‘sell’ the idea of LED to local government by pointing at the increased tax revenue from a more vibrant local business sector.

However, if this link does not exist, LED is a very hard sell. But even if local governments are willing to undertake LED, it is by no means certain that they possess the communicative and organisational skills necessary to deliver in an effective way. Regarding participation, doubts with respect to its effectiveness have increasingly been voiced as participatory approaches moved into the mainstream.

LED is to a large extent about learning – not only how to produce better products, but also to produce them in a more efficient way. LED is also about various local stakeholders learning about each other’s existence and goals, learning about the structure and evolutionary pattern of the local economy, learning about opportunities to stimulate upgrading in the local economy, and the tools necessary to do that.

The evolution of entrepreneurship and the growth of the local economy is usually to a significant extent due to failure in the market. Barriers to entry due to anti-competitive behaviour, lack of information and market intelligence, indivisibilities and other factors, deter potential entrepreneurs and hamper the growth of existing companies. Unclear property rights imply, among other things, a lack of access to capital. In successful locations, LED has a strong focus on market failure. Networking events address information failure, while collective action and associations address free riding. LED is seen to unlock resources and business opportunities. It addresses issues that will not be addressed through business entrepreneurship because the risk is too high, the amortisation period too long or the immediate profit too low. In other words, it addresses market failures that stand in the way of growth.

LED empowers and ensures local participation, local people can play an active part in planning their own economic future, LED ensures that local business are involved in the process and are more open to play an active role in partnerships with local communities. In addition, LED ensures that local development is locality based and focused on local comparative advantages, it allows for more resilient local economies and LED could create local opportunities and local jobs, thereby improving the local quality of life

For LED to be a success regarding implementation is dependent on six key issues according to:

  • Good local leadership at local government, local business and local communities
  • An enabling economic environment must exist with access to opportunities for majority
  • The local youth must be involved through youth development programmes
  • Job creation potential must exist, relating to sustainable jobs
  • Good governance
  • Availability of capacity and skills on all levels of the local economy
  • All efforts must lead to poverty alleviation and improvement in quality of life

For all intents and purposes, LED is “everybody’s business”, including all levels of government, the local communities and business people, as it is a cross-cutting issue success requires strong and committed local leaders and local LED “champions”.

Local leadership is critical and essential for LED success. The term “local leadership” includes members of the “LED triangle” of local stakeholders. Government leaders are expected to take the lead in coordination and facilitation, but other leaders from the community and business must contribute. Under the term “local leadership”, two other terms are also listed namely “local champions” and “local drivers”. Local leaders and champions must work together as partners to maximize local resources and actions. Local leaders must make sure the local economy is driven and to create momentum. Local government must take quick and effective decisions to the benefit of the local community.

In conclusion, the following challenges exist regarding the LED process from policy to implementation at the local government sphere. These include that policy doesn’t automatically lead to implementation, improved skills levels are required, staff and funding shortages need to be resolved, poor community involvement in the planning and implementation of LED projects exist and poor monitoring and evaluation.

By Edmund Kamugisha

Edmund Kamugisha Edmund is the Engagement Director at BLEGSCOPE®, and has 10+ years of   management consultancy experience notably in MSMEs, FMCG companies and in the service industry. You can follow him on twitter: @edmokmg

1 comment

    • O on September 30, 2018 at 2:07 pm
    • Reply

    Thank you for the deeper insights of your work.
    I am especially impressed since the concept is not so well appreciated in the Local Government context.
    Henry Obale.
    Senior Administrator.

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