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. Local economic development combines economic development activities, urban planning, infrastructure development and social development activities to improve local conditions. 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.
Definitions for local economic development There are several definitions for local economic development. In one of the early concept notes on LED, the World Bank in 2006 defined LED as "the process by which public, business and non-governmental sector partners work collectively to create better conditions for economic growth and employment generation. The aim is to improve the quality of life for all in the community". In 2007 GTZ (now called GIZ) refined the definition of the World Bank by describing LED as "a process to mobilise stakeholders from the public and the private sectors as well as from civil society, to become partners in a joint effort to improve the economy of a defined subnational territory and thus increase its competitiveness". The Swiss Agency for Development and Cooperation defined LED as "a broad set of activities, which aim at creating a competitive advantage for an urban or rural territory and for the enterprises in this territory to improve territorial attractiveness and economic wellbeing". This definition was developed for the SDC by Mesopartner, a research consultancy specialising in LED that was co-founded by the late Jörg Meyer-Stamer. Different developmental organisations tend to emphasise elements in the definitions that are aligned with their specific mandate. For instance, UN-Habitat defines LED "a participatory process where local people from all sectors work together to stimulate local commercial activity resulting in a resilient and sustainable economy." and as "an approach to help create decent jobs and improve the quality of life for everyone, including the poor and marginalized". The International Labour Organization (ILO) defines LED as "a participatory development process that encourages partnership arrangements between the main private and public stakeholders of a defined territory, enabling the joint design and implementation of a common development strategy, by making use of the local resources and competitive advantage in a global context, with the final objective of creating decent jobs and stimulating economic activity". From these different definitions of LED there are several core elements that are common:
It takes place within a defined territory It has a strong bottom-up orientation, it is driven by local stakeholders It involves a range of stakeholders from the public and private sector, as well as from civil society It is about improving the competitiveness and attractiveness of the location It is undertaken for the purpose of fostering economic well-being With the rapid changes in global, national and local economies, increasingly definitions of LED are adding aspects of inclusiveness, sustainability and resilience. Many international development organisations see LED as complementary to other support measures, such as improving governance, reducing inward migration and improving urban development. International development projects or national government projects can help to establish or enhance LED locally, but should not replace or displace local effort. As a consequence, the aim of an externally support should be to establish an effective LED process locally, not to solve the problems of the locality with regards to its economy. There are more definitions out there. Many countries, development organisations and even locations have created their own definitions.
Approach There are two broad approaches to LED. One is about developing a strategy for a location, mainly through planning. This is often the preferred approach by international development organisations and governments in developing countries. The other approach is a more iterative approach where local stakeholders jointly learn about what is possible in the local context. In this approach a broad range of private and public stakeholders cooperate to improve local conditions to create jobs and local wealth. According to the 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. 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.
Local economic development responses to the COVID-19 pandemic With the COVID-19 pandemic and associated restrictions impacting the economies of many cities and towns, local economic development responses played a particularly important role. Key approaches included support to keep businesses afloat during lockdowns and other restrictions, efforts to reactivate cities after restrictions eased, and a focus on long-term economic development. Lessons that emerged from the experience of the pandemic include the need to respond and iterate rapidly, the importance of collaboration between stakeholders and different tiers of government, and the need to maintain a focus on multiple time horizons, even in the midst of the crisis.
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