Strategic Local Economic Development: A Guide for Local Governments


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Strategic Local Economic Development: A Guide for Local Governments

  1. 1. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 1 A Guide for Local Governments
  2. 2. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments Copyright © 2009 Local Governance Support Program in ARMM (LGSPA) All rights reserved. The Local Governance Support Program in ARMM (LGSPA) encourages the use, translation, adaptation and copying of this material for noncommercial use, with appropriate credit given to LGSPA. Although reasonable care has been taken in the preparation of this manual, neither the publisher nor contributor, nor writer can accept any liability for any consequences arising from the use thereof or from any information contained herein. ISBN 978-971-94065-9-4 Printed and bound in Davao City, Philippines Published by: Local Governance Support Program in ARMM (LGSPA) Unit 72 Landco Corporate Centre J.P Laurel Avenue, Bajada . 8000 Davao City, Philippines Tel. No. 63 2 227 7980-81 This project was undertaken with the financial support of the Government of Canada provided through the Canadian International Development Agency (CIDA). Te c h n i c a l Te a m Writers Technical Review Team Photography Chona Balagat Myn Garcia Bobby Timonera Anami Canag Mags Z. Maglana cover photo, pages 13, 21, 75 Rizal Barandino Technical Advisor Edgar Catalan Rizal Barandino Emma Barbara Remitio Sef Carandang page 91 Editorial and Creative Direction Technical Coordination Cover Design and Layout Myn Garcia Maya Vandenbroeck Tata Lao4 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  4. 4. 6 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  5. 5. Contents 2 Foreword 3 Acknowledgments13 4 Preface 5 Acronyms 7 Introduction 13 Chapter 1: Understanding the Local Economy How a Local Economy Works The Fundamental Components of the Local Economy 21 Chapter 2: Integrating LED in Local Government Processes When does an LGU do the Strategic LED Process?21 The Five-Stage Strategic LED Process Stage I: Organizing the LED Effort Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA) Stage 3: Formulating the LED Strategy Stage 4: Implementing the LED Strategy Stage 5: Reviewing the LED Strategy 75 Chapter 3: LED in Practice Tugaya, Lanao del Sur: Culture as an Engine of Local Economic Development Wao Lanao del Sur: Pursuing Food Security and Environmental Sustainability through the LED Process Upi, Maguindanao: Developing the Entrepreneurial LGU through the LED Process75 Tuguegarao City, Cagayan: Enhancing the Business Enabling Environment for Community-Based Enterprises Naga City, Camarines Sur: Good Governance as Catalyst of Economic Growth Baybay, Leyte: Setting the LED Direction through Participatory Economic Planning Bohol Province: LED through Investment Promotion and Good Governance 91 Chapter 4: Lessons Learned 98 Reference List 100 Annex A. The LGU Mandates and Related Laws on LED91 102 Annex B. Data for Local Economy Profiling STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 5 A Guide for Local Governments
  6. 6. Foreword Assalamo Alaikum Warahmatullahi Wabarakatuho! Today many local governments are already looking beyond planning and the delivery of social welfare services as priorities. LGUs are now findings ways of undertaking programs and improving capacities that would enable constituents to take part in promoting and implementing initiatives that spur local economic development. The transformation of communities from being recipients of services to becoming active participants in economic development is gaining ground and wider acceptance among LGUs. Strategic Local Economic Development: A Guide for Local Governments is a very timely publication considering the growing clamor for local governments to take active part in promoting local economic development both as a goal and as a program in local governance. This publication serves not only as an eye opener but also as a guide for LGUs to understand and integrate local economic development processes and mechanisms into local government functions. The LGU experiences featured in the publication are good examples of how local leadership can steer economic progress through participatory, transparent and accountable governance. The publication is also inspiring coming as it is from the experiences of local governments in the Autonomous Region in Muslim Mindanao (ARMM). One important insight is that local economic development can happen in any type or class of LGU. This Guide also highlights the importance of LGU, community stakeholders and government agency interaction as a critical element in achieving local economic development. Each one has a role to play in the local economic development process. The steps provided in this Guide are not only useful to LGUs but also to other stakeholders, especially to agencies such as the DTI-ARMM. Strategic Local Economic Development: A Guide for Local Governments emboldens us to strengthen further our efforts in integrating the LED process within the DTI-ARMM’s mandate, plans and programs. We trust that this publication will motivate and inspire more LGUs to embark on a meaningful, deliberate and strategic LED process. Our congratulations to the LGSPA for coming out with this relevant and most useful knowledge resource! SAJID S. DRUZ ALI Regional Secretary Department of Trade and Industry-ARMM (DTI-ARMM)2 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  7. 7. AcknowledgementsThis publication was made possible through the dedication and collective efforts of individuals and teamswho willingly shared their ideas and valuable time in conceptualizing and developing this Guide.The Local Governance Support Program in ARMM thanks:The local economic development stakeholders of the municipalities of Upi, Datu Odin Sinsuat, SultanKudarat and Parang in Maguindanao; Wao and Tugaya in Lanao del Sur; Lamitan in Basilan, Bongao in Tawi-Tawi; and Jolo in Sulu, whose experience in facilitating local economic development in their respectiveareas inspired the writing of this GuideLGSPA Program Officers Jaime Dumarpa, Jim Hassan, Veronica Quinday, Fatima Darwissa Yussah andAssistant Manager Cecile Isubal for providing technical assistance to their respective LGUs in undertakingthe LED processThe DTI-ARMM LED coach team headed by ASec Maritess Maguindra for continuing the support toLGUs and for integrating the LED process in their agency’s programsThe technical team of this publication -- Chona Balagat, Anami Canag, Emma Barbara Remitio, MynGarcia, Rizal Barandino, Edgar Catalan, Mags Z. Maglana, Maya Vandenbroeck, Sef Carandang and TataLao -- who passionately saw through the development and completion of this GuideLGSPA managers and staff who contributed in many ways to promoting local economic development andto producing this knowledge product STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 3 A Guide for Local Governments
  8. 8. Preface Strategic Local Economic Development: A Guide for Local Governments is the embodiment of the collective experience of local government units, government agencies and the Local Governance Support Program in ARMM (LGSPA) in promoting local economic development in the Autonomous Region in Muslim Mindanao. Despite difficulties and conditions that were inimical to durable economic development and peace, the work of LGSPA has produced a wealth of knowledge that contributes to the further evolution of the framework and strategies in local economic development promotion that were initially pursued in the second phase of the Local Government Support Program (LGSP II). In this connection, the electronic file of the Local Economic Development: Stimulating Growth and Improving Quality of Life publication of LGSP II has been included as a companion CD to this material. Strategic Local Economic Development: A Guide for Local Governments is based on the field application by LGSPA of existing local economic development (LED) general processes and guidelines. Using the tenets of good governance as anchors, the LGSPA experience highlights the importance of participation, transparency and accountability as very important elements in local government-facilitated economic development. In the context of the ARMM, the experience underscores the importance of integrated, collaborative and purposive undertakings among economic agencies, private stakeholders and local government units in maximizing opportunities for local economic development. This Guide hopes to fill in knowledge gaps in boosting the capacities of local governments to engage stakeholders and players of local economic development. It emphasizes the industry approach, promotes entrepreneurship for wealth and job creation and recommends more robust ways of assessing competitiveness and crafting LED strategies. It also links LED to gender equality and poverty reduction, themes that are equally important to LGUs and citizens. The Guide includes LED experiences in ARMM through the work of LGSPA and of other areas in the Philippines. With Strategic Local Economic Development: A Guide for Local Governments, LGSPA hopes to have shown that local economic development can be implemented in the context of promoting good governance and that good governance is vital to local economic development. Local Governance Support Program in ARMM (LGSPA)4 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  9. 9. AcronymsABC Association of Barangay Captains DSWD Department of Social Welfare andADB Asian Development Bank DevelopmentAI Artificial Insemination DTI Department of Trade and IndustryAIP Annual Investment Plan ELA Executive-Legislative AgendaARD-GOLD Associates in Rural Development – EO Executive Order Governance and Local Democracy e-TRACS Electronic Tax and Revenue Assessment andARMM Autonomous Region in Muslim Mindanao Collection SystemATI Agricultural Training Institute EU European UnionBDC Business Development Center FARMC Fisheries and Aquatic Resources ManagementBEMO Bohol Environmental Management Office CouncilBEPO Bohol Employment and Placement Office GAD Gender and DevelopmentBIPC Bohol Investment Promotion Center GFI Government Financing InstitutionsBIPP Bohol Investment Promotion Program GTZ German Technical CooperationBIR Bureau of Internal Revenue HVCC High Value Commercial CropsBLECS Bohol Law Enforcement Communication IEC Information, Education, Communication System ILO International Labor OrganizationBOL Build-Operate-Lease IPAG Investment Promotion Advisory GroupBOO Build-Operate-Own IRA Internal Revenue AllotmentBOT Build-Operate-Transfer IT Information TechnologyBPRMO Bohol Poverty Reduction and Management KAS Konrad Adenauer Stiftung Office LCE Local Chief ExecutiveCALABARZON Cavite, Laguna, Batangas, Rizal, Quezon LDC Local Development Council Economic Zone LDIP Local Development Investment ProgramCDP Comprehensive Development Plan LDIS Local Development Indicator SystemCDS City Development Strategy LECA Local Economy and CompetitivenessCLUP Comprehensive Land Use Plan AssessmentCMU Central Mindanao University LED Local Economic DevelopmentCSO Civil Society Organization LGPMS Local Governance Performance ManagementDA Department of Agriculture SystemDAR Department of Agrarian Reform LGSP II Local Government Support Program Phase 2DENR Department of Environment and Natural LGSPA Local Governance Support Program in the Resources Autonomous Region in Muslim MindanaoDepEd Department of Education LGU Local Government UnitDILG Department of the Interior and Local LRED Local and Regional Economic Development Government LRIA Local Resource Inventory and AssessmentDOH Department of Health M&E Monitoring and EvaluationDOLE Department of Labor and Employment MEDCo Mindanao Economic Development CouncilDOST Department of Science and Technology MNDC Metro Naga Development CouncilDOT Department of Tourism MPDC Municipal Planning and DevelopmentDPWH Department of Public Works and Highways Coordinator MSME Micro, Small and Medium-Scale Enterprise STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 5 A Guide for Local Governments
  10. 10. MPDC Municipal Planning and Development QUEDANCOR Quedan and Rural Credit Guarantee Coordinator Corporation MSME Micro, Small and Medium-Scale RA Republic Act Enterprise SB Sangguniang Bayan MSU-IIT Mindanao State University - Iligan SCALOG System on Competency Assessment for Institute of Technology Local Governments MTDP Medium Term Development Plan SDC Swiss Agency for Development NCCA National Commission for Culture and Cooperation the Arts SEC Security and Exchange Commission NCR National Capital Region SEZ Special Economic Zone NEA National Electrification Administration SMART Specific, Measurable, Achievable, NEDA National Economic Development Relevant, Time-bound Authority SME Small and Medium Enterprise NGO Non-Government Organization SMEDC Small and Medium Enterprise NIA National Irrigation Administration Development Council NSO National Statistics Office SP Sangguniang Panlalawigan OBOL One Barangay One Livelihood SWOT Strengths, Weaknesses, Opportunities ODA Official Development Assistance and Threats OECD Organisation for Economic Co-operation TCTLDC Tuguegarao City Technology and and Development Livelihood Development Center OFWs Overseas Filipino Workers TESDA Technical Education and Skills OTOP One Town One Product Development Authority PAHRDF Philippines-Australia Human Resource TOP Technology of Participation Development Facility TWG Technical Working Group PAssO Provincial Assessor’s Office UNCDF United Nations Capital Development PBIA Panglao Bohol International Airport Fund PCARRD Philippine Center for Agricultural UNESCO United Nations Educational, Scientific Research on Rural Development and Cultural Organization PCE Philippine Center for Entrepreneurship UN-HABITAT United Nations Human Settlements PCC Philippine Carabao Center Programme PEE Public Economic Enterprise UNIDO United Nations Industrial Development PESO Public Employment Service Office Organization PGMA Provincial Government Media Affairs UNWTO United Nations World Tourism PMS Presidential Management Office Organization PO People’s Organization USAID United States Agency for International PPP Public–Private Partnerships Development PSP Private Sector Participation WB World Bank PTEZ Panglao Tourism Economic Zone WFO World Food Organization6 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  11. 11. IntroductionIt is at the local level that the greatest potentials for spurring development — for promoting investments,creating jobs and boosting demand – exist. With the decentralization of certain powers and functionsbrought about by the Local Government Code of 1991, the role of local government units (LGUs) indevelopment have also expanded. It is for this reason that LGUs are now viewed not just as providers ofpublic goods and basic social services, but more importantly as promoters of local economic developmentor LED. The LGUs have a critical role to play as agents of economic development in their respectivecommunities.However, LGU support to LED for the most part has been ad hoc and limited to one-off ‘livelihood’projects that have proven to be unsustainable and often counterproductive in attaining the overarchinggoal of poverty reduction. Among the pressing concerns of the LGUs are limited economic activities,especially in the rural areas. Since most LGUs belong to the 3rd to 5th income classes, they are faced withthe problem of limited local funds to finance economic projects and related activities. They also havelimited capacity and technology to manage or link with other resource institutions, markets and otherpotential partners.Strategic Local Economic Development: A Guide for Local Governments is intended to provide practicalsteps and tools on the application of the LED process in Local Government Units (LGUs). Theseprocedures are based on the experiences of the Local Governance Support Program in ARMM (LGSPA),the Local Government Support Program (LGSP) II and other pioneering LED-related interventions inthe Philippines. This knowledge product is a companion piece to the 2003 LGSP resource book, LocalEconomic Development: Stimulating Growth and Improving Quality of Life.The LGU-facilitated strategic LED process described in this Guide follows the five-stage strategicplanning process proposed in two excellent references published by the World Bank: the Local EconomicDevelopment: A Primer - Developing and Implementing Local Economic Development Strategies and ActionPlans, and the Making Local Economic Development Strategies: A Trainer’s Manual. This Guide, however,offers a new perspective on the LED process in three ways based on the experience of the LGSPA:1. It describes the LGU-facilitated LED process as part of the economic sector development function and integrated in the planning, implementation, monitoring, evaluation and policy- making systems of an LGU;2. It gives emphasis to value chain and industry-based LED strategy formulation; and STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 7 A Guide for Local Governments
  12. 12. 3. It demonstrates the use of small, medium and enterprise development, performance management, and poverty-sensitive and gender-responsive strategies in the implementation of the LED plan. The specific steps, tools and examples under each stage are mostly drawn from the LGSPA experience in the ARMM, which are also practical and relevant to any LGU in the Philippines wishing to undertake a systematic and participatory process of formulating a LED strategy. The Guide has five major parts: Introduction Chapter 1 – Understanding the Local Economy Chapter 2 – Integrating LED in Local Government Processes Chapter 3 – LED in Practice Chapter 4 – Lessons Learned The Introduction gives a synopsis of the fundamentals of LED – rationale, nature, goals, principles, legal framework, stakeholders and their roles and responsibilities – which are expounded in the LED: Stimulating Growth and Improving Quality of Life resource book. Having an appreciation of the concepts and merits of undertaking the LED process is necessary before proceeding to its specific steps and methodologies. Chapter 1 – Understanding the Local Economy shows how the flow of money coming in, circulating, and leaving a community impacts the economic development and wealth creation in the locality. This chapter also discusses the five fundamental components of the local economy (labor, technology, infrastructure, financial capital and leadership) and some of the issues related to these components that LGUs may have to deal with in the LED process. Chapter 2 – Integrating LED in Local Government Processes translates the concepts and principles of LED into concrete actions by presenting step by step procedures and tools in planning and implementing the LED Strategy. This chapter discusses the five-stage Strategic LED process, namely: 1) Organizing the LED Effort, 2) Doing the Local Economy and Competitiveness Assessment or the LECA, 3) Formulating the LED strategy, 4) Implementing the LED Strategy, and 5) Reviewing the LED Strategy. Chapter 3 – LED in Practice is a compendium of LED experiences, innovations and good practices of selected LGUs in the Philippines including those of Wao and Tugaya in Lanao del Sur, and Upi in Maguindanao, which are municipalities covered by the LGSPA. LED initiatives of the provincial government of Bohol, the city government of Tuguegarao in Cagayan, the city government of Naga8 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  13. 13. in Camarines Sur and the municipal government of Baybay in Leyte are also featured. Useful insights can be drawn from the different approaches and strategies resorted to by these LGUs in stimulating economic growth in their respective areas of responsibility. Chapter 4 – Lessons Learned documents the learning gained from the LGSP II and LGSPA LED projects. These include strategies that work or do not, as well as factors that facilitate or hinder the LED process. These lessons are presented so that other LGUs can gain some ideas on which approaches to avoid, adopt or modify based on local conditions.What is Local Economic Development?Essentially, economic development is a process and the practice of increasing the rate of wealth creation bymobilizing human, financial, organizational, physical, and natural resources to generate more marketable goodsand services whereby the economic developer influences the process for the benefit of the whole community(McSweeney, n.d.).Countless economic policies and strategies have been initiated in the past by the national governmentto address poverty and equitable growth but more focus was given on larger enterprises, urban andurbanizing communities and centralized planning that overlooked the indispensable role of the LGUs.As a result, rural economy where most Filipinos are living and working remained sluggish resulting toincreased poverty incidence and poorer quality of life (LGSP 2003). ,LED offers an alternative approach that aims to fill in the gaps of the previous initiatives. Local economicdevelopment (LED) is the process by which actors (governments, private sector and civil society) withinlocalities, work collectively with the result that there are improved conditions for economic growth, employmentgeneration and quality of life for all (Adapted from the World Bank definition).The term Local in the definition signifies that LED involves building the economic strength of a localarea by optimizing local resources and capacities; the prime movers or driving forces are economicstakeholders in barangays, municipalities, cities and provinces singly or collectively; and it is territorial(or area-based) in its approach. Although the focus is local, there are links to the regional, national andinternational levels.The Economic in local economic development drives home the importance of identifying and seizingbusiness opportunities, supporting entrepreneurial initiatives (whether formal or informal, micro orlarge), facilitating market access and creating a climate conducive to investment and business activity. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 9 A Guide for Local Governments
  14. 14. The term Development emphasizes that LED is holistic; it does not only cover the economic dimension but also includes social, politico-administrative and cultural aspects. The quality and direction of growth is as important as its quantity and size. Sustainable development is at the heart of LED which means satisfying the needs of the present generation without sacrificing the future of succeeding ones (LGSP , 2003). LED enables and promotes the coordination and optimization of scarce resources available in an area, the integration of LED plans, priorities and programs into regional and national plans (with direction from the bottom going up) and citizen participation and consensus building among stakeholders. Goals and Principles of LED The goals of LED are to create wealth, generate jobs, increase incomes and, ultimately, reduce poverty and improve the quality of life in the locality. LED operates on several principles. First, LED promotes equitable and sustainable economic growth. Equitable means opportunities to wealth creation are open to both men and women of working-age, to the rich and poor, to urban and rural dwellers, and to all ethnic and religious groups. To sustain economic growth, local resources may be transformed to marketable goods for the current population but it must be continuously regenerated so as not to deprive the future generation of the same resources. Second, LED is a multi-stakeholder partnership. Those who are affected and can affect the economic growth in the locality (such as government, business and civil society) have a stake and a role in LED. Third, the private sector is the acknowledged engine of employment and growth and as such, LGUs must be conscious of its “enabler” role, which is setting the right environment for the local economy to grow. The LGU may, however, prudently decide to provide certain services in situations where there are insufficient private or voluntary sector providers of such services or when cartels control the prices of certain commodities in the locality. Finally, good economy thrives when there is transparent and accountable governance – a practice that should permeate the political and economic structures in the community. The LGU Mandates and Related Laws on LED Some LGUs have already started economic programs and activities, drawing power and authority from existing statutes. These laws and mandates are fully discussed in LED: Stimulating Growth and Improving Quality of Life. Among these laws is the Local Government Code of 1991 (RA 7160) which has given the10 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  15. 15. LGUs more power and authority to accelerate local economic development and improve the quality oflife in their communities.RA 8425 or the Social Reform and Poverty Alleviation Act also mandates LGUs through the LocalDevelopment Councils (LDCs) to formulate, implement, monitor and evaluate poverty reductionprograms in their respective jurisdictions, which are consistent with the poverty reduction strategy of thenational government. These are further bolstered by the laws on the development of Small and Medium-Scale Enterprises (SMEs) such as the Magna Carta for Small Enterprises (RA 6977), Kalakalan 20 (RA6810), An Act Providing Assistance to Women Entrepreneurs (RA 7882) and the Omnibus InvestmentCode (EO 226).The Department of the Interior and Local Government (DILG) has also issued memorandum circularsto the local governments pertinent to the pursuit of local economic growth and poverty reduction. SeeAnnex A for a complete list of LGU mandates and related laws on LED.The LED Stakeholders, their Roles and ResponsibilitiesThe LED process calls for the collective efforts of local stakeholders to spur economic growth. Theybring with them different levels of knowledge and expertise, perspectives, resources or assets that wouldrender LED effective and successful in attaining its targets. No matter how small the role of a stakeholder is,engaging it is important in spreading ownership of the community’s economic development strategies.Actions of community and government leaders can change, alter and direct the condition of their localeconomy. The economic quality of life of the residents and the success of businesses many times aredirectly affected by the policies and leadership of those who have the influence and power to create aclimate conducive to economic growth (Fruth, W., n.d.).The LGU takes the role of provider, enabler or facilitator of local economic development. As provider,it sees to it that the infrastructure and subsidy requirements of existing and potential industries are inplace. As enabler or facilitator, it ensures the economic players’ access to information and advisoryservices, formulates relevant and supportive policies and regulations, provides incentives, and works forthe stability of peace and order. In addition, it has to carry out regular functions that have bearing onthe success of LED, namely: policy making and taxation; regulatory functions; planning and budgeting;information collection, storage and dissemination; procurement of goods and services; marketing andpublic relations; investment and enterprise promotion; management of public economic enterprises(PEE) and the provision of physical facilities; public safety and cultural heritage activities; and, provision ofsocial and environmental services. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 11 A Guide for Local Governments
  16. 16. The LGU may also take on the role of service provider in situations where there are insufficient private or voluntary sector providers or when the capacities of these service providers are inadequate. This option, however, must be weighed carefully and the extent of LGU intervention must be clearly qualified considering its limited resources and array of social concerns other than infrastructure and economic projects. The private or business sector is represented by micro, small, medium and large-scale enterprises. With their role as engine for local employment and growth, they are tasked to scan and seize opportunities, take risks, develop markets and create economic value. Micro enterprises represent the informal economy and though not a significant generator of employment, they are considered incubators of bigger enterprises and fallback mechanism in times of economic crisis. Small and medium-scale enterprises are employment generators, the largest taxpayers, users of the latest technologies, and sources of managerial, technical and financial competencies. Organized business groups like chambers of commerce, industry associations, craft and professional associations and local guilds play a crucial role in setting and enforcing quality standards, upgrading human and technological resources, product development, marketing, business development, financing and creation of an LGU brand. Cooperatives (producers, credit, consumers) and microfinance institutions serve as depositories of community savings; providers of credit assistance, social protection measures such as health insurance, mortuary packages, and emergency loans; and promoters of frugality, discipline, trust, self and mutual help, and entrepreneurship. Civil social organizations (CSOs) such as non-government organizations (NGOs) and people’s organizations (POs) from the informal sector (vendors, tricycle drivers) and agriculture sector (farmers, fishers), represent the grassroots’ sentiments, needs and views making them excellent collaborators in planning, service delivery, community organizing and mobilization and in monitoring and evaluation of projects thereby promoting transparency and accountability. Educational institutions are providers of knowledge, developers and promoters of new technologies, trainers, and providers of talents and services for business institutions. National government agencies assist the LGU in the organization, planning, implementation and evaluation of the LED strategy by providing technical assistance, helping in fund sourcing, advocating LED among the stakeholders, developing and enforcing standards, and providing information and other market and resource linkages.12 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  17. 17. Chapter 1Understanding the Local Economy shows how the flow of money coming in, circulating, and leaving a community impacts the economic development and wealth creation in the locality. This chapter also discusses the five fundamental components of the local economy (labor, technology, infrastructure, financial capital and leadership) and some of the issues related to these components that LGUs may have to deal with in the LED process. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 13 A Guide for Local Governments
  18. 18. Understanding the Local Economy The Introduction provided a brief background on LED concepts and principles and underscored the importance of mobilizing local people and organizations in provinces, cities or municipalities to attain a vibrant local economy. However, to better understand the context in which the LED process operates, it is important to have an appreciation of how the local economy works and the factors that determine economic growth. How a Local Economy Works A local economy is a geographic area where people predominantly live and work and also earn and spend (Fruth, W., n.d.). As used in this Guide, the local economy refers to the geographic area within a political unit which could be a province, city or municipality. Money flows into the local economy in two ways: first, from the earned monies when products are sold to an outside customer (exported) and when people work out-of-town; second, from the unearned monies from outside sources to the local government and to community citizens. Also referred to as captured monies, these come from social security, retirement payments, interest income, rent and dividend from outside investments, revenue allotments and grants from national governmental agencies, grants and investments from official development assistance (ODA), foundations, NGOs, cooperatives and investors and remittances from family members working outside the community (Darling, 1991). When money pours in, it is circulated through spending on local goods and services. Some are spent locally, thus, generating more jobs and employment as goods and services are consumed. Money also flows out of the community in several ways: when local business firms and their employees buy their needs from outside sources, pay their taxes and social security to national governmental offices; when local households buy goods and services out-of-town; when local residents invest their money in businesses outside the locality; when there is inefficient use of local assets such as land, buildings and human skills and talents or when local investments do not pay off; when estate settlements are bequeathed to heirs living in other areas; and through investments on education of children who eventually leave the area for better opportunities elsewhere. The inflow and outflow of money in a local economy can be illustrated using the “leaking barrel” of wealth model. The example in Figure 1 shows that the money coming into a municipality’s local economy largely come from tourists and visitors, the LGU’s Internal Revenue Allotment (IRA), family member remittances, and agricultural products sold to buyers and consumers outside the locality. The leaks in the barrel represent the money or income leaving the economy. In the example, the leaks in the economy come in the form of crop production inputs, construction materials and labor that come from outside14 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  19. 19. Understanding the Local Economysources; printing and publishing services that are absent in the municipality; local residents shopping inother cities; and, LGU expenditures outside the municipality.As money is imported into the community, it enters the barrel where it is mixed and blended, going fromperson to person, business to business, creating local employment and wealth. It is impossible to seala community’s economic boundaries completely (Schmidt & Myles, n.d.) but when nothing is done to“plug the leaks” or slow down the rate of money flowing out, wealth will not multiply within the localeconomy. Figure 1. Example of Money Flow in a Local Economy Economic Generators Tourist & Visitors P = P = Internal Revenue Allotment (P73 M) Agri-aqua Production P = P = Remittances of family members working outside the municipality MUNICIPALITY’S LOCAL ECONOMY P = Crop Production Local Residents Inputs (Fertilizers, Shopping in other Cities P = Seeds, etc.) Leakage Out of P = Construction Materials the Municipality P = P = P = LGU Expenditures outside the Municipality Construction Labor Printing & Publishing Services Source: Adapted from McSweeney (n.d.) STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 15 A Guide for Local Governments
  20. 20. Understanding the Local Economy Fundamental Components of the Local Economy Local economic growth is determined by the interplay of the economy’s labor, financial capital, technology, infrastructure and leadership components. These are the factors that must be analyzed during the LED process particularly in the Local Economy and Competitiveness Assessment (LECA) so that specific issues (strengths, weaknesses, opportunities and threats) in each of the component can be pinpointed and later addressed accordingly during the LED strategy formulation. Labor Labor, as a factor of production, pertains to the community’s most precious and abundant resource – its workforce. Factors affecting labor productivity in the local economy include housing, health and education services, skills availability, security, and training opportunities. Some of the problems besetting the labor sector of our local communities are the high unemployment rate in the rural area, among female and male youths and those with higher education (LGSPA, 2007). This suggests that population growth is higher than the production growth. Although there are masses of people who can provide “raw labor,” the quality of human capital is still below par making it difficult for job seekers to meet the required qualifications. The current demand gives preference to a broader set of skills such as better analytical, problem-solving and communication skills. The quality of labor is becoming more important than the cost of labor. In terms of gender equality, more women are now joining the workforce and a significant number are occupying management level positions. The Philippines is the 2nd highest in percentage of entrepreneurially active females (among 42 countries) (Madarang, Habito, & Philippine Center for Enterpreneurship (PCE), n.d.). The service sector has been absorbing an increasing number of workers, particularly women (LGSPA, 2007). The human resource is the means for social and material progress and at the same time the end or object of development. Economic development is concerned with the equitable distribution of real income, which is indicated by the average per capita income of the working age population and improved purchasing power of individuals. A productive labor force requires continuing enhancement of human capital. Investments on education, skills training, health and basic infrastructure like water, roads and electricity have positive effects on the locality’s manpower. By providing these facilities and services, the LGU can help educated, healthy, creative, proactive, and skilled male and female workers meet the labor requirements of businesses16 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  21. 21. Understanding the Local Economyin or outside the locality. Generating local business investments and jobs to absorb the community’sunemployed is another challenge to the LGU.TechnologyTechnology generally refers to better techniques or methods of production (Fajardo, 1985). Thedevelopment of a new technique is an invention and its application to production is called innovation.Technological advances impact the local economy by changing the nature of products and productiontechniques and improving productivity so that the economy remains competitive. Industry and businesshave become so knowledge-driven that the cost of products, particularly those requiring advancedtechnology, are driven by investments on knowledge or research rather than by actual production costs.Given their limited resources to conduct research and development, LGUs can harness the expertiseof institutions and individuals by eliciting their participation in local economic development planning andimplementation. Examples of research and technology development institutions are the AgriculturalTraining Institute (ATI), universities and colleges, Department of Science and Technology (DOST),Technical Education and Skills Development Authority (TESDA), Philippine Center for AgriculturalResearch on Rural Development (PCARRD), Technology and Livelihood Development Center (TLDC)as well as corporations that are willing to provide technical assistance on product development to smallbusinesses as part of their corporate social responsibility.InfrastructureInfrastructures are large-scale public systems, services and facilities that are necessary for economicactivities, including power and water supplies, public transportation, telecommunications, roads, schools,training and research centers, and health care facilities.The infrastructure needs of business have changed in recent years. The quality of service in terms ofdependability, timeliness and convenience has become more important to the investors and the consumingpublic. Public investment in infrastructure leads to increased return on investment for business, higherproductivity and a boost in private sector investment.The absence or lack of infrastructure, particularly in the rural areas, is due to the fact that most LGUs arecash-strapped. Some innovative and proactive LGUs have tapped the private sector for infrastructuredevelopment and management through such schemes as Build-Operate-Transfer (BOT), Build-Operate-Own (BOO), and Build-Operate-Lease (BOL). LGUs who have aggressively sought assistance, networkedand demonstrated exemplary governance practices have attracted foreign funding agencies to finance the STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 17 A Guide for Local Governments
  22. 22. Understanding the Local Economy establishment of local infrastructures. Unfortunately, there are infrastructure projects that have turned into white elephants or have benefited only a few because investment decisions were not based on sound economic analysis and financial planning. An example of this is a seaweed processing plant lying idle because of inadequate working capital. These unutilized or underutilized facilities present another leak in the community’s barrel of wealth and could be prevented through careful analysis and planning that is being espoused in the LED process. Financial Capital Financial capital fuels businesses. There are two types of financial capital and both are required at different stages of business growth. The first type is debt which is the lending or loaning of money with interest. It involves minimal risk to the lender because it is being secured by requiring collateral from the business or its owner. It requires regular payments of the loan principal and the interest. The second type of financial capital is equity which is money invested without interest. It involves a higher risk since it is unsecured by assets. In return for his or her investment, the investor acquires shares of ownership and sometimes is involved in the management of the business (McSweeney, n.d.). The lack of financial capital is the hindering factor most frequently cited by micro, small and medium- scale enterprise owners. The usual measure being adopted by LGUs, national government agencies, foundations and other development institutions in response to this issue is the shelling out of small livelihood grants or loans, without sufficient support to other aspects of the business like production and marketing. This one-off intervention, by and large, serves only as a temporary remedy and seldom results to sustained economic activity. Financial capital may be generated from various internal and external sources including the LGU (with its IRA and local revenues), banks, cooperatives, microfinance institutions, government financing institutions, NGOs/foundations, foreign-assisted projects, local businesses/industries and family savings (from remittances of family members, retirement fees, property rentals, pensions and insurances). Capital may also pour in from investors outside of the locality, which can be maximized by the LGU through investor- friendly policies. Leadership The leadership triangle in Figure 2 shows that there are three economic development interests that must cooperate for a successful local economic development. These are the local government or political18 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  23. 23. Understanding the Local Economyleadership, the business community leadership, and the professional leadership (McSweeney, n.d.).Local government regulates the environment, provides or facilitates economic development incentivesand programs, develops and manages human and financial resources and provides basic infrastructure.The business community leadership is represented by the industry players, the Small and MediumEnterprise Development Council (SMEDC) and the Chamber of Commerce, if any. They take the leadin creating wealth by generating marketable goods and services. Professional leadership are those thatprovide technical assistance (on small and medium enterprises, business planning, feasibility studies) suchas LED and business consultants, Department of Trade and Industry (DTI) specialists, economic agencies,academic institutions, and other organizations with economic development mandates. These lead entitiesminimize barriers to growth, create opportunities and conditions to speed up the rate of wealth creationand facilitate the exploitation of these opportunities. The potential roles of government, business andprofessional sectors in LED planning and implementation are further discussed in Chapter 2. Figure 2. Economic Development Leadership BUSINESS LEADERSHIP Successful Local Economic Development LOCAL PROFESSIONAL GOVERNMENT LEADERSHIP LEADERSHIP Source: McSweeney (n.d.) STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 19 A Guide for Local Governments
  24. 24. 20 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  25. 25. Chapter 2Integrating LED in Local Government Processestranslates the concepts and principles of LED into concrete actions by presenting step by step procedures and tools in planning and implementing the LED strategy. This chapter discusses the five- stage Strategic LED Process, namely: 1) Organizing the LED Effort, 2) Doing the Local Economy and Competitiveness Assessment or the LECA, 3) Formulating the LED strategy, 4) Implementing the LED strategy, and 5) Reviewing the LED strategy. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 21 A Guide for Local Governments
  26. 26. Integrating LED in Local Government Processes “For a LED initiative to be successful it has to be clearly defined around economically functional space, and should be locally owned and championed. Leadership is key to bring together shared vision, actors and resources. The generic processes, approaches and tools have to be adapted and contextualized.” – (Kebede, 2008) The previous chapter discussed how the local economy works from a perspective of money flowing into, circulating in and leaving a locality. It also presented the major components that affect the productive capacity of a local economy: labor force, technology, infrastructure, financial capital, and leadership. These factors and the strategies to create wealth are some of the issues that can be addressed within the LED process. It must be recognized though that the “leaking barrel of wealth” model and the components of economic growth as described in Chapter 1 may only be a partial representation of the economic reality in a specific locality. In the course of undertaking the LED process, other factors that impact a community or locality may unfold and will have to be considered in the formulation of the LED strategy. In this chapter, the concepts and principles of LED are translated into concrete actions in an LGU- facilitated LED process. The components of the local economy presented in Chapter 1 provide the bases for analysis and strategy formulation during the LED process. What critical issues in the locality’s labor force, technology and other components should be addressed and how? One of the most important insights gained from the LGSP and LGSPA LED initiatives is that the success and sustainability of LED rest on a participatory, strategic and planned approach. It should be a process that is purposeful, deliberate and founded on sound analyses. Undertaking a strategic planning process is22 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  27. 27. Integrating LED in Local Government Processesnecessary to guide local leaders and implementers in identifying and carrying out the best alternatives toan LGU-facilitated LED. The LED Strategic Plan is the landmark document in the LED process.This Guide is not designed to prescribe implementation activities for specific LED programs and projects.This is because LED approaches are wide-ranging and different for each LGU, depending on localconditions. However, the basic factors to consider in implementing and monitoring the LED strategy areincorporated in this chapter. Also, examples of actual LED strategies and how these were implementedby LGUs are provided throughout this Guide.When does an LGU do the Strategic LED Process?LGUs in the Philippines are mandated to prepare two major plans – the Comprehensive Land Use Plan(CLUP) and the Comprehensive Development Plan (CDP). The CLUP is a long-term plan that outlinesstrategies for managing the local territory in terms of its physical land use. The CDP on the other hand, ,set out the vision, goals, objectives, programs, projects and activities relevant to five development sectors,namely, social, economic, infrastructure, environmental and institutional. LGUs operationalize theseplans with an organized mechanisms and instruments including the term-based Executive and LegislativeAgenda (ELA), the Local Development Investment Program (LDIP), and the Annual Investment Plan(AIP). These plans and strategies are all products of an integrated and iterative process that includeeconomic sector planning (LGSPA, 2008).The strategic LED process, which involves a participatory process of formulating and implementing a LEDStrategic Plan between the LGU and stakeholders, is both a vehicle to implement and an instrument toconcretize the economic sector plan of the LGU. The LED Strategic Plan should serve as the economicsector plan integral to the bigger local development plans of the LGU. It should tie to and build onthe LGU’s overall vision and goals as articulated in the CDP and ELA. Thus, it would be ideal if theLED strategy formulation is done in conjunction with the preparation of the CDP ELA or the Provincial ,Physical Framework Development Plan.The LED process, however, may also be done at any other time as long as the LGU is ready to pursueLED. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 23 A Guide for Local Governments
  28. 28. Integrating LED in Local Government Processes The Five-Stage Strategic LED Process There are five stages in the LED Process, as follows: THE FIVE-STAGE STRATEGIC LED PROCESS Stage 1: Organizing the LED Effort Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA) Stage 3: Formulating the LED Strategy Stage 4: Implementing the LED Strategy Stage 5: Reviewing the LED Strategy Stage 1: Organizing the LED Effort The main activity here is organizing institutional arrangements and stakeholder involvement to successfully develop and implement a LED strategy. At this stage, an LGU LED team is created to provide leadership and establish systems and structures in undertaking the LED process. A LED stakeholders group is also created as a multi- stakeholder mechanism that will ensure the active participation of the community from planning to implementation to monitoring and evaluation. Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA) This entails gathering and analyzing available quantitative and qualitative data on the sources, structures and trends in production and employment, skills, and other resources to help identify the strategic direction for the local economy as well as potential programs and projects. Stage 3: Formulating the LED Strategy At this stage, the LGU LED team together with the LED stakeholders group develops the LED Strategic Plan, which contains the economic vision, goals and objectives as well as specific strategies in the form of programs and projects.24 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  29. 29. Integrating LED in Local Government Processes Stage 4: Implementing the LED Strategy LED program and project implementers from the LGU and other stakeholders carry out the LED strategy guided by the LED Strategic Plan, the overall LED implementation strategy, and individual project action plans. Stage 5: Reviewing the LED Strategy This involves monitoring and evaluation (M & E) activities and reviewing and enhancing the LED Strategy based on the M & E results and on changing local conditions.The following sections discuss in detail how the LED process is carried out and integrated in LGU functionsand activities. Stage 1: Organizing the LED EffortThis marks the beginning of a collaborative undertaking wherein the LGU and community stakeholdersagree on pursuing LED as an end result and as a process. The primary goal of Stage 1 is for the LGU toorganize institutional arrangements and stakeholder involvement in LED planning and implementation.The principle of participatory governance should be appreciated and demonstrated by the LGU as earlyas Stage 1 in order to gain public support and credibility. By engaging and organizing stakeholders at theoutset, the LED activity becomes a province, city or municipal-wide undertaking.Following the general guide outlined in the World Bank documents, organizing the LED effort may bedivided into four steps: Stage 1: ORGANIZING THE LED EFFORT Step 1: Identify and establish the LGU LED Team Step 2: Establish and maintain active involvement of LGU political leaders in the LED Process Step 3: Develop a LED Stakeholders Group Step 4: Identify other tiers of government (provincial/ regional/ national) to work with STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 25 A Guide for Local Governments
  30. 30. Integrating LED in Local Government Processes Step 1: Identify & establish the LGU LED Team The LGU LED team is composed of LGU officials and staff that shall take the lead in initiating and facilitating the LED process. The LGU LED team is expected to provide the leadership of and establish the structures and systems in the whole LED process. It is not only concerned with managing the technical side of the process but also in getting ‘buy-in’ from political leaders, the relevant and related government agencies, business and non-government sector. Thus, it is important to have a good mix of relevant technical staff and elected officials in the LGU LED team who can influence and build partnerships with other stakeholders and resource institutions. The following considerations are important in the LED team composition: Involvement and leadership of the LCE and the Legislative Council. A very important consideration in the formation of the team is the degree of participation and involvement of the LCE and the members of the local legislative council (Sangguniang Bayan, Panglunsod or Panlalawigan). The LCE in particular should provide a visible leadership of the team to bring in the legitimacy, credibility and commitment of all the sectors involved in the process. The Sangguniang members, on the other hand, have a key role in terms of pushing legislation and approving budget appropriation in relation to LED. In the LGSPA experience, one thing common among successful LED cases is the Mayor himself/herself taking primary responsibility for LED as the Team Leader. The leadership of the mayor facilitates and moves the implementation of activities faster. Multi-disciplinary. The LED process requires multi-disciplinary and multi-faceted activities. The members of the LED team should have the background, skills and the attitude to push forward and champion the process. It should be a multi-disciplinary team that can work across LGU departmental lines, as well as between governmental and non-governmental lines. The LGU LED team and the departments that will be involved in the process, at the minimum, should have knowledge and skills of the following: community locality26 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  31. 31. Integrating LED in Local Government Processes processes, project management, financial management and fund-raisingFor LGUs that have completed the CDP-ELA, the economic sector planning committee can serve as theinitial core members of the LGU LED team. This can be expanded based on the requirements of theLED process.Table 1. Sample composition of the LED Team SUGGESTED COMPOSITION OF THE LGU LED TEAM Who? Why? Local Chief Executive/Mayor Can provide leadership and political influence in the formulation and establishment of structures and systems Municipal Planning and LED planning is integral in municipal planning; can facilitate the Development Coordinator integration of the LED Strategy into the CDP ELA and other LGU plans. , Municipal Agriculture Officer Most of the municipality’s economic activities are agri-based; can facilitate implementation of agri-based LED programs and projects Municipal Treasurer Can provide information on the LGU resources that will be available for the process. Municipal Assessor Can provide information on the valuation of land and resources in the locality Municipal Budget Officer Can provide information on the budget available for the LED activities. Chairperson of the Legislative Can recommend policies in support of local economic development Council Committee on Agriculture Chairperson of the Legislative Can push for the appropriation of budget necessary for LED implementation. Council Committee on Finance Municipal Tourism Officer Tourism is also a significant source of income of the municipality; can facilitate the implementation of tourism programs and projects Municipal Local Government Can help champion the LED process and guide team regarding LGU mandates Operations OfficerIn establishing the LGU LED team, it is important to level off on the task and responsibilities of the team.The following activities and decisions are therefore critical in establishing a coherent team: a) Conduct orientation and preparatory meetings to level off on LED process, concepts and objectives STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 27 A Guide for Local Governments
  32. 32. Integrating LED in Local Government Processes Orientation meetings should provide guidance on the LGU LED team on the overall objective, scope and concepts of the LED process. The team should fully understand and recognize LED as: A strategy for wealth creation, job and income generation, and, ultimately, alleviation of poverty and improved quality of life. A process that promotes self-help, empowerment, innovation, public, private and civil society sector collaboration, bottom-up planning, and sustainable development incorporating environmental, social and cultural responsibility with economic development A potential contributor to the LGU’s future revenue growth A purposeful and planned approach to pursuing economic transformation, which is an aspiration and mandate inherent in all local governments The following decision makers and department heads are relevant and must be present, where applicable, in the team orientation: LCE (Mayor or Governor) Vice Mayor or Vice Governor Planning and Development Coordinator Treasurer Budget Officer Agriculture Officer Tourism Officer Administrator Assessor Chairpersons of the Committees on Economic Development, Agriculture, and Finance and Appropriation of the local Sangguniang Government agencies’ staff working with in the LGU like the DILG’s Local Government Operations Officer (LGOOs), the DA’s Agriculture Officer, DTI technical staff Other department heads that the LGU sees fit It is important that the decision makers understand their individual and collective role in facilitating the LED process. For instance, the Planning and Development Coordinator can facilitate the technical and day-to-day LED process, in behalf of the LCE. It can also facilitate the discussion with the members of the Local Development Council (LDC) as the secretariat of the council. On the other hand, the Planning Coordinator, together with the Treasurer and Budget Officer are the core members of the Local Finance Committee (LFC) which is the body task with determining LGU finances and budget ceilings and therefore plays very important role in ensuring that LED projects28 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  33. 33. Integrating LED in Local Government Processesand activities are prioritize and allocated resources.The LGU can tap LED experts coming from the government (i.e., DTI), the private sector (e.g., localconsultants, business groups, or entrepreneurs) or the academe to assist in the orientation and theorientation and initial preparations for the LED process.b) Agree on the terms of reference for the LGU LED TeamIn the course of team meetings and consultations, the LGU LED team has to agree on is its own termsof reference. As mentioned, the main objectives of the LGU LED team are to provide leadership inthe LED process and establish the structures and systems in the formulation and implementation ofthe LED Plan. The LGU LED team members and their functions and activities at each stage of theLED process should also be specified in a terms of reference so that there is a clear delineation ofresponsibilities and accountabilities.The team has also to agree on the operational guidelines of the whole LED process. While the LCEcan exercise overall leadership, the functional and day-to-day project management and coordinationwork can be delegated to a key office. In the LGSPA experience, this task is normally delegated tothe Municipal Planning and Development Coordinator (MPDC), or the Municipal Administrator oranother senior officer who has the LCE’s confidence. Sometimes, a member of the LED team who,in the course of the LED process, exhibits leadership qualities and develops a reputation of gettingthings done becomes the de facto Assistant Team Leader.Table 2 gives an example of the decisions made by an LGU regarding the specific roles of the LGULED team. After such working arrangements are agreed upon, the LCE then issues an executiveorder creating the LGU LED team and defining its composition and functions. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 29 A Guide for Local Governments
  34. 34. Integrating LED in Local Government Processes Table 2. Example of LGU LED Team Roles and Scope of Work FUNCTIONS OF THE LGU LED TEAM analyzing/assessing the economy of the LED Plan ACTIVITIES OF THE LGU LED TEAM IN THE LED STAGES Stage 1: structures and systems Stage 2: Stage 3: Strategic Plan Stage 4: committees to implement the programs and projects Stage 5: LED stakeholders group.30 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  35. 35. Integrating LED in Local Government Processes c) Determine the appropriate budget for the LED Strategy formulation A key decision that the LGU LED team has to agree is the budget required for the LED process. The LGU LED team should have enough resources for meetings, coordination, data collection and workshops. The budget for LED organizing up to planning may include cost of materials, meals, transportation, printing, communication, as well as the cost of LED experts that may be tapped by the LGU. d) Determine where the LGU LED Team will be established in the LGU In the initial stages of the LED process, the activities of the LED team can be coordinated by the office of the Mayor (or Governor) especially if the LCE is the designated leader of the LED team. In the course of the LED process and particularly in the execution of the LED strategy, the LGU eventually have to decide to organize mechanisms to support the implementation of the LED plan including the possible formalizing of the LED team as an economic coordinating or support group in the LGU. In the LED project of LGSPA, the LGU LED team was usually lodged in the Mayor’s Office. Establishing the LED team in the office of the LCE has the advantage of ‘visibility’ and political weight. Situated in this department, LED is likely to have a higher profile and exhibit more of a policy and facilitation focus, which in turn can help guarantee coordination with other LGU departments. Step 2: Establish and maintain active participation and involvement of LGU political leadersAs already emphasized, the strong and visible support from the leaders is important and imperative in theLED process from planning up to the execution of the economic development strategy. The consistentparticipation and interest of the LGU political leaders are important from the planning to the executingstages of the LED process.The LGU LED team should agree on the involvement of the political leaders in the entire LED process andnot just on the membership in the team. The political leaders as managers and as esteemed communityleaders should champion the process within the LGU and among the community stakeholders.The political leaders need to ensure that the LED process and strategy are incorporated or adopted in theformal development plans of the LGU such as the CDP and ELA. The LGU leaders also need to assurethat the LED process and strategy are included in the long term and annual investment programs of the STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 31 A Guide for Local Governments
  36. 36. Integrating LED in Local Government Processes LGU. Other areas where participation of political leaders may be concretized in the LED process are by: a) Involving the Local Development Councils, relevant Local Special Bodies, and the Association of Barangay Captains in the LED planning and implementation mechanisms. b) Establishing monitoring, evaluation and reporting system and performance management system that would include participation from stakeholders and relevant special bodies that would become a basis for economic plan improvement and policy development c) Ensuring that the LED process and strategy are given due importance and priority in the LGU annual budget process Step 3: Develop a LED Stakeholders Group With the LGU LED team formally organized, it can now move on to the heart of LED process - the identification and involvement of the community-based stakeholders group. The World Bank’s LED Trainer’s Manual defines stakeholders as individuals, businesses, organizations or groups in the public, private and non-profit sectors that have an interest in strategizing and implementing LED programs and projects. These are individuals and organizations who: a) have a stake in LED issues, b) might benefit or be affected negatively by the LED process, c) should be included because of their formal position, d) should be included because they control resources or e) have the power to block LED implementation. LED stakeholders vary across LGUs. Normally in low-income and generally rural/urbanizing areas, private sector economic stakeholders largely come from producers (e.g., farmers and farmer groups) and traders including cooperatives. The critical question that the LGU LED team needs to answer is who are its economic development stakeholders? Who is the private sector in the locality? Aside from the private business sector, the LGU LED team also needs to identify stakeholders from the public sector (including the appropriate regional and provincial line agencies), the labor sector, and the community and civil society organizations. National, regional and provincial levels of governments have a key role to play in facilitating an environment that is conducive to local economic development, and it is therefore appropriate to include these levels of government into the strategic planning process when necessary (Swinburn et al., 2006).32 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  37. 37. Integrating LED in Local Government ProcessesIn the context of the ARMM, the following agencies and offices in the Autonomous Regional Government(ARG) were included as stakeholders in the LGU LED process: Department of Trade and Industry-ARMM (DTI-ARMM); Department of Agriculture and Fisheries (DAF-ARMM) and attached agencies likethe Philippine Carabao Center (PCC); Department of Science and Technology; chambers of commerce;business councils; provincial government; government financing institutions such as Land Bank of thePhilippines; state colleges and universities.It is also important to add that stakeholders identified should be those that have offices or area ofoperations located in the city/municipality if it is a city/municipal LED process or located in the provinceif it is a provincial LED process. Table 3 provides a list of potential stakeholders in the LED process in alocality. The list is not meant to be exhaustive.Table 3. Examples of Stakeholders in the LED Process Public Sector Business and Labor Community and CSOs departments, e.g., entrepreneurs o People’s organizations Agriculture, Infrastructure, and Finance fisherfolks associations o Women’s associationsEngaging the stakeholders’ group will involve two key tasks:a. Conduct Stakeholders AnalysisAfter a long list of stakeholders is drawn up, the LGU LED team analyzes each identified stakeholderin terms of their interests, role and contribution in the LED process. An example of this analysis isillustrated in Table 4. This type of analysis is useful in identifying key stakeholders that will compose theLED stakeholders group. STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 33 A Guide for Local Governments
  38. 38. Integrating LED in Local Government Processes Table 4. Example of Stakeholders Analysis for Partnership Stakeholder Description of Interest Partnership Assessment Key Potential Role in the in LED LED Process Barangay Government Units LED impact area, poverty Essential Partner in implementation alleviation in rural areas Vendors Association Expansion of client base Essential Strategic planning program/ project implementation Farmers’ Cooperative Business opportunity, market Important Strategic planning program/ expansion, productivity project implementation enhancement Rubber Budders Association Business opportunity, Important Program/project production and market implementation expansion Women’s Federation Business opportunity, skills Important Program/project development implementation Electric Cooperative Expansion of client base Important Program/project implementation Philippine National Police Mandated to protect the Minor Provide protective services people and maintenance of peace and order b. Orient and level off with the LED Stakeholders Group The LED stakeholders group serves as a forum for eliciting inputs from industry and civil society perspectives, discussing and resolving economic issues, building networks and linkages, and pooling resources for LED implementation. The LED stakeholders group should be engaged throughout the five stages of the LED process and become the core of a permanent public-private partnership to manage the implementation of the LED Strategic Plan. The LED stakeholders group serves as a forum for eliciting inputs from industry and civil society perspectives, discussing and resolving economic issues, building networks and linkages, and pooling resources for LED implementation. The LED stakeholders group should be engaged throughout the five stages of the LED process and become the core of a permanent public-private partnership to manage the implementation of the LED Strategic Plan.34 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  39. 39. Integrating LED in Local Government ProcessesThe LED stakeholders group must be large enough to ensure representation of all major groups in thecommunity, but small enough to carry on meaningful discussions and reach consensus (USAID LEDUkraine, n.d.). A minimum of 20 and a maximum of about 35 members would be a good size.In the LGU-facilitated LED cases in LGSPA, the Mayor also headed the LED stakeholders group. Asecretariat of about three to five people from the LGU and (in the case of Tugaya) the private sector wasalso formed to provide administrative and support services including documentation, record-keeping,communications, arranging meetings and keeping the Mayor abreast with LED activities.The LED stakeholders group may start out as an ad-hoc advisory body created through an executive orderand, in the course of LED implementation, evolves into a formal organization by virtue of a LegislativeCouncil resolution. It can take the form of a coordinative council, a task force, an advisory committeeor any other variation. For example, the Provincial LED stakeholders group in the province of Suluis the Sulu Kahawa Sug Task Force. The provincial, city or municipal Small and Medium EnterpriseDevelopment Council (SMEDC), which is mandated by DILG Memorandum Circular 2002-107, mayalso be looked into as a possible organization to function as the stakeholders group. Whether or not thestakeholders group should be subsumed in any existing multi-sectoral body is a decision that rests withthe LGU and other stakeholders.Like the LGU LED team, the LED stakeholders group should also draw up a ‘terms of reference’ as totheir objectives, functions and composition as illustrated in Table 5 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 35 A Guide for Local Governments
  40. 40. Integrating LED in Local Government Processes Table 5. Example of LED Stakeholders Group Composition and Scope of Work Composition of the LED Stakeholders Group Who? Why? Rural Bank Can provide information on the economy and participate in LED strategy implementation Electric Cooperative Colleges Can help out in LECA and strategy formulation Can provide human resource development intervention and technical assistance Market Vendors Association Can help out in LECA, strategy formulation and implementation Filipino - Chinese Chamber of Commerce Can help out in LECA, strategy formulation and implementation Barangay Public Employment Service Office LED is directed towards employment generation (PESO) Coordinators Association Can help out in LECA Functions of the LED Stakeholders Group development mandate to ensure that local priorities are known to them and supported by them Activities of the LED Stakeholders Group in the LED Stages Stage 1: Organizing the LED Effort for the LED stages Stage 4: Implementing the LED Strategy Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA) financial) and technical assistance on required training and capacity building interventions Stage 3: Formulating the LED Strategy Stage 5: Reviewing the LED Strategy strategy formulation implementation value chain analysis36 STRATEGIC LOCAL ECONOMIC DEVELOPMENT: A Guide for Local Governments
  41. 41. Integrating LED in Local Government Processes Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA)A good Local Economy and Competitiveness Assessment (LECA) is the foundation of a solid LEDstrategy. In the context of the LGSPA experience, the LECA is a valuable process in the LGU specificallyin the economic sector planning and in identifying the industry sector that would contribute to the wealthcreation program of the LGU. The LECA is anchored on the value chain and industry competitiveassessment. A detailed assessment of the basic components of economic development is also conductedparticularly in relation to job creation, poverty reduction strategies and gender sensitivity promotion.The steps, contents and organization of Stage 2 in this Guide are largely based on the design, inputs andtools used in LGSPA’s LGU capacity-building project on facilitating LED. The whole LECA process canbe done in six sub-steps namely: Stage 2: Doing the LECA Step 1: Collect and assess local economic data Step 2: Conduct Local Resource Inventory and Assessment Step 3: Conduct a SWOT Analysis of the local economy Step 4: Conduct Value Chain Analysis Step 5: Identify priority industries Step 6: Document the LECA Step 1: Collect and assess local economic dataThe data needed for the local economy profiling are categorized into the following: 1 According to the Philippine Standard Industry Classification, the following activities are listed under each sector: i. Primary Sector - Agriculture, livestock, fishery and forestry labor and employment; highest educational attainment; and, presence of institutions providing ii. Secondary Sector - Mining and quarrying; manufacturing; education, training and research services. electricity, gas and water; and, construction iii. Tertiary Sector - Wholesale and retail trade; transportation, storage and communication; finance, insurance, real estate three industry sectors (primary, secondary, tertiary1 ) of the economy. and business services; and, community, social and personal services STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 37 A Guide for Local Governments