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Regional Economic Development Overview • • • • • • Understanding RED RED policy How are regional economies developed RED goals and tools Critical success factors Lessons UNDERSTANDING REGIONAL ECONOMIC DEVELOPMENT? What is a region? • • • • • • • City/ Municipality City region District Functional economic region Province Country Cluster of countries The world at night Why Regions? • Much of the economic action in the world economy today goes on at a regional level • It is often regions, not nations, that are competitive in certain areas • Regions therefore often drive national economies Regional Economic Development The ability of a region to: • Generate a rising standard of living for the region’s residents • Compete successfully in a range of economic activities that allow for economic and social advancement and increased inclusion • Contribute to national development through its own efforts and through interaction with the rest of the country • Operates both within governmental spheres and within markets where factors outside the control of governments • Time frame in which economic development outcomes appear are more akin to business cycles (12-15 years) than to the electoral cycles (3-5 years). Why RED? • Nations deal with macro policies and macro economics • Focus on groups of firms and industries • Provinces focused on development and equity • Regions often draw upon common resources, labor pools, inputs, knowledge bases • Local deal with day to day issues of providing services • Leaves a gap in the policy framework for regions • Regions about matching the interactions, supply chains, infrastructure requirements, financial linkages, capabilities, and logistics linkages necessary to do business • Regions can benefit from coordinated investments in infrastructure, education, training, marketing, information gathering, and related public goods • Tend to cross jurisdictions and therefore require cooperation Lack of coordination at a regional level will tend to leave city, state or provincial, or district economies isolated and uncompetitive 8 Challenges of dealing with regions • Regions vary greatly in size • Different industries and clusters have different geographic scopes • Regional boundaries are therefore often fluid • Political jurisdictions often do not match economic areas increasing the challenges of a coordinated approach RED POLICY RED policy evolution Key question: Where is South Africa and this region in this continuum? Smart approach Territorial approach Increase performance of the nation’s economy Focus on economic hubs Planning based approach International economy the reference point Balance and compensate for disparities Multiple stakeholders involved in action Focus on lagging regions National economy key reference point Government key actor Increase performance of a region and its regional economic network Focused on value chain economies International economy and the role of the region in this economy the reference point Collaborative action HOW ARE REGIONAL ECONOMIES DEVELOPED? There are identifiable features that foster the evolution of regional economies • Initial location – – – – – Resource base Location of markets Related industries and spillovers Particular entrepreneur or firm Government impetus • Subsequent development – – – – – – Skills and capabilities Labor/ supplier/ buyer pools Innovative performance Competition and cooperation New entrepreneurs and firms Other external economies 13 Competitiveness in… Industries Vertical Chains Activities 14 Competitiveness in… Industries Clusters Activities 15 Which activities are performed in the region? Which are performed by local firms? Foreign firms? Education? Etc. Professional services Business and services Financial services Transport and other logics High-tech manufacturing Mid-tech manufacturing ACTIVITIES Low-tech manufacturing INDUSTRY TYPES Agriculture, forestry, fishery Regional Competitiveness Assessment R&D Product D & E Process D & E Components manufacturing Assembly Mktg & Branding Supply Chain Management Selling & Retail Mgmt Distribution After sales service Strategy Setting Firm Admin November 2012 17 RED GOALS AND TOOLS Goals of RED Requires balancing three different but interdependent goals namely: • Economic growth: Increased demand for goods and services and improved productivity – The growth of a region usually requires changes to how resources are organised, business and investment climate, connectivity and marketing. • Economic development: Development of targeted sectors, locations, firms and/or people who have the potential to be channels for growth – Targeted interventions to support and shape the development of a targeted group • Economic Inclusion: Ensuring the benefits of growth and development are shared in ways which improve participation of people who are otherwise excluded or participating in sub-optimal ways – Involves a combination of infrastructure, spatial, skills and education and social support mechanism • Key question: How has this region balanced these goals? Economic growth tools • Generally supported through tools that raise productivity, increase market access, and stimulate demand side interest. These include RED actions such as: – Business and Investment Climate improvements (eg rebates, red tape reduction, fast tracking planning approvals, etc) – Interventions that improve the quality of the living environment such as addressing crime and improving settlements – Investment Tools and Resources such as incentives and investment agencies – Infrastructure – soft and hard – High end skills training – Marketing and promotion interventions Economic development tools • To support the development of particular firms, sectors, or locations RED process typically focus on: – Sector and cluster development programmes and networks. – SMEs and Entrepreneurship initiatives and support services. – Spatial development initiatives such as urban redevelopment, regeneration programmes and intensive district management. – Sites and land redevelopment for specific purposes. Economic inclusion tools • To address inclusion RED strategies typically employ: – Addressing spatial inequalities often with better access to opportunity areas. – Labour market interventions especially in skills and employment and recruitment practices. – Interventions to support the development of new entrepreneurs and firms – Preferential procurement and contracting for HDI and smaller firms – Social infrastructures such as health, schools, childcare – Enabling policies in social welfare such as housing subsidies and child support grants. – Community economic development. Tools Key questions: • What have been the primary tools used in South Africa and this region to enhance regional economic development? • Have they been the right tools? • What other tools are needed? CRITICAL SUCCESS FACTORS Critical success factors of RED • Tailored strategy – not one size fits all or copycats – Understanding the advantages of disadvantages of the region – Understand the regional actors and institutional landscape • Build on the existing economic strengths – – – – Work with existing strengths/ base and remove bottlenecks Assess the potential of collective activities to remove barriers Develop new activities and industries linked to existing economic base Focus on retaining existing investors and then attracting new investors • Develop a shared vision and regional identify – Space of strategy and influence • Relationships – All about relationships between stakeholders – sectors, industries, firms, government spheres, neighbouring regions – Successful regions usually are tightly linked and integrated into a larger system of production with other neighbouring regions (e.g East Asian manufacturing complex links regions in China, Taiwan, Japan, Singapore, Vietnam etc playing different roles in value chain) – Space of influence not command • Think of sequencing – don’t start with the biggest problem, start with the ones that are easiest to solve – About “step by step by step” LESSONS No silver bullet Step by step Not an all or nothing game – becoming the leading region is difficult but becoming more prosperous is possible Dynamic Process networks dialogue Act Vision Apply the lessons Research & Reflect partnerships Markets are dynamic and changing. Regional Economic Development programmes must be nimble, and be able to change as the context changes. Get the basics right Doing fewer silly things Engage movers and shakers • Emphasis on identifying and working with people with energy and drive – Distinct but complementary to more representative participatory processes – Requires fluid fast process support by efficient administration • But finding ways to push them out of comfort zones through collective effort • Projects without sufficiently skilled committed champions invariably fail Combination of products (infrastructure) and process (of engagement between government and business/ industries in a cluster/ etc to find common ground). Markets as drivers of innovation • Requires excellent economic intelligence on local economy • Requires knowing who are the economic actors • Looking at assets and opportunities not needs as drivers of growth • Identifying synergies between needs and opportunities Relationships more important than research Large portfolio with implementation funnel Encourages innovation, networks and preparedness to take higher level of risk Value chain focus linking micro with Meso • Drive growth at a meso level by linking with growth centres to increase opportunity and income • Identify market opportunities within the value chains of key sectors • Identify opportunities for increasing value provided by the region • The benefits of improved macro performance do not reach the community in an inclusive way. Requires finding supportive ways of linking emerging business to the growth opportunities Dedicated ‘Embedded external’ facilitator Importance of an external facilitator to broker partnerships and networks, the institutional base for economic development. Building the stakeholder momentum and harnessing the energy requires capacity and capability and takes time Importance of institutional credibility of facilitator – who initiates, who hosts, who pays, who oversees performance only really answerable in specific contexts Recognising and supporting external facilitation key to regions ability to make a step change in its economic interventions Too much money can be a hazard Just enough resources to catalyse action often enough and better Thank you