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Local and Regional Economic Development

Lessons learnt and new opportunities ofthe LRED approach

2014, July 18th

Global Retreat 2014 of the GIZ-Division Economic Development and Employment

Ulrich-Harmes Liedtke

[email protected]


IS THERE SUCH A THING AS IS THERE SUCH A THING AS ONE LRED APPROACH?ONE LRED APPROACH?

The LRED approach


In many places local economies grow and evolve naturally.

So why is an LRED approach necessary,what are we trying to achieve?


The LRED approach emerged ina specific context

Development context

Builds on economic success and promotion activities in industrial countries

Became popular in the 90s as an antidote to this very strong top down approach

Highlights the endogenous potential for growth

LRED Hexagon 1st Triangle

EntrepreneursInvestors

Existing firms


Systemic Competitiveness highlights targeted interventions to overcome market failure

Macro levelThe sphere of economic

framework conditions, defining incentives through laws, institutions and generic policies

Meta levelThe sphere of societal

framework conditions that guidedecisions about fundamental economic alternatives

Micro levelThe sphere of allo-

cation through markets, hierarchies & networks

Meso levelThe sphere of targeted

interventions to address temporary and persistent market failure


Different entry points to LRED

Sou

rce:

IDB

-MIF

(20

14)

The

mat

ic s

tudy

on

RE

D


First conclusions

Approach

LRED is an overarching umbrella or meta-approach to intervene in economies at the territorial level

Motivations Economic problems (poverty,

unemployment, etc.) concern local and regional government

Decentralization affects economic policies

Success stories of thriving cities and regions encourage decision makers


WHAT HAVE WE LEARNED OVER THE LAST TWO DECADES?

Lessons learnt


Strong social or human institutions and physical infrastructure

Weak social or human institutions and physical infrastructure

Main

sec tors

with

sust ain

ed

gro

wth

Mai

n s

ecto

rs i

n

in s

tag

nat

ion

/ o

r d

ecli

ne

Declining region Thriving region

Marginalized region Emerging region

Different types of territories

There is no one-size-fits all approachTerritory and context mattersPrinciples of LRED stays the same, but

the priorities differ


Local knowledge, participation and ownership are critical


Combine bottom up and top down: Need to manage polarities

Top downBottom up

•Leverage of endogenous potential

•Local ownership•Greater diversity of territorial experiments

•Lack of scale for broader development

•Local power structures persist

• Interventions are generic

•Scale is possible• Integration in general policy•Disseminate best practices•Broad visibility• Political priority• More funds

• Interventions do not meet local needs

•Prioritization of large scale interventions

• Ignorance of local self-help


Territorial development connects fragmented policy approaches at the territorial level

SM

E P

rom

otio

n

En

tre

pren

eur

ship

pro

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tion

Inve

stm

ent

pro

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Exp

ort

pro

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Ski

lls d

evel

opm

ent

Em

plo

ymen

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omot

ion

Ag

ricul

tura

l dev

elop

men

t

Res

earc

h an

d d

evel

opm

ent

Tec

hnol

ogy

exte

nsio

n

Territorial Development


Political environment has changed

An active role of state is no taboo anymore,

but new industrial policy is not necessary bottom up


Beyond competiveness

Porters diamond Sustainability


LRED (often) eludes linear planning

Local economies are complex adaptive systems and require a more explorative approach to support resilience


WHAT’S NEXT?Challenges and opportunities for the future


The environment of LRED has changed dramatically

As knowledge becomes more readily available globally, specific tacit knowledge in locations becomes more valuable

Industrial policy is back (active role of the state in economic development broadly recognized)

Climate change and planetary boundaries require more environmental sensitive approaches

Need for more inclusive business modelsNew players entering in the field of economic development

(private donors, emerging countries, etc.) Information Technologies and Communication provide

new opportunities for interaction


The Future of LRED builds on past experience

Sou

rce:

IDB

-MIF

(20

14)

The

mat

ic s

tudy

on

RE

D


Key questions for a New LRED Wave

How to make territorial approach more relevant?– How to make impact visible?– How to scale up?

– How to become more complexity sensitive?What could be the future role of GIZ in LRED?

– How to become a thought leader in a new LRED wave?

– Which levels to intervene?– Which concepts to disseminate?

20140718 mesopartner lred giz#2 short

Economy & Finance