Economic and fiscal development - At the service of governance

For the SDC, local economic development is not just an economic matter but a cooperative approach which provides an excellent tool for bringing together different interest groups to agree on local cooperation that can help create jobs and income, in addition to improving governance.

Key facts

•	Local economic development is a consultation and decision-making process that involves the public sector, the private sector and civil society and translates into projects implemented on the ground. It aims to improve the living conditions of local society, create socio-economic opportunities and strengthen local governance.

Local economic development brings together various stakeholders from civil society, as well as the public and private sectors. Its goal is to promote cooperation so as to develop a given area. Cooperation is a key factor in governance. Local economic development (LED) triggers a political process in which the protagonists have to negotiate the priorities bearing in mind the limited human and financial resources at their disposal.

Forces that drive the economy
Economic considerations drive the private sector. Cooperation on creating public goods, such as improved framework conditions for investment, calls for a private-public collaboration that is built into concrete projects ("We'll build the road, and you'll build the factory. You tell us what's not right about the investment climate, and we'll put it right."). In this way, combined LED efforts create new business prospects. The public sector needs the private sector for local economic development.

In virtually every country, it is the private sector that creates most jobs and generates income, and jobs and income are a priority for the public sector's customers and voters. Poverty reduction and – perhaps more important for a civil servant – re-election of the mayor and his staff depend on the generation of income.

Governance as a process
Civil society, like local associations, should also be part of planning and implementing development projects in which the economic dimension is obviously not the only issue at stake. The State and local government do not cover all the ground. So the three stakeholder groups – the public and private sectors and civil society – negotiate and cooperate on the basis of concrete information derived from evaluating the strengths and weaknesses of the local economy, as well as the opportunities and risks involved. This dynamic exchange between partners improves governance at local level.

The SDC focus: At the centre of better dialogue

Moreover, local economic development can also strengthen governance at national level. In countries like Kosovo or Burkina Faso, the SDC conducts local economic development activities which have been implemented simultaneously in several towns. This has enabled municipalities (or rather territories, because each town has close links with its peri-urban and rural hinterland) to exchange information and experience that are specific to them. This has led to better cooperation among local authorities and thus added weight to the local dimension in dialogue with central government.

Theme contact: Peter Beez

Additional themes in this area:

The economic aspect of local economic development
The economic aspect is inherent in the competitiveness of the individual regions, which is sustainably promoted through the population's participation in political and economic decision-making processes and, in so doing, enhances living conditions.

Additional Information and Documents

Internal Links

Governance

External Links

Informations about Local Economic Development on the Website of the World Bank
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/EXTLED/0,,menuPK:341145~pagePK:149018~piPK:149093~theSitePK:341139,00.html