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4.1 Encouraging local business growth

Encouraging local business growth involves providing advice, support and resources to enable existing local businesses to grow The aim is to provide the most attractive business environment possible so that the businesses that are already established in the area can stay and grow.

These strategies are sometimes called business retention and expansion strategies. Most economic growth in your city is likely to be generated by small and medium sized businesses that are already established in your city. The range of initiatives to support local businesses is vast and some can be expensive, but others are not. The following provide an idea of what you can do.

Programs and projects include:

Business retention visits and surveys:
By visiting and surveying a firm you are able to identify its problems, how the business is performing, where it sources its inputs from, whether it is expanding (and if so you can work on a plan to help them grow in your community) and so on. You may be able to persuade them to source more inputs locally, identify and finance training and skills needs, help you develop appropriate strategies and so on. Perhaps the most important role these visits can have is to forestall a business leaving the area. Please also refer to the after-care program suggested in 4.3.

Technical assistance:
This can include broad based management and marketing programs, quality and environmental standards training and advice through to more specialized export training or research and development support. The focus here should be on providing accredited, demand-led, technical assistance, paid for on a fee-for-service basis if possible. Often these services are provided through one stop business service centers.

Financial advice and assistance:
One of the hardest issues for businesses is to access capital. An appropriate financial support program will be able to give advice and training on financial planning, access to capital and credit etc. In some cases it may be possible to establish small grant or loan programs to encourage, for example, investment in modern technology. Great care should be taken with these to ensure fairness and these schemes should always be transparent.

Public procurement policies and "buy local" campaigns:
These are local business friendly policies where the local government, public sector organizations and larger local businesses make their contracts more accessible to local companies. This has to be done within fair-practice laws normally. Initiatives could include adjusting the size of contracts so that smaller companies may bid, encouraging and accepting bids from groups of local companies, holding procurement events for local businesses, publishing local business competency directories and so on.

Bureaucracy reduction programs:
The amount of permits and approvals that businesses need to obtain, and the time it takes to obtain them, are not only expensive and time consuming, they can also be a disincentive to register into the formal economy or expand. A good place to start is to review existing regulations and laws, consult with stakeholders and develop a remedial plan. This will include an internal local government process and also it may well include a lobbying program to reduce bureaucracy in other government areas. A program to minimize the complexity, costs and bureaucracy associated with approval processes will improve the competitiveness of your area.

Provision of sites and premises:
Since local authorities and the state are often the owners of industrial and commercial land and buildings, they can use these to encourage business investment and expansion. A good understanding of the local property market should enable a local authority to plan for growth. Funding such hard infrastructure investments is a challenge, however, rents and sales should provide a market return for the authority, the option of private sector intervention or partnership should always be examined to ensure best use of local authority resources.

4.2 Encouraging new enterprises

Programs and projects include:

Provision of finance for new businesses:
Micro-enterprise financial support is key to enabling businesses to start up as they usually cannot access traditional lending and investment institutions. Micro-enterprise financing is a specialist area and is well documented. There are many examples of largely private successful micro-enterprise support institutions, all of which need some money to start with, but that can become self sustaining, through revolving funds. Local authorities normally become involved in these schemes by meeting with micro-enterprise institutions to assess forms of support needed and ways of collaboration. It is not normal for Local Authorities to be involved in micro-finance schemes as they generally do not have the skills and resources to do this. Their role is to identify needs and encourage institutions and private sector players to intervene.

Provision of micro and managed workspace:
This is one of the most effective ways to assist new businesses, especially when tied to technical and administrative support and mentoring programs.

Providing technical advice on business management:
Someone establishing a business for the first time needs to know how to produce his or her product. They must also understand finance, business planning, marketing, some aspects of the law including employment, taxation, safety at work, environmental legislation and so on. The provision of training and support in these areas meets a basic need and can be provided through one stop shops or independent advisers. As in most areas of technical assistance, it is better for the Local Authority to enable the provision of these services rather than provide them itself, again an issue of skills and resources. Charging for these services can be difficult, and some agencies give a limited number of consultations and then make modest charges thereafter.

Supporting the establishment and implementation of formal and informal business networks:
People learn from each other. Networks facilitate that learning. Active involvement in business networking is also important for developing a customer base, acquiring intelligence for expanding businesses as well as developing collaborative relationships with businesses in the same sector.

Conducting business mentoring programs:
Good practice suggests that by linking new and small business owners with established businesses, significant benefits can result for both businesses. These need not be formal networks. In addition, informal networks of mentors and new businesses can create further benefits by developing supplier linkages, establishing critical mass for specialist training and so on.

4.3 Promoting foreign direct and domestic inward investment

 

Promoting foreign direct and inward investment means to attract businesses to your area from elsewhere in your country and from other countries.

Attracting large manufacturing and service sector employers into communities is one of the most difficult, frustrating and riskiest of all LED strategies. This is partly because there are far fewer investors than there are communities trying to attract them. Also many communities, including those practicing third-wave strategies, are prepared to offer massive incentives to inward investors. Foreign direct investors often prefer greenfield, edge-of-town sites, to accommodate these wishes, communities often over-ride their planning policies in order to attract the investment. This brings with it considerable problems, contributes to urban sprawl, transportation problems, to name just a few problems. Careful consideration should be given to the costs and benefits of attracting inward investors.

Some of the issues inward investors review when locating a business include: A stable macro-economic climate A stable political and regulatory environment Market access and open competition A welcoming environment Available sites and or premises Appropriate and available and reliable utilities and transportation. Available skilled workforce Local suppliers and resource availability. Appropriate education, training and research facilities A good quality of life, especially when bringing ex-patriots Manageable regulation and taxation systems Incentive schemes.

The benefits when success is achieved can be great. Besides direct employment, an increase in the tax base and indirect employment, there are potential wins for the local community through up-skilling of the workforce, increases in wages, and opportunities for local SMEs that supply and buy from these investors.

Inward investment strategies are likely to be most successful when:

• They form a small part of a broad LED strategy
• The community has the appropriate hard and soft infrastructure in place or available to support the likely investments
• Targeted investments fit the competitive advantage of the receiving community, (normally a sector/cluster approach is likely to be most successful)
• Marketing strategies are carefully prepared, budgets are appropriate and follow up procedures are in place
• Incentive programs are considered, varied and not excessive (for example, funding to help local workers to upgrade their skills)
• Staff involved in attracting strategic investors have an understanding of investment needs and what their community has to offer
• Opportunities for local businesses are optimized through careful after care programs. This means that when a new investor is attracted to a community every opportunity is taken, on an ongoing basis, to encourage the investor to source their supplies locally, enabling supply chain advantages to be exploited locally. This is most successfully achieved through developing an investor after care program. These programs are aimed at ensuring investors are happy and that they are given every opportunity to source their inputs from the local community.

Activity 7 : Consider your city: 1. In trying to attract inward investment, what are your city's three strongest advantages?       2. What are your three biggest weaknesses?

4.4 Investment in hard infrastructure

 

Investment in hard infrastructure involves investing in improving the built environment for businesses thereby making it more attractive for business retention, expansion and recruitment.

Programs and projects include:

• Building or improving key access roads
• Improving the railway for passenger and goods services
• Developing, improving and/ or expanding the local airport
• Developing, improving and/or expanding the local port
• Developing improving and/or expanding industrial sites and buildings:This could include anything from planting a few trees to comprehensive landscaping or building entire new science parks.
• Developing improving and/or expanding commercial sites and buildings (for shops and offices)
• Increasing the availability of industrial and potable water
• Improving and /or expanding the sewerage disposal system
• Improving and expanding the telecommunications systems
• Improving and expanding the energy systems
• Environmental enhancements
• Crime prevention equipment installation.

4.5 Investment in soft infrastructure

Programs and projects include:

Enabling or providing skills training:
In communities where enterprise has not been a key priority, then enterprise training could be targeted. There is an almost universal need for information technology (IT) skills training too. Wherever possible this should be linked to education programs in schools. The provision of skills training should be demand-led, i.e. training should be provided in response to employer skills needs.

Providing increased business focused education and access to education:
The more schools can do to prepare young people for the world of work the better. Programs could include: work ethics, information technology, basic entrepreneurship education and then perhaps sector studies where students can study key business sectors of importance to their communities. Meanwhile adult literacy is a major problem that needs addressing through LED education and outreach strategies.

Supporting research and development:
This can be done through collaborative projects between businesses and institutions of higher learning. Perhaps a local research fund could be established, or even a graduate placement program, where new graduates can pass on their skills to local businesses.

Providing business advisory services:
Depending on budgets, this service could start with one person who just points people in the right direction, for example, to lenders, to skills training and so on. Clear sign-posting is the key to good business advisory services. Good practice points to 'one stop shops' as an effective way of providing technical and financial support. Effective one stop shops are usually housed in one building where local businesses may access all technical support that they need. Good practice also points to these facilities offering a one-stop service center for all local authority legal and regulatory issues as well as business issues. These services are often housed in buildings that have become redundant because of structural change. Sometimes the one stop shop facility is also used to house incubator or managed work or office space, thus generating cost savings.

The provision of access to capital and finance:
At the most basic level, this could be a sign posting service where businesses are directed to potential sources of finance. Local Authorities rarely become involved in detailed advice to businesses on funding issues as these services are provided by specialist institutions.

Supporting the development of business and trade associations:
This is a basic institution building process that could bring considerable benefits to the business community and LED efforts. Ideally all towns and cities should have a number of these organizations including Chambers of Commerce, Boards of Trade etc. Also more specific groups can be supported such as town center promotion groups, sector activities such as a tourism marketing group or an exporters club. Most are likely to initially need some 'pump-priming' funding (i.e. initial funding to get the scheme started) and capacity building support.

Improving delivery of local government services to businesses:
This is a key area as businesses are not only the drivers of the local economy, they are also potential ambassadors. A happy business person may well be able to attract more businesses to the area. All aspects of a regulations, taxation and licensing are candidates for review to minimize cost, time and frustration for businesses, whilst maintaining appropriate necessary environmental and related standards.

Social inclusion strategies:
A first stage should be to establish who and where the most vulnerable communities are, and then develop strategies to include them. These strategies could include, for example, language programs for ethnic minority communities, helping women into/back to work, encouraging the recruitment of disabled people into the workplace, encouraging social activities for the very young and elderly citizens.

Crime prevention measures:
These can include everything from introducing 'good citizenship' classes into the school curriculum, to developing initiating after-school activities to keep young people busy. Other initiatives could include everything from drug free zones to imposing curfews at night.

Some of these initiatives may well not be suitable for your city, but they will give you an idea of different approaches. See if you can adapt some of these ideas for your city.

 

Activity 8 : Consider your city: 1. What programs do you operate, or would you like to see that would address the issue of crime?       2. Which do you think are your city's most pressing soft infrastructure needs?

4.6 Cluster and/or sector development

 

Cluster development means that LED initiatives are concentrated on encouraging and supporting inter-firm collaboration, institutional development and support in targeted industrial sectors. These sectors are those that offer the most local economic development potential.

These cluster strategies are undertaken within a broader LED strategy that would normally include the standard approaches, as described in sections 4.1- 4.10 Programs and projects include:

Developing broker and network agencies: Special attention is paid to encouraging local people engaged in the same cluster to meet together to enable business development opportunities. These could include encouraging local fishermen and fish processors to meet and exchange ideas on improving facilities and adding more value to their products, so they would all benefit. Another example could be to start a craft network. The network could jointly market their goods, and then start inter-trading with each other, building synergies.

Supporting joint research: Institutions of higher learning can undertake research that could benefit all in the cluster. One example of this would be to undertake research into minimizing losses from post-harvest losses of agricultural products.

Developing cluster focused public procurement and local purchasing agreements:
The public sector is often the largest buyer in a city and as such there are opportunities to enable local businesses to access tender processes more easily. It is often difficult for small businesses, in a cluster or not, to bid for large government contracts. A cluster initiative here could include developing a food supplier network to supply government catering needs. A logical cluster development initiative could be to encourage suppliers of basic food products to enter into some form of food processing. Cluster development activities could then move on to transportation, storage and packaging of food products. From there it is likely businesses could start retailing and producing processed foods for the private sector.

Providing cluster specific information: One of the most effective ways of developing a cluster is to gather information about businesses and institutional support systems in the cluster, and then produce it so that it can be shared. Thereafter, with a small amount of effort, supplier linkages can be developed. These do not need to be sophisticated.

Developing cluster related marketing efforts: Once a cluster has been identified and it starts developing, there are opportunities to promote it and attract supporting investment as well as promoting business opportunities externally for cluster members.

Developing demand-led skills and education training programs: A significant benefit to developing a cluster initiative is that a key outcome of business networking will be an appreciation of skills needs in the sector. When a number of businesses express needs, it is more likely that training or education will be provided. A lone voice is not likely to be taken as seriously.

 

Activity 9 1. What industries in your city have potential for cluster development? (e.g. tourism, fish, shoe making etc)       2. Select one of the above. Identify three ways your city might be able to support your chosen cluster to grow?       3. Are there cities nearby that may also be likely to support the same cluster?       4. And if that is the case, how could you collaborate with the other city so that everyone could benefit?

4.7 Area targeting

 

Area targeting means that strategies are developed to address specific site or small area LED issues. While most LED initiatives can be targeted at specific locations, 'area targeting' examines a specific area within a municipality to address a specific area based problem such as a redundant factory, declining shopping area, a slum and so on.

Although many LED initiatives are aimed at ensuring that the entire city becomes more competitive, there are normally areas that need special attention for one reason or another. An example could be a run-down town center, an abandoned factory complexes, a redundant port complex or similar. For these situations, special measures are called for.

Programs and projects include:

Town center enhancement schemes:
These can include a wide range of initiatives including developing a business partnership, marketing the town center, undertaking surveys and upgrading the physical environment, targeting investment and so on. A vital and vibrant town center is the heart of an areas' ability to be competitive.

Upgrading out-of-date or abandoned industrial premises:
See section on regeneration.

Developing industrial estates, business parks or science parks:
This type of activity is normally undertaken by the private sector, however mayors and city managers can pave the way by establishing a demand for such a facility and encouraging an enabling environment within the local authority. Investing in servicing sites with water, electricity and sewerage is expensive, so is building speculative advance factory units (where no tenant has been identified). Because of these reasons local authorities are encouraged to seek private sector investment in this area.

Encouraging investment into growth nodes:
One strategy to encourage growth is to identify specific areas within a city where certain types of businesses will be encouraged to locate. A growth node may then act as the center for planned growth and employment.

Encouraging investment into corridors:
These are similar to nodes but here growth is encouraged to expand from an area of promising economic activity out towards a more challenging area. By encouraging incremental investment, the aim is to develop an active growth corridor linking richer and poorer areas, so reducing social and economic exclusion.

4.8 Targeting disadvantaged groups

 

Targeting disadvantaged groups means that measures are targeted at groups of individuals such as ethnic minority groups, the urban poor, women, redundant workers, the long-term unemployed and youths.

Programs and projects include:

• Language training: This is a key issue where there are groups of foreign workers and minority communities. Outreach programs are often successful here.
• Skills retraining and job placement programs: Skills retraining should be done with a demand led approach. There is little point retraining individuals in skill areas for which there is no local demand.
• Raising educational achievement: This is usually an issue for an entire city, but specific communities may be in need of extra support
• Enterprise training: Many disadvantaged groups have both high unemployment and a large proportion of workers in the informal sector. Basic training in terms of business management, finance and marketing can have a significant impact on these communities.
• Women into employment and self-employment programs: including confidence building, crèches, after-school clubs
• Micro enterprise lending programs: This area of activity is also well suited to assisting disadvantaged groups to access self employment.
• Work experience and teacher/pupil placement schemes: These schemes involve students working for short periods of time in businesses to gain work experience and a work ethic. Teachers can also do this, so giving them a better understanding of workplace requirements.
• Developing mentor programs: Mentor programs can be very informal, it is a way of helping individuals start their own business, the idea is that more experienced business people mentor new starts and give them support, encouragement and ideas.
• Health awareness programs: It is usually the most disadvantaged that suffer from the worst health. AIDS and drug misuse are deeply concerning at this time. Besides the direct effects on individuals, poor health becomes a serious limiting factor when accessing work. Health awareness programs can be closely targeted at for example, specific schools, communities and so on. They may also be delivered through community resource centers.
• Development of community resource centers: The purpose of these centers is to gather together in a local community information, support and services to meet the needs of a local community. Since transport is often a problem, and since many individuals do not like to go into 'official looking' buildings, community centers can provide an ideal place to meet local needs. Buildings do not need to be sophisticated, the most important element is to make sure staff are customer friendly and have an understanding of the services that are available. Services can include everything from health care, education services, business advice to paying taxes, play areas for children and so on.

 

Activity 10 1. List up to five groups in your city that you feel are disadvantaged       2. Describe one scheme that your city currently runs, or would like to run that assists some of these disadvantaged individuals.

4.9 Regeneration strategies

 

Regeneration strategies are targeted at communities that have normally suffered from structural change, perhaps a major industry closing or a rural area in decline or a town center suffering from neglect and crime.

The implementation of effective regeneration programs and the tackling of social and economic disadvantage represent two of the major challenges facing contemporary policy makers. Regeneration strategies go some way to meet these challenges. They use all the tools available but because an area is in need of regeneration specific, community focused and often highly targeted policy responses are usually needed. Regeneration strategies are likely to be the most challenging, the most expensive, take the longest time and be the most necessary activity a local authority is likely to undertake.

Programs and projects include:

Derelict site reclamation programs:
Many traditional industries were housed on large sites. They occupied large buildings and frequently considerable contamination of the sites resulted. As a first step in most regeneration programs these major issues need to be tackled. Decisions need to be made on whether buildings can be effectively reused, how much contamination needs to be cleared and what after-use programs need to be established. None of this is easy or cheap. But contaminated sites, besides being a danger to local communities are never likely to bought by reputable employers. They have to be addressed. A comprehensive brownfield reclamation program needs to be established within the LED strategy when this is an issue. This could include an initial survey of sites, identification of severity of pollution, identification of ownership, prioritizing reclamation, finding funds for it, developing after-use programs and ensuring regulatory systems encourage reclamation.

Adaptation of disused buildings:
In some instances redundant buildings will be able to be adapted for further use such as for a managed workspace, which can be owned by the public or private sector. Some buildings may benefit from splitting into smaller workspaces. Some of the most historic buildings are often the hardest to reclaim, this should not stop efforts to save all buildings of historic or architectural importance.

Industrial and commercial site preparation:
In most regeneration programs there will be a need to develop some land for incoming and expanding businesses. To accommodate these most effectively, it is better to have some sites serviced with basic infrastructure at the outset, if this is possible. At least there should be some assessment of the likely costs and timescales involved in installing basic infrastructure. There is significant expenditure involved with this, so partnerships with the private sector are ideal.

Retraining of redundant workers:
This is a serious problem in most communities that are undergoing structural readjustment. The likely target populations will be older men who have clearly defined skills sets. The challenge is to ensure that skills training is given on a demand-led basis. This is hard, and there are no easy solutions especially as there is likely to be high unemployment in the community at large.

Job search and employment outreach:
One of the most difficult areas is for redundant workers to find a new job. This is often because they do not know basic job search skills (such as where to find opportunities), these programs can be very effective and involve everything from confidence building, resume writing, interview skills to matching unemployed with potential employers.

Street scene enhancement programs:
Rapid improvements can be made with programs to improve the street scene. These may include closing streets to traffic and installing pedestrian friendly street furniture, planting trees and installing new pavements. More modest schemes include painting shops, installing attractive street lighting, a few seats, encouraging shop owners to install more attractive overnight shutters to hanging basket competitions. Local businesses may well be encouraged to pay for at least some of these initiatives.

Public park and play provision:
Besides improving the environment improved parks and play facilities are likely to reduce the risk of crime, smoking and drug addiction. A start could be establishing open, traffic free areas where children can play safely.

Entrepreneurship training and SME support programs:
The city's mainstream programs could be adapted to meet specific needs of this target group and area. Local delivery of services could also be helpful.

Community confidence building:
This can include many measures such as promoting local success stories, encouraging the community to develop its own newsletter, to developing arts and crafts initiatives and so on.

Crime and safety measures:
These measures can include a wide range of activities from increased policing, installation of closed circuit television, increased bus services at night, neighborhood watch schemes, installation of more lights in dark streets and so on.

4.10 Which programs don't work (but we still keep using them!)

Unfortunately there are countless examples of failed LED strategies and projects. Some of these are listed below:

• Expensive untargeted foreign direct investment marketing campaigns
• Supply-led training programs (demand led programs are those that employers have expressed a need for)
• Excessive reliance on grant-led investments
• Over generous financial inducements for inward investors (not only can this be an inefficient use of taxpayers money, it can breed considerable resentment amongst local businesses that may well not be entitled to the same benefit).
• Business retention subsidies (where firms are paid to stay in the area despite the fact that financial viability of the plant is at risk)
• Relying on "low road" techniques e.g. cheap labor and capital
• Government conceived and controlled and directed strategies (need to involve stakeholders.)

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