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Daniel Francois Meyer, North-West University, South Africa Daniel.Meyer@Nwu.Ac.Za INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCE STUDIES Vol 10, No 1, 2018 ISSN: 1309-8055 (Online) THE DEVELOPMENT AND APPLICATION OF A REGIONAL AND LOCAL ECONOMIC DEVELOPMENT ASSESSMENT INSTRUMENT Daniel Francois Meyer, North-West University, South Africa [email protected] ─Abstract ─ ─Abstract ─ Globally, local economic development (LED) is recognised as a strategic process that assists with the acceleration of economic development in local regions, in both developed and in developing countries. Economic development practitioners have a need for user-friendly assessment instruments and tools to analyse and compare economic development in regions. The aim of the study was therefore to develop and apply an instrument to assess the economic development potential of a region since such a comprehensive strategic and practical instrument does not exist. Various types of regions, from national to local, could be assessed and compared using the instrument. The development potential (DP) of a region has been formulated as the aggregate of all local resources (R) multiplied by the aggregate of local capacity (C); therefore DP = R x C. Extensive research has lead to the identification of variables contributing to the extent of the local resources and capacity. The methodology included the identification of variables representing capacity and resources and the allocation of values for each variable through a quantitative survey method which included 380 local business people. The instrument was tested in a developing region in South Africa known as the “Vaal-Triangle” region, which includes the municipal areas of Emfuleni, Metsimaholo and Midvaal. In testing and applying the instrument in the study region, it was found that all three areas had low economic development indexes of below 30 (where the maximum is 100). The instrument identified the variables responsible for this relatively low index and those factors need to be addressed in a LED strategy. In addition, the instrument could assist development practitioners to assess the economic development potential for a region and to formulate strategies to improve the potential. Keywords: Assessment instrument, development potential, local economic development (LED), regional development, Vaal-Triangle region. 16 INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCE STUDIES Vol 10, No 1, 2018 ISSN: 1309-8055 (Online) JEL Classification: O2, R11, R58. 1. INTRODUCTION Local Economic Development (LED) as a strategic development instrument has the potential to ensure the optimal utilisation of local resources and capacity to improve economic conditions in a specific region through job opportunities and the improvement of the quality of life there (USAID, 2006). Romer (1986) states that economic development can potentially occur when local people utilise and arrange resources in such a way that they are more valuable and effective to local communities. The optimal use of local resources is a major challenge for local economic development decision-makers (World Health Organization (WHO), 2014). The aggregate of the economies of all regions in a country constitutes the building blocks of a national economy. Therefore, towns, cities, metropolitan areas and all regions need to take responsibility for their economic future within the overall national economic policy. Local and regional role players such as government and local businesses need to assume the challenge and seize opportunities through assessment of the local economy and formulation of local development strategies for implementation (Leigh & Blakely, 2013). A region’s economic development potential and ultimate success are dependent on its ability to use its resources and capacity effectively and to adapt to local, national and global changes to stay competitive (USAID, 2006). Within this challenging environment, the coordination and cooperation of all role players is vital for success, as is the role of local government in the creation of an enabling environment in which local business and communities may prosper (Meyer, 2014). Economic development planners have a need for economic development assessment instruments to assess local regions and also to compare specific regions in both developed and developing regions (Stimson, Stough & Roberts, 2006). In an analysis of existing instruments, it was determined that a gap exists for a practical and user-friendly development assessment instrument. The aim of this article is consequently to formulate and apply a local development assessment instrument to determine the development potential of a local region. The intention is to relate theory to practice with an applied assessment instrument. As indicated by Carroll and Blair (2012), LED is an applied research field with the distinction of theory and practice being untenable in most cases. Economic development 17 INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCE STUDIES Vol 10, No 1, 2018 ISSN: 1309-8055 (Online) practitioners find it difficult to assess local economies and this instrument could assist in this process, as well as in the comparison of regions (Leigh & Blakely, 2013). 2. LITERATURE REVIEW In this section, concepts, definitions and approaches concerning the design and formulation of an economic development assessment instrument, are analysed. Concepts such as local economic development (hereafter LED), development potential regarding resources and capacity as well as the enabling environment are analysed. Many definitions of LED exist globally. Trousdale (2005) defines LED as all the economic actions and initiatives, attempted and implemented by members of a local community in order to achieve improved quality of life and to create sustainable economic opportunities for all, including the poor. In an interesting analysis, USAID (2006) analysed the concept of LED. According to this body, “Local” signifies the existing capacity and potential of endogenous knowledge and processes; “Economic” focuses on the recognition of investment opportunities, entrepreneurship development and development of local markets; and “Development” relates to a process of improving quality of life and the creation of employment opportunities. Ruecker and Trah (2007) declared that LED is an ongoing process in which all local stakeholders from public and private sectors work together to create unique location advantages, to ensure the specific locality is superior to other localities with different resources and capacity. Finally, Leigh and Blakely (2013) list a number of objectives of LED which include an increase in the standard of living over time; the reduction of local inequality; achievement of economic stability with a diverse economic base and lastly, the sustainable use of resources and extension of capacity. From the definitions of LED, it seems that the economic development potential of a region could be determined through the existing and potential resources and capacity of the region (Pillay, 2013). As Leigh and Blakley (2013) note, for a local economy to develop, resources need to be optimised and the capacity needs to be increased. Lawson (2012) also indicates that organisational and institutional capacity and local resources are important for the successful facilitation of the LED process. In South Africa, local government, through the Constitution of 1996 (South Africa, 1996), is tasked to be developmental and to ensure LED. The 18 INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCE STUDIES Vol 10, No 1, 2018 ISSN: 1309-8055 (Online) International Labour Organization (ILO)(2006) links LED and resources by stating that LED is a process to find solutions to the threat of globalisation for local regions and to maximise the effective utilisation of local resources to stay competitive. Rogerson (2009) agreed, when he added that the challenge for LED processes is to find ways to optimise local resources, including local knowledge. In terms of LED resources, the following variables have been identified: availability of natural resources; land and buildings; strategic locality; availability of labour (skills levels, and potential labour workforce); capital investment; infrastructure development; entrepreneurship; transport; communication; industrial sector composition; technology; size of economy and local market; export market and finance and funding as well as government spending. In most cases, especially in developing regions, resources are underutilised; with high levels of developmental capacity, such a region can experience a revitalisation in development (Leigh & Blakely, 2013). The United Nations Development Programme (UNDP) (2008), defines capacity development as a process where individuals, organisations and societies obtain, strengthen, and maintain the capabilities to set and achieve their development objectives over time. The UNDP (2010) later adds that the capacity of local people and institutions needs to be strengthened for them to effectively achieve their developmental objectives. Specifically, it is important to note the lack of human and capital capacity within local government in South Africa, leading to poor LED success (Nel, 2001). Local economic development capacity factors, according to Leigh and Blakely (2013) include the economic, social, technological and political aspects of capacity. Capacity factors also include local management structures of all three groups of role players, government, business and community, which involves the capacity for research and development, government support for business and community development.
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