Learning the local business

 

Workshop I. Good governance – role of local governments in LED and their efficiency

23 March, 2011, Gödöllő

Gábor Péterigpeteri@lgidev.com

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Local governments on the market

Legacy: direct government intervention

• Subsidy to local companies

• Local investments in profit making sector

• Subsidized user charges

• Loan guarantee

• Local lending to entrepreneurs

They are the least preferred actions today!

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Why do new enterprises start in your city?

1. wages, salaries2. transportation, access3. qualification of labour force4. price of plots, real estate for investments 5. local taxes6. contacts to the local government7. zoning regulations

Local business climate matters!

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Transformation of LED: indirect influence

1. Capital: municipal property, business park

2. Labour: comprehensive education, LLL

3. Infrastructure: physical, telecom, banks

4. Finances: local taxes, partnership

5. Regulation: urban planning, zoning, licensing

6. Doing businesses with LGs: procurement, CoI

7. Managing LED: marketing, agency/company

8. Planning: strategy, program, EU projects

From “brick-and-mortar” tofinancial instruments

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Attracting inward investment

Most preferred actions by cities (HU, 2006):    

1. Building public utilities

2. Contacting foreign investors

3. Listing available sites and buildings

4. Approaching national government

5. Creating new sites, plots

6. Re-zoning

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Establishing partnerships

Narrow definition of PPP (risk sharing):

• Contracting out: services, management, leasing

• Institutionalised forms: supplement, share with private capital (BOT => concession)

Broad sense:

• Contract based urban development

• Dynamic process: LG as owner (land, buildings), regulator (tax, charges, zoning), service provider

Responding on the crisis: economic stimuli or restrictions

Sources of financing development1. EU grants: bringing forward projects; higher

advances; simplified procedures; lower tender prices

2. National investments programmes: “Green Growth”

3. Municipal borrowing: bond issue to co-finance; new limits; restructuring

4. PPP: declining resources

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Re-inventing LEDMunicipalities go beyond mandatory functions: – create jobs– increase local tax base – share local infrastructure financing

Long adaptation process:– EU limits on state aid lifted (€200K=> €500K)– simplification of administrative procedures – local tax reliefs – national loans for paying local contractors – special funds

Utilising municipal property: access + management

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In search of new policies

1980s: improved efficiency: through market and private sectorPresent attitudes: • market creates monopolies and social inequalities; • emergency measures of intervention• state should be owner, not only a regulator

LED (decentralisation) is at the crossroads: finding endogenous sources of growth horizontal cooperation, vertical communication network development, support to business innovation energy efficiency inclusive development new EU policies: place based development