The Local Business Environment and Decentralised Cooperation

PLATFORMA, the pan-European coalition of local and regional governments engaged in international cooperation for sustainable development, has just published my report on the Local business Environment and Decentralised Cooperation.

This report shows how improving the local business requires capacity development for local governments and decentralisation reforms. Through decentralised cooperation, local and regional governments can lead reforms that support business growth, create jobs and drive innovation.

The study finds that local and regional governments play an important role in the business environment through their competencies at the local level.

National business environments have attracted attention among policymakers and development practitioners over the last two decades. However, the local business environment also affects the decisions made by private investors and business people. These decisions have a direct impact on local investment, economic growth and job creation.

Local economic development (LED) policies and strategies were found to provide an important framework for private sector development and local business environment reform. While these reforms are often not included within LED policies and programmes, such reforms provide an additional tool for LED policymakers and practitioners to use.

Local and regional governments were found to be constrained in their efforts to improve the local business environment by inadequate technical and financial resources within highly-centralised political and financial systems. Government decentralisation is essential if local and regional governments are to realise their potential for stimulating local economic growth and creating local business environments that are conducive to increased private investment. However, the role of local and regional government in economic development varies across countries.

Local and regional governments require the political and legal authority provided to them by a decentralised nation state. They also require the capabilities, tools and capacity to assess the local business environment and to design, implement and monitor meaningful reforms.

Recommendations

Drawing on the study findings, three categories of recommendations are proposed.

It is recommended that Central Governments:

1. Support decentralisation reforms in collaboration with associations of local and regional governments; and
2. Promote national dialogue and collaboration with local and regional governments.

It is recommended that EU institutions:

3. Promote the role of local and regional governments in economic and private sector development;
4. Support decentralisation reforms in the political dialogue with partner countries’ central governments;
5. Support the benchmarking of local business environments; and
6. Support the capacity building of local and regional governments through decentralised cooperation.

It is recommended that local and regional governments:

7. Integrate local business environment reforms to local economic development strategies;
8. Promote partnerships and dialogue with the private sector; and
9. Promote the sharing of knowledge and experiences on local business environment reform and support capacity building among other local and regional governments.