Regional Economic Promotion (REP) Approaches in Chile

A summary of lessons learnt

Regional economic promotion (REP) means a change from a sectoral to a territorial approach in economic promotion. For many people, this is a new and unfamiliar approach and requires time and effort to familiarize themselves with. Another issue is access to reliable and detailed data. Often, regional and local development potentials can only be seen on the background of new or better information. Thus, Chilean projects usually strive for two things: first, joint endeavours among municipalities, local stakeholders and government support institutions in the beginning of REP initiatives; second, creating new visions and perspectives and an adequate information base in order to allow for strategic planning.

Local and regional authorities are often not prepared in matters of effective local economic development policy. Methodological knowledge about data collection, data analysis and participatory planning methods is rare. To ensure effectiveness of the REP approach, it is most important to get all relevant stakeholders to actually participate in meetings, conferences and workshops.

Municipalities, provincial and regional governments must also be enabled to link strategic planning with existing obligatory regional planning, spatial planning, land use planning and site planning procedures.

Institutional demarcations of political and administrative entities such as municipalities, provinces and regions are not always congruent with economic networks and linkages. If, however, support for genuine economic regions is the objective, this needs to be kept in mind when local stakeholders for local and regional economic promotion are rallied. Experience showed that activities grounded in genuine economic regions had quicker and more significant success.

Municipalities were willing to contribute in cash and kind when they were able to see the scope of action widened for local decision makers and when development perspectives were clear. This contributes to improved ownership in the municipalities and increases significance and outreach of activities.

All measures aiming at strengthening political capacities of municipalities, provinces and regions have to be rooted in an analysis of the present institutional setting. From this point of view, it is evident that regional authorities presently hardly profit from entrepreneurial activities in their territories. Apart from positive effects on the labour market and income situation (which differ widely locally according to investment and sector), municipalities and regions are hardly or not at all benefiting from tax income. This contributes to centralizing tendencies in enterprise structure, aggravates the intensification of local value chains and prevents quality oriented competition between locations. Decentralisation of income has to be matched with decentralisation of public investment .

Decentralisation is taking place in Chile but in a hesitant manner and without a consistent overarching concept of institutional modernisation. Nevertheless, it has led to networks of local stakeholders with a structure-inducing effect in municipalities and regions. On the background of this development, the legislative process seems to be particularly backward. The reason for this is that central government political protagonists (congress, political parties and the majority of ministries in particular) do not perceive the dynamics of institutional change, or they interpret it as a zero-sum game from which they will finally evolve as losers. This shows that decentralisation in Chile is different from decentralisation processes in other Latin American countries. While constitutional reforms marked the beginning of the process and political practice followed (decentralisation top-down) in Brazil, Bolivia, Venezuela and Colombia, major political decisions in Chile are taking place before legislative or even constitutional activities occur (decentralisation bottom-up). This does not mean that one way is better than the other but either way has important implications for the consultancy process in institutional modernisation.

In times of institutional change there is often something happening like a redundancy of institutions which may aggravate the actual efficiency of political governance mechanisms. However, this redundancy also has positive effects: it makes competition between different approaches and solutions possible which will broaden adaptive options and chances in society in the long run. A development model which invites this kind of competition and does not count on one-dimensional institutional solutions for the sake of short-term efficiency is thus more favourable to learning processes in society.

Recommendations:

REP addresses economic regions. As they do not always coincide with administrative borders of provinces or regions or even nations, other solutions have to be found. In cases of high heterogeneity, it may be possible to support cooperation between municipalities of similar or complementary structures.

Integrating the whole business range: where they exist, medium and large businesses should also be supported in order to strengthen their linkages with the local economy. They should be invited to participate in strategic development planning right from the beginning. Institutions of enterprise and export promotion or (vocational) training institutions are other potential partners in cooperation.

Incentive structures and promoters: the question of incentive structures is at the center of institutional modernization. If municipalities and regions are supposed to be strengthened effectively as promoters of regional and local economic promotion, they need to partake in entrepreneurial success in their respective localities, above all through shares from the tax income. Furthermore, their autonomy in programme implementation and in budget policy also needs to be enhanced. The shifting of competencies in resource allocation needs to be paralleled by fiscal decentralisation.

Planning competence and information processing capacities: planning competencies of municipalities need to be strengthened in order to achieve a viable connection between strategic visions and public investment decisions. Municipalities often dispose neither of institutional capacities nor of necessary information for autonomous spatial planning and land use planning to channel public investment and attract private investment. Experiences in Chile show that local stakeholders tend to be overwhelmed by the dynamics of local change. Serious information deficits on the local level with regard to new promotional and budgetary instruments and scope of action are common. Sometimes, information exists about certain areas of economic, social or demographic development but there is no organisation to collect and update these data. Information processing capacities are therefore important in regional economic promotion.

REP as a cross cutting task and strengthening of meso level institutions: Local and regional economic promotion are typical cross-cutting tasks touching all competence levels of the political system (nation, region, municipality) A core area for capacity building is the institutional design of the meso level in the political and administrative system. The REP approach represents a profound change from a centrally managed supply-oriented policy to a policy of decentralised, proactive voicing of needs. This implies the necessity of leaving the respective programmes open to initiatives and innovations of regional and local stakeholders and of strengthening institutions that effectively carry out mediating functions between the local level and central government institutions. It is also essential to supplement local level activities through institutional modernisation and political consultancy on higher levels of the political system to ensure that local successes will be firmly rooted on a broad institutional basis. From that perspective, strengthening of the internal evaluation and monitoring capacities of meso level institutions becomes important. In addition, those national level structures should be supported in the process of administrative decentralisation that facilitate the evaluation of good REP practices in the regions and make them available to other regions.

This study is based on an evaluation of 7 projects dealing with local economic development issues (5 GTZ, 2 FES). It was compiled by Christian von Haldenwang (DIE).

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