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Strategic Local Economic Development: 1

A Guide for Local Governments


Strategic Local Economic Development:
A Guide for Local Governments
Copyright © 2009 Local Governance Support Program in ARMM
(LGSPA)

All rights reserved.

The Local Governance Support Program in ARMM (LGSPA) encourages the use, translation, adaptation and copying
of this material for noncommercial use, with appropriate credit given to LGSPA.

Although reasonable care has been taken in the preparation of this manual, neither the publisher nor contributor,
nor writer can accept any liability for any consequences arising from the use thereof or from any information
contained herein.

ISBN 978-971-94065-9-4

Printed and bound in Davao City, Philippines

Published by:

Local Governance Support Program in ARMM (LGSPA)


Unit 72 Landco Corporate Centre
J.P. Laurel Avenue, Bajada
8000 Davao City, Philippines
Tel. No. 63 2 227 7980-81
www.lgspa.org.ph

This project was undertaken with the financial support of the Government of Canada provided through the Canadian
International Development Agency (CIDA).

Te c h n i c a l Te a m
Writers Technical Review Team Photography
Chona Balagat Myn Garcia Bobby Timonera
Anami Canag Mags Z. Maglana cover photo, pages 13, 21, 75
Rizal Barandino
Technical Advisor Edgar Catalan Rizal Barandino
Emma Barbara Remitio Sef Carandang page 91

Editorial and Creative Direction Technical Coordination Cover Design and Layout
Myn Garcia Maya Vandenbroeck Tata Lao

4 Strategic Local Economic Development:


A Guide for Local Governments
Strategic Local Economic Development:
A Guide for Local Governments

Strategic Local Economic Development: 5


A Guide for Local Governments
6 Strategic Local Economic Development:
A Guide for Local Governments
Contents
2 Foreword
3 Acknowledgments
13 4 Preface
5 Acronyms
7 Introduction
13 Chapter 1: Understanding the Local Economy
How a Local Economy Works
The Fundamental Components of the Local Economy
21 Chapter 2: Integrating LED in Local Government Processes
When does an LGU do the Strategic LED Process?
21

The Five-Stage Strategic LED Process
Stage I: Organizing the LED Effort
Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA)
Stage 3: Formulating the LED Strategy
Stage 4: Implementing the LED Strategy
Stage 5: Reviewing the LED Strategy
75 Chapter 3: LED in Practice
Tugaya, Lanao del Sur: Culture as an Engine of Local Economic Development
Wao Lanao del Sur: Pursuing Food Security and Environmental Sustainability through the
LED Process
Upi, Maguindanao: Developing the Entrepreneurial LGU through the LED Process
75 Tuguegarao City, Cagayan: Enhancing the Business Enabling Environment for
Community-Based Enterprises
Naga City, Camarines Sur: Good Governance as Catalyst of Economic Growth
Baybay, Leyte: Setting the LED Direction through Participatory Economic Planning
Bohol Province: LED through Investment Promotion and Good Governance

91 Chapter 4: Lessons Learned


98 Reference List
100 Annex A. The LGU Mandates and Related Laws on LED
91 102 Annex B. Data for Local Economy Profiling
Strategic Local Economic Development: 5
A Guide for Local Governments
Foreword
Assalamo Alaikum Warahmatullahi Wabarakatuho!

Today many local governments are already looking beyond planning and the delivery of social welfare
services as priorities. LGUs are now findings ways of undertaking programs and improving capacities that
would enable constituents to take part in promoting and implementing initiatives that spur local economic
development. The transformation of communities from being recipients of services to becoming active
participants in economic development is gaining ground and wider acceptance among LGUs.

Strategic Local Economic Development: A Guide for Local Governments is a very timely publication considering
the growing clamor for local governments to take active part in promoting local economic development
both as a goal and as a program in local governance. This publication serves not only as an eye opener
but also as a guide for LGUs to understand and integrate local economic development processes and
mechanisms into local government functions. The LGU experiences featured in the publication are good
examples of how local leadership can steer economic progress through participatory, transparent and
accountable governance. The publication is also inspiring coming as it is from the experiences of local
governments in the Autonomous Region in Muslim Mindanao (ARMM). One important insight is that local
economic development can happen in any type or class of LGU.

This Guide also highlights the importance of LGU, community stakeholders and government agency
interaction as a critical element in achieving local economic development. Each one has a role to play in
the local economic development process. The steps provided in this Guide are not only useful to LGUs
but also to other stakeholders, especially to agencies such as the DTI-ARMM. Strategic Local Economic
Development: A Guide for Local Governments emboldens us to strengthen further our efforts in integrating
the LED process within the DTI-ARMM’s mandate, plans and programs.

We trust that this publication will motivate and inspire more LGUs to embark on a meaningful, deliberate
and strategic LED process.

Our congratulations to the LGSPA for coming out with this relevant and most useful knowledge
resource!

SAJID S. DRUZ ALI


Regional Secretary
Department of Trade and Industry-ARMM (DTI-ARMM)

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Acknowledgements
This publication was made possible through the dedication and collective efforts of individuals and teams
who willingly shared their ideas and valuable time in conceptualizing and developing this Guide.

The Local Governance Support Program in ARMM thanks:

The local economic development stakeholders of the municipalities of Upi, Datu Odin Sinsuat, Sultan
Kudarat and Parang in Maguindanao; Wao and Tugaya in Lanao del Sur; Lamitan in Basilan, Bongao in Tawi-
Tawi; and Jolo in Sulu, whose experience in facilitating local economic development in their respective
areas inspired the writing of this Guide

LGSPA Program Officers Jaime Dumarpa, Jim Hassan, Veronica Quinday, Fatima Darwissa Yussah and
Assistant Manager Cecile Isubal for providing technical assistance to their respective LGUs in undertaking
the LED process

The DTI-ARMM LED coach team headed by ASec Maritess Maguindra for continuing the support to
LGUs and for integrating the LED process in their agency’s programs

The technical team of this publication -- Chona Balagat, Anami Canag, Emma Barbara Remitio, Myn
Garcia, Rizal Barandino, Edgar Catalan, Mags Z. Maglana, Maya Vandenbroeck, Sef Carandang and Tata
Lao -- who passionately saw through the development and completion of this Guide

LGSPA managers and staff who contributed in many ways to promoting local economic development and
to producing this knowledge product

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A Guide for Local Governments
Preface
Strategic Local Economic Development: A Guide for Local Governments is the embodiment of the collective
experience of local government units, government agencies and the Local Governance Support Program
in ARMM (LGSPA) in promoting local economic development in the Autonomous Region in Muslim
Mindanao. Despite difficulties and conditions that were inimical to durable economic development and
peace, the work of LGSPA has produced a wealth of knowledge that contributes to the further evolution
of the framework and strategies in local economic development promotion that were initially pursued in
the second phase of the Local Government Support Program (LGSP II). In this connection, the electronic
file of the Local Economic Development: Stimulating Growth and Improving Quality of Life publication of LGSP
II has been included as a companion CD to this material.

Strategic Local Economic Development: A Guide for Local Governments is based on the field application
by LGSPA of existing local economic development (LED) general processes and guidelines. Using the
tenets of good governance as anchors, the LGSPA experience highlights the importance of participation,
transparency and accountability as very important elements in local government-facilitated economic
development. In the context of the ARMM, the experience underscores the importance of integrated,
collaborative and purposive undertakings among economic agencies, private stakeholders and local
government units in maximizing opportunities for local economic development.

This Guide hopes to fill in knowledge gaps in boosting the capacities of local governments to engage
stakeholders and players of local economic development. It emphasizes the industry approach,
promotes entrepreneurship for wealth and job creation and recommends more robust ways of assessing
competitiveness and crafting LED strategies. It also links LED to gender equality and poverty reduction,
themes that are equally important to LGUs and citizens. The Guide includes LED experiences in ARMM
through the work of LGSPA and of other areas in the Philippines.

With Strategic Local Economic Development: A Guide for Local Governments, LGSPA hopes to have shown
that local economic development can be implemented in the context of promoting good governance and
that good governance is vital to local economic development.

Local Governance Support Program in ARMM (LGSPA)

4 Strategic Local Economic Development:


A Guide for Local Governments
Acronyms
ABC Association of Barangay Captains DSWD Department of Social Welfare and
ADB Asian Development Bank Development
AI Artificial Insemination DTI Department of Trade and Industry
AIP Annual Investment Plan ELA Executive-Legislative Agenda
ARD-GOLD Associates in Rural Development – EO Executive Order
Governance and Local Democracy e-TRACS Electronic Tax and Revenue Assessment and
ARMM Autonomous Region in Muslim Mindanao Collection System
ATI Agricultural Training Institute EU European Union
BDC Business Development Center FARMC Fisheries and Aquatic Resources Management
BEMO Bohol Environmental Management Office Council
BEPO Bohol Employment and Placement Office GAD Gender and Development
BIPC Bohol Investment Promotion Center GFI Government Financing Institutions
BIPP Bohol Investment Promotion Program GTZ German Technical Cooperation
BIR Bureau of Internal Revenue HVCC High Value Commercial Crops
BLECS Bohol Law Enforcement Communication IEC Information, Education, Communication
System ILO International Labor Organization
BOL Build-Operate-Lease IPAG Investment Promotion Advisory Group
BOO Build-Operate-Own IRA Internal Revenue Allotment
BOT Build-Operate-Transfer IT Information Technology
BPRMO Bohol Poverty Reduction and Management KAS Konrad Adenauer Stiftung
Office LCE Local Chief Executive
CALABARZON Cavite, Laguna, Batangas, Rizal, Quezon LDC Local Development Council
Economic Zone LDIP Local Development Investment Program
CDP Comprehensive Development Plan LDIS Local Development Indicator System
CDS City Development Strategy LECA Local Economy and Competitiveness
CLUP Comprehensive Land Use Plan Assessment
CMU Central Mindanao University LED Local Economic Development
CSO Civil Society Organization LGPMS Local Governance Performance Management
DA Department of Agriculture System
DAR Department of Agrarian Reform LGSP II Local Government Support Program Phase 2
DENR Department of Environment and Natural LGSPA Local Governance Support Program in the
Resources Autonomous Region in Muslim Mindanao
DepEd Department of Education LGU Local Government Unit
DILG Department of the Interior and Local LRED Local and Regional Economic Development
Government LRIA Local Resource Inventory and Assessment
DOH Department of Health M & E Monitoring and Evaluation
DOLE Department of Labor and Employment MEDCo Mindanao Economic Development Council
DOST Department of Science and Technology MNDC Metro Naga Development Council
DOT Department of Tourism MPDC Municipal Planning and Development
DPWH Department of Public Works and Highways Coordinator
MSME Micro, Small and Medium-Scale Enterprise

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MPDC Municipal Planning and Development QUEDANCOR Quedan and Rural Credit Guarantee
Coordinator Corporation
MSME Micro, Small and Medium-Scale RA Republic Act
Enterprise SB Sangguniang Bayan
MSU-IIT Mindanao State University - Iligan SCALOG System on Competency Assessment for
Institute of Technology Local Governments
MTDP Medium Term Development Plan SDC Swiss Agency for Development
NCCA National Commission for Culture and Cooperation
the Arts SEC Security and Exchange Commission
NCR National Capital Region SEZ Special Economic Zone
NEA National Electrification Administration SMART Specific, Measurable, Achievable,
NEDA National Economic Development Relevant, Time-bound
Authority SME Small and Medium Enterprise
NGO Non-Government Organization SMEDC Small and Medium Enterprise
NIA National Irrigation Administration Development Council
NSO National Statistics Office SP Sangguniang Panlalawigan
OBOL One Barangay One Livelihood SWOT Strengths, Weaknesses, Opportunities
ODA Official Development Assistance and Threats
OECD Organisation for Economic Co-operation TCTLDC Tuguegarao City Technology and
and Development Livelihood Development Center
OFWs Overseas Filipino Workers TESDA Technical Education and Skills
OTOP One Town One Product Development Authority
PAHRDF Philippines-Australia Human Resource TOP Technology of Participation
Development Facility TWG Technical Working Group
PAssO Provincial Assessor’s Office UNCDF United Nations Capital Development
PBIA Panglao Bohol International Airport Fund
PCARRD Philippine Center for Agricultural UNESCO United Nations Educational, Scientific
Research on Rural Development and Cultural Organization
PCE Philippine Center for Entrepreneurship UN-HABITAT United Nations Human Settlements
PCC Philippine Carabao Center Programme
PEE Public Economic Enterprise UNIDO United Nations Industrial Development
PESO Public Employment Service Office Organization
PGMA Provincial Government Media Affairs UNWTO United Nations World Tourism
PMS Presidential Management Office Organization
PO People’s Organization USAID United States Agency for International
PPP Public–Private Partnerships Development
PSP Private Sector Participation WB World Bank
PTEZ Panglao Tourism Economic Zone WFO World Food Organization
6 Strategic Local Economic Development:
A Guide for Local Governments
Introduction
It is at the local level that the greatest potentials for spurring development — for promoting investments,
creating jobs and boosting demand – exist. With the decentralization of certain powers and functions
brought about by the Local Government Code of 1991, the role of local government units (LGUs) in
development have also expanded. It is for this reason that LGUs are now viewed not just as providers of
public goods and basic social services, but more importantly as promoters of local economic development
or LED. The LGUs have a critical role to play as agents of economic development in their respective
communities.

However, LGU support to LED for the most part has been ad hoc and limited to one-off ‘livelihood’
projects that have proven to be unsustainable and often counterproductive in attaining the overarching
goal of poverty reduction. Among the pressing concerns of the LGUs are limited economic activities,
especially in the rural areas. Since most LGUs belong to the 3rd to 5th income classes, they are faced with
the problem of limited local funds to finance economic projects and related activities. They also have
limited capacity and technology to manage or link with other resource institutions, markets and other
potential partners.

Strategic Local Economic Development: A Guide for Local Governments is intended to provide practical
steps and tools on the application of the LED process in Local Government Units (LGUs). These
procedures are based on the experiences of the Local Governance Support Program in ARMM (LGSPA),
the Local Government Support Program (LGSP) II and other pioneering LED-related interventions in
the Philippines. This knowledge product is a companion piece to the 2003 LGSP resource book, Local
Economic Development: Stimulating Growth and Improving Quality of Life.

The LGU-facilitated strategic LED process described in this Guide follows the five-stage strategic
planning process proposed in two excellent references published by the World Bank: the Local Economic
Development: A Primer - Developing and Implementing Local Economic Development Strategies and Action
Plans, and the Making Local Economic Development Strategies: A Trainer’s Manual. This Guide, however,
offers a new perspective on the LED process in three ways based on the experience of the LGSPA:

1. It describes the LGU-facilitated LED process as part of the economic sector development
function and integrated in the planning, implementation, monitoring, evaluation and policy-
making systems of an LGU;
2. It gives emphasis to value chain and industry-based LED strategy formulation; and
Strategic Local Economic Development: 7
A Guide for Local Governments
3. It demonstrates the use of small, medium and enterprise development, performance management,
and poverty-sensitive and gender-responsive strategies in the implementation of the LED plan.

The specific steps, tools and examples under each stage are mostly drawn from the LGSPA experience
in the ARMM, which are also practical and relevant to any LGU in the Philippines wishing to undertake a
systematic and participatory process of formulating a LED strategy.

The Guide has five major parts:

• Introduction
• Chapter 1 – Understanding the Local Economy
• Chapter 2 – Integrating LED in Local Government Processes
• Chapter 3 – LED in Practice
• Chapter 4 – Lessons Learned

The Introduction gives a synopsis of the fundamentals of LED – rationale, nature, goals, principles, legal
framework, stakeholders and their roles and responsibilities – which are expounded in the LED: Stimulating
Growth and Improving Quality of Life resource book. Having an appreciation of the concepts and merits of
undertaking the LED process is necessary before proceeding to its specific steps and methodologies.

Chapter 1 – Understanding the Local Economy shows how the flow of money coming in,
circulating, and leaving a community impacts the economic development and wealth creation in the
locality. This chapter also discusses the five fundamental components of the local economy (labor,
technology, infrastructure, financial capital and leadership) and some of the issues related to these
components that LGUs may have to deal with in the LED process.

Chapter 2 – Integrating LED in Local Government Processes translates the concepts and
principles of LED into concrete actions by presenting step by step procedures and tools in planning
and implementing the LED Strategy. This chapter discusses the five-stage Strategic LED process,
namely: 1) Organizing the LED Effort, 2) Doing the Local Economy and Competitiveness Assessment
or the LECA, 3) Formulating the LED strategy, 4) Implementing the LED Strategy, and 5) Reviewing
the LED Strategy.

Chapter 3 – LED in Practice is a compendium of LED experiences, innovations and good practices
of selected LGUs in the Philippines including those of Wao and Tugaya in Lanao del Sur, and Upi
in Maguindanao, which are municipalities covered by the LGSPA. LED initiatives of the provincial
government of Bohol, the city government of Tuguegarao in Cagayan, the city government of Naga
8 Strategic Local Economic Development:
A Guide for Local Governments
in Camarines Sur and the municipal government of Baybay in Leyte are also featured. Useful insights
can be drawn from the different approaches and strategies resorted to by these LGUs in stimulating
economic growth in their respective areas of responsibility.

Chapter 4 – Lessons Learned documents the learning gained from the LGSP II and LGSPA LED
projects. These include strategies that work or do not, as well as factors that facilitate or hinder
the LED process. These lessons are presented so that other LGUs can gain some ideas on which
approaches to avoid, adopt or modify based on local conditions.

What is Local Economic Development?

Essentially, economic development is a process and the practice of increasing the rate of wealth creation by
mobilizing human, financial, organizational, physical, and natural resources to generate more marketable goods
and services whereby the economic developer influences the process for the benefit of the whole community
(McSweeney, n.d.).

Countless economic policies and strategies have been initiated in the past by the national government
to address poverty and equitable growth but more focus was given on larger enterprises, urban and
urbanizing communities and centralized planning that overlooked the indispensable role of the LGUs.
As a result, rural economy where most Filipinos are living and working remained sluggish resulting to
increased poverty incidence and poorer quality of life (LGSP, 2003).

LED offers an alternative approach that aims to fill in the gaps of the previous initiatives. Local economic
development (LED) is the process by which actors (governments, private sector and civil society) within
localities, work collectively with the result that there are improved conditions for economic growth, employment
generation and quality of life for all (Adapted from the World Bank definition).

The term Local in the definition signifies that LED involves building the economic strength of a local
area by optimizing local resources and capacities; the prime movers or driving forces are economic
stakeholders in barangays, municipalities, cities and provinces singly or collectively; and it is territorial
(or area-based) in its approach. Although the focus is local, there are links to the regional, national and
international levels.

The Economic in local economic development drives home the importance of identifying and seizing
business opportunities, supporting entrepreneurial initiatives (whether formal or informal, micro or
large), facilitating market access and creating a climate conducive to investment and business activity.

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The term Development emphasizes that LED is holistic; it does not only cover the economic dimension
but also includes social, politico-administrative and cultural aspects. The quality and direction of growth
is as important as its quantity and size. Sustainable development is at the heart of LED which means
satisfying the needs of the present generation without sacrificing the future of succeeding ones (LGSP,
2003).

LED enables and promotes the coordination and optimization of scarce resources available in an area, the
integration of LED plans, priorities and programs into regional and national plans (with direction from the
bottom going up) and citizen participation and consensus building among stakeholders.

Goals and Principles of LED

The goals of LED are to create wealth, generate jobs, increase incomes and, ultimately, reduce poverty
and improve the quality of life in the locality.

LED operates on several principles. First, LED promotes equitable and sustainable economic growth.
Equitable means opportunities to wealth creation are open to both men and women of working-age, to
the rich and poor, to urban and rural dwellers, and to all ethnic and religious groups. To sustain economic
growth, local resources may be transformed to marketable goods for the current population but it must
be continuously regenerated so as not to deprive the future generation of the same resources.

Second, LED is a multi-stakeholder partnership. Those who are affected and can affect the economic
growth in the locality (such as government, business and civil society) have a stake and a role in LED.

Third, the private sector is the acknowledged engine of employment and growth and as such, LGUs
must be conscious of its “enabler” role, which is setting the right environment for the local economy to
grow. The LGU may, however, prudently decide to provide certain services in situations where there
are insufficient private or voluntary sector providers of such services or when cartels control the prices
of certain commodities in the locality.

Finally, good economy thrives when there is transparent and accountable governance – a practice that
should permeate the political and economic structures in the community.

The LGU Mandates and Related Laws on LED

Some LGUs have already started economic programs and activities, drawing power and authority from
existing statutes. These laws and mandates are fully discussed in LED: Stimulating Growth and Improving
Quality of Life. Among these laws is the Local Government Code of 1991 (RA 7160) which has given the
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LGUs more power and authority to accelerate local economic development and improve the quality of
life in their communities.

RA 8425 or the Social Reform and Poverty Alleviation Act also mandates LGUs through the Local
Development Councils (LDCs) to formulate, implement, monitor and evaluate poverty reduction
programs in their respective jurisdictions, which are consistent with the poverty reduction strategy of the
national government. These are further bolstered by the laws on the development of Small and Medium-
Scale Enterprises (SMEs) such as the Magna Carta for Small Enterprises (RA 6977), Kalakalan 20 (RA
6810), An Act Providing Assistance to Women Entrepreneurs (RA 7882) and the Omnibus Investment
Code (EO 226).

The Department of the Interior and Local Government (DILG) has also issued memorandum circulars
to the local governments pertinent to the pursuit of local economic growth and poverty reduction. See
Annex A for a complete list of LGU mandates and related laws on LED.

The LED Stakeholders, their Roles and Responsibilities

The LED process calls for the collective efforts of local stakeholders to spur economic growth. They
bring with them different levels of knowledge and expertise, perspectives, resources or assets that would
render LED effective and successful in attaining its targets. No matter how small the role of a stakeholder is,
engaging it is important in spreading ownership of the community’s economic development strategies.

Actions of community and government leaders can change, alter and direct the condition of their local
economy. The economic quality of life of the residents and the success of businesses many times are
directly affected by the policies and leadership of those who have the influence and power to create a
climate conducive to economic growth (Fruth, W., n.d.).

The LGU takes the role of provider, enabler or facilitator of local economic development. As provider,
it sees to it that the infrastructure and subsidy requirements of existing and potential industries are in
place. As enabler or facilitator, it ensures the economic players’ access to information and advisory
services, formulates relevant and supportive policies and regulations, provides incentives, and works for
the stability of peace and order. In addition, it has to carry out regular functions that have bearing on
the success of LED, namely: policy making and taxation; regulatory functions; planning and budgeting;
information collection, storage and dissemination; procurement of goods and services; marketing and
public relations; investment and enterprise promotion; management of public economic enterprises
(PEE) and the provision of physical facilities; public safety and cultural heritage activities; and, provision of
social and environmental services.

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The LGU may also take on the role of service provider in situations where there are insufficient private
or voluntary sector providers or when the capacities of these service providers are inadequate. This
option, however, must be weighed carefully and the extent of LGU intervention must be clearly qualified
considering its limited resources and array of social concerns other than infrastructure and economic
projects.

The private or business sector is represented by micro, small, medium and large-scale enterprises. With
their role as engine for local employment and growth, they are tasked to scan and seize opportunities,
take risks, develop markets and create economic value. Micro enterprises represent the informal
economy and though not a significant generator of employment, they are considered incubators of bigger
enterprises and fallback mechanism in times of economic crisis. Small and medium-scale enterprises are
employment generators, the largest taxpayers, users of the latest technologies, and sources of managerial,
technical and financial competencies.

Organized business groups like chambers of commerce, industry associations, craft and professional
associations and local guilds play a crucial role in setting and enforcing quality standards, upgrading human
and technological resources, product development, marketing, business development, financing and
creation of an LGU brand.

Cooperatives (producers, credit, consumers) and microfinance institutions serve as depositories of


community savings; providers of credit assistance, social protection measures such as health insurance,
mortuary packages, and emergency loans; and promoters of frugality, discipline, trust, self and mutual
help, and entrepreneurship.

Civil social organizations (CSOs) such as non-government organizations (NGOs) and people’s
organizations (POs) from the informal sector (vendors, tricycle drivers) and agriculture sector (farmers,
fishers), represent the grassroots’ sentiments, needs and views making them excellent collaborators in
planning, service delivery, community organizing and mobilization and in monitoring and evaluation of
projects thereby promoting transparency and accountability.

Educational institutions are providers of knowledge, developers and promoters of new technologies,
trainers, and providers of talents and services for business institutions.

National government agencies assist the LGU in the organization, planning, implementation and
evaluation of the LED strategy by providing technical assistance, helping in fund sourcing, advocating
LED among the stakeholders, developing and enforcing standards, and providing information and other
market and resource linkages.

12 Strategic Local Economic Development:


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Chapter 1
Understanding
the Local Economy

shows how the flow of money coming in, circulating, and


leaving a community impacts the economic development and
wealth creation in the locality. This chapter also discusses
the five fundamental components of the local economy
(labor, technology, infrastructure, financial capital and
leadership) and some of the issues related to these
components that LGUs may have to deal with in the
LED process.

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A Guide for Local Governments
Understanding the Local Economy

The Introduction provided a brief background on LED concepts and principles and underscored the
importance of mobilizing local people and organizations in provinces, cities or municipalities to attain a
vibrant local economy. However, to better understand the context in which the LED process operates,
it is important to have an appreciation of how the local economy works and the factors that determine
economic growth.

How a Local Economy Works

A local economy is a geographic area where people predominantly live and work and also earn and spend
(Fruth, W., n.d.). As used in this Guide, the local economy refers to the geographic area within a political
unit which could be a province, city or municipality.

Money flows into the local economy in two ways: first, from the earned monies when products are sold to
an outside customer (exported) and when people work out-of-town; second, from the unearned monies
from outside sources to the local government and to community citizens. Also referred to as captured
monies, these come from social security, retirement payments, interest income, rent and dividend from
outside investments, revenue allotments and grants from national governmental agencies, grants and
investments from official development assistance (ODA), foundations, NGOs, cooperatives and investors
and remittances from family members working outside the community (Darling, 1991).

When money pours in, it is circulated through spending on local goods and services. Some are spent
locally, thus, generating more jobs and employment as goods and services are consumed.

Money also flows out of the community in several ways: when local business firms and their employees
buy their needs from outside sources, pay their taxes and social security to national governmental offices;
when local households buy goods and services out-of-town; when local residents invest their money in
businesses outside the locality; when there is inefficient use of local assets such as land, buildings and
human skills and talents or when local investments do not pay off; when estate settlements are bequeathed
to heirs living in other areas; and through investments on education of children who eventually leave the
area for better opportunities elsewhere.

The inflow and outflow of money in a local economy can be illustrated using the “leaking barrel” of wealth
model. The example in Figure 1 shows that the money coming into a municipality’s local economy
largely come from tourists and visitors, the LGU’s Internal Revenue Allotment (IRA), family member
remittances, and agricultural products sold to buyers and consumers outside the locality. The leaks in the
barrel represent the money or income leaving the economy. In the example, the leaks in the economy
come in the form of crop production inputs, construction materials and labor that come from outside

14 Strategic Local Economic Development:


A Guide for Local Governments
Understanding the Local Economy

sources; printing and publishing services that are absent in the municipality; local residents shopping in
other cities; and, LGU expenditures outside the municipality.

As money is imported into the community, it enters the barrel where it is mixed and blended, going from
person to person, business to business, creating local employment and wealth. It is impossible to seal
a community’s economic boundaries completely (Schmidt & Myles, n.d.) but when nothing is done to
“plug the leaks” or slow down the rate of money flowing out, wealth will not multiply within the local
economy.

Figure 1. Example of Money Flow in a Local Economy

Economic Generators
Tourist & Visitors p
= p
= Internal Revenue Allotment (P73 M)

Agri-aqua Production p
=
p
= Remittances of family
members working outside
the municipality

Municipality’s
Local Economy
p
= Crop Production
Local Residents Inputs (Fertilizers,
Shopping in other Cities p
= Seeds, etc.)

Leakage Out of p
= Construction
Materials
the municipality
p
=
p
= p
=

LGU Expenditures
outside the Municipality Construction Labor
Printing &
Publishing Services

Source: Adapted from McSweeney (n.d.)

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Understanding the Local Economy

Fundamental Components of the Local Economy

Local economic growth is determined by the interplay of the economy’s labor, financial capital, technology,
infrastructure and leadership components. These are the factors that must be analyzed during the LED
process particularly in the Local Economy and Competitiveness Assessment (LECA) so that specific issues
(strengths, weaknesses, opportunities and threats) in each of the component can be pinpointed and later
addressed accordingly during the LED strategy formulation.

Labor

Labor, as a factor of production, pertains to the community’s most precious and abundant resource
– its workforce. Factors affecting labor productivity in the local economy include housing, health and
education services, skills availability, security, and training opportunities.

Some of the problems besetting the labor sector of our local communities are the high unemployment
rate in the rural area, among female and male youths and those with higher education (LGSPA, 2007).
This suggests that population growth is higher than the production growth. Although there are masses of
people who can provide “raw labor,” the quality of human capital is still below par making it difficult for
job seekers to meet the required qualifications. The current demand gives preference to a broader set of
skills such as better analytical, problem-solving and communication skills. The quality of labor is becoming
more important than the cost of labor.

In terms of gender equality, more women are now joining the workforce and a significant number are
occupying management level positions. The Philippines is the 2nd highest in percentage of entrepreneurially
active females (among 42 countries) (Madarang, Habito, & Philippine Center for Enterpreneurship (PCE),
n.d.). The service sector has been absorbing an increasing number of workers, particularly women
(LGSPA, 2007).

The human resource is the means for social and material progress and at the same time the end or
object of development. Economic development is concerned with the equitable distribution of real
income, which is indicated by the average per capita income of the working age population and improved
purchasing power of individuals.

A productive labor force requires continuing enhancement of human capital. Investments on education,
skills training, health and basic infrastructure like water, roads and electricity have positive effects on
the locality’s manpower. By providing these facilities and services, the LGU can help educated, healthy,
creative, proactive, and skilled male and female workers meet the labor requirements of businesses

16 Strategic Local Economic Development:


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Understanding the Local Economy

in or outside the locality. Generating local business investments and jobs to absorb the community’s
unemployed is another challenge to the LGU.

Technology

Technology generally refers to better techniques or methods of production (Fajardo, 1985). The
development of a new technique is an invention and its application to production is called innovation.
Technological advances impact the local economy by changing the nature of products and production
techniques and improving productivity so that the economy remains competitive. Industry and business
have become so knowledge-driven that the cost of products, particularly those requiring advanced
technology, are driven by investments on knowledge or research rather than by actual production costs.

Given their limited resources to conduct research and development, LGUs can harness the expertise
of institutions and individuals by eliciting their participation in local economic development planning and
implementation. Examples of research and technology development institutions are the Agricultural
Training Institute (ATI), universities and colleges, Department of Science and Technology (DOST),
Technical Education and Skills Development Authority (TESDA), Philippine Center for Agricultural
Research on Rural Development (PCARRD), Technology and Livelihood Development Center (TLDC)
as well as corporations that are willing to provide technical assistance on product development to small
businesses as part of their corporate social responsibility.

Infrastructure

Infrastructures are large-scale public systems, services and facilities that are necessary for economic
activities, including power and water supplies, public transportation, telecommunications, roads, schools,
training and research centers, and health care facilities.

The infrastructure needs of business have changed in recent years. The quality of service in terms of
dependability, timeliness and convenience has become more important to the investors and the consuming
public. Public investment in infrastructure leads to increased return on investment for business, higher
productivity and a boost in private sector investment.

The absence or lack of infrastructure, particularly in the rural areas, is due to the fact that most LGUs are
cash-strapped. Some innovative and proactive LGUs have tapped the private sector for infrastructure
development and management through such schemes as Build-Operate-Transfer (BOT), Build-Operate-
Own (BOO), and Build-Operate-Lease (BOL). LGUs who have aggressively sought assistance, networked
and demonstrated exemplary governance practices have attracted foreign funding agencies to finance the

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establishment of local infrastructures.

Unfortunately, there are infrastructure projects that have turned into white elephants or have benefited
only a few because investment decisions were not based on sound economic analysis and financial planning.
An example of this is a seaweed processing plant lying idle because of inadequate working capital. These
unutilized or underutilized facilities present another leak in the community’s barrel of wealth and could
be prevented through careful analysis and planning that is being espoused in the LED process.

Financial Capital

Financial capital fuels businesses. There are two types of financial capital and both are required at different
stages of business growth. The first type is debt which is the lending or loaning of money with interest. It
involves minimal risk to the lender because it is being secured by requiring collateral from the business or
its owner. It requires regular payments of the loan principal and the interest. The second type of financial
capital is equity which is money invested without interest. It involves a higher risk since it is unsecured by
assets. In return for his or her investment, the investor acquires shares of ownership and sometimes is
involved in the management of the business (McSweeney, n.d.).

The lack of financial capital is the hindering factor most frequently cited by micro, small and medium-
scale enterprise owners. The usual measure being adopted by LGUs, national government agencies,
foundations and other development institutions in response to this issue is the shelling out of small
livelihood grants or loans, without sufficient support to other aspects of the business like production and
marketing. This one-off intervention, by and large, serves only as a temporary remedy and seldom results
to sustained economic activity.

Financial capital may be generated from various internal and external sources including the LGU (with its
IRA and local revenues), banks, cooperatives, microfinance institutions, government financing institutions,
NGOs/foundations, foreign-assisted projects, local businesses/industries and family savings (from
remittances of family members, retirement fees, property rentals, pensions and insurances). Capital may
also pour in from investors outside of the locality, which can be maximized by the LGU through investor-
friendly policies.

Leadership

The leadership triangle in Figure 2 shows that there are three economic development interests that must
cooperate for a successful local economic development. These are the local government or political
18 Strategic Local Economic Development:
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Understanding the Local Economy

leadership, the business community leadership, and the professional leadership (McSweeney, n.d.).

Local government regulates the environment, provides or facilitates economic development incentives
and programs, develops and manages human and financial resources and provides basic infrastructure.
The business community leadership is represented by the industry players, the Small and Medium
Enterprise Development Council (SMEDC) and the Chamber of Commerce, if any. They take the lead
in creating wealth by generating marketable goods and services. Professional leadership are those that
provide technical assistance (on small and medium enterprises, business planning, feasibility studies) such
as LED and business consultants, Department of Trade and Industry (DTI) specialists, economic agencies,
academic institutions, and other organizations with economic development mandates. These lead entities
minimize barriers to growth, create opportunities and conditions to speed up the rate of wealth creation
and facilitate the exploitation of these opportunities. The potential roles of government, business and
professional sectors in LED planning and implementation are further discussed in Chapter 2.

Figure 2. Economic Development Leadership

Business Leadership

Successful
Local Economic
Development
local professional
government leadership
leadership

Source: McSweeney (n.d.)

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20 Strategic Local Economic Development:
A Guide for Local Governments
Chapter 2

Integrating LED
in Local Government
Processes

translates the concepts and principles of LED into concrete actions


by presenting step by step procedures and tools in planning and
implementing the LED strategy. This chapter discusses the five-
stage Strategic LED Process, namely: 1) Organizing the LED
Effort, 2) Doing the Local Economy and Competitiveness
Assessment or the LECA, 3) Formulating the LED
strategy, 4) Implementing the LED strategy, and 5)
Reviewing the LED strategy.

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“For a LED initiative to be successful it has to be


clearly defined around economically functional space,
and should be locally owned and championed.
Leadership is key to bring together shared vision,
actors and resources. The generic processes,
approaches and tools have to be adapted and
contextualized.”
– (Kebede, 2008)

The previous chapter discussed how the local economy works from a perspective of money flowing into,
circulating in and leaving a locality. It also presented the major components that affect the productive
capacity of a local economy: labor force, technology, infrastructure, financial capital, and leadership. These
factors and the strategies to create wealth are some of the issues that can be addressed within the LED
process. It must be recognized though that the “leaking barrel of wealth” model and the components of
economic growth as described in Chapter 1 may only be a partial representation of the economic reality
in a specific locality. In the course of undertaking the LED process, other factors that impact a community
or locality may unfold and will have to be considered in the formulation of the LED strategy.

In this chapter, the concepts and principles of LED are translated into concrete actions in an LGU-
facilitated LED process. The components of the local economy presented in Chapter 1 provide the
bases for analysis and strategy formulation during the LED process. What critical issues in the locality’s
labor force, technology and other components should be addressed and how?

One of the most important insights gained from the LGSP and LGSPA LED initiatives is that the success
and sustainability of LED rest on a participatory, strategic and planned approach. It should be a process
that is purposeful, deliberate and founded on sound analyses. Undertaking a strategic planning process is

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necessary to guide local leaders and implementers in identifying and carrying out the best alternatives to
an LGU-facilitated LED. The LED Strategic Plan is the landmark document in the LED process.

This Guide is not designed to prescribe implementation activities for specific LED programs and projects.
This is because LED approaches are wide-ranging and different for each LGU, depending on local
conditions. However, the basic factors to consider in implementing and monitoring the LED strategy are
incorporated in this chapter. Also, examples of actual LED strategies and how these were implemented
by LGUs are provided throughout this Guide.

When does an LGU do the Strategic LED Process?

LGUs in the Philippines are mandated to prepare two major plans – the Comprehensive Land Use Plan
(CLUP) and the Comprehensive Development Plan (CDP). The CLUP is a long-term plan that outlines
strategies for managing the local territory in terms of its physical land use. The CDP, on the other hand,
set out the vision, goals, objectives, programs, projects and activities relevant to five development sectors,
namely, social, economic, infrastructure, environmental and institutional. LGUs operationalize these
plans with an organized mechanisms and instruments including the term-based Executive and Legislative
Agenda (ELA), the Local Development Investment Program (LDIP), and the Annual Investment Plan
(AIP). These plans and strategies are all products of an integrated and iterative process that include
economic sector planning (LGSPA, 2008).

The strategic LED process, which involves a participatory process of formulating and implementing a LED
Strategic Plan between the LGU and stakeholders, is both a vehicle to implement and an instrument to
concretize the economic sector plan of the LGU. The LED Strategic Plan should serve as the economic
sector plan integral to the bigger local development plans of the LGU. It should tie to and build on
the LGU’s overall vision and goals as articulated in the CDP and ELA. Thus, it would be ideal if the
LED strategy formulation is done in conjunction with the preparation of the CDP, ELA or the Provincial
Physical Framework Development Plan.

The LED process, however, may also be done at any other time as long as the LGU is ready to pursue
LED.

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The Five-Stage Strategic LED Process

There are five stages in the LED Process, as follows:


The Five-Stage Strategic LED Process
Stage 1: Organizing the LED Effort
Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA)
Stage 3: Formulating the LED Strategy
Stage 4: Implementing the LED Strategy
Stage 5: Reviewing the LED Strategy

Stage 1: Organizing the LED Effort

The main activity here is organizing institutional arrangements and stakeholder


involvement to successfully develop and implement a LED strategy. At this stage, an
LGU LED team is created to provide leadership and establish systems and structures
in undertaking the LED process. A LED stakeholders group is also created as a multi-
stakeholder mechanism that will ensure the active participation of the community from
planning to implementation to monitoring and evaluation.

Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA)

This entails gathering and analyzing available quantitative and qualitative data on
the sources, structures and trends in production and employment, skills, and other
resources to help identify the strategic direction for the local economy as well as
potential programs and projects.

Stage 3: Formulating the LED Strategy

At this stage, the LGU LED team together with the LED stakeholders group develops
the LED Strategic Plan, which contains the economic vision, goals and objectives as well
as specific strategies in the form of programs and projects.

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Stage 4: Implementing the LED Strategy


LED program and project implementers from the LGU and other stakeholders carry
out the LED strategy guided by the LED Strategic Plan, the overall LED implementation
strategy, and individual project action plans.

Stage 5: Reviewing the LED Strategy

This involves monitoring and evaluation (M & E) activities and reviewing and enhancing
the LED Strategy based on the M & E results and on changing local conditions.

The following sections discuss in detail how the LED process is carried out and integrated in LGU functions
and activities.

Stage 1: Organizing the LED Effort

This marks the beginning of a collaborative undertaking wherein the LGU and community stakeholders
agree on pursuing LED as an end result and as a process. The primary goal of Stage 1 is for the LGU to
organize institutional arrangements and stakeholder involvement in LED planning and implementation.

The principle of participatory governance should be appreciated and demonstrated by the LGU as early
as Stage 1 in order to gain public support and credibility. By engaging and organizing stakeholders at the
outset, the LED activity becomes a province, city or municipal-wide undertaking.

Following the general guide outlined in the World Bank documents, organizing the LED effort may be
divided into four steps:

Stage 1: Organizing the LED Effort


Step 1: Identify and establish the LGU LED Team
Step 2: Establish and maintain active involvement of LGU political leaders in the LED Process
Step 3: Develop a LED Stakeholders Group
Step 4: Identify other tiers of government (provincial/ regional/ national) to work with

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Step 1: Identify & establish the LGU LED Team

The LGU LED team is composed of LGU officials and staff that shall take the lead in initiating and facilitating
the LED process. The LGU LED team is expected to provide the leadership of and establish the structures
and systems in the whole LED process. It is not only concerned with managing the technical side of the
process but also in getting ‘buy-in’ from political leaders, the relevant and related government agencies,
business and non-government sector. Thus, it is important to have a good mix of relevant technical
staff and elected officials in the LGU LED team who can influence and build partnerships with other
stakeholders and resource institutions.

The following considerations are important in the LED team composition:

Involvement and leadership of the LCE and the Legislative Council. A very important consideration
in the formation of the team is the degree of participation and involvement of the LCE and the members
of the local legislative council (Sangguniang Bayan, Panglunsod or Panlalawigan). The LCE in particular
should provide a visible leadership of the team to bring in the legitimacy, credibility and commitment of
all the sectors involved in the process.

The Sangguniang members, on the other hand, have a key role in terms of pushing legislation and approving
budget appropriation in relation to LED.

In the LGSPA experience, one thing common among successful LED cases is the Mayor himself/herself
taking primary responsibility for LED as the Team Leader. The leadership of the mayor facilitates and
moves the implementation of activities faster.

Multi-disciplinary. The LED process requires multi-disciplinary and multi-faceted activities. The
members of the LED team should have the background, skills and the attitude to push forward and
champion the process. It should be a multi-disciplinary team that can work across LGU departmental
lines, as well as between governmental and non-governmental lines.

The LGU LED team and the departments that will be involved in the process, at the minimum, should
have knowledge and skills of the following:

• Socio-economic and environment development concepts, principles and realities in the


community
• Agricultural, industrial and service sector development concepts, principles and realities in the
locality

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• Partnership building and networking


• Group processes and dynamics (e.g., “vested interests,” political linkages and “turf” protection)
• Management concepts and skills such as team-building, problem-solving and decision-making
processes, project management, financial management and fund-raising
• Organizational and capacity development framework and design
• Facilitation, training and communications

For LGUs that have completed the CDP-ELA, the economic sector planning committee can serve as the
initial core members of the LGU LED team. This can be expanded based on the requirements of the
LED process.

Table 1. Sample composition of the LED Team


Suggested Composition of the LGU LED Team
Who? Why?
Local Chief Executive/Mayor Can provide leadership and political influence in the formulation
and establishment of structures and systems
Municipal Planning and LED planning is integral in municipal planning; can facilitate the
Development Coordinator integration of the LED Strategy into the CDP, ELA and other LGU plans.
Municipal Agriculture Officer Most of the municipality’s economic activities are agri-based;
can facilitate implementation of agri-based LED programs and projects
Municipal Treasurer Can provide information on the LGU resources that will be
available for the process.
Municipal Assessor Can provide information on the valuation of land and resources in the locality
Municipal Budget Officer Can provide information on the budget available for the LED activities.
Chairperson of the Legislative Can recommend policies in support of local economic development
Council Committee on Agriculture
Chairperson of the Legislative Can push for the appropriation of budget necessary for LED implementation.
Council Committee on Finance
Municipal Tourism Officer Tourism is also a significant source of income of the municipality; can
facilitate the implementation of tourism programs and projects
Municipal Local Government Can help champion the LED process and guide team regarding LGU mandates
Operations Officer

In establishing the LGU LED team, it is important to level off on the task and responsibilities of the team.
The following activities and decisions are therefore critical in establishing a coherent team:

a) Conduct orientation and preparatory meetings to level off on LED process, concepts
and objectives

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Orientation meetings should provide guidance on the LGU LED team on the overall objective, scope
and concepts of the LED process. The team should fully understand and recognize LED as:

• A strategy for wealth creation, job and income generation, and, ultimately, alleviation of
poverty and improved quality of life.
• A process that promotes self-help, empowerment, innovation, public, private and civil
society sector collaboration, bottom-up planning, and sustainable development incorporating
environmental, social and cultural responsibility with economic development
• A potential contributor to the LGU’s future revenue growth
• A purposeful and planned approach to pursuing economic transformation, which is an
aspiration and mandate inherent in all local governments

The following decision makers and department heads are relevant and must be present, where
applicable, in the team orientation:

• LCE (Mayor or Governor)


• Vice Mayor or Vice Governor
• Planning and Development Coordinator
• Treasurer
• Budget Officer
• Agriculture Officer
• Tourism Officer
• Administrator
• Assessor
• Chairpersons of the Committees on Economic Development, Agriculture, and Finance
and Appropriation of the local Sangguniang
• Government agencies’ staff working with in the LGU like the DILG’s Local Government
Operations Officer (LGOOs), the DA’s Agriculture Officer, DTI technical staff
• Other department heads that the LGU sees fit

It is important that the decision makers understand their individual and collective role in facilitating
the LED process. For instance, the Planning and Development Coordinator can facilitate the
technical and day-to-day LED process, in behalf of the LCE. It can also facilitate the discussion
with the members of the Local Development Council (LDC) as the secretariat of the council. On
the other hand, the Planning Coordinator, together with the Treasurer and Budget Officer are the
core members of the Local Finance Committee (LFC) which is the body task with determining LGU
finances and budget ceilings and therefore plays very important role in ensuring that LED projects

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and activities are prioritize and allocated resources.

The LGU can tap LED experts coming from the government (i.e., DTI), the private sector (e.g., local
consultants, business groups, or entrepreneurs) or the academe to assist in the orientation and the
orientation and initial preparations for the LED process.

b) Agree on the terms of reference for the LGU LED Team

In the course of team meetings and consultations, the LGU LED team has to agree on is its own terms
of reference. As mentioned, the main objectives of the LGU LED team are to provide leadership in
the LED process and establish the structures and systems in the formulation and implementation of
the LED Plan. The LGU LED team members and their functions and activities at each stage of the
LED process should also be specified in a terms of reference so that there is a clear delineation of
responsibilities and accountabilities.

The team has also to agree on the operational guidelines of the whole LED process. While the LCE
can exercise overall leadership, the functional and day-to-day project management and coordination
work can be delegated to a key office. In the LGSPA experience, this task is normally delegated to
the Municipal Planning and Development Coordinator (MPDC), or the Municipal Administrator or
another senior officer who has the LCE’s confidence. Sometimes, a member of the LED team who,
in the course of the LED process, exhibits leadership qualities and develops a reputation of getting
things done becomes the de facto Assistant Team Leader.

Table 2 gives an example of the decisions made by an LGU regarding the specific roles of the LGU
LED team. After such working arrangements are agreed upon, the LCE then issues an executive
order creating the LGU LED team and defining its composition and functions.

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Table 2. Example of LGU LED Team Roles and Scope of Work


Functions of the LGU LED Team
• Facilitate the diagnosis and assessment of the local economy including data gathering, profiling,
analyzing/assessing the economy
• Facilitate the formulation of the LED Strategic Plan
• Facilitate the legitimization of the LED Strategic Plan
• Provide the political leadership in the implementation of the LED Strategic Plan
• Organize the LED stakeholders group and coordinate their activities
• Serve as the Technical Working Group (if no structures are organized yet) in the implementation
of the LED Plan
Activities of the LGU LED Team in the LED Stages

Stage 1:
Organizing the LED Effort • Stakeholder analysis and organizing of the LED stakeholders group
• Organize a technical working group (TWG) and other required committees,
structures and systems
• Identify other tiers of government to work with

Stage 2:
Doing the Local Economy • Local economic data and information gathering with LED stakeholders
and Competitiveness • Local economy profiling with LED stakeholders
Assessment (LECA) • Local economy assessment and analysis with LED stakeholders


Stage 3:
Formulating the LED Strategy • Facilitate strategy formulation
• In collaboration with the LED stakeholders group develop the LED
Strategic Plan

Stage 4:
Implementing the • Coordinate the implementation of the LED Strategic Plan
LED Strategy • Create Technical Working Groups, Project Implementation Teams or ad hoc
committees to implement the programs and projects

Stage 5:
Reviewing the LED Strategy • Facilitate the evaluation and review of the LED strategy together with the
LED stakeholders group.

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c) Determine the appropriate budget for the LED Strategy formulation

A key decision that the LGU LED team has to agree is the budget required for the LED process.
The LGU LED team should have enough resources for meetings, coordination, data collection and
workshops. The budget for LED organizing up to planning may include cost of materials, meals,
transportation, printing, communication, as well as the cost of LED experts that may be tapped by
the LGU.

d) Determine where the LGU LED Team will be established in the LGU

In the initial stages of the LED process, the activities of the LED team can be coordinated by the office
of the Mayor (or Governor) especially if the LCE is the designated leader of the LED team. In the
course of the LED process and particularly in the execution of the LED strategy, the LGU eventually
have to decide to organize mechanisms to support the implementation of the LED plan including the
possible formalizing of the LED team as an economic coordinating or support group in the LGU.

In the LED project of LGSPA, the LGU LED team was usually lodged in the Mayor’s Office. Establishing
the LED team in the office of the LCE has the advantage of ‘visibility’ and political weight. Situated
in this department, LED is likely to have a higher profile and exhibit more of a policy and facilitation
focus, which in turn can help guarantee coordination with other LGU departments.

Step 2: Establish and maintain active participation and involvement of

LGU political leaders

As already emphasized, the strong and visible support from the leaders is important and imperative in the
LED process from planning up to the execution of the economic development strategy. The consistent
participation and interest of the LGU political leaders are important from the planning to the executing
stages of the LED process.

The LGU LED team should agree on the involvement of the political leaders in the entire LED process and
not just on the membership in the team. The political leaders as managers and as esteemed community
leaders should champion the process within the LGU and among the community stakeholders.

The political leaders need to ensure that the LED process and strategy are incorporated or adopted in the
formal development plans of the LGU such as the CDP and ELA. The LGU leaders also need to assure
that the LED process and strategy are included in the long term and annual investment programs of the
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LGU.

Other areas where participation of political leaders may be concretized in the LED process are by:

a) Involving the Local Development Councils, relevant Local Special Bodies, and the Association of
Barangay Captains in the LED planning and implementation mechanisms.

b) Establishing monitoring, evaluation and reporting system and performance management system that
would include participation from stakeholders and relevant special bodies that would become a basis
for economic plan improvement and policy development

c) Ensuring that the LED process and strategy are given due importance and priority in the LGU annual
budget process

Step 3: Develop a LED Stakeholders Group

With the LGU LED team formally organized, it can now move on to the heart of LED process - the
identification and involvement of the community-based stakeholders group.

The World Bank’s LED Trainer’s Manual defines stakeholders as individuals, businesses, organizations or
groups in the public, private and non-profit sectors that have an interest in strategizing and implementing
LED programs and projects. These are individuals and organizations who: a) have a stake in LED issues,
b) might benefit or be affected negatively by the LED process, c) should be included because of their
formal position, d) should be included because they control resources or e) have the power to block LED
implementation.

LED stakeholders vary across LGUs. Normally in low-income and generally rural/urbanizing areas,
private sector economic stakeholders largely come from producers (e.g., farmers and farmer groups)
and traders including cooperatives. The critical question that the LGU LED team needs to answer is who
are its economic development stakeholders? Who is the private sector in the locality?

Aside from the private business sector, the LGU LED team also needs to identify stakeholders from the
public sector (including the appropriate regional and provincial line agencies), the labor sector, and the
community and civil society organizations. National, regional and provincial levels of governments have
a key role to play in facilitating an environment that is conducive to local economic development, and it
is therefore appropriate to include these levels of government into the strategic planning process when
necessary (Swinburn et al., 2006).
32 Strategic Local Economic Development:
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In the context of the ARMM, the following agencies and offices in the Autonomous Regional Government
(ARG) were included as stakeholders in the LGU LED process: Department of Trade and Industry-
ARMM (DTI-ARMM); Department of Agriculture and Fisheries (DAF-ARMM) and attached agencies like
the Philippine Carabao Center (PCC); Department of Science and Technology; chambers of commerce;
business councils; provincial government; government financing institutions such as Land Bank of the
Philippines; state colleges and universities.

It is also important to add that stakeholders identified should be those that have offices or area of
operations located in the city/municipality if it is a city/municipal LED process or located in the province
if it is a provincial LED process. Table 3 provides a list of potential stakeholders in the LED process in a
locality. The list is not meant to be exhaustive.

Table 3. Examples of Stakeholders in the LED Process


Public Sector Business and Labor Community and CSOs
• Local government including technical • Micro, small and medium-scale • Civil society organizations
departments, e.g., entrepreneurs o People’s organizations
o Office of the Mayor or Governor • Large corporations (whether or not registered)
o Legislative Council Committees on • Cooperatives & farmers and o Non-government organizations
Agriculture, Infrastructure, and Finance fisherfolks associations o Women’s associations
o Planning and Development Office • Banks, pawnshops and other
o Agriculture Office private financial institutions • Agriculture and Fisheries
• Provincial, district, regional or national • Rice and corn millers Council
government department or agency • Chambers of Commerce • Fisheries and Aquatic Resources
• Institutions of research and higher • Professional associations Management Council
learning such as public schools and • News media Community leaders
state universities • Transport associations
• Public utilities • Market vendors associations
• Government financial institutions • Private utilities
• Private education establishments

Engaging the stakeholders’ group will involve two key tasks:

a. Conduct Stakeholders Analysis

After a long list of stakeholders is drawn up, the LGU LED team analyzes each identified stakeholder
in terms of their interests, role and contribution in the LED process. An example of this analysis is
illustrated in Table 4. This type of analysis is useful in identifying key stakeholders that will compose the
LED stakeholders group.

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Table 4. Example of Stakeholders Analysis for Partnership


Stakeholder Description of Interest Partnership Assessment Key Potential Role in the
in LED LED Process
Barangay Government Units LED impact area, poverty Essential Partner in implementation
alleviation in rural areas

Vendors Association Expansion of client base Essential Strategic planning program/


project implementation

Farmers’ Cooperative Business opportunity, market Important Strategic planning program/


expansion, productivity project implementation
enhancement

Rubber Budders Association Business opportunity, Important Program/project


production and market implementation
expansion

Women’s Federation Business opportunity, skills Important Program/project


development implementation

Electric Cooperative Expansion of client base Important Program/project


implementation

Philippine National Police Mandated to protect the Minor Provide protective services
people and maintenance of
peace and order

b. Orient and level off with the LED Stakeholders Group

The LED stakeholders group serves as a forum for eliciting inputs from industry and civil society
perspectives, discussing and resolving economic issues, building networks and linkages, and pooling
resources for LED implementation. The LED stakeholders group should be engaged throughout the five
stages of the LED process and become the core of a permanent public-private partnership to manage the
implementation of the LED Strategic Plan.

The LED stakeholders group serves as a forum for eliciting inputs from industry and civil society
perspectives, discussing and resolving economic issues, building networks and linkages, and pooling
resources for LED implementation. The LED stakeholders group should be engaged throughout the five
stages of the LED process and become the core of a permanent public-private partnership to manage the
implementation of the LED Strategic Plan.

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A Guide for Local Governments
Integrating LED in Local Government Processes

The LED stakeholders group must be large enough to ensure representation of all major groups in the
community, but small enough to carry on meaningful discussions and reach consensus (USAID LED
Ukraine, n.d.). A minimum of 20 and a maximum of about 35 members would be a good size.

In the LGU-facilitated LED cases in LGSPA, the Mayor also headed the LED stakeholders group. A
secretariat of about three to five people from the LGU and (in the case of Tugaya) the private sector was
also formed to provide administrative and support services including documentation, record-keeping,
communications, arranging meetings and keeping the Mayor abreast with LED activities.

The LED stakeholders group may start out as an ad-hoc advisory body created through an executive order
and, in the course of LED implementation, evolves into a formal organization by virtue of a Legislative
Council resolution. It can take the form of a coordinative council, a task force, an advisory committee
or any other variation. For example, the Provincial LED stakeholders group in the province of Sulu
is the Sulu Kahawa Sug Task Force. The provincial, city or municipal Small and Medium Enterprise
Development Council (SMEDC), which is mandated by DILG Memorandum Circular 2002-107, may
also be looked into as a possible organization to function as the stakeholders group. Whether or not the
stakeholders group should be subsumed in any existing multi-sectoral body is a decision that rests with
the LGU and other stakeholders.

Like the LGU LED team, the LED stakeholders group should also draw up a ‘terms of reference’ as to
their objectives, functions and composition as illustrated in Table 5

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Table 5. Example of LED Stakeholders Group Composition and Scope of Work


Composition of the LED Stakeholders Group
Who? Why?
Rural Bank Can provide information on the economy and participate in
LED strategy implementation

Electric Cooperative Colleges Can help out in LECA and strategy formulation
Can provide human resource development intervention and
technical assistance

Market Vendors Association Can help out in LECA, strategy formulation and implementation
Filipino - Chinese Chamber of Commerce Can help out in LECA, strategy formulation and implementation

Barangay Public Employment Service Office LED is directed towards employment generation
(PESO) Coordinators Association Can help out in LECA

Functions of the LED Stakeholders Group


• Create public awareness of the LED process and the need for community input and support
• Invite others to participate in various stages of the process to broaden awareness and commitment
• Provide inputs in the gathering, interpretation and analysis of the LECA
• Actively participate in the LED strategy formulation and in the in the Technical Working Groups
• Contribute in the implementation of the LED strategy either in advocacy, actual investment, technical assistance
• Liaise with provincial, regional and national economic agencies and other institutions with economic
development mandate to ensure that local priorities are known to them and supported by them
• Advocate and work for strengthening the capacities of the members of the LED stakeholders group

Activities of the LED Stakeholders Group in the LED Stages


Stage 1: Organizing the LED Effort
• Participate in planning the activities
for the LED stages Stage 4: Implementing the LED Strategy
• Steer the implementation of the LED strategy
Stage 2: Doing the Local Economy and • Provide resources (human, technology,
Competitiveness Assessment (LECA) financial) and technical assistance on
• Undertake LECA required training and capacity building
• Provide data on the economy interventions
• Provide technical assistance in the analysis • Conduct linkaging and networking

Stage 3: Formulating the LED Strategy Stage 5: Reviewing the LED Strategy
• Provide technical assistance in • Review and evaluate LED strategy
strategy formulation implementation
• Provide information and skills in
value chain analysis

36 Strategic Local Economic Development:


A Guide for Local Governments
Integrating LED in Local Government Processes

Stage 2: Doing the Local Economy and Competitiveness


Assessment (LECA)

A good Local Economy and Competitiveness Assessment (LECA) is the foundation of a solid LED
strategy. In the context of the LGSPA experience, the LECA is a valuable process in the LGU specifically
in the economic sector planning and in identifying the industry sector that would contribute to the wealth
creation program of the LGU. The LECA is anchored on the value chain and industry competitive
assessment. A detailed assessment of the basic components of economic development is also conducted
particularly in relation to job creation, poverty reduction strategies and gender sensitivity promotion.

The steps, contents and organization of Stage 2 in this Guide are largely based on the design, inputs and
tools used in LGSPA’s LGU capacity-building project on facilitating LED. The whole LECA process can
be done in six sub-steps namely:

Stage 2: Doing the LECA

Step 1: Collect and assess local economic data


Step 2: Conduct Local Resource Inventory and Assessment
Step 3: Conduct a SWOT Analysis of the local economy
Step 4: Conduct Value Chain Analysis
Step 5: Identify priority industries
Step 6: Document the LECA

Step 1: Collect and assess local economic data

The data needed for the local economy profiling are categorized into the following: 1 According to the Philippine
Standard Industry Classification,
the following activities are listed
under each sector:
• Demographic – This includes data on LGU population size, growth, density, age distribution; i. Primary Sector - Agriculture,
livestock, fishery and forestry
labor and employment; highest educational attainment; and, presence of institutions providing ii. Secondary Sector - Mining
and quarrying; manufacturing;
education, training and research services. electricity, gas and water; and,
construction
iii. Tertiary Sector - Wholesale
and retail trade; transportation,
• Economic – This includes data on production, number of firms and employment in each of the storage and communication;
finance, insurance, real estate
three industry sectors (primary, secondary, tertiary1 ) of the economy. and business services; and,
community, social and personal
services

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• Business enabling environment – This include data on the availability of business enabling and
support systems in the LGU taxation and business registration system, bureaucratic procedures,
and business and investment promotion services. This also includes an assessment of the local
government capacity to carry out local economic development functions based on LGU income,
assets, capacity of the structures, skills of key LGU officials on LED planning and implementation,
and existence of approved development plans.

• Infrastructure – This includes data on the availability and condition of utilities, road, transport
modalities, telecommunication, land and real estate development, and agriculture development
infrastructure.

• Provincial, regional, and national economic factors that impact the local economy such as
provincial, regional, and national programs and policies and global trends.

The full list data requirement for the economic profiling is attached in Annex B of this Guide. The LGU
LED team and the LED stakeholders group should identify sources and plan where to collect the data
required for the local economy profiling.

Data Sources

A broad range of approaches can be used to obtain information for the profiling such as desk-based
research, questionnaires and surveys (e.g., local business enabling environment and business attitude
surveys), structured/unstructured key informant interviews and focus group discussions. The LGU
should choose the approach that is the most doable given the availability of data and time and cost
considerations.

One excellent source of information is the Socio-Economic Profile (SEP) and the Ecological Profile (EP)
updated by the LGU in the formulation of the CDP-ELA. Updating the SEP and EP during the LED
process reinforces the importance of socio-economic data and thus, contributes to the enhancement and
development of the LGU’s economic database and sectoral plans.

Among the specific data sources are the National Statistics Office for official statistics on population and
demographics. For the economic data, sources include the DTI, DA, NEDA, area-based offices such as
the MEDCo (in Mindanao) and other similar agencies, and the provincial government.

For the business enabling environment, the information on this can be generated from the LGU personnel
and the LED stakeholders group through a focus group discussion or survey. LGU self-assessment of
the LGPMS is also an important source particularly for the indicators under the Economic Governance
38 Strategic Local Economic Development:
A Guide for Local Governments
Integrating LED in Local Government Processes

performance area of the system.

The following information, which are the result of the analysis of the economic data as discussed in the
Guide to Comprehensive Development Plan (CDP) for the Local Government Unit (DILG, 2008), can
also be used as reference for LGUs that have already undertaken these kinds of economic analysis during
CDP formulation:

• Food self-sufficiency or security


• Level of urbanization or the percentage of the population engaged in non-agricultural activities.
• Structural shift or changes in the relative share of each sector (primary, secondary and tertiary)
to the total economy over time.
• The locality’s industry or sector specialization using the location quotient (L.Q.), which is an
indicator of the relative importance of an area in terms of selected industry types or sectors.
• Linked economic activities in terms of production backward and forward linkages as well as
trade and services linkages.
• The inflow and outflow of money into the local economy using the money flow theory (like the
“leaking barrel” model shown in Chapter 1).

Results of performance and competitive assessments are also important sources of information that
the LGU can utilize. This includes information generated from the Local Governance Performance
Management System (LGPMS)2 and other systems such as the Competitive Assessment Program (used
mostly by cities), Balance Scorecard and others.

Understanding the data

The collected data are then organized according to Local Economy Profile outline. For data to be
meaningful, these have to be interpreted and presented in context. For example, if the volume of corn
production in a municipality is 100 tons annually, how does this compare against other crops in the area,
against corn production in other municipalities or against the provincial or regional performance? 2 The LGPMS is a web-based
database system of an LGU self-
assessment tool that enables
In assessing the local economy, it is necessary to compare, contrast and evaluate local data with the provincial, city and municipal
governments to monitor and
larger area of which the LGU is a part: nation, region and province. Understanding the community’s evaluate their performance
in five performance areas/
relative competitiveness requires a comparison with other municipalities or communities located nearby, sectors, namely, governance,
administration, social services,
perhaps within the same metropolitan area or region, or adjacent to the community. It is important to economic development and
environmental management,
evaluate local indicators and trends, and compare them with national data to determine differences and at three levels of results:
input, output and outcome
commonalities. This can provide important information on the competitiveness of an LGU at a national levels (LGSPA, 2008). LGUs
are required by the DILG to
level. A local economy assessment also requires comparisons of trends over time. (World Bank & Cities collect data and assess their
performance against these
of Change, n.d.). LGPMS measures.

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Step 2: Conduct Local Resource Inventory and Assessment

The Local Resource Inventory and Assessment (LRIA) is used to determine the major economic resources
in the area and to assess the potential contribution of each resource to local economic development. The
LRIA forms the basis for value chain analysis and priority industry selection. Some of the data needed for
this step can be obtained from the data generated in Step 1.

In the LRIA, as illustrated in Table 5, the LED stakeholders group determines the:

a) Major land, sea and forest resources in the area under the three economic sectors: primary, secondary
and tertiary.
b) Location and size of each resource in terms of area covered and value and volume of production.
c) Existing local economic activities with regards to each resource
d) Forward and backward linkages of these industries/economic activities, including linkages outside
of the local economy. Production, trade and services linkages identified in the CDP formulation
can be used as a reference for this. Industry players and industry studies can also provide more
information.
e) Opportunities for development including regional, provincial, national programs and policies that
provide financial, technical, development services in support to the development of the resource
such as official development assistance and national agencies’ program assistance relevant to the
resource. These can be gleaned from the “Provincial, Regional, and International Factors” section of
the Local Economy Profile. Opportunities can also include potential markets for each resource.

Table 6. Example of Template for Local Resource Inventory and Assessment


Sector/Resource Location and Size Activities Done Forward and Backward Opportunities for
in the Locality Linkages Development
Land Resources
Example: 20 barangays Corn farming Forward: DA subsidizes seeds and
Agriculture Sector 18,268 hectares 67% Corn shelling Milling provides technical
Corn of agricultural land Trading and marketing
Warehousing assistance
Volume:
36,000 tons/year Backward:
Value: Seedling production
PhP468 million/year Pesticide production
Fertilizer production
Machinery fabrication

Sea/Aquamarine Resources

Forest and Mineral Resources

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Step 3: Conduct a SWOT Analysis of the Local Economy

Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis is conducted by the LGU LED team


together with the LED stakeholders group to integrate and summarize data, information and perceptions
on the local economy from a standpoint of overall competitiveness (Cities Alliance, 2007). A community’s
competitive position is a function of internal (strengths and weaknesses) and external (opportunities
and threats) factors. The Local Economic Profile and the result of the LRIA are important sources of
information for this exercise.

Internal factors are attributes of the locality and are within the influence of the LGU while external factors
refer to trends and conditions of the external environment that are beyond the LGU’s control. Strengths
are local assets or factors that give the area an advantage and make it attractive for investment, growth
and development. Weaknesses are local obstacles or constraints to a thriving economy: these can be
social, legal, physical, environmental, financial or regulatory constraints. Opportunities are external factors
that make it easier to develop a competitive advantage. Threats are unfavorable trends or developments
external to the economy that can lead to a decline in competitive advantage.

The SWOT Analysis is most useful in defining the focus of the LED Strategic Plan. Issues identified in
the SWOT inform the crafting of the vision, goals and objectives and designing of programs and projects
that eliminate or minimize the weaknesses, maximize strengths, take advantage of opportunities and
overcome or reduce the influence of threats.

Table 7 gives specific parameters, based on the five fundamental components of the economy discussed
in Chapter 1, which can be used in doing a SWOT analysis of the local economy.
Source: Adopted from World Bank & Cities of Change LED Trainer’s Manual

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Table 7. Example of a Template for SWOT Analysis of the Local Economy


FACTOR INTERNAL ANALYSIS EXTERNAL ANALYSIS
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
Labor Market
Skills
Wage Rates
Availability

Financial Capital
Private capital
Public capital

Access to Markets
Proximity or distance to
market centers
Proximity to suppliers

Transportation
Access to major highways
Access to airports
Access to ports
Access to trains

Sites and facilities
Number of sites and size
Infrastructure
Utilities
Telecommunications
Number of existing structures
Knowledge Resources
Research/Development facilities
Industry or trade Association

Education and Training
Colleges or universities
Higher technical training
Vocational skills training
Business services and Technical
Support
Business Climate
Government responsiveness
(including capacity to carry out
LED functions)
Taxes
Regulations and controls
Cooperation/assistance with
private sector

Quality of Life
Cost of living
Culture and recreation
Public services (including peace
and order)
Attractiveness of city
Natural resources

Source: Adopted from World Bank & Cities of Change LED Trainer’s Manual

42 Strategic Local Economic Development:


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Integrating LED in Local Government Processes

Step 4: Conduct Value Chain Analysis

The LED stakeholders group then selects as much as the top ten resources of the LGU in terms of
value or volume of production as determined in Step 2, the LRIA. Each of the resources is subjected to
a value chain analysis, which is a tool in mapping industry structure (how industry participants interact to
bring products to the market) and assessing industry-specific competitiveness. The result of the SWOT
analysis is also important information in the value chain analysis.

A value chain can be defined as all the firms within a subsector or industry that buy and sell from each
other in order to supply a particular set of products or services to final consumers (Lusby & Panlibuton,
2007). It shows the relationships and linkages among buyers, suppliers, and a range of market actors in
between.

The basic objectives of the value chain analysis are to:

• Identify market channels, market trends and market potentials within the value chain
• Identify the primary actors in the value chain, their number, roles, and interrelationships, including
the number of women industry players
• Identify constraints (weaknesses and threats) that are holding back growth and competitiveness of
local firms participating in the value chain
• Pinpoint priority areas for reform within the environment in which these industries or firms
operate
• Identify the strengths of the industry and opportunities for stimulating wealth creation and alleviating
poverty in the local economy

Table 8 describes the industry competitiveness factors (market demand, reach, presence of MSMEs,
forward and backward linkages, and participation of women) that can be analyzed using the value chain:

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A Guide for Local Governments
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Table 8: Examples of Factors to Consider in a Value Chain Analysis


Factor Description
Market Demand • Opinions and data from key informants on market trends and industry competitiveness
• Information from existing statistics/ studies
• Examples of businesses that have problems meeting demand
• Comparisons within the region (based on opinions from key informants of market information)

Reach • Estimate of the number of enterprises for each type of firm in the value chain (input suppliers,
producers, wholesalers, etc.)
• Average firm size for the different types of value chain firms in terms of capitalization and number of
employees/employed
• Average salary/wages for employees in different types of value chain firms

Significant • Estimate (in a few geographic zones) of the number of MSMEs (at all levels of the subsector) that
Presence of exist outside of urban areas
MSMEs in the • Description of the type of enterprises in the value chain that operate outside of the major urban
rural areas* areas

Significance of • Description of the different kind of transactions that take place among local market actors in the
Forward and value chain
Backward Linkages • General description of the volume and number of these transactions between a given number of
among Local firms
Market Actors

Participation of • Number of women who are self employed, own businesses or work as employees in the value chain
Women (should include participation at all levels of the value chain)

*In this example, emphasis is given to the rural area it being the target of poverty reduction goals.

A good starting point for conducting any analysis is to access existing studies, reports, or statistics that
provide information on the targeted value chain. These can be found in government agencies, with
donors, and with implementing organizations. It is also important to identify “key informants” who
are particularly knowledgeable about the value chain as a whole (Lusby & Panlibuton, 2007). They can
include members of the LED stakeholders group. The value chain analysis activity can bring together
producers, government agencies and other stakeholders in the different segments of the value chain to
jointly seek solutions to overcome key impediments that affect the performance of the chain (The World
Bank Group, 2007).

A value chain map presents, in graphical form, all the major actors in a targeted value chain as illustrated
in Figure 3. The determination of forward and backward linkages that is done in the LRIA provides the
starting point for the value chain analysis.

44 Strategic Local Economic Development:


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Integrating LED in Local Government Processes

Figure 3. Value Chain Map: Dairy Subsector

D
O
M
E
S
T
I
C

M
A
R
K
E
T

SUPPORT INDUSTRIES
INFRA SUPPORT UTILITIES FINANCING RESEARCH AND DEVELOPMENT
Water, Power & Communication HR DEVELOPMENT ANIMAL WASTE AND UTILIZATION

Source: Wao, Lanao Sur Livestock and Poultry Industry Study, 2007.

Step 5: Identify priority industries

Priority industry selection is important so that the LGU can maximize the use of its limited resources and
give focus to local industries which have the greatest potential of pushing local economic development.
Table 8 shows a tool that can be used for industry prioritization. Using a tool such as this will allow
the LED stakeholders group to identify – in a systematic way – industries or products which have a
competitive advantage that it would like to develop and promote (similar to the One Town One Product
concept). However, the LGU may opt to skip this industry ranking and prioritization process if there
are obviously only a few, say one to three, industries in the locality that can have a substantial and wide-
reaching impact on the economy.

The criteria for selection can include availability of resources (human, physical, capital and knowledge
resources, and infrastructure), demand conditions, number of supplier industries, number of local players
Strategic Local Economic Development: 45
A Guide for Local Governments
Integrating LED in Local Government Processes

operating in the industry, number of forward and backward linkages, and relative ease in promoting and
developing the industry. It can also include other criteria that reflect the priorities of the LGU such as
potential for employment generation, participation of women or environmental conservation.

Industries with the highest weighted scores are the priority industries.

Table 9. Sample Criteria Used in Priority Industry Selection


Factors/Criteriaa Description/Remarks Weight (%) Industry
A. Conditions of Factors of 25 Scoreb Weighted
Production Score
(Score x
Weight)

1. Human resources Availability of human resources (in terms of quantity 5


and skills)
2. Physical resources Location, abundance, quality, accessibility and cost of 7
water, land and other physical resources necessary
to compete in the industry
3. Capital resources Amount and cost of capital available to the industry 7
4. Knowledge resources The stock of scientific, technical, and market 2
knowledge on the industry
5. Infrastructure The type, quality and user cost of infrastructure 4
available that affects the industry

B. Demand Conditionsc

1. Size of local demand Based on opinions & data from key informants on 15
2. Number of independent market trends & value chain competitiveness &
buyers information from existing statistics/studies.

C. Number of Related and Based on the number of enterprises for each type of 15
Supporting /Supplier Industries firm in the value chain (input suppliers, producers,
(Indicated by the number of wholesalers, etc.)
activities that are located locally)

D. Number of Players in the Based on the number of MSMEs (at all levels of the 15
Industry subsector) that exists in rural areas.

E. Number of forward and Based on the volume and number of transactions 10


backward linkages that take place among domestic market actors in
the value chain

F. Requires relatively modest or 20


unsophisticated private & social
investment or easiest to develop
or address as it is supported by
ODA and government programs

Notes:
a
Most factors are based on Michael Porter’s Model for Industry Analysis.
b
Each industry is assigned a score per criterion ranging from 1 to 3, with 3 as the highest score.
c
Refer to results of the value chain analysis as illustrated in Table 7.

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Step 6: Document the LECA

The LGU LED team then puts together and packages the LECA Report and presents the final output to
the LED stakeholders group for validation before the strategy formulation workshops begin. Box 1 gives
an example of a LECA Report outline.

Box 1: Example of a Local Economy and Competitive Assessment Report Outline

I. Introduction (Location and Background of the LGU)



II. Local Economy and Competitiveness Assessment

A. Local Economy Profile
1. Demographic
2. Economic Profile
3. Business Environment
4. Infrastructure
5. Provincial, Regional, International Factors

B. Competitiveness Assessment
1. Local Resource Inventory and Assessment (LRIA)
1.1 Land Resources
1.2 Sea/Aquamarine Resources
1.3 Forest and Mineral Resources
2. SWOT Analysis of the Local Economy
2.1 Strengths
2.2 Weakness
2.3 Opportunities
2.4 Threats
3. List of Industries, Ranked in Order of Competitiveness
4. Top 5 Industries that the Locality has Competitive Advantage
4.1 Profile and Value Chain Analysis of Industry A
4.2 Profile and Value Chain Analysis of Industry B
4.3 Profile and Value Chain Analysis of Industry C
4.4 Profile and Value Chain Analysis of Industry D
4.5 Profile and Value Chain Analysis of Industry E

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Stage 3: Formulating the LED Strategy

At this stage, the LGU LED team together with the LED stakeholders group develops the LED Strategic
Plan in order to set out the economic future of the locality and to address the issues identified in the LECA.
The LED Strategic Plan has following key elements: vision, goals, objectives, programs and projects.

As in the comprehensive development planning, the intent is to achieve an integrated approach to local
economic development strategic planning. In devising this strategy, practitioners in local government and
principal stakeholder groups will need to balance local economic development with environmental and
social needs (Swinburn et al., 2006).

Stage 3 can be divided into eight major steps:

Stage 3: Formulating the LED Strategy


Step 1: Identify critical issues from the LECA
Step 2: Create a Vision
Step 3: Develop Goals
Step 4: Develop Objectives and Performance Indicators
Step 5: Develop Programs
Step 6: Select Projects
Step 7: Mainstreaming Gender Responsiveness and Sensitivity to Poverty in LED
Strategy Formulation
Step 8: Document the LED Strategic Plan and Integrate in LGU Plans and Processes

Step 1: Identify critical issues from the LECA

Prior to the “Visioning” workshop, it is important that LED stakeholders are able to relate strategy
formulation to issues identified in Stage 2. Here are some guide questions that can be posed to
stakeholders to trigger analysis and provide a clearer context and basis for vision setting and strategy
formulation:

a) What critical gaps and issues or weaknesses and threats identified in the LECA need to be
48 Strategic Local Economic Development:
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Integrating LED in Local Government Processes

addressed?
b) What strengths and opportunities can the LED strategy seek to build on?
c) What conclusions can be made about the competitive position of the locality?
d) What can be realistically achieved in the timeframe of the LED strategy?
e) What groups in the community are perceived to be disadvantaged (e.g., rural poor, indigenous
people) and must be given special attention?

Step 2: Create a Vision

In a workshop, the LED stakeholders group dialogue and agree on a vision of the preferred economic
future of the community. Stakeholders are first asked to give concise statements about their “dreams
for the economic future of the community.” They can draw ideas and inspiration from the critical issues
identified in Step 1 in composing a vision statement. In Tugaya, recognizing the municipality’s competitive
position in arts and culture-based industries, the LED stakeholders group came up with this LED vision -
“A prosperous and productive Tugaya that is the center of Maranao Arts and Culture in the Philippines, as
showcased by its metal and wood craft industry.”

The LGU’s overall vision as articulated in the CDP and ELA can also be reviewed and reframed to reflect
economic aspects and aspirations of the locality.

In general, vision statements should be: a) understood and shared by members of the community, b)
broad enough to allow a diverse variety of local perspectives to be encompassed within them, c) inspiring
and uplifting to everyone involved, and d) easy to communicate (Nagy & Fawcett, n.d.).

Step 3: Develop Goals

Goals point to specific outcomes that the community seeks to achieve. Goals are much more descriptive
and concrete than a vision statement, and should be directly related to the findings from the LECA
including the key issues arising from Step 1. Good practice indicates that in selecting goals, a manageable
number is usually no more than six (Swinburn et al., 2006).

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Table 10 illustrates how goal statements are linked to LED issues.

Table 10. Example of Goal Statements and their Link to LED Issues
Goal Link to LED Issues from the LECA
To be the leading producer of • Strengths: vast land resources for forage and pasture development and abundant
cattle, carabao and goats in the supply of crops and agricultural by-products for feedstuffs
region • Opportunities: proximity to several research and training centers on livestock
production, proximity to market centers outside of municipality through well paved
roads
• Livestock industry is number 2 in the LECA industry competitiveness ranking

To be the halal organic fertilizer • Value chain analysis: fertilizers, seeds, and pesticides accounted for 80% of the value
capital in the region of local corn production. Of the PhP500 million annual value of corn production,
PhP400 million were draining out of the local economy because farmers were buying
inputs from outside sources
• Local organic fertilizer production will reduce cost of inputs in crop production,
provide income opportunities and protect the environment

To develop an efficient • Weakness: Inadequate power supply. 115 individual generators in 23 barangays
municipal power supply system are being used whenever electricity from the provincial electric cooperative is not
available
• Adequate power supply is necessary in order to increase productivity and quality of
metalcraft and woodcraft production

Each goal statement should have the following characteristics:

a) Clear regarding what is to be done and why – it should be based on the LECA and flow directly from
the vision formulated in Step 1
b) Outcome oriented – represents specific key result areas on which the LED strategy will focus to
achieve the vision. The specific key result areas will be the gaps and critical issues identified in the
SWOT Analysis
c) Robust - it leaves open a variety of possible means
d) Inclusive - reflects the voices of all people who are involved and the greatest needs and highest
economic priorities of the municipality
e) Concise

The set of goals can include statements that are industry-specific as well as goals that impact and cut
across all economic activities such as “improved local business investment climate.” What is important
is that these goals reflect the LGU priorities and addresses the major LED issues. Having industry-based
goals, however, provide focus or a clear sense of purpose to the LGU and these normally become the
50 Strategic Local Economic Development:
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Integrating LED in Local Government Processes

bases and motivation in the development and improvement of the various enterprise-related programs
and services of the local government.

Step 4: Develop Objectives and Performance Indicators

Objectives are even more specific. They serve as performance standards and targets for each goal identified
in Step 3. In developing objectives, it is important to clearly describe the markers or benchmarks that
would help the community assess where it is now (baseline or pre-intervention) and where it will be if the
initiative were successful (objectives). For example: “To increase corn production by 10% by 2010.”

Objectives should be specific, measurable, attainable, realistic, and time bound (SMART). To measure
progress toward the achievement of goals and objectives, a clear and structured set of key performance
indicators should be developed. Performance indicators can be both quantitative and qualitative.
Quantitative indicators will include numbers, percentages, percentage changes, etc. Qualitative indicators
are more difficult to measure. They focus on aspects such as the quality of a result or an individual’s
attitude towards a new service (Swinburn et al., 2006).

As suggested in the World Bank LED Primer, indicators should be:

• valid - they are valid in the eyes of the key participatory M&E stakeholders and should actually
measure what they set out to measure
• reliable - conclusions based on the indicators should be the same if measured by different people
• gender sensitive - indicators should be disaggregated by sex
• sensitive - they should be sensitive enough to measure important changes in the situation being
observed
• cost-effective - the information/learning should be well worth the time and money it costs to collect
the data
• timely - it should be possible to collect and analyze the data fairly quickly
• in-line with local capabilities/resources - they should not be overly complex and burdensome to
the project partners
• build on what exists - indicators should not ‘reinvent the wheel’ and should draw on existing local
data collection activities, or from indicators used with other projects, where possible. For example,
local economic development performance indicators available in the Local Governance Performance
Management System (LGPMS) of the DILG can be used as a guide in framing performance
indicators.

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Step 5: Develop Programs

Having completed the LECA and determined the vision, goals and objectives, the LED stakeholders
group will need to decide on the key programs that will become the core of its LED strategy. A program
is a package of interrelated projects. Programs and projects should seek to build on strengths, minimize
weaknesses, exploit opportunities or mitigate threats identified in the LECA, particularly in the SWOT
and value chain analyses.

In developing programs and projects, identify:

a) Those participants/beneficiaries that are to be targeted at each different level - i.e., individuals,
groups, organizations and sectors, and/or broader systems. These targets should be linked to the
highlights of the LECA. They could be the economic players of the priority industries or of areas that
have been adjudged as economic strengths of the locality or opportunities.

b) The personal and environmental factors to be addressed by the initiative

• Personal factors can include: knowledge, beliefs, skills, education and training, experience,
cultural norms and practices, social status, cognitive or physical abilities, gender, age
• Environmental factors can include: social support, available resources and services, barriers
(including financial, physical, and communication), social approval, policies, environmental
hazards, living conditions

c) Those who can contribute and how they can be reached or involved in the effort. Identify agents
of change or LED champions, i.e., those who may be in a position to contribute to the initiative or
commit to leading it.

It is a good practice to undertake programs and projects where clear champions are committed to
being involved in leading them. Project champions may come from local government, the private
sector, community or other sectors (e.g. research or educational institution) (Swinburn et al.,
2006).

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The results of the above scoping can be rendered as part of a matrix for strategy formulation as presented
in table 11.

Table 11. Matrix for Strategy Formulation


Levels & List of Target Potential Champions (4)
Participants/Beneficiaries (1)

A. Individuals
1. 1.
2. 2.
x. x.

B. Groups & Organizations


1. 1.
2. 2.
x. x.

C. Sectors
1. 1.
2. 2.
x. x.

D. Broader Systems
1. 1.
2. 2.
x. x.

Recommended Approach to LED Program Development

Chapter 4 of the first LGSP resource book on LED presents some of the programs that can be adopted
by the LGU to facilitate LED. A comprehensive list of program options is also discussed in detail in the
World Bank LED Primer.

Although there are other several recommendations in various LED and enterprise development resources
and literature, clearly, program and project selection must be limited according to the needs and resources
of the LGU and must be consistent with the LED vision, goals and objectives.

However, some already existing frameworks or theories related to economic development are highlighted
in this Guide, namely the Money Flow or “Leaking Barrel” theory, the SME Development Framework, the
LGPMS economic development indicators, and Integrating Gender Equality and Poverty Reduction in LED,
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which can aid the LGU in ensuring that issues affecting all components of the local economy (discussed in
Chapter 1) are taken into account in the formulation of programs and projects and, ultimately, come up
with an integrated plan. A set of procedures is recommended to help LGUs come up with LED programs
that are coherent and have added value.

a. Using LGPMS Indicators to Review LGU Performance in LED

There are also indicators set out in the LGPMS wherein the economic development sector is divided into
two “service areas”, namely 1) Agriculture and Fisheries Development and 2) Entrepreneurship, Business
and Industry Promotion. They exemplify standard LGU inputs and outputs that directly concern local
economic development. For each service area governance performance indicators have been identified.
Hence, it is helpful to check LGU performance in the indicators shown in Table 12 and to verify gaps or
areas that need to be improved.

Those LGPMS economic development indicators that have not been addressed or require further
strengthening and which are directly linked to the priority industries need to be among the programs that
the LGU should focus on. Among the outcome indicators in LGPMS that needs to be addressed include
unemployment and underemployment rates, poverty incidence, income per capita and family income.

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Table 12. LGPMS Economic Governance Performance Indicators


Service Area: Agriculture and Fisheries Development
Infrastructure support for agriculture development, e.g.,
 Rehabilitation or construction of irrigation system for irrigated or irrigable areas.
 Provision of post-harvest equipment, machines or facilities
 Rehabilitation or construction of feeder roads or farm-to-market roads

Local government agricultural extension and on-site research services or facilities, e.g.,
 Credit facilitation services
 Production support services
 Research and development services
 Market development services
 Other alternative and innovative assistance to farmers

Making the Fisheries and Aquatic Resources Management Council (FARMC) functional
Infrastructure support for fishery development, e.g.,
 Rehabilitation or construction of fishery related infrastructure
 Credit facilitation services
 Production support services
 Research and development services
 Market development services
 Other alternative and innovative assistance to fisherfolks

Service Area: ENTREPRENEURSHIP, BUSINESS AND INDUSTRY PROMOTION

Promoting a business-friendly environment and promoting businesses, enterprises and industries, e.g.,
 Improving business application and processing time
 A local government-supported administrative body that is responsible in the promotion of
business and industry in the LGU
 Provision of tax incentive
 Assistance in product labeling especially for small and medium enterprises
 Training of business-employed personnel or private sector employees
 Maintenance of industrial peace
 Support to job fairs

Source: LGPMS Manual

The Manual on the Local Planning Process: Formulating CDP and ELA for ARMM, another LGSPA knowledge
product, presents in detail how the LGPMS can be used in both strategy formulation and monitoring and
evaluation.

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b. Using the Money Flow or the “Leaking Barrel” Theory

As shown in Chapter 1, money flows in and out of the local economy like water flowing in and out a
barrel. The water level in the barrel will rise and fall and represents the level of wealth or prosperity in
the community. This theory can help LGUs analyze how to increase wealth in the local economy and how
to reduce income leakage. It suggests the following economic strategies (Darling, 1991) that the LED
planners can consider in formulating programs and projects:

To increase inflows:

• Selling more goods and services to outside customers (export)


• Accessing resources from ODA programs, higher government agencies and other external
organizations

To slow down outflows and create more wealth locally:

• Providing locally those goods or services currently being purchased outside the area. This idea is
called import substitution. (For example: producing organic fertilizer locally in order to reduce
dependence on inorganic fertilizers from outside sources). This creates new businesses in the locality
and will entail improving linkages between local buyers and sellers
• Encouraging people to invest their savings locally. This keeps the money circulating in the economy
and adds to the productive capacity of the local economy
• Improving the community’s quality of life, which is important not only to retain and attract residents
but also outside investors
• Putting the inefficiently utilized local resource to work more productively

The level of wealth is not only dependent on the volume of money inflows and outflows but also on
the productive capacity of all firms, households, government units and other producing and consuming
entities participating in the local economy. When these are functioning at full capacity, the level of
prosperity is high (Darling, 1991). Local firms will respond to changes in internal and external markets.
However, their ability to react to changes in markets will depend upon the condition of the fundamental
components of the economy within the locality, that is, the availability of resources such as investment
capital, skilled workers, and the know-how to produce at costs that are competitive, as well as the
presence of adequate infrastructure and an environment conducive to business.

LED planners should give emphasis to programs that would help grow the level of wealth in the locality
and that have a direct bearing on the results of the LECA – those that would optimize local strengths and
available opportunities and develop the priority industries.
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c. Using the SME Development Framework

One of the most effective ways of facilitating wealth and job creation is to develop LED programs and
projects that improve the local business enabling environment and support the development of micro,
small and medium sized businesses3 (Swinburn et al., 2006). The Philippines’ SME Development Plan 2004-
2010 prescribes integrated efforts to strengthen and stimulate the SME (includes “micro-enterprises”)
sector so it can contribute significantly to the country’s development.

Category Value of Total Assets in PhP Number of Employees


Micro-enterprises 3,000,000 – or less 1–9
Small Enterprises 3,000,001 – 15,000,000 10 – 99
Medium Enterprise 15,000,001 – 100,000,000 100 – 199

These enterprises may fall under any industry classification (e.g. manufacturing, agriculture, service) and includes
farmers, fisherfolks and the informal (unregistered) sector. “SME” includes micro-enterprises.

The Plan presents four major SME development outcomes (DTI, n.d.), as follows:
 
•    Enhancing the Business and Investment Enabling Environment (BIEE)
•    Enhancing Access to Finance (A2F)
•    Enhancing Access to Market (A2M)
•    Enhancing Productivity and Efficiency (P&E)

LED planners should look at programs that would meet the requirements of the priority industries in
terms of materials, technology, finance, markets and policy support.

Table 13 shows a list of possible interventions to enhance the business and investment environment,
access to finance, access to markets, and productivity and efficiency of SMEs that can be incorporated in
the LED Strategic Plan.

3Philippine SMEs are categorized


based on assets (excluding land)
and number of employees. In
January 2003, the SMED Council
categorized the SME sector
into:

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Table 13. Examples of SME Development Strategies


SME Objectives and Strategies

Strategies to enhance the Business and Investment Enabling Environment, e.g.,


 Streamlining of business regulatory requirements (e.g., one-stop licensing and business registration office)
 Promotion of ordinances/ policies supporting local SMEs (e.g., Zoning Ordinance, CLUP)
 Organizing of structures supporting local SMEs (e.g., LED Assistance Unit, Business Development Center,
Technology and Livelihood Development Center)

Strategies to enhance Access to Finance, e.g.,


 Local SME financing programs
 Encouraging the setting up of rural banks
 Partnering with national line agencies regarding financing programs like the Multi-livestock Development Loan
Program
 Systems and structures to assist SMEs in accessing financing programs like the One Town One Product of the DTI

Strategies to enhance Access to Market, e.g.,


 SME market information support
 Facilitating partnership/ linkages with suppliers and buyers
 Systems and structures to assist SMEs link with programs that enhance access to market
 Infrastructures that enhance access to market

Strategies to enhance Access to Production, e.g.,


 Business development and extension services
 Entrepreneurship training
 Skills training to improve productivity or provide livelihood opportunities
 Systems and structures to assist local industry productivity and product quality enhancement
 Infrastructures that enhance productivity and product quality

Rationalizing the Priority Programs

At this point in the LED strategy formulation, the team and stakeholders would have come up with a long
list of programs that must be systematically trimmed down to a set of focused, coherent and integrated
initiatives. The long list of program would have come from reviewing LGU performance in the LGPMS
economic development service area, from applying the leaking barrel theory, and from utilizing the SME
development framework

The short-listing process can be aided by verifying the links of and matching the programs to:

• The identified Goals and Objectives and Performance Indicators


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• Strengths and Opportunities of the LECA particularly the priority industries so that they could be
optimized
• Weaknesses and Threats to the local economy and its competitiveness, particularly to the priority
industries in order to mitigate/manage them
• The target participants/beneficiaries and the relevant personal and environmental factors that
need to be addressed

The planners can also begin to brainstorm on which government agency to involve as well as the potential
champions from the private sector, academe or civil society organizations that could be mobilized (refer
to Table 14) mindful that further particularization and finalization would occur as the programs are
translated into projects.

In relation to role definition, the programs that are considered as part of LGU mandates are those that
are linked to LGPMS (infrastructure support for agricultural development, local government agricultural
extension and on-site research services or facilities making the FARMC functional, and promoting a
business-friendly environment and promoting businesses, enterprises and industries); programs that
are   “public” in nature and can not be taken on by other levels of government; and those that are
“strategic” and can not (yet) be taken on by the private sector.

Table 14. Brainstorm Matrix on LED Program Development


Levels & List of Target Priority Strategies Responsible Potential
Participants/Beneficiaries (1) (2) Gov’t Office (3) Champions (4)

A. Individuals
1. 1.
2. 2.
x. x.

B. Groups & Organizations


1. 1.
2. 2.
x. x.

C. Sectors
1. 1.
2. 2.
x. x.

D. Broader Systems
1. 1.
2. 2.
x. x.

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Step 6: Select Projects

Within each program area, the next step is to propose and select projects on the basis of clear criteria.
LGUs are often interested in comparing the benefits of a project proposal in terms of generating new
jobs, improving income, creating new enterprises, increasing revenue, and value-for-money (Swinburn et
al., 2006). The potential impact to a target sector, such as women, may also be a factor.

Each proposed project should also be assessed as to whether it meets the broader LED goals, objectives
and priorities that were agreed by the LED stakeholders group.

Including ‘early-win’ projects that will achieve visible and tangible impact in the short-term will be
fundamental to the overall LED strategy development process in ensuring the continued support of the
different stakeholders. Complex projects with larger resource and longer timeframe requirements will
need to go through a more rigorous selection process and should include an initial viability assessment,
feasibility studies, design review, business plan preparation and tailored monitoring and evaluation
program (Swinburn et al., 2006).

Table 15 shows the LED Vision to Projects Matrix formulated by the LED stakeholders group of the
municipality of Wao, Lanao del Sur.

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Table 15. LED Vision to Projects Matrix of the Municipality of Wao, Lanao del Sur
VISION GOALS OBJECTIVES PROGRAMS PROJECTS
Food Security and 1. To develop the Wao 1.1 To increase Wao Livestock • Livestock and poultry industry/
Environmental livestock and poultry number of and Poultry enterprise profiling project
Sustainability production in order to livestock Industry • Study Tour
provide additional income and poultry Development • Training of Village-based A.I.
source to farmers producers by Program Technicians
10% each year • Goat Dairy Module Project

2. To increase Wao corn 2.1 To Increase Wao Corn • Organic Fertilizer Production
productivity in order to corn production Industry Project
increase income of corn by 10% per Development • Seeds Production Project
farmers year Program • Integrated Pest Management
Farmers Field School Project

3. To develop organic 3.1 To increase Organic Rice • Organic Fancy Rice Production
fancy rice production in organic rice Production project
order to conserve Wao’s production by Development
land resources 10% in 2010 Program

4. To develop Wao’s 4.1To increase Rubber Industry • Rubber Nursery Project


rubber industry in order rubber Development
to increase forest cover production area Program
and income of farmers by 20% in 2010

5. To develop high- 5.1 To develop Wao HVCC • HVCC Bagsakan Center


value commercial crops 2,000 hectares Production Project
production in order to planted to Program • HVCC Seedlings/ Nursery
provide additional income HVCC by 2010 Development Project
and promote diversified
farming in the municipality

6. To develop organic 6.1 To establish Wao • Composting Project under


fertilizer production in one organic Commercial the Solid Waste Management
order to provide farm fertilizer Organic Program
inputs that conserve Wao’s processing plant Fertilizer • Organic Fertilizer Raw
land resources and provide by year 2010 Industry Materials Production Training
income opportunities for Program Project
the women sector. • Organic Fertilizer Plant Project

Source: Wao LED Strategic Plan

Again, it is important that the LED stakeholders are involved in project selection. This way the potential
roles and contributions of the LGU and of relevant individual stakeholders, businesses or institutions,
in project implementation can be ascertained early on. Some projects may require private sector
investments with the local government providing enterprise organizing, linkages, training and other types
of assistance without necessarily infusing any equity capital to a business. In certain conditions, the LGU
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may also opt to set up a public economic enterprise in order to provide the intended product or service
itself. Still other projects may be developed as public-private sector joint ventures. The roles of the LGU
and stakeholders should be set out in the individual project action plan, which will be discussed in the
next chapter.

The LGSPA’s Manual on the Local Planning Process: Formulating CDP and ELA for ARMM provides a tool
(Table 16) for sifting projects to define possible ownership and for guiding the LGU LED team in integrating
projects to higher level plans, or for categorizing projects according to administrative responsibility
(provincial, city/municipal or barangay) or for identifying projects which can be better done by the private
sector. This approach is practical especially if the LGU LED team and the stakeholders consider the LGUs
limited resources and also to maximize the roles of the stakeholders in the LED Strategic Plan.

Table 16. Sifting Projects for Ownership


Project National Local Government Private
Province Municipal Barangay
• Livestock and poultry x
industry/ enterprise
profiling project

• Training of Village-based x x
A.I. Technicians
• Organic Fertilizer x
Production Project
• Seeds Production Project x x
• Integrated Pest Management x x x
Farmers Field School Project

• HVCC Bagsakan Center x x x


Project

• HVCC Seedlings/ Nursery x x


Development Project

• Composting Project under x x x


the Solid Waste Management
Program
• Organic Fertilizer Plant x
Project

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Step 7: Mainstreaming Gender Responsiveness and Sensitivity to Poverty in LED


Strategy Formulation

In the Philippines, about 69% of businesses that are 3.5 months old are owned by women. However,
of the businesses that are more than 42 months old, only 44% are owned by women (Madarang et al.,
n.d.). Although the initiative to set up an enterprise usually comes from women, only a small percentage
of them are able to continue their business because of conflicts with family time or child-rearing, issues
with the husband, gender discrimination and health-related concerns. Hence, the LED Strategic Plan
should include programs and projects that create an enabling environment for women entrepreneurs and
that provide business development services in support of women (LGSPA, 2007). The LGU may use the
GAD budget to allocate additional resources for such programs and services.

Box 2 shows a checklist that the LGU can use to assess whether gender equality is integrated in the LED
Strategy.

Box 2. Gender Equality Checklist for LED Strategy Formulation

 Do the LED policies, programs and services support women’s equal access to productive resources for enter
prise development?
• Markets: local and global markets
• Raw materials
• Technology
• Capital
• Training: skills training, management training
• Business services
• Information
 Will women workers be protected from gender-based violence and other labor law violations?
 Will the informal sector producers and workers be able to avail of support mechanisms (such as social
protection, child-minding centers, etc.) that empower women?
 Do skills trainings and product-related services delivered to women avoid gender stereotyping?
 Are issues and concerns that impact on women’s ability to access productive resources or to become
economically empowered addressed?
• Relations between women and their partners
• Personal empowerment i.e. building self-esteem
• Equity concerns, i.e. exclusion due to religion, ethnicity
• Reproductive concerns
• Women’s overall lack of political empowerment which affect their decision making
 Do the strategies pay special attention to the needs of rural women and indigenous women?

Source: LGSPA, 2009.


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Also, the LED strategy should be able contribute to poverty alleviation targets and positively impact
the most vulnerable sectors of the population. The following are some guide questions on assessing a
program or project’s sensitivity to the needs of the poor:

• Will the program or project benefit a large number of poor families?


• Will the program or project empower these families to meet the minimum basic needs of income,
employment, health, nutrition, shelter, water and sanitation, basic education, and peace and order?
• Will the impact on each of the basic needs or poverty dimensions be direct or indirect?
• What is the anticipated degree of impact of the program or project on each basic need: high, medium,
low?
• Will the benefits of the program or project be felt immediately, in the medium-term or the long
term?

Priority should be given to programs and projects with more direct, a higher degree and wider-reaching
impact on the ability of the community to meet its basic needs.

Step 8: Document the LED Strategic Plan and Integrate in LGU Plans and Processes

At this point, the LGU LED team has five important tasks:

a) Put together the LED Strategic Plan according to an outline agreed upon by stakeholders(see
Box 3 for an example of the LED Strategic Plan Outline)

b) Plan for strategy presentation to and approval by the Local Development Council and Legislative
Council

c) Integrate the LED Strategic Plan in the CDP and ELA

d) Prioritize the programs and projects identified in the LED plan in the LGUs 3-year Local
Development Investment Program (LDIP) and the Annual Investment Plan; and

e) Incorporate the LED plan and accomplishments in the LGU annual processes including the
preparation of the department or unit-level operations plans and budgets, the State of Local
Governance Reports (SLGR), Annual Reports and the LCEs State of the Municipality/City/
Province Address (SOMA/SOCA/SOPA)

In integrating the LED Strategic Plan, the planning team should also be able to make the links between
64 Strategic Local Economic Development:
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the clearly entrepreneurial or economic strategies in the LED Strategic Plan and the other strategies
contained in the CDP and ELA that would impact on the local economy in the overall. Some examples
are social service and environmental management strategies that would shape the human capital and
ecological and natural resources in the locality in the medium to long-term.

Box 3. Example of a LED Strategic Plan Outline

Local Economic Development Strategic Plan Outline

Executive Summary
I. Introduction
A. Rationale/ LGU Background
B. The LGU LED Team
C. The LED Stakeholders Group

II. Local Economy and Competitive Assessment
A. Local Economy Profile
1. Demographic
2. Economic
3. Business Environment
4. Hard Infrastructure
5. Provincial, Regional, and National Factors
B. Competitiveness Assessment
1. Local Resource Inventory and Assessment
2. Strengths, Weaknesses, Opportunities, and Threats of the Local Economy
3. Profile and Value Chain Analysis of Industries that the Locality Has Competitive Advantage

III. LED Strategic Plan


A. Vision, Goals, Objectives and Performance Indicators
B. LED Strategies (Programs and Projects)

IV. Annexes
A. Demographic Data and Information Tables
B. Local Industry Competitiveness Ranking Matrix

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Stage 4: Implementing the LED Strategy

For the LED process to gain credibility and for the LGU and other LED stakeholders to demonstrate their
commitment to this endeavor, implementation should be carried out immediately after the LED Strategic
Plan is completed. This is also to take advantage of the momentum created in the preceding stages.

Stage 4 can be broken down into five steps:

Stage 4: Implementing the LED Strategy


Step 1: Prepare an Overall LED Implementation Strategy
Step 2: Prepare Individual Project Action Plans
Step 3: Build Institutional Frameworks for LED Implementation, Monitoring and
Sustainability
Step 4: Build Linkages with other Tiers of Government
Step 5: Carry Out Tasks in Project Action Plans

Step 1: Prepare an Overall LED Implementation Strategy

The execution of the LED Plan is driven by a broad implementation strategy, which in turn is driven
by individual project action plans. The overall implementation strategy lays out the budgetary, human
resource, institutional and procedural implications. It is thus the point of integration of all LED programs
and projects (Swinburn et al., 2006).

Swinburn et al. (2006) enumerates the key issues in implementing the LED Strategic Plan, as follows:

a) Who takes responsibility for each program or project?


b) What are the targets in terms of outputs and timing?
c) What steps need to be taken to achieve the targets?
d) What will the reporting structures and communication strategy consist of and how will they be put
into effect?
e) What are the performance monitoring and evaluation systems and processes?
f) What are the budgetary and human resource requirements for the sustained delivery of the project
or program?
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g) What are the institutional implications of the LED programs and projects, including internal
implications of the procedures and processes of the LGU?
h) What new departmental and staff coordination will be necessary to fulfill the project?
i) What are the new skills required for the implementation of programs and projects? (This is similar to
the LGU’s Capacity Development Plan for ELA Implementation)

Step 2: Prepare Individual Project Action Plans

After program and project selection has been completed, it is necessary to detail the actions that need to
be undertaken to implement each project. Table 17 shows an example of a project action plan template
that can be used to organize project components and activities, the expected results, the target sector,
the possible stakeholders and their respective roles or contributions, the project manager, the source of
funding, and the timeframe, outputs and costs of each activity.

Table 17. Example of a Project Action Planning Template


Project Title: LED Program Title:
Short Description of the Project (Project components and major activities):
Expected Results (Objectives): Target individuals, groups, organizations and sectors, and/
1. or broader systems:
2.
3.
4.
Stakeholders: Contributions to the Project:
1.
2.
3.
4.
Project Manager: Source(s) of Funding:
Activity Timeframe per Activity Outputs per Activity Cost per Activity
1.
2.
3.
4.

The individual action plans can then be discussed by the LGU LED team and select members of the
stakeholders group with the Local Finance Committee (LFC) for prioritization in the LGUs Annual
Investment Plan and for linking the actions plans to LGU budget. The LFC, together with the Local
Development Council (LDC), is a very important body in the LGU as it is in charge of setting up of the
level of annual expenditures and ceilings including that of the LED priority projects.

In making the case for LED programs and projects and seeking local government funding, it would be
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helpful for the LGU LED team to present to the Local Finance Council, the LDC and the Legislative Council
a cost-benefit analysis, showing how the economic benefits outweigh the investment and operating costs.
The same can also be done when accessing external fund sources.

Step 3: Build Institutional Frameworks for LED Implementation, Monitoring and


Sustainability

As the LED process moves from planning to implementation, the LGU needs to study the organizational
needs for implementing the LED Strategic Plan. Based on the LED strategy, programs and projects, and
the resources available for implementation, the LGU should analyze requirements for an effective LED
implementation. The following considerations can guide the LGU on its decision-making in this regard:

a) Propose an organizational ‘home’ and structure for LED implementation. Identify the three main
reasons why this is the most favorable solution for the LGU. For example, the LGU LED team
headed by the Mayor may still continue to coordinate strategy implementation but with project
management duties delegated to the respective project implementation teams, committees or
technical working groups consisting of members from the LGU LED team and the LED stakeholders
group. The LGU LED team and LED stakeholders group, which started off as ad hoc structures in
Stage 1, may be formalized through a Legislative Council resolution or a separate LED Assistance
Unit may be created through a local ordinance.

b) Based on the LED project action plans, identify which committees, task forces or teams should
participate in project implementation.

c) For the chosen home and structure, indicate how this structure will be established, how it will be
funded and what the reporting structure will be. Indicate the potential obstacles or problems that are
likely to need resolving in establishing and funding this organizational structure.

In Upi, the LGU passed a municipal ordinance creating a Business Development Center (i.e., as a
separate unit dedicated to facilitate LED programs and projects). This is to ensure that the structure
will remain even beyond the term of the current LCE. The BDC reports to the LGU LED team,
which in turn reports to the LED stakeholders group in regular monthly or quarterly meetings. The
BDC has a dedicated manager and staff to take the lead in the execution of the LED strategy and
provide business development and assistance services.

In Tugaya, primary cooperatives were organized to support the LGU implement the LED strategy.
The cooperatives manage common service facilities (kiln dryer and metal foundry) for its metal-craft

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and woodcraft industries as separate business enterprises.

d) Establish a group profile of the types of individuals that will comprise the key staff, and identify the
types of skills that these staff will need. Estimate the likely budget for undertaking this. In the case
of Upi’s Business Development Center, three plantilla positions were created including that of the
Business Manager. Four additional personnel from other LGU departments were detailed to the
office.

e) Determine which partner organizations or institutions are crucial to achieving successful project
implementation. What should their respective role be in the management and coordination of the
project?

Depending on the nature of the project, the private sector may be called on to provide logistical
support, technical assistance or even invest in an industry or enterprise being proposed in the LED
plan. In Upi, the active participation of the business sector in the LED stakeholders group led to the
establishment of the Upi Agricultural Ventures Corporation, a SEC-registered company, that is partly
owned by the LGU and some private investors. The corporation will own, operate and manage a
Halal organic fertilizer production enterprise as part of Upi’s LED Strategy implementation. In Wao,
the setting up of a rubber nursery, identified as one of the projects in the LGU’s LED plan, was also
taken on by private investors.

f) Organize the necessary policy, legislative and administrative support mechanisms needed to
implement the LED Strategic Plan. The LGU LED team and technical staff, in coordination with
the legislative council, should ensure that required legislations are included in the Legislative Agenda
of the Council. The LED team, together with the LCE and other elected officials, also need to
ensure that technical and legislative coordination and complementation are establish for programs
and projects that requires support at all levels (e.g., regional, provincial or barangay governments).

The political leaders can use their influence to initiate and build multi-level partnerships and networks
to support the LED process, and make the case for LED resource allocation (Swinburn et al., 2006).
They can engage the business sector and secure support from higher-level government agencies.

Step 4: Build Linkages with Other Tiers of Government

The LED process also entails not only working with other local organizations but also with other tiers of
government as discussed in Stage 1 and shown in Figure 4.

Building linkages with other tiers of government at the provincial, regional and national levels is necessary
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in planning for specific economic projects, formulating implementation strategies, and accessing external
technical and financial resources. For example, what provincial, regional and national programs are
available for industry sectors that the LGU deems as their most competitive? If livestock development is
a priority, what agencies have mandates related to livestock development?

Figure 4. Links with Other Tiers of Government


National Government Agencies
National Level and Attached Agencies such as
DTI, DA, QUEDANCOR

Regional Office of Agencies


Regional Level such as DTI, DA, DOST

SMEDC, Chamber of Commerce,


Provincial Level Industry Association,
Provincial Offices of DTI, DA

L O C A L L E V E L

Step 5: Carry Out Tasks in Project Action Plans

In carrying out the Project Action Plans, make sure that:

a) A Project Manager is designated for each project. It is not necessary that the project manager
has a high level of expertise. However, he or she has to have a reasonable understanding of the
technical needs of the project. Political sensitivity, leadership and ability to handle stress are other
skills normally required of the project manager
b) Members of the TWGs, Project Implementation Teams or committees have a clear grasp of their
respective roles and responsibilities in the project implementation
c) A Business Plan is prepared for each enterprise development project
d) A memorandum of agreement (MOA) is forged with any institution the LGU wants to partner with
during project implementation. The LGU of Tugaya, Lanao del Sur, for example, has forged a MOA
with the Mindanao State University-Iligan Institute of Technology (MSU-IIT) whereby the latter will
provide technical assistance on the setting up and operations of a wood kiln dryer and metal foundry
for a period of five years
e) Regular project monitoring and evaluation is conducted through meetings, site inspections, and
progress reporting

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Stage 5: Reviewing the LED Strategy

Although the LED strategy is usually written for a five to 10-year period, it should be quickly reviewed
each year in case it needs to be adjusted in response to dynamic local economic conditions. It is not
something set in stone, but a dynamic instrument that should be changed as local conditions change
(Swinburn, 2006).

The implementation of the LED strategy should go through a more rigorous annual assessment. This
review should make use of established monitoring and evaluation indicators of the local economy and
resources available for the strategy effort. The review needs to cover not just inputs, outputs, outcomes
(and where possible impact), but the implementation processes, including levels of participation. Alongside
the review of the entire strategy, systems should be in place to monitor the progress of every project. All
these systems will give decision-makers the tools they need to adjust the strategy in response to dynamic
local conditions (Swinburn, 2006).

This stage can be broken down into two steps:

Stage 5: Reviewing the LED Strategy


Step 1: Implement an M & E Strategy
Step 2: Revise the LED Strategy according to M & E Results

Step 1: Implement an M & E Strategy

Monitoring is the continuous assessment of the LED strategy and/or project implementation in relation to
agreed schedules, and of the use of inputs, infrastructure, and services by project beneficiaries (Swinburn
et al., 2006).

Evaluation is the periodic assessment of a LED project’s relevance, performance, efficiency, and impact
(both planned and unplanned) in relation to stated objectives. Evaluations can be divided into two categories.
‘Process evaluations’ focus on the implementation of programs or projects, while ‘outcome evaluations’
focus on program results. Process evaluation is concerned with how a program can be improved while
outcome evaluation is concerned with whether the program actually works. Process evaluations overlap
with monitoring activities and both are concerned with project or program implementation (Swinburn
et al., 2006).

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Monitoring and evaluation (M&E) is a very important management tool in the LED implementation.
Performance indicators as laid out Stage 3 particularly in the step on “Objectives and Performance
Indicators” will be a major component of the LED Implementation M&E system. Input and output
tracking are also important regular activity of the LED M&E system along with process assessments. LED
impact assessments should also be done and should coincide with the other outcome assessments in the
LGU like the LGPMS development assessments which is done every three years.

The M&E system should also include existing performance self-assessment systems that would help
enhance the LGUs capacity to implement the LED strategy. This includes the LGPMS, the System on
Competency Assessment for Local Governments (SCALOG), competitive assessments programs and
others.

As described in the LGSPA Manual on the Local Planning Process, the following are the key elements of
an M & E strategy:

a) Performance indicators and targets to measure progress towards the achievement of goals, objectives
and outputs developed in Stage 3
b) Data source to assess performance vis-à-vis target
c) Collection methods to gather data on each indicator
d) Frequency at which measurements will be made
e) Responsibility centers for monitoring progress towards each result

It can also include the frequency of reporting the M&E results and to whom. For example, M&E results
can be reported back to the LED stakeholders group during monthly or quarterly meetings as well
as to the Local Development Council. These can also be fed into the annual LGPMS database and,
consequently, to the State of Local Governance Report. Information on significant LED outputs or
outcomes may also be disseminated to the general public through the LCE’s State of the Municipality/
City/Province Address (SOMA/SOCA/SOPA).

The LED M&E system should also build on and utilize existing monitoring and evaluation mechanisms
in the LGU. For instance, impact assessments can be assigned to the Local Planning and Development
Office together with the appropriate sectoral committee of the LDC. The LDCs Project Monitoring
Committee (PMC) can also be tapped for monitoring of LED projects funded by the LGU development
funds, ODA and national funds.

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Step 2: Revise the LED Strategy according to M&E Results

The LED Strategic Plan can then be reviewed and enhanced periodically based on the results of the
M&E to ensure that it continues to be relevant and responsive to current conditions. The World Bank
LED Primer recommends that the following issues should be taken into account when revising the LED
strategy:

• Is the SWOT analysis still valid or have circumstances changed?


• Is more information available and have key issues changed as a result?
• Should changes be made to the vision, goals or objectives to reflect changing circumstances?
• Are projects achieving the expected results? If not, what can be done?
• Are performance indicators being met? If not, why not?
• What changes need to be made?
• Should the indicators be changed?
• Should there be more action on projects?
• Should the projects be changed?

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74 Strategic Local Economic Development:
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Chapter 3

LED in Practice

is a compendium of LED experiences, innovations and good


practices of selected LGUs in the Philippines including those of
Wao and Tugaya in Lanao del Sur, and Upi in Maguindanao, which
are municipalities covered by the LGSPA. LED initiatives of
the provincial government of Bohol the city government of
Tuguegarao in Cagayan, the city government of Naga in
Camarines Sur and the municipal government of Baybay
in Leyte are also featured. Useful insights can be
drawn from the different approaches and strategies
resorted to by these LGUs in stimulating
economic growth in their respective areas of
responsibility.
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This chapter presents some notable practices and positive results that were engendered in the application
of the LED process by selected LGUs. The first three cases follow the experiences of three LGUs in
the ARMM in the formulation of their LED strategies, their achievements to date (just one year into
the implementation of their LED plans) and the major factors that facilitated the LED process. The
last four stories feature local governments in other regions that also pursued economic development
initiatives through a strategic planning and participatory development process with assistance from other
development or foreign-funded programs. Hopefully, these success stories will motivate and inspire more
LGUs and LED practitioners to advocate LED both as a process and as a goal of good local governance.

Tugaya, Lanao Del Sur: Culture as an Engine of Local Economic Development

Tugaya is a small municipality along the western shore of Lake Lanao in the Province of Lanao del Sur,
with a population of 20,000 and a land area of a little over 4,000 hectares. The industry that fuels its
economy is its age-old arts and crafts that have been preserved and handed down through generations.
The whole town is virtually a workshop and a “museum” of Maranao arts and crafts – all intricately and
painstakingly done using traditional tools and methods and indigenous decorative designs. In fact, due to
its cultural value that is fostered by the distinctive artistry and skills of its people, Tugaya has earned an
NCCA (National Commission for Culture and the Arts) nomination to the United Nations Educational,
Scientific and Cultural Organization (UNESCO) World Heritage List. Despite this recognition, Tugaya is
largely unknown in the country as the source of Maranao brasswares, handlooms, hand-carved wooden
chests (baor) and furniture which are being sold in native crafts and furniture stores.

Formulating and Implementing the LED Strategy

In 2006, through the LGSPA’s LGU capacity-building project on facilitating LED, Tugaya completed its
LED Strategic Plan. As contained in the plan, the LGU envisions a “prosperous and productive Tugaya
that is the center of Maranao Arts and Culture in the Philippines, as showcased by its metal and wood
craft industry”. In its Local Economic and Competitiveness Assessment (LECA), the LGU LED Team,
together with the private sector and other LED stakeholders (including representatives from the Tugaya
Brassware Producers Association, Baor Producers Cooperative, Loom Weaving Association and the
Pandiaranao Womens’ Association), identified the following as the town’s most competitive industries:
handloom weaving, iron works, brass wares, wood carving, and goldsmithing.

In 2007, LGSPA organized a study tour for the Tugaya LED team and private sector representatives to
LGUs in Luzon known for their metal and wood crafts. This opened more opportunities in terms of
networking and market and production expansion. It also turned out that Tugaya was the first LGU
to visit the NCCA. The commission was so impressed by Tugaya’s initiative that it offered to provide
technical and financial assistance for a “cultural mapping” to support its nomination as a World Heritage
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Site.

The LGU LED team then enhanced the wood and metal crafts industry development plan incorporating
the learnings and knowledge gained from the study tour. A multi-disciplinary committee composed of
representatives from POs, academic institutions and metal and woodcraft organizations was also formed
by the LGU to conduct the cultural mapping, i.e., the research and documentation of the Maranao
tradition and culture in the municipality.

In 2008, the LGU passed a municipal ordinance to preserve, conserve and protect all places, structures,
relics and the like that are part of the heritage of Tugaya, particularly its metal and woodcraft industry. It
also passed a municipal resolution declaring metal and wood craft as its priority product under the “One
Town One Product” (OTOP) program of the Department of Trade and Industry.

Of late, the LED stakeholders group developed a business plan for its metal and woodcrafts industry and is
in the process of establishing a multi-purpose wood kiln dryer, a melting furnace, and a blacksmithing facility
in order to improve productivity and product quality. Two more benchmarking tours were conducted
to observe the design and operations of such facilities in Mindanao. The LGU and the Mindanao State
University - Iligan Institute of Technology (MSU-IIT) also reached a Memorandum of Agreement whereby
MSU-IIT shall provide technical assistance in the design, setting up, and operations and maintenance of
the said facilities. However, as mandated by the municipal ordinance, sites that use traditional equipment
and methods will still be preserved.

Towards the end of the LED project, LGSPA assisted the LGU organize the artisans and craftsmen into
three cooperatives. The wood and metal craft cooperatives will operate their respective common service
facilities as a business. The handicrafts cooperative, composed mainly of women weavers, will set up a
microfinance facility and a consumer store, and undertake bulk buying of raw materials.

Prior to the LGSPA LED project, the LGU was focused mainly on expanding the market of its handicrafts,
particularly in the retail market. After undergoing the LECA and LED strategy formulation, the LGU
realized that the development of the industry required an integrated approach addressing all aspects of
an enterprise, including: a) ensuring a sustainable supply of raw materials through environmentally sound
utilization of resources and production methods, b) enhancing productivity and product quality through
new but appropriate technologies that keep cultural integrity intact, c) accessing or facilitating access
to financial resources such as the OTOP, d) building LGU brand recognition and breaking into new and
institutional markets such as hotels, restaurants and interior decorators, and, e) creating a business and
investment enabling environment including the provision of infrastructure and power and water utilities
required by the industry.

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Factors that Facilitated the LED Process

The LED process by no means had a smooth start in Tugaya and only began to resonate to participants
when arts and culture, in which all of them had a common stake, was identified as the town’s main eco-
nomic driver. The participants also began to appreciate the process more when inputs and discussions
were translated or done in the Maranao language. Moreover, the nomination to the World Heritage List
produced a renewed sense of purpose to the LGU, private sector, academe and other government agen-
cies. With this recognition, the LGU hopes to position the municipality as a cultural tourism destination
and attract more support and investments for the preservation and promotion of its arts and crafts. It has
already received an award for “Culture-friendly Local Government” from the Office of the President.

The arts have been instrumental in facilitating social cohesion, bringing tourism to unlikely places,
fostering a sense of belonging, and preserving collective memory (Creative City Network of Canada,
2005). Despite a long history of clan feuding and political rivalries, the arts and crafts have truly built
community identity and pride in Tugaya. In fact, due to a shared interest and passion for their art, the LED
process has brought together community members from different clans and of different political colors
(as evidenced by the profile of the LGU LED team, stakeholders group and PO members). With the
continued collaboration in the implementation of the LED strategy, Tugaya will be an excellent testament
that culture-based industries can also provide a strong impetus to achieving local economic development
and peace.

Wao, Lanao del Sur: Pursuing Food Security and Environmental Sustainability
through the LED Process

The municipality of Wao is one of the 37 municipalities of the province of Lanao del Sur and geographically
the farthest from the seat of the provincial government in Marawi City, which is 325 kilometers away via
the Bukidnon - Cagayan de Oro City - Iligan City route.

Formulating and Implementing the LED Strategy

In 2007, with technical assistance from the LGSPA, the Wao LED stakeholders completed the LGU LED
strategy that articulates their vision of food security and environmental sustainability and their industry
priorities: upgrading and increasing the local herd of cattle and carabao, goat and dairy production, organic
fertilizer production, organic rice production, rice and corn seeds production, and rubber tree farming.
(See Table 12 in Chapter 2 for a summary of the Wao LED strategy).

Livestock industry development was first on the LGU’s LED implementation agenda. The LGU LED
team of Wao along with teams from two other LGUs in the ARMM went on a study tour organized by the
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LGSPA to LGU-managed livestock production centers and relevant government institutions in Mindanao.
As a result, Wao was able to enhance its LED strategy, refine its livestock industry action plan, and secure
technical support from the Philippine Carabao Center (PCC) at the Central Mindanao University (CMU)
in Bukidnon and from the livestock division of the Department of Agriculture - Region X in Cagayan de
Oro City. The partnership between LGU and PCC-CMU for the implementation of the Wao Livestock
Industry Development Program was formalized through a Memorandum of Agreement. Wao sent seven
technicians to the PCC-CMU for a month-long training on Artificial Insemination (AI) for large ruminants.
The PCC-CMU has also provided the LGU with AI equipment while the LGU has set aside budget for
liquid nitrogen and AI supplies. In addition, the LGU is conducting IEC activities and working with the
newly trained village-level technicians to promote the use of AI in large ruminants.

Technical Working Groups composed of members of the LGU LED team and the LED stakeholders
group are now finalizing business plans for the organic fertilizer production enterprise, goat production
enterprise and rubber production. The LGSPA organized a study tour for the team to visit organic fertilizer
producers in Mindanao and gain more knowledge about production and marketing. The organic fertilizer
enterprise will make use of compost from the LGU’s materials recovery facility that has equipment to
convert the biodegradable component of collected municipal wastes into compost. The enterprise will
also be working closely with the people’s organizations and households in several barangays that have
already been taught vermicomposting by the Helen Keller Foundation. It will buy vermicast from these
households as feedstock to the organic fertilizer production. The LGU is studying two options as to the
enterprise organization: a public economic enterprise or a corporation wherein the LGU will own 40%
to 60% of the stock while the rest will be private investments.

Meanwhile, a supplemental budget for the operations of the goat production public economic enterprise
has already been approved by the Sangguniang Bayan. Goat housing facilities have already been set-up;
an order for 25 upgraded does and one Anglo-Nubian buck has already been booked with the CMU; and,
staffing and management group of the goat farm has already been drawn-up. As for rubber production,
a rubber nursery has been established and is being managed by the private sector.

Factors that Facilitated the LED Process

The integration of crosscutting themes, particularly poverty reduction, gender equality and environmental
sustainability, is evident in Wao LGU’s priority programs and advances the principles of sustainable
development. To illustrate, the proposed organic fertilizer production ties with the LGU’s concerns for
solid waste management, land conservation, job creation, and gender equality (since women are actively
involved in vermicomposting). The LGU’s goat dairy production is envisioned to supply fresh milk to
the LGU’s feeding program, an initiative to address the high rate of malnutrition in the locality, as well as
create an alternative source of income to livestock farmers. Goat raising and milk processing also provide
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business opportunities for women. Rubber tree production, on the other hand, is not only a source of
income but can be used for reforestation purposes.

The momentum of the LED process was only disrupted once and this was around the time of the local
elections when a change in administration resulted in the shuffling of technical personnel from one
department to another. But despite the many local industry development action plans simultaneously
getting off the ground, the Wao LGU has been able to keep the LED strategy implementation moving due
to several factors:

• Systems for participatory governance are in place from the barangay to the municipal level
• Proximity to and continued partnership-building with resource institutions relevant to identified
priority industries such as the PCC, CMU, and DA Region X
• Sustained collaboration with private sector, banks, academe, POs, CSOs from the planning to
implementation stage
• A dedicated LGU LED Team and creation of technical working groups for the crops, livestock and
organic fertilizer projects. The Municipal Agriculture Office personnel in charge of crops and livestock
head the TWGs for the first two concerns. The Municipal Environment and Natural Resources Office,
on the other hand, is spearheading the organic fertilizer project
• The Vice Mayor and the Chairperson of SB Committee on Agriculture are active LED champions.
Thus, local funds for the LED projects are easily accessed

Upi, Maguindanao: Developing the Entrepreneurial LGU through the LED Process

Upi, a 3rd class municipality, is one of the more progressive municipalities in the province of Maguindanao
in ARMM. A community of “tri-people”, Upi is predominantly populated by Tedurays (44%), the native
inhabitant of the place, followed by the Maguindanaons (27%) and the Ilonggos and other settlers (17%).
It has a total land area of 74,295 hectares with 24, 350 hectares devoted to Forest area. It has a population
is at 51,650.

Economically, the municipality is known for its corn (18,268 hectares) and upland rice (6,724 hectares)
production. Based on its municipal agricultural profile, the area has 25,000 farmers with an average
annual income of P50, 000.00. Employment and business shares a small percentage. Native handicrafts
such as bags, baskets, decors made of rattan and bamboo craft are available and can be customized upon
request. Culturally, Upi promotes its tri-people approach to traditions through celebrations like the
Meguyaya Festival.

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Formulating and Implementing the LED Strategy

The LED program of the municipality of Upi, Maguindanao started in 2005 during LGSP II. This was
followed up by LGSPA in 2008 with technical support for the implementation of the Upi LED Strategic
Plan. This particular assistance was aimed at a) deepening the Upi LED team and the Upi stakeholders
group’s appreciation of the LED process and of the Upi LED program, b) building their knowledge and
skills in identifying priority industries or economic sectors, and c) enhancing their capacity to support and
assist local SMEs, especially in these priority sectors. The LED stakeholders group identified cereals,
high-value commercial crops, rubber, ecotourism and livestock as the municipality’s most competitive
industries. The group then undertook a series of planning workshops and study tours to enhance the
strategic plan and fine-tune individual project action plans.

While doing the value chain analysis of Upi’s corn industry, the LED stakeholders group discovered that
fertilizers, seeds, and pesticides accounted for 80% of the cost of local corn production. Of the PhP500
million annual value of corn production in Upi, PhP400 million was draining out of the local economy because
farmers were buying these inputs from outside sources. The LGU then saw an opportunity for import
substitution, job creation, and reduction in crop production cost in setting up a Halal organic fertilizer
enterprise. This enterprise eventually became a top priority in the LED strategy implementation. The
Upi LGU in partnership with the business sector has created the Upi Agricultural Ventures Corporation,
a SEC-registered company, that will own, operate and manage the organic fertilizer enterprise. The
business sector has invested PhP200,000 to the corporation while the LGU has put up PhP2 million for
the licensing fee of a particular organic fertilizer brand.

In 2007, the LGU created a Business Development Center (BDC), a unit under the Mayor’s Office, to
provide business development support services to entrepreneurs. LGSPA assisted Upi in the formulation
of the BDC operations manual and strengthened its capacity in mainstreaming gender equality in the
BDC services and the LED programs and projects. During a review of the BDC structure, systems
and operations plan in 2009, the Upi LED stakeholders’ group agreed that the BDC functions would
encompass the strategies for SME development (See Stage 4 of the LED Process), namely, business
investment and environment, facilitating access of Upi SMEs to finance and market, and providing support
services to enhance productivity including improvement of production of Upi SMEs. As of writing,
the BDC is working on establishing a one-stop office for business registration in partnership with the
DTI Maguindanao Provincial Office and organizing farmer-entrepreneurs, including the Upi Women’s
Federation, as LGU partners in developing the ginger and other high value commercial crops production
and the organic fertilizer raw material production.

In addition, the LGU is negotiating with the Land Bank of the Philippines to establish the first ever banking
services in the municipality. It is also developing its tourism potential through the Tourism Council to
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promote spelunking, waterfalls, and other outdoor challenge activities.

Factors that Facilitated the LED Process

Like other successful LED cases, the local chief Executive in Upi took primary responsibility for LED
planning and implementation. Guided by Mayor Ramon Piang’s drive, leadership and analytical skills,
the LGU was able to make significant investments in the LED program in a short period of time. Other
helpful factors include the active participation of the private sector through the LED stakeholders group,
the LGU’s judicious use of funds, and its strong linkages with higher levels of government.

Tuguegarao City, Cagayan: Enhancing the Business Enabling Environment for


Community-Based Enterprises

Tuguegarao City is the capital of the Province of Cagayan and the center of the Cagayan Valley Region,
located in Northeast Philippines. It is one of the cities included in Phase 2 of the City Development
Strategy4 (CDS) Program in the Philippines in 2002. The CDS is a participatory planning process that is
a combination of learnings derived from the CDS process developed by the World Bank and the Local
Environmental Planning and Management Program, which is based on the Sustainable Cities Approach of
UNDP. The objectives of the CDS are to:

a) Guide the city’s direction for economic development with the aim of creating more employment
opportunities;
b) Develop a consensus building process to establish the city’s priorities, strategies and actions;
c) Assist the local authorities outline their financing and investment strategies; and
d) Build local capacity for more effective urban management.

4In the annual Cities Alliance Strategies Employed


Public Policy Forum in 2007,
the League of Cities of the
Philippines (LCP) Secretary In a speech given in a 2004 CDS Conference in Hanoi Vietnam, then Mayor Randoph S. Ting of Tuguegarao
General Mayor Mel Senen
Sarmiento of Calbayog City
shared that several tools were used in formulating their CDS. These include the Technology of Participation
said that “Through the CDS, (TOP), Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis, Priority Identification, Consensus-
cities have adopted a new
approach to managing their building, Strategy Formulation, Decision Analysis, Forecasting and Capital Investment Planning. He said
cities. First and foremost is
the realization of the city as
that CDS has taught the LGU to involve all stakeholders in developing their urban indicators, formulating
an economic space. Cities are the City Vision, agreeing on strategies and priority projects, deciding on the best mix of resources and
identifying their competitive
advantages and maximizing reviewing their efforts together.
these in promoting local
economic development.”
(Retrieved from http:// One of the LED programs adopted by Tuguegarao under its CDS is the One Barangay, One Livelihood
www.lcp.org.ph/04142008_
PhilCities.htm). (OBOL) Program, which was inspired by the One Village, One Product Movement of the Oita Prefecture
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of Japan. The program is aimed at enabling barangays to successfully operate economic activities, provide
gainful employment, boost the local economy, and create products that shall become their respective
trademarks.

In 2003, the LGU also launched the Tuguegarao City Technology and Livelihood Development Center
(TCTLDC), a knowledge and skills center in the countryside (Tuguegarao LGU, n.d.). It is tasked to
provide the needed technology and networks to transform Tuguegaraoeños into self-reliant and globally
competitive entrepreneurs. It offers the following services to the public:

• Technical Assistance (on-site trainings, post training services and techno forum)
• Business/Livelihood Technology Trainings (project development and packaging. Business counseling
and capability building
• Marketing Services (market linkages, trade fairs, events marketing)
• Financing Assistance (micro/project lending and venture capital)

In 2005, the TCTLDC conducted a total of 20 trainings, techno-demos and seminar-workshops including
the highly successful livelihood-training-workshop “Isang Gunting, Isang Suklay, Hanapbuhay.” Market
linkages and promotions for the Padday na Ybanag products were also strengthened through participation
in local and national trade fairs.

Tuguegarao City also launched a “Kasanayan sa Hanapbuhay” (Apprenticeship and Learnership Program),
an employment generation strategy in cooperation with TESDA, DTI, DOLE and the private sector.
Thirty firms registered and successfully completed the training of 244 apprentices/learners.

Results Achieved

In his 2004 speech, Mayor Randolph Ting said that the CDS has dramatically improved the implementation
of the LGU’s Poverty Reduction Agenda and Local Economic Development program. The number of
households living below the poverty threshold has decreased from 11,416 households in 2000 to 5,121
households in 2003 (Ting, 2004).

As of 2004, under the OBOL program, the city government has successfully facilitated the establishment
and operations of community-based enterprises in 21 out of its 49 barangays. The most popular products
include the roasted peanuts of Pallua, the carabao milk candy and chocomilk of Namabbalan and the
cacao choco balls of Capatan, which is a favorite centuries-old family recipe. The wide-ranging OBOL
enterprises featured in the Tuguegarao City government website, http://www.tuguegaraocity.gov.ph,
include swine fattening in Libag Sur, organic fertilizer production in Cataggaman Nuevo, and metal craft
in Larion Bajo, among others.
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Naga City, Camarines Sur: Good Governance as Catalyst of Economic Growth

Naga City is located in the province of Camarines Sur, Bicol region (Region V) and is 450 kilometers
southeast of the National Capital Region (NCR). It has a total population of 160,516 as of 2007 (NSO
Census) and a land area of 8,448 hectares.

In the early 1980’s, Naga City was not a desirable place to live in as gambling and other vices proliferated,
the city government was spending more than its resources and the quality of life was not getting any
better. This situation turned around when then 29 year-old Jesse Robredo was elected as city mayor in
the 1988 election (Mangahas, 2006).

Strategies Employed

Naga’s achievements were not realized overnight. Its exemplary governance practices evolved over time
through the following initiatives (Mangahas, 2006):

Economic Governance - The city government propelled economic activities by instituting and nurturing
strong partnerships with organized sectors, encouraging people’s participation, taking the lead in strategic
planning, and empowering the private sector.

Improved Local Government Capability – Personnel hiring and staffing is based on aptitude and
competence, not on patronage. A Productivity Improvement Program and a Merit and Promotion Board
were established to encourage innovation and productivity improvement.

Formation of the Metro Naga Development Council (MNDC) or Metro Naga – The Council,
comprising of Naga City and 14 towns of Camarines Sur, is a mechanism that allows complementation of
limited resources and pooling of investment potentials and comparative advantages to ensure balanced
growth and sustainable development in the Metro Naga region. The city government of Naga served as
a competent and willing regional development catalyst by spearheading the formation of an economic
region out of disparate political units in the province.

Partnerships with the Private Sector - The city government encouraged private sector partnerships
by improving cost-efficiency in the construction of public works, practicing transparency in its operations,
and implementing other confidence-building measures.

Institutionalized Participatory and Inclusive Governance – The city government organized and
authorized a People’s Council (composed of accredited NGOs) to sit in every legislative committee and
local special body through Ordinance 95-092. It also published the Naga Citizen’s Charter that provides
84 Strategic Local Economic Development:
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step-by-step procedures for availing its 150 frontline services and has set up a website (www.naga.gov.
ph) that updates citizens on the city’s finances, policies and activities.

Local Policies and Initiatives - By virtue of Ordinance No. 97-114, the city government grants incentives
to investors in preferred industries to generate jobs and promote balanced growth. The Investment
Promotions and Action Center implements the investment Board’s objectives, markets Metro Naga as an
investment site, facilitates joint venture projects with local and external investors, and provides assistance
to investors.

Economic Planning and Analysis – The Mayor transformed the planning process into one that is
participatory, need-focused, long-term and views the city as an economic space whose sustainability also
depends on conditions beyond its geographic environment.

Financing Development – Development projects were financed from bank borrowings, mixed public-
private financing, grants and local revenues (which account for over 40% of the city’s total income).

Results Achieved

As a result, the city government income rose from $0.5 million in 1988 to about $6.0 million in 2001.
To date, Naga boasts of a dynamic economy made evident by its 6.5% average annual growth rate, an
average family income that is 126% and 42% higher than the national and regional averages, lower
unemployment rate of 5.2%, and a lower poverty incidence of 29% compared to 50% of the region. It
accounts for 21% of total investments in the Bicol region. It has garnered more then 100 international,
national, and regional awards. The most notable of which are being one of the Philippines’ most livable
cities (Interface Newsmagazine), one of four most improved cities in Asia (Asiaweek,1999), and having
one of the Top 10 Best Practices worldwide (Dubai International Award, 1998). Naga City is now one
of the country’s brightest economic spots, a model local government unit and a center for innovation in
local governance (Naga LGU, n.d.).

The Naga Governance Model has been tested and fine-tuned over the years and rests on three key
elements, namely: progressive development perspective, functional partnerships and people participation.
Growth-oriented and equity-building strategies were particularly employed to forge and nurture city
government and private sector partnership (Naga LGU, n.d.). Growth-oriented strategies promote
economic development and expand investment opportunities while equity-building strategies ensure that
the poor benefit from the fruits of development.  These are service delivery mechanisms that fulfill the
promise of development for all, particularly the poorest sectors of society.

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Baybay, Leyte: Setting the LED Direction through Participatory Economic


Planning5

Baybay is one of the 41 towns of Leyte Province. It has 92 barangays with a total land area of 46,050
hectares, making it the largest town in Eastern Visayas (Region VIII). Based on the 2007 NSO census,
Baybay registered a total population of 102,526. It is home to the world renowned Visayas State
University (VSU), the biggest agricultural school in the Philippines. It is an agricultural community with a
high potential for agro-industries. Specialty Pulp Manufacturing, the largest abaca pulp mill in Asia, two
coconut mills and a big activated carbon plant are some of Baybay’s
industry locators.

Strategies Employed

The local government unit (LGU) of Baybay believed that huge resources are required for local economic
projects to be successful. This mindset plus the traditional practice of implementing projects from a list
prepared and prioritized by department heads characterized the development outlook of the LGU prior to
the Department of Trade and Industry (DTI) and German Technical Cooperation (GTZ) interventions.

In 2005, consultation workshops were held to build a consensus on the economic issues, local needs
and doable strategies that would stimulate economic growth in the municipality. The participatory
planning process of the Local and Regional Economic Development (LRED) approach was introduced
to the participants who came from both public and private sectors. Emphasis on building private-public
partnerships, motivation and engagement of the stakeholders, encouraging learning and creativity, shifting
ways of thinking, building local ownership and securing “buy-in” of key stakeholders to actively cooperate
for a common economic good were emphasized.

This initiative was made possible through the Small and Medium Enterprise Development for Sustainable
Employment Program (SMEDSEP), a development cooperation project between the Republic of the
Philippines and the Federal Republic of Germany that aims to improve the Business and Investment
Climate for Small and Medium Enterprises (SMEs) in the Philippines, especially in the Visayas. SMEDSEP
is implemented in partnership with the DTI at the national, regional and provincial levels and the GTZ on
behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

5This account is largely based The participatory planning process was appreciated by the participants representing stakeholders from
on the Small and Medium
Enterprise Development
the private sector, community residents, local partner NGOs and the local government. As a result, a
for Sustainable Employment strong sense of ownership of the Local Economic Development (LED) Action Plan of Baybay emerged
Program’s (SMEDSEP)
success story on Baybay and motivated the stakeholders group into action.
written by Ria Adapon (n.d.).

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The LGU ensured the smooth implementation of the LED Action Plan by having four representatives
from the public and private sectors trained and coached by GTZ SMEDSEP and DTI on specific tools for
planning, implementation, monitoring and assessing the progress of the Action Plan and communicating
its results not only within the municipality but also to other areas in the Eastern Visayas Region. These
facilitators guided the local stakeholders in the LRED process with DTI and GTZ providing coaching
support. Mayor Jose Carlos Cari and Councilor Vic Veloso championed the process and their active
involvement facilitated the realization of the plan. Mayor Cari advocated the LRED in Knowledge Sharing
Fora and in Sensitizing Workshops in the Eastern Visayas. The LGU and private sector representatives
jointly monitored the progress of the Action Plan every month. The progress meetings, most often
attended by the Mayor, discussed key milestones, issues and next steps.

The LED Action Plan focused on tourism and investment promotion as its priority development areas.
The LGU reactivated the Tourism and Investment Council which established the Tourism and Investment
Promotion Office (TIPO). The position of Tourism and Investment Officer (TIO) was created and was
tasked to operate the TIPO. The TIO also acted as the LGU’s focal person for the LRED initiatives closely
coordinating with the GTZ and the regional office of the Department of Tourism.

Results Achieved

Consequently, Baybay was recognized for its effectiveness in tourism and investment promotion through
its promotion materials, participation in outbound investment and benchmarking missions to Malaysia and
Singapore, and active participation to Tourism Fairs outside the Leyte Province. Better coordination with
the regional Department of Tourism (DOT) has likewise resulted to the inclusion of Baybay in the region’s
promotional materials, activities and in the Tourism Map of Eastern Visayas.

The Baybay Tourism and Investment Promotion Office has also aggressively promoted the municipality as
a location for business and a tourist destination in its website and has established links directly with hotels
and tourism operators in the Visayas. Since 2005, approximately PhP 125 million was invested in Baybay,
a clear demonstration that Baybay has improved its business climate and institutional environment. As a
result, the Philippine Chamber of Commerce and Industry’s Most Business Friendly LGU Award Program
cited LGU Baybay in 2006 for its efficient Investment Promotion.

While the LGU recognizes the quick wins, specifically in the areas of Tourism and Investment Promotion, it
has further taken the following steps in 2007 to sustain the gains: integrating the short term LRED Action
Plan to its Comprehensive Development Plan and applying the participatory planning approach of LRED
in all planning activities. The LGU is also committed to institutionalize the planning approach through
iterative capacity building, allocation of financial resources to sustain LRED initiatives and creation of
monitoring mechanisms.
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LED in Practice

Bohol: Local Economic Development (LED) through Investments Promotion and


Good Governance

Bohol is the tenth largest island in the country, located between the islands of Cebu and Leyte (Gawad
Galing Pook, 2001). It has a population of 1,230,110 (2007 NSO Census) and a land area of 4,117 square
kilometers. It consists of 47 municipalities and one city.

Bohol was one of the provinces that experienced severe unemployment and massive out-migration
due to lack of countryside opportunities. This led to a low population growth rate (average of 0.89%
yearly) (Gawad Galing Pook, 2001), underinvestment and brain drain. Then Governor Rene Relampagos
initiated the Bohol Investment Promotion Program (BIPP) to promote Bohol as an investment and
tourist destination; to encourage business and finance projects; involve citizens in policy formulation
on investment promotion; and establish and maintain an information base to aid policy formulation and
technical assistance.

Strategies Employed

A brief account of BIPC’s humble beginnings was documented by Gawad Galing Pook (2001), as
follows:

1. Public Consultation -The provincial government with the assistance of the ARD-GOLD of the
USAID conducted a series of consultation-workshops from October 1995 to December 1996 using the
Technology of Participation. These were participated in by provincial and municipal officials, selected
national agencies, NGOs and private sector. Participants were clustered by municipalities based on the
grouping of the League of Municipalities. Determining the province’s preferred growth focus, the strategic
public and private investments and project requirements per growth focus were done. A Technical
Working Group (TWG) was created to define the direction of the province, followed by the formation
of the multi-sectoral Bohol Investment Promotion Advisory Group (IPAG) which took on the functions
identified by the TWG. The consultations identified three drivers of economic growth: eco-cultural
tourism, agro-industrialization and light manufacturing.

2. Creation of the Bohol Investment Promotion Center - The program capacitated the technical
support group called Bohol Investment Promotion team on investment promotion through cross-visits,
formal orientations on special skills, production of promotion collaterals and project packaging. The
provincial government provided office space, equipment and materials amounting to PhP1.4 million.

A series of Industry Assessment Workshops on the agro-industrial sector were also conducted that led
to the identification of nine priority agricultural sub-sectors. The Bohol Investment Promotion Team was
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replaced by the Bohol Investment Promotion Center (BIPC), which is tasked to facilitate the immediate
setting up of investors’ projects. In October 1998, BIPC was created through an Executive Order by the
Provincial Governor. It was formally established on February 1999 by virtue of a Sangguniang Panlalawigan
ordinance.

The BIPC embarked on promotion activities such as materials production for the investors, infrastructure-
support organizations, government agencies and private sector; participation in travel marts, investment
exhibits, study and promotion missions to CALABARZON, Laguna, Cavite, United States and Osaka, Japan
to gain more insights on promotion and marketing, operation, and management. BIPC also developed a
website to provide access to international information-seekers.

3. Creation of a Livelihood Promotion Unit – In March 2000, a Livelihood Unit was created under the
BIPC to respond to the needs of existing and would-be small entrepreneurs.

4. Adoption of the Bohol Investment Code – The Sangguniang Panlalawigan adopted the Investment
Code that serves as a guide in the granting of fiscal and non-fiscal incentives.

5. Financing the Program – The Bohol Investment Promotion Program was financed by the Provincial
Government from various sources.

Results Achieved

After 13 years of persistent participatory and transparent home-grown initiatives, Bohol has successfully
extricated itself from “Club 20”, i.e., the 20 poorest provinces in the country. Bohol has been a recipient
of various awards and citations for its exemplary performance in poverty reduction and economic
growth. In 2008, it was cited by the Konrad Adenauer Stiftung (KAS) for its excellence in governance
and sustainable development. Incumbent Governor Erico Aumentado was awarded a KAS Medal of
Excellence for piloting Bohol’s phenomenal growth and sustained development (Blanco, 2008a).

Gawad Galing Pook has been consistently giving out awards from 2000 to 2005 to the Provincial
Government of Bohol for its programs. It cited as Trailblazing Programs Bohol’s Investment Promotion
Program Providing Barangay Livestock Assistance for Income Generation and Sustainable Livelihood in
2000 and the Poverty Reduction, Peace and Development Program in 2005. Included in Gawad Galing
Pook’s Top Ten Programs in the country were Bohol’s Cultural Renaissance: Towards Synergy of Heritage,
Arts and Eco-cultural Tourism Development in 2002; the Bohol Coastal Law Enforcement Council in
2003; and, Bohol Ecotourism Development Program in 2004 (Gawad Galing Pook, 2005).

Bohol has hugely attracted both public and private investors in the country and abroad. ODA, national
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government funding, private sector investments, and grants from foundations or NGOs have been
pouring in to finance and stimulate Bohol’s economic drivers. Funding for hard infrastructure such as
roads, bridges, international airport, irrigation, mini hydro-electric plant, school buildings among others
has been sourced out. Likewise, technical assistance, job placements, human resource development and
other soft infrastructure are being provided by foreign-funded programs and international agencies like
the ADB, WB, GTZ, WFO, UNWTO, PAHRDF, USAID, EU; the governments of South Korea, Austria,
Bulgaria, China; national agencies like the PMS, DPWH, NEA, DA, NIA, DepEd, DTI, DAR, DOH, DSWD
and DOST; and, NGOs and foundations.

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Chapter 4

Lessons
Learned

documents the learning gained from the LGSP II and LGSPA LED
projects. These include strategies that work or do not, as well
as factors that facilitate or hinder the LED process. These
lessons are presented so that other LGUs can gain some
ideas on which approaches to avoid, adopt or modify
based on local conditions.

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Lessons Learned

This chapter presents some insights drawn from the LGSP II and LGSPA LED experiences. It includes
the factors that contribute to or hinder the successful implementation of the LED process as well as the
strategies that were found effective and those that were not. These LED experiences offer the following
lessons that will hopefully prove invaluable in enhancing approaches and strategies in advocating and
facilitating the LED process.

1. The prospect of community wealth creation is the major ‘selling point’


that has motivated LGUs and stakeholders to buy into and commit to the LED
Process.

In all communities, especially where there is chronic inability to meet basic needs, the proposition of
generating jobs, creating wealth and, ultimately, reducing poverty by embarking on the LED process
appeals to government and ordinary citizens alike. These are the themes that resonate to all stakeholders
– the poor and the vulnerable sector, civil society organizations, learning institutions, the business sector,
and all tiers of government. Some local leaders also recognize that a successful LGU-facilitated LED,
with its anticipated impact on the poorer and larger segment of the population, makes for good political
platform.

It is thus important that individuals and organizations advocating the LED process should be able to
communicate its connection to wealth creation, empowerment, sustainable development and other good
governance principles to be able to gain the attention and cooperation of LGUs and other stakeholders.

One way this can be concretely done is to make the links to economic and poverty data from the LECA,
the LGPMS and sectoral plans such as the Local Poverty Reduction Action Plan.

2. Any LGU can undertake the LED process.

The LED process can be done in or by any LGU, whether a municipality, city or province, and regardless
of income classification, as long as it is interested and willing to pursue local economic development
following the principles and procedures presented in this Guide. There are no other requirements or
criteria that an LGU should meet in order to begin the LED process or to qualify for technical assistance
from any program, institution or individual that provide capacity-building interventions to LGUs on LED.

3. A new initiative requires champions and new structures for implementation.

One of the immediate objectives of LED is to marshal the stakeholders and gain their acceptance and
cooperation to undertake the LED process. Championing this initiative primarily rests with the local chief
executive (LCE) who holds the greatest influence and authority among the local actors. Among LGSPA-
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assisted LGUs, the ones that have made significant strides in LED are those with LCEs that have bought
into and shown commitment to the LED process. It is also essential to get the cooperation of members
of the legislature so that ordinances and resolutions toward a favorable business climate can be passed
and fund allocation for LED programs and project can be facilitated. LED champions may also come
from the private sector and the community. The more advocates, the greater the likelihood of success
in achieving the LED goals.

Developing systems and structures for LED implementation begins with the organization of the LGU LED
team and the LED stakeholders group. These structures provide the foundation for more formal and
long-term collaboration – to include public-private enterprise partnerships – among representatives of
the three economic leaderships (Figure 2) in carrying out LED programs and projects. It is also important
to note that the municipal LGUs in LGSPA areas appreciated and recognized structures formed through
participatory analysis and planning processes, such as the LED stakeholders group, than they do existing
but inactive local bodies that were mostly created simply to comply with a national law.

4. LED success and sustainability rests on a strategic and planned approach.

The foundation of a good LED program is a sound participatory planning process. LED stakeholders are
able to come up with informed and resolute decisions through a deliberate, organized and systematic
strategic planning.

Undertaking the Local Economic Competitiveness Assessment (LECA) or Stage 2 of the LED process is
critical to be able to formulate LED strategies that are appropriate to the conditions and responsive to
the issues in the locality. Recent studies also show that an area’s competitive advantage is determined not
so much by one-shot, step-by-step planning but more so by an iterative process of “self-discovery” and
“searching and learning” consisting of both flexible planning and entrepreneurial risk-taking.

As shown in Figure 5, “Examples of LGU Behavior Models in LED”, a sustainable and purposeful LED
program or project is characterized by a high concern for both system (orderliness) and risk. A well-
planned LED stems from a highly systematic approach and an enthusiasm for innovation.

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Figure 5. Examples of LGU Behavior Models in LED


Examples of LGU Behavior Models in LED
HIGH
TRADITIONAL LED PURPOSEFUL/

Concern for System


SUSTAINABLE LED
•Livelihood development?
• Most PEE? •Planned LED

CRISIS LED OPPORTUNISTIC LED

•Credit retail (micro-finance)? •Some PSP/PPP projects?


•Some agro-industrial zones?

LOW Concern for Risk HIGH


*Adapted from the LGSP II PEE Behavior Models

5. There is not one exclusive approach for LGUs to facilitate LED. In fact, one of
the lessons from LED initiatives has been that duplication of initiatives is rarely
successful. Each locality is unique and LGUs are themselves entrepreneurial and
innovative.

Economic interventions should be customized according to the conditions unique to each target
community. Although two localities may have the same leading industries or resources, these industries
may differ in scale (e.g., volume of production and area covered), technologies used, access to support
facilities and markets, and other factors. LED strategies should take into consideration the physical,
natural, financial and human resource factors peculiar to each LGU.

LED programs proved to be successful in LGUs that are entrepreneurial and innovative. Such LGUs
promote competition between service providers. They empower citizens by pushing control out of
the bureaucracy, into the community. They measure the performance of their agencies, focusing not
on inputs but on outcomes. They are driven by their goals – their missions – not by their rules and
regulations. They prefer market mechanisms to bureaucratic mechanisms. They redefine their clients as
customers and offer them choices, e.g., between schools, between training programs, between housing
options. They prevent problems before they emerge, rather than simply offering solutions afterward.
94 Strategic Local Economic Development:
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They put their energies into earning money, not simply spending it. They decentralize authority and
embrace participatory management. And they do not simply focus on providing public services, but also
on catalyzing all sectors (public, private, and voluntary) into action (Osborne & Gaebler, 1992).

6. LED gains credibility when planned initiatives are immediately carried out.

After strategy formulation, it is necessary to immediately move to the implementation of priority LED
projects in order that the momentum and the energy created from the previous LED stages can be
carried over into implementation, and also for the LED process and its implementers to gain the trust and
confidence of stakeholders and the larger community. Concrete results early in the strategy execution
will ensure continued support and participation from local and external development partners. Pursuing
and sustaining LED then becomes high on the agenda not only of the LGU but of all LED stakeholders.

7. LED gives focus and direction to other programs of the local government.

All activities of the LGU influence the local economy. Social programs on health, education and
welfare as well as gender and development services impact the productive capacity of the labor sector.
Environmental projects protect and improve the locality’s natural resource base that is necessary for
sustainable economic activities. Infrastructure development facilitates production and marketing of
goods. Having a LED strategy, however, provides the various LGU programs a clear basis and focus. For
example, identifying organic fertilizer production as a LED priority in Wao provided direction to the solid
waste management program of the LGU. Prioritizing the metal craft and woodcraft industry in Tugaya
led to the development of programs for biomass fuel production (for kiln drying and firing purposes) and
support infrastructure and underscored the need for sustainable forest management.

8. The benefits of LED can be effectively reaped when the partnership between
the local government and the community translates into concrete and day-to-day
actions the principles of participation, responsiveness, equity, accountability and
transparency throughout the LED process.

Any LGU committed to LED must put in practice the principles of participation, responsiveness, equity,
accountability and transparency.

For the LED process to be inclusive and participatory, the LGU must seek the broad representation of
the economic sector stakeholders to ensure that economic development strategies capture the interests
and have the approval of everyone concerned. The convergence of the stakeholders’ ideas, resources
and networks is critical in successfully pushing economic growth. It also ensures the responsiveness of
strategies, programs and projects to the needs and core competitiveness of the community. On the
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Lessons Learned

contrary, economic strategies that are left to the hands of a privileged and influential few promote elitism
and often fail.

Equity is crystallized when economic gains, privileges, rights and responsibilities are, as much as possible,
equitably distributed. Economic growth should not only be characterized by increasing total earnings in
the local economy (such as growth in the “Gross Community Product”) but also by a narrowing of the
income gap between the rich and the poor.

Accountability should also be established for every deliverable in the LED process in order to get things
done right, on time and within budget. That is why the roles, duties and responsibilities of the stakeholders
group, LGU LED team and TWGs should be clearly defined from the very start but modifications and
innovations can be done later or when necessary. Economic interventions can go to waste due to
unorganized and uncoordinated implementation.

No less important among these principles is transparency, which promotes mutual trust among stakeholders.
This entails instituting mechanisms for information-sharing, making available economic sector information
to the general public and clarifying government economic rules, regulations, and decisions. Transparency
mechanisms include regular LED program or project performance (including financial) reporting to LED
stakeholders and the Local Development Council, community feedback mechanisms, and participatory
decision-making and monitoring.

9. Analyzing LED strategies through the gender lens promotes women’s


economic empowerment

Women play an important role in community building and local economic development. As cited in
Chapter 2, although more women than men have the propensity to start a business venture, more
women-owned enterprises fold prematurely. This phenomenon should be one of the concerns to be
addressed within the LED process. Gender equality should be analyzed in the LECA and espoused and
integrated in LED strategic plans. The LED process can serve as the springboard for women’s economic
empowerment.

10. There is a need to ensure that the LED process is supported and that key
outputs are achieved.

In undertaking the activities in the LED process, specific LED technical expert maybe required to ensure
the accomplishment of the activity. For instance, based on the LGSPA experience LGUs need technical
assistance in determining their comparative advantage and in formulating strategies to harness this (tools,
information requirements, an entrepreneurial mindset, replicable practices, new models). LED experts
96 Strategic Local Economic Development:
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may come from government agencies (e.g., DTI), from the private sector (e.g. consulting firms or even
entrepreneurs), and from the academe.

Appropriate technical support is also needed in guiding the LGUs in various approaches in implementing
the LED Plan (start-up versus scaling up; including agricultural, ensuring an entrepreneurial and value
chain-oriented approach; opting for a strategic response: enabling or facilitative; if direct service provider,
with a clear exit strategy).

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Sector. Addison-Wesley, Reading. Session%203/S3-02-Randolph%20Ting%20docEN.pdf

Philippines-Canada Local Government Support Program Tuguegarao LGU (n.d.). Livelihood Development. Retrieved from
(LGSP). (2003). Local Economic Development: Stimulating http://www.tuguegaraocity.gov.ph
Growth and Improving Quality of Life. Manila, Philippines:
Author. The World Bank Group (2007). Moving Toward Competitiveness:
Schmidt, J.F. & Myles, A.E. (n.d.). Understanding Your Community’s A Value Chain Approach. Retrieved from http://www.ifc.
Economy. Mississippi State University. Retrieved from org/ifcext/fias.nsf/AttachmentsByTitle/MovingTowardCo
http://msucares.com/pubs/publications/p1646.htm mpetitiveness/$FILE/Value+Chain+Manual.pdf

Swinburn, G. (2006). Local Economic Development LED Quick United States Agency for International Development (USAID)
Reference. Retrieved from http://www.worldbank.org/ LED Ukraine. (n.d.) LED Toolkit. Retrieved from http://
urban/led site50.tangram-studio.com/eng/tools/index.html

Swinburn, G., Goga, S., & Murphy, F. (2006). Local Economic World Bank & Cities of Change Initiative. (n.d.). Making Local
Development: A Primer - Developing and Implementing Economic Development Strategies: A Trainer’s Manual.
Local Economic Development Strategies and Action Plans. Retrieved from http://www.worldbank.org/urban/local/
Retrieved from http://siteresources.worldbank.org/ toolkit/pages/home.htm
INTLED/423069-1099670772921/20738133/led_primer.
pdf

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ANNEX A
The LGU Mandates and Related Laws on LED

1. Local Government Code • SEC. 109


“Functions of Local Development Councils.”
Republic Act 7160 or the Local Government Code has given
the local government units (LGUs) more power and authority 2. The Social Reform and Poverty Alleviation Act
to accelerate local economic development and improve the
quality of life in our communities. The following provisions are RA 8425 or the Social Reform and Poverty Alleviation Act
the most relevant to LED: stipulates that it is the declared policy of the State “to adopt
an area-based, sectoral and focused intervention to poverty
• SEC. 16 alleviation wherein every poor Filipino family shall be
“Every local government unit shall exercise its powers… which empowered to meet its minimum basic needs of health, food
are essential to the promotion of the general welfare. Within and nutrition, water and environmental sanitation, income
their respective jurisdictions, local government units shall… security, shelter and decent housing, peace and order, education
promote full employment among their residents…” and functional literacy, participation in governance, and family
care and psycho-social integrity.” It mandates LGUs through the
• SEC. 17 (B)(2)(IX) Local Development Councils (LDCs) to formulate, implement,
“Public markets, slaughterhouses and other municipal monitor and evaluate poverty reduction programs in their
enterprises.” respective jurisdictions, consistent with the poverty reduction
strategy of the national government.
• SEC. 17 (B)(2)(XI)
“Tourism facilities and other tourist attractions, including the 3. Laws on the Development of Small and Medium
acquisition of equipment, regulation and supervision of business Enterprises (SMES)
concessions, the security services for such facilities.
• MAGNA CARTA FOR SMALL ENTERPRISES (R.A. 6977)
• SEC. 17 (B)(3)(IX) The law requires the creation of the Small and Medium
“Investment support services, including access to credit Enterprise Development Council (SMEDC) so that there is
financing” close coordination between government institutions involved
in SME development and the private sector for coherence in
• SEC. 35 both policy thrusts and implementation of action programs. To
“Local government units may enter into joint ventures and address the problem of access to financing, the Magna Carta
such other cooperative arrangements with people’s and non- requires all lending institutions, whether public or private, to
governmental organizations to… develop local enterprise… set aside at least 6% and 2%, respectively, of their total loan
to improve productivity and income, diversity agriculture, spur portfolio for SME credit for a period of 10 years from August
rural industrialization… and enhance the economic and social 12, 1997 to August 9, 2007.
well-being of the people.”
• KALAKALAN 20 (R.A. 6810)
• SEC. 36 Assistance is provided to countryside barangay and business
“A local government unit may… provide assistance… to such enterprises through minimum regulation, and provision of
people’s and non-governmental organizations, for economic, financing and other government services and assistance.
socially-oriented projects to be implemented within its
territorial jurisdiction.”

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• AN ACT PROVIDING ASSISTANCE TO WOMEN • MC NO. 2001-109: Initial Areas for Action in the
ENTREPRENEURS (R.A. 7882) Implementation of Programs on Poverty Reduction and Local
Government financial institutions are mandated to provide Economic Transformation
financial assistance to non-government organizations engaged
in developing women entrepreneurs engaged in manufacturing, • MC NO. 2001-105: Designation of Local Poverty Reduction
processing, service and trading businesses Program Action Officers and the Functions of the LPRAO

• THE OMNIBUS INVESTMENT CODE (E.O. 226) • MC NO. 2002-30: Guidelines Prescribing Time Periods on
SMEs that are engaged in the priority areas of the investment the Adoption, Review and Approval of Comprehensive and
priorities plan are entitled to the standard incentives under the Land Use Plans (CLUPS)/ZONING ORDINANCES (ZOs) of
code such as income tax holiday for 4-6 years, tax and duty free Municipalities, Component Cities, Highly Urbanized Cities and
importation of capital equipment, additional deduction from Provinces
taxable income for labor expense, exemption from contractor’s
tax, unrestricted use of consigned equipment, and access to • MC NO. 2002-81: Creation of Local Culture and the Arts
bonded manufacturing warehouses. Additional incentives are Council
given to SMEs that locate in less developed areas. SMEs that
are registered with the Board of Investments (BOI) may avail • MC NO. 95-162: Inventory of LGU Tourism, Culture and the
of technical and other support services provided by the agency. Arts Councils

4. DILG Memorandum Circulars (MC) on LED • MC NO. 2001-19: Solid Waste Management Program
Implementation of Republic Act No. 9003 Otherwise Known as
The LGUs can also draw authority from the following DILG the Ecological Solid Waste Management Act 2000
Memorandum Circulars and the Joint Memorandum of DILG,
DBM and NCRFW when pursuing LED: (For a detailed • MC NO. 2001-38: Addendum to DILG MC 2001-19 Re-
description, refer to the LGSP Resource Book, Local Economic Implementation of Republic Act 9003, Otherwise Known as the
Development: Stimulating Growth and Improving Quality of Ecological Solid Waste Management Act of 2000
Life).
• MC NO. 2001-48: Addendum to DILG MC 2001-19 Re-
• MC NO. 2002-48: Local Economic Transformation Program Implementation of Republic Act 9003, Otherwise Known as the
for Local Governments Ecological Solid Waste Management Act Of 2000

• MC NO. 2002-107: Organization and/or Strengthening of • MC NO. 2001-48: Inventory of all Solid Waste Disposal
Local Small and Medium Enterprise Development Councils Facilities and Sites in LGUs
(SMEDCS)
• JOINT MEMORANDUM (DILG, DBM, NCRFW)
• MC NO. 2002-09: Implementation of the LGU-Cluster CIRCULAR NO. 2001-01: Guidelines for Integrating Gender
Development Approach Project (LGU-CLAP) as a Strategy in and Development (GAD) in the Local Planning and Budgeting
the Adoption of One Village, One-Product Movement System through the Formulation of GAD Plans

• MC NO. 2001-172: Guidelines on Poverty Reduction Program • MC NO. 2002-163: Creation of Local Council for Women
for Local Governments

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ANNEX B
Data for Local Economy Profiling

1. Demographic

1.1 Population
• Population Size (Compare w/ other municipalities in the province and in the region)
• Population Growth rate (compare with other municipalities in the province and in the region)
• Population Density (compare with the other municipalities in the province)
• Population By Age Distribution (to be used to analyze the labor factor)
- 0-14 yrs old
- 15-64
- 65 above

1.2 Labor and Employment
Use the ‘Table: Household Population 15-65 Years Old by Employment Status and Sex’ to show data and
information on Labor and Employment. This is contained in all Socio-economic or Ecological Profiles of LGUs and
NSO Population Surveys

1.3 Education and Training
• Colleges or tertiary education establishments by type and numbers attending. (Include vocational and technical
schools)
• Educational attainment levels by numbers and types. Use the ‘Table: Population 5 Years Old and Over By Highest
Educational Attainment Completed and Sex’. This is contained in all Socio-economic Profiles of LGUs and NSO
Population Surveys.
• Number of training centers and research institutions in the locality.
• Regular training programs conducted (e.g., TESDA trainings)

2. Economic Profile

2.1. Primary Sector (Agriculture)

a. Crops (other than fruits and vegetables, e.g., rice, corn, coconut, sugarcane, cassava, coffee, rubber tree, etc.)
• Production – hectares planted, % to total municipal area,% to total agricultural land, location (barangays),
average yearly volume and value of production (Compare with other municipalities in the province and in
the region), average yield per hectare (Compare with provincial or regional figures from the Department of
Agriculture Bureau of Agricultural Statistics)
• Per Capita Consumption – Use average provincial per capita consumption and compare it with regional and
national. Important for staple food crops like rice, corn, and cassava.
• Number of farmers/ firms engaged in the production

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b. Fruits and Vegetables
• Production – hectares planted, % to total municipal area,% to total agricultural land, location (barangays),
average yearly volume and value of production (Compare with other municipalities in the province and in
the region), average yield per hectare (Compare with provincial or regional figures from the Department of
Agriculture Bureau of Agricultural Statistics)
• Per Capita Consumption for selected crops – Use average provincial per capita consumption and compare it
with regional and national.
• Number of farmers/ firms engaged in the production
c. Aquaculture and Fisheries
• Production/catch – hectares covered, % to total potential area, location (barangays), average yearly volume
and value of fish catch. (Compare with other municipalities in the province and in the region).
• Per Capita Consumption for selected species – use average Provincial Per Capita Consumption and compare it
with Regional, and National).
• Number of farmers/ fishers/firms engaged in the production

d. Livestock and Poultry
• Herd inventory by type of livestock (cattle, carabao, swine, and goats) and poultry (chicken and ducks)
• Value of herd inventory
• Current local consumption in kilograms per type of livestock – use average Provincial Per Capita Consumption
(if not available use Regional Per Capita Consumption) and multiply by total local population to get local
consumption
• Local production in kilograms per type of livestock – (Average meat recovery /carcass weight per type of
livestock multiplied by the estimated percentage of herd inventory available for slaughter)
• Estimated number of farmers/ firms engaged in livestock (per animal type) production

e. Support Services to Local Agriculture
No of LGU Staff that provide agricultural extension services (Crop technician, fishery technician, livestock
technician, etc.) and their areas of expertise and highest educational attainment.
Provincial, Regional, and National DAF programs/projects currently implemented in the locality in partnership
with the LGU.

2.2 Secondary Sector



a. Manufacturing – Type, number of firms, name of firms, and number employed in each firm
b. Construction – Number of firms, name of firms, and number employed in each firm
c. Mining & quarrying - Type, number of firms, name of firms, and number employed in each firm
d. Water, electricity, & gas - Type, number of firms, name of firms, and number employed in each firm

2.3. Tertiary Sector



a. Financial services - Type, number of firms, name of firms, and number employed in each firm
b. Transport - Type, number of firms, name of firms, and number employed in each firm
c. Tourism & other related services - Type, number of firms, name of firms, and number employed in each firm
d. Community, social and personal services (health and wellness facilities, sports facilities, etc. Including government
facilities) - Type, number of firms, name of firms, and number employed in each firm
e. Wholesale and retail trade - Type, number of firms, name of firms, and number employed in each firm

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2.4 Unaccounted (informal economy)
Type, number of firms, name of firms, and number employed in each firm

3. Business Environment - Data and information that detail how the local government helps or hinders
businesses in the formal and informal sectors.

• Taxation of businesses
• Amount of ‘red tape’ or excessive and complicated bureaucratic procedures
• Existence of business support networks and institutions such as Chambers of Commerce
• Local government economic development support – services offered or subsidized (e.g., Business Development
Services)
• Assessment of municipal government capacity to carry out local economic development functions (LGU income,
assets, capacity of the structures, skills of key LGU officials on LED planning and implementation, existence of
approved CLUP).
• Access to funding (training grants, business incentives)

4. Infrastructure

• Condition of water, electricity and wastewater and waste management in areas of economic activities
• Provision of land, real estate/office space for economic development activities including markets and Central
Business Districts
• Availability and quality of road and other transport modalities to nearest/major markets (e.g. ports, airports,
railroads, fishports, etc.)
• Availability of telecommunications infrastructure.
• Description of agriculture development infrastructure support (e.g. irrigation system, farm-to-market roads, solar
dryers, water impounding system, public markets/trading post/food terminals, etc.)

5. Provincial, Regional, and International Factors - Presents Provincial, Regional and National information that
impact the local economy.

• What neighboring municipalities are doing in terms of their local economic development
• How neighbors are competing
• How they can collaborate
• What is happening at the national level
• What are provincial, regional, and national programs that have local impact (positive or negative)
• Major international / global trends that may impact the local area
• ODAs, bilateral programs, etc. that have local impact
• The opportunities provided by national development programs (SME DEV Plan, HVCC programs, BFAR programs,
PCA programs, National Dairy Development program, etc.)

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