CHAPTER THREE: THE FAILURE OF DEVELOPMENT PROJECTS
3.2 LOCAL ECONOMIC DEVELOPMENT (LED) PROJECTS
According to Trousdale (2003:1), the key point of LED lies in the collective participation of local people from all sectors of life, people who work together for sustainable economic development. As the World Bank (2003:7) states, the public and business sectors work jointly to improve conditions for employment and economic growth through the process of LED, which is aimed at improving the quality of life of all people. Cunningham and Meyer-Stamer (2005) observe that LED involves various organizations in the designing of LED projects. The detailed planning of LED projects includes the defining of tasks, realistic timetables, responsible parties, human and financial needs, sources of funding, results, expected impacts, measures of performance and evaluation methods to assess progress.
Trousdale (2003:5) asserts that through the process of planning and implementation of LED projects, the local government is better positioned than other stakeholders to integrate LED plans that include environmental and social objectives, and to play an important leadership role. This is justified because local governments, democratically elected, are accountable to citizens and
deeply involved in the activity of local business as tax collectors, suppliers of infrastructures and regulators of land. The growing trend is towards decentralizing local governments. This enables them to play a role in matters of global consensus, and to be fully committed to the execution of LED projects associated with the policy of poverty reduction and to address the problems of market failure.
However, in developing countries, local governments lack funds because decentralization of responsibilities is not always followed by decentralization of taxation or funds (Ministry of Finance and Economic Planning, 2007). They tend to be overpowered by new responsibilities and focus on pressing and immediate problems such as inadequate social infrastructure, the lack of physical infrastructure, corruption and the lack of transparency in the processes of decision- making. They are willing to implement LED projects and empower citizens but they do not have enough organizational and communicative skills to be effective in delivering quality products and services (Cunningham and Meyer-Stamer, 2005). In addition to this, politicians are often not comfortable with the LED strategy and, because they are accountable to citizens, they tend to try and avoid anything that is risky and unpredictable (Cunningham and Meyer-Stamer, 2005). This is a great obstacle in communication processes: the lack of exchange of information among different economic actors does not guarantee a successful coordination of activities and it creates an atmosphere of conflict and distrust among the stakeholders (Ministry of Finance and Economic Planning, 2007).
As Cunningham and Meyer-Stamer (2005) state, bureaucracies and inefficiencies in governments at national and local levels, constitute major barriers to successful business development because they handicap the process of continual learning and collective participation of all stakeholders from various sectors in planning, implementing and evaluating LED projects.
Donor Guidelines (2001) found that local governments recorded many market failures because they lack experience in implementing the LED strategy and cannot effectively assist business organizations by providing them with helpful services. Therefore, small and medium enterprises got financial support from international organizations, but state-owned enterprises did not produce the desired social and economical benefits. Rather, they often collapsed after the donors’ withdrawal. Meyer-Stamer (2005) adds that special economic zones, fiscal incentives, cluster promotion and technology incubators come and go, often without making a significant difference.
According to Mintzberg (2010), many governments are willing to efficiently provide services, but globalization does not permit that efficiency.Globalization is about taking down trade barriers and allowing free movement of people, goods and services, and direct foreign investment from one country to another. Mintzberg (2010) argues that globalization is much more suitable for multinational companies than for business on a local scale. It is perceived as aggressive and as forced onto poor countries. The ultimate objective to be achieved by developed countries is to open markets everywhere in the world for their manufactured goods and to close their own markets to poor countries which become marginalized. Even national governments, which have been democratically elected, are victims of that unfair economic development. Poor countries are forced to imitate developed countries rather than following a process of learning. Cunningham and Meyer-Stamer (2005) observe that globalization is forced development and one of the main causes of market failures in developing countries because copying without time for reflection, is a mindless activity that damages dignity, pride and the confidence that people have in their own culture and socio-economic setting. This makes it difficult for local governments to play their visible role of mobilizing their nation and give leadership. But this is not the case in developed countries where patterns of governance have evolved from hierarchical to network structures and to implicit cooperative relationships.
Mintzberg (2010) asserts that SMEs, when working cooperatively in local networks, can lead to income generation and job creation. But this is only possible when they can exercise their civil rights regarding the freedom of choosing their business activities and location.
From the above it becomes clear that it is very difficult to make a sustainable success of projects designed to implement Local Economic Development strategy in an atmosphere characterized by governmental bureaucracies and inefficient services, threatening globalization forces, lack of cooperation between all key stakeholders, lack of skills in project planning and communication, and governmental decentralized structures, without true empowerment of the local community.
In such an atmosphere, inadequate leadership, corruption, and lack of control, accountability and responsibility are manifest and these interfere with the success of projects as they bring about poor project planning, waste or lack of resources, delays, poor quality of products or services, embezzlement and increase of unnecessary costs. This situation is also an obstacle to effective participation of the local people, who are perceived as the main beneficiaries and actors of the LED projects. Projects planned and implemented in such an environment do not make a significant contribution to the sustainable development of developing countries. Sustainable development would mean that LED projects contribute to the increase of skills in project
management, improvement of social life (health, education, shelters, etc) and of economic life (transport, communication, incomes, employment, etc) as well as increased conservation of the environment (protection of natural resources such as air, water, land and forests). Again, collaborative relationships among all role players in and around a project are invaluable when it comes to promoting and maintaining sustainable development of the people.