Effectiveness of State Frameworks for Local Economic Development

Chapter 1. Introduction

Over the last several years there has been a growing recognition of the importance of local economic development. This has been reflected in a burgeoning international literature on the topic and rapid growth across Australia in the number of State, Commonwealth, local government and community initiatives. Governments across Australia have accepted that there is a need to facilitate economic development through local initiatives. Both the academic literature (Blakely, 1989; Bowman and Blakely 1989, Meyer, 1991; Harvey 1989 and Kirby 1985) and the policies of government (McKinsey and Co. 1994; Kelty Report 1994; Department of Housing and Regional Development 1994) have emphasised the importance of local economic development in promoting economic and job growth. The McKinsey Report, Lead Local: Compete Global argued that strengthening regional economies by encouraging local leadership was essential to the growth of the Australian economy. Similar sentiments can be traced back to the National Conference on Local Employment Initiatives of 1986 (Fagan 1987) and were reported by the Taskforce on Regional Development (the Kelty Report). It was also one component of the Commonwealth Government's Regional Development Program (RDP) which in turn was an element of the Working Nation initiatives.

There has been a proliferation of local economic development programs and strategies over the last several years as governments and the community sector have recognised the need to act. Within the last ten years states such as Western Australia and South Australia have created new systems for regional development while arrangements in Victoria have been restructured a number of times over the last decade. Increasingly, local governments have become involved in economic development. Many employ one or more staff to work on economic development issues while continuing to participate in regional fora such as regional development boards or Voluntary Regional Organisations of Councils (VROCs). There has been profound growth in the level of involvement of Commonwealth Government agencies with regional development programs. In the five years to 1996 the Commonwealth set up the Rural Partnership Program (RPP), the Regional Development Program (RDP), Area Consultative Committees (ACCs), delivered labour market adjustment programs through locality-based OLMA sub-committees and established a set of regions for the Aboriginal and Torres Strait Islander Commission (ATSIC) to encourage regional planning and development. Many of these programs were substantially reduced or abolished altogether under the Howard Coalition Government.

Over the last several years there has been considerable activity in the creation of local or regional development organisations and systems but little attention has been paid to understanding how each of the systems work. While a lot has been written about local economic development in Australia all of this work has been concerned with developments at either the national level or one of the States (see for example, Self 1994). Little attempt has been made to compare and contrast developments and strategies within each State and Territory. We consider this to be a significant omission. The framework for local economic development in each State and Territory largely determines the relative success of local or regional economic development as this level of government either controls or significantly influences resource levels, the division of powers and responsibilities, the adequacy of administrative arrangements, the relationship with Commonwealth, State and local government programs and the types of assistance available through development boards and agencies. The importance of the framework for local economic development in each State and Territory is highlighted by the way many Commonwealth programs differ between States in their administration and application. For example, the Commonwealth Government’s Regional Development Organisations (RDOs) were constituted in a very different way in South Australia to the arrangements in Queensland or Victoria.

Many who work as local economic development practitioners or within State or Commonwealth departments are well aware of the importance of local economic development frameworks and resource levels. One State Government official argued:

This study is a first attempt to understand the institutional framework or structure of local economic development in each of the States and Territories and the implications of that framework for effective local action. It is concerned with the nature and functioning of the institutional frameworks for local economic development operating in each of the States and Territories in Australia. This study addresses the way local or regional economic development is organised in each jurisdiction. It considers the division of roles and responsibilities in each State and Territory, the level and mechanisms for funding economic development bodies, the manner in which these bodies are integrated with other programs of government and the range of activities performed by these agencies.

This report addresses the strategies and institutional arrangements for encouraging economic development at the local level in each of Australia’s States and Territories. Across the country there is considerable uncertainty about what is local economic development, and what should be thought of as regional development. There is also a high level of confusion about which activities are local (or regional) economic development and which represent the sectoral policies and programs of governments. For example, should the provision of small business advice or the offering of incentives to select one capital city over another be considered local economic development? Similarly, are organisations developed to service the needs of an industry that happens to be concentrated in one location (such as the Australian Dried Fruits Association with 85 per cent of production coming from Sunraysia) appropriately considered local development agencies?

Throughout this report we have used the terms local economic development and regional economic development interchangeably. Fundamentally we are concerned with policies, programs and, most importantly, institutions concerned with encouraging local economic growth and employment which operate at the sub-State or Territory level. This definition embraces a considerable diversity of organisations and situations ranging from the Brisbane City Council with a population of over 800,000 persons, through to small community groups representing a region of a few thousand persons with thirty or so active members.

It is sometimes difficult to distinguish between economic development programs that are delivered at individual localities but are fundamentally state-wide or sector-wide initatives and those that are unequivocally local economic development strategies. In one way or another, all States and Territories have engaged in local economic development initiatives. These range from formal policies encompassing regional development boards through to informal arrangements covering a limited number of locations. The approaches used by State governments vary considerably. They include:

• charging local government with responsibility for economic development at the sub-state level;

This diversity makes categorisation of activities very difficult. Moreover, State, Federal and local governments all have a significant impact on local economic development through their investment decisions and general policies and programs. Many of these programs are not constituted to specifically encourage local development. For example, Highways Departments are important both for the provision of economic infrastructure and as employers. However, local economic development is not the raison d'etre of these authorities. Similarly, State or Territory Government sponsorship of mineral exploration can result in considerable growth in areas close to new mineral discoveries but this a welcome side-effect to the major objective of encouraging growth in the State as a whole. We would also argue that the inducements offered to large enterprises to locate facilities in one capital city rather than another reflect state-wide priorities rather than location specific concerns.

There appear to be a number of factors which help differentiate local or regional development initatives from the general programs of government which are important locally and which differentiate community economic development strategies from the general activities of community organisations These are:

• the creation of a separate organisation or set of organisations to administer economic development programs within a defined region. This agency may be a unit within a local government, a statutory authority, a corporation created through private subscriptions or a Committee operating as an incorporated body;

• a primary focus on economic development;

• the organisation straddles a number of fields. For these organisations there is a primary focus on the growth of the region or locality rather than one or a number of its constituent industries. Primary industry departments often have one or a number of staff posted within regions to encourage the development of agriculture. They are locally important but not true economic development organisations. By contrast, regional or local development organisations within the region would address primary industry matters, tourism, retailing, infrastructure, labour market training and other needs.

The variation within State local economic development frameworks is both considerable and important as each represents a different model or approach to local economic development. Some State and Territory Governments are relatively centralised in their approach, others have divested themselves of the responsibility (and cost) of this activity, some have developed clear lines of communications and action between local development agencies and the State public service, while there is greater distance between local agencies and the State or Territory Government elsewhere. The framework for local economic development in each jurisdiction is important because while capable staff or committee members, especially Chief Executive Officers or Committee Chairs, can create success under the most difficult of circumstances, the systems in some states are more likely to encourage development than elsewhere. Economic development organisations have higher probability of success in places where the framework for growth is well articulated.

During the course of this research we found that practitioners in most States and Territories had a very poor idea of arrangements, strategies and practices in other parts of Australia. A small number who had worked in more than one state could compare and reflect upon the differences between two states, but few had any detailed knowledge about financial arrangements, responsibilities and the division of powers across the state border. We consider that all practitioners and all responsible State and Commonwealth bodies would benefit considerably from better knowledge of the range of strategies and approaches used across the country. It would create a greater awareness of the problems and difficulties that unite these organisations - such as the difficulty of securing core funding - as well as the range of strategies used to overcome these hurdles.

In presenting this research we wish to emphasise that there is no "best" approach to encouraging local economic development. No State or Territory has a system without flaws or a framework so substantially superior to alternative arrangements that we would recommend its immediate adoption across the county. Instead, each framework represents a set of responses to the problems of assisting development at the local level. Each framework reflects decisions taken to best deal with competing, and often contradictory, demands, such as the need to create powerful and efficient organisations on one hand, and to allow for considerable community input and ownership on the other. We therefore hope that this report will be read with an eye to the common issues and questions that emerge through the discussion of each State and Territory’s framework rather than from a parochial perspective of defending one’s own state and condemning the rest. We also recognised that larger and wealthier states are able to devote more resources to promote regional economic development and that any comparative assessment needed to make allowance for this fact. Development Commissions in Western Australia receive over $1 million in state funding each year while South Australia’s Regional Development Boards can receive a maximum of $150,000 from the State Government. Clearly, it would be unreasonable to judge the two types of organisations on the same output measures. However, it is possible to observe how each deals with some common problems confronting local economic development systems such as the way in which with which they are linked with government agencies and other organisations, their capacity to pursue strategic planning and their ability to embrace a variety of tasks.

Work on this research commenced in July 1995. This report is based on a review of the relevant academic literature as well as policy documents and a series of interviews conducted in all States and Territories. The interviews were conducted in roughly two phases: an initial round in November and December 1995 and a second round in February and March 1996. The first round of interviews in each State and Territory were directed towards relevant State and Commonwealth Government officials, as well as persons from relevant peak organisations, such as the local government association in each state. These interviews were concerned with defining the broad parameters of local economic development framework in each State, the nature and level of government involvement and the critical issues from the perspective of the central agencies. The second series of interviews was directed towards local development practitioners - the Chief Executive Officers and Project Officers employed by local governments, Business Enterprise Centres, Regional Development Boards and other bodies. These discussions were primarily focussed on the strengths and weaknesses of the system within which they work, the type of activities they engage in and the steps needed to increase their effectiveness. In most cases, both public servants and practitioners had a very well developed knowledge of how local economic development is organised in their state.

Local economic development across Australia has experienced considerable change over recent years and it is likely that this period of turmoil will continue over the foreseeable future. The election of the Howard Coalition Government with a commitment to significantly reducing Federal expenditure in 1996-97 and 1997-98 has already ready resulted in the substantial reduction - and the removal - of some of the funding sources used by local development agencies. A substantial cutback in Commonwealth Government expenditure could result in a drying up of funds for labour market training, the removal of OLMA funding for regional programs, the disappearance of Regional Development Organisations and the rationalisation of some primary industry programs. A large number of local economic development agencies could disappear or become much smaller as a consequence of these cuts. This would mean that the frameworks described through the body of this report would no longer exist as one or more types of bodies are removed from the scene and others change their methods of operation to adjust to the new circumstances.

This chapter has briefly outlined the purpose and objectives of the study. It has highlighted the variability within arrangements for encouraging local economic development between the States and Territories and the importance of better understanding each system. The chapter also considered how best to define local economic development agencies and programs. We need to recognise that many government programs have a considerable impact on a local community’s prospects for growth, but are not in themselves local or regional development initiatives. The recent growth in the number of agencies charged with pursuing economic development and/or employment growth has further emphasised the need to comprehend which factors contribute to effective development and which are an impediment.

The next chapter discusses the approach we used to assess the effectiveness of local economic development framework. It reviews conventional approaches to policy evaluation and discusses why these approaches were not used in this study. Chapter Three considers the various Commonwealth Government programs that specifically address local or regional development issues. It discusses the various Federal Government agencies directly involved in local economic development and briefly considers funding and related issues. Chapters Four through Ten then consider the framework for local economic development in each of the States and Territories. Chapter Eleven concludes the report and draws out the major themes to emerge from the study.

It would appear self-evident that the way in which local economic development is organised or structured will have a profound impact on the relative success of the constituent organisations. Organisational frameworks can influence the ability of local or regional economic development organisations to undertake their core activities using their own resources, to engage in long-term planning for themselves and their region, to take advantage of additional funding sources, and to accommodate external factors such as the emergence (or loss) of new Commonwealth programs or the loss of employment within the region. The way local economic development is structured can also influence the level of community and political support for local growth initiatives and the ability to establish linkages between actions at the local level and State and Commonwealth Government programs.

Somewhat surprisingly, relatively little attention has been paid to the organisation of regional and local economic development. There is a considerable international literature on local economic development strategies, but this research has largely focussed on individual agencies or programs (see for example, Bartik 1994; Cox 1995 and Hughes 1991; Accordino 1994; Rubin. 1988). This may reflect the greater uniformity of arrangements in the United Kingdom and the USA, from where most of the international literature comes. Some authors, such as Harvey (1989), Blakely (1989), Meyer (1991) and Hall and Hubbard (1996), have reviewed the broad pattern of local economic development and noted its increasing importance worldwide, but there have been few empirical studies that have compared practices in different jurisdictions.

This chapter discusses the processes used to establish a way of assessing local and regional development arrangements in each of the States and Territories. It considers conventional approaches to policy evaluation and the reasons why those techniques were inappropriate for this study. The chapter then considers the indicators of organisational strength used within this study and considers some of the broader issues that arise out of their development.

There is a considerable body of academic and applied writing on the processes and techniques of public policy evaluation (see Hogwood and Gunn 1986; Masser and Folley 1987; Beer and Paris 1990; House 1993; Patton 1993; and Bryman and Burgess 1994). Conventionally program and policy evaluation is thought of as comprising three broad phases:

• firstly, identify and document the goals or objectives of the program. These may be well articulated and understood or the operating agency may work on the basis of assumed priorities and objectives. In the latter instance it is important to document the true goals of the program;

• secondly, measure the success of the program in achieving specific outputs relevant to the programs objectives. For a local economic development agency this could include indicators such as the number of new businesses established within a region; and,

• thirdly, evaluate the extent to which the programs goals have come to fruition and the degree to which current arrangements appear to be cost effective and efficient. For example, a local economic development agency might be very successful in attracting additional businesses to its region (a specific outcome) but the broader goal of improving employment outcomes is not achieved because other firms have closed or reduced their staff.

Measuring the success of a program in achieving its goals is often the most difficult phase of the evaluation as appropriate data may not be available, or the information at hand does not reflect broader changes in the environment in which the program operates. Most evaluations rely on the collection of data that should indicate a program’s success - such as the number of long-term unemployed finding paid work in the case of labour market programs - or on the assessment of knowledgeable parties, including the clients of organisations, impartial observers and others involved in the sector. In the United Kingdom, the evaluation of a local economic development agency or program would typically involve the application of questionnaire to businesses and persons who are actual or potential clients of the program (Bartik 1994) or an attempt to calculate the number of jobs in a region attributable to the agency’s actions (Hughes 1991).

The evaluation of local economic development initiatives is fraught with difficulties even when relatively small programs or agencies are evaluated. These problems appear to grow exponentially as the programs increase in scale and become more complex. Researchers can partly limit these problems by tightly defining the scope of their study. Fulop and Wiggers de Vries (1996), for example, examined issues associated with the application of the regional development program, including the development of indicators of best practice, through a survey of 42 board members of four RDOs.

Techniques that draw upon expert opinion are commonly used in all forms of program evaluation and forecasting. They can be used in assessing local economic development strategies and frameworks. These techniques are applied in situations where there is considerable uncertainty or relevant data is not available. Delphi analysis, for example, was originally developed for planning by the military and makes use of expert opinion to assess likely outcomes under a number of scenarios (Masser and Folley 1987). The same techniques can be applied to conventional public policy with experts asked to evaluate the likely outcomes associated with alternative policies - such as no local economic development initiative, enhanced local economic development initiatives - or the use of different types of policy instruments to encourage growth locally.

It would be reasonable to expect that the very large literature on program and policy evaluation would clearly indicate an appropriate technique for evaluating local economic development frameworks in Australia. Unfortunately several factors militate against the application of these established tools. The absence of a single set of goals or objectives amongst the State and Territory development frameworks is a fundamental check on the use of established methodologies. While all jurisdictions are concerned to promote economic growth locally, the emphasis within each varies, ranging from vocational training, community empowerment, infrastructure provision and marketing opportunities. Moreover, while some States and Territories have formally established their activities through policy statements and the development of program objectives, others either have not or have shifted responsibility to external agencies. For example in Victoria local governments now carry the major responsibility for local economic development, and the State Government’s involvement largely consists of creating and supporting the conditions under which local governments are able to act. By contrast, the NSW Government keeps tight control of local economic development through Minister-appointed boards, State programs for local economic growth and through Development Board staff who are State Government employees. Clearly, some economic development frameworks in Australia are apples and others are oranges. It would be impossible to define a single set of objectives for arrangements in States and Territories.

The second phase of conventional approaches to policy evaluation also presents significant challenges to this study. As discussed above, the diverse nature of the organisations makes it difficult to determine a uniform set or sets of indicators of success. As importantly, external factors can exert a considerable bias. The rapid population and economic growth in Western Australia and Queensland could result in their frameworks for local economic development being considered more successful than those in slow growth States such as South Australia and Tasmania. The resources devoted to local economic development also vary considerably. Western Australia’s Development Commissions are well funded compared with the equivalent organisations in other States and Territories. To what extent would their higher success rate simply reflect a larger budget? On the other hand, to what degree is an adequate budget part of a successful framework for local economic development, as it allows agencies greater certainty of planning, the ability to reach a ‘critical’ size and greater visibility with the public?

In many respects expert opinion would appear to be a promising tool for the evaluation of local economic development frameworks. As discussed above, techniques involving experts are commonly used in areas where quantifying outcomes is difficult or impossible and external factors exert a considerable influence. Experts would be able to assess the strengths and weaknesses of arrangements in each jurisdiction on the basis of their experience and, making adjustments for the size of the budget, the level of growth within each state and other factors. Unfortunately, there are several basic problems in the application of these techniques to this study. Put simply, there is a complete absence of persons with sufficient knowledge of each and every one of the State and Territory development frameworks. Practitioners have a detailed knowledge about procedures in the State in which they operate but have little or no information on procedures interstate. Delphi and related methodologies rely on being able to call upon a group of experts, and in this case that group of experts could not be identified.

We also decided against running meetings in each State in which experts would consider the strengths and failings of the framework in which they work. We did so because of concerns about the potential partiality of participants. Local economic development is a small field and only those working in the area could make meaningful comments on the State structure. State government officials, the Chief Executive Officers of regional development organisations, economic development officers based in local governments and persons employed through job creation programs, and representatives of Chambers of Commerce and equivalent organisations were potential candidates for these meetings. However as practitioners, there was a high likelihood that they would have vested interests to protect or agendas to promote. Even the representatives of the private sector would have an established position on the current framework which could affect their participation in any forum. They may have a desire to change the current system, protect a set of arrangements they helped create or secure the position of a current or potential source of funds. We felt therefore that this approach to evaluating the local economic development framework in each state was not appropriate.

Established evaluation techniques appear to have limited applicability in assessing State and Territory frameworks for regional and local economic development. The organisation of local economic development is either too large or too poorly defined for much conventional quantitative analysis, and too embedded within state political frameworks to allow for qualitative assessment by experts. However, some form of evaluation must be possible given that, in broad terms at least, these organisations share a commitment to encouraging economic development at the local level, they work within a Federal system in which until recently only State and Territory Governments were active, and must deal with a range of Commonwealth Government programs that affect them as a group. To come to grips with this set of issues a series of interviews were conducted with State and Commonwealth Government officials and local development practitioners in each of the States and Territories. In developing a philosophy for assessing local economic development greater emphasis was placed on the latter set of discussions. In these interviews we asked a series of wide-ranging questions. There was, however, a particular focus on a number of core themes:

• what is the "core business" of the agency?

• how are you funded and where does that funding come from?

• how is your organisation managed?

• do you evaluate your performance, and if so how?

• what are the major problems that you face in conducting your operations?

• how do you relate to other tiers of government and other agencies involved in local economic development?

• what is your relationship with the broader community?

These themes formed the backbone of the series of interviews although individual discussions varied considerably. There was, for example, little point in asking local governments in Victoria that had been active in economic development for only one or two years how they evaluate their performance. In other cases, individual organisations offered very different insights that related to their particular circumstances only. The broad themes emerged from the first discussions we held and were continually refined through the course of the study.

A series of check points were developed out of the interviews conducted in each of the States and Territories in order to assess the robustness of each system. These check points or indicators reflect the arguments and ideas presented by practitioners on what helps them to facilitate local economic development and what hinders their performance. Each of the points is indicative of a broad principle of what constitutes an effective organisation. There are, however, no hard and fast rules. In our research we uncovered very effective organisations in each of the States and Territories, including those with poor financial resources and little apparent organisation. At the other extreme, even the best organised and most well funded jurisdictions had a number of organisations that were not successful. Skilled and talented staff, especially the Chief Executive Officer, can create a productive organisation in even the most adverse circumstances. However, some sets of organisational arrangements are more likely to result in successful local development agencies than others.

This section discusses the indicators used in the report. They are reproduced in each of the state summary chapters. It discusses the arguments and meaning behind each of the check points and briefly considers their relevance for developing functionally stronger economic development frameworks.

The average age of economic development organisations in a State or Territory is a simple but relatively powerful indicator of the robustness of that State’s framework. It is important for a number of reasons. First, many economic development projects take a considerable time, often three, four or even five years. Organisations that survive for only one or two years are unable to see a project to fruition and as a consequence a community may miss out on investment because assistance was not available when needed. Second, a past history of success and word-of-mouth transfer of information amongst businesses and other clients appears to be one of, if not the, most effective marketing strategy for regional development agencies (Beer and Maude 1996). Recently established agencies do not have a history of past performance and previous clients to direct business to them and certainly suffer in consequence. Third, a high turnover in regional development bodies creates uncertainty within the field and may add to the workload of agencies. Newly established bodies need to develop working relationships with those already active in the field, develop strategic plans and create a profile within their region. All of this detracts from the central task of encouraging local economic development. It is, for example, significant that the need to reshape current working relationships was one of the chief complaints of established development agencies against the Federal Government’s Regional Development Organisations. Fourth, a system in which there is a high "death" rate can create significant gaps within the State’s development structure. As morbidity and then mortality sets in, there is considerable uncertainty over responsibilities and it may further worsen the perception of a bleak future in depressed economic areas. Few businesses would seek assistance from an organisation seen to be on the verge of collapse.

Australia as a whole fares poorly against the longevity indicator. We estimate that the median age of economic development organisations across the country is just three to four years. This youthfulness reflects the establishment of the RDOs from 1994 to 1996, the creation of Area Consultative Councils, the complete restructuring of local government in Victoria and the relative newness of the South Australian system of regional development boards. Although most have been operating since the late 1980s, these boards are only now approaching the end of their first five years of funding through the Department of Manufacturing Industry, Small Business and Regional Development (MISBARD). In addition, there are a handful of small community development groups and local government sponsored agencies that emerged independently over the last several years.

We consider it important that most of the area of a State or Territory is covered by a local economic development agency. It is not necessary to ensure that every centimetre of territory is covered, but a greater coverage indicates a higher level of organisation. It is highly desirable that the territorial units are organised in a logical fashion and one which is relevant to local communities.

Coverage is important for two separate but related reasons. There is a clear need to ensure that development in all areas is covered to give all locations an opportunity to pursue development. Towns that are not covered by economic development boards, business enterprise centres or equivalent bodies may miss out on economic opportunities. The way regions or other areal units are organised is also a signpost of the broader level of organisation within that State. From our fieldwork it appears that States which do not consciously create a set of regional units end up with a large number of smaller organisations servicing the needs of a tightly defined territory. This may be a local government area, a town or a regional city. There is a cost to the region as a whole as the individual development organisations cannot achieve economies of scale in their operations and compete with each other for finite growth opportunities.

One notable feature across Australia is the absence of State-established regional development boards or comparable bodies in the metropolitan areas. In NSW, South Australia and Western Australia there are strongly developed non-metropolitan regional development boards but little or no coverage within the capital city. In Melbourne there is no single body clearly responsible for the city’s future as economic development responsibilities have been transferred to local government. The current arrangements may reflect the belief of state governments that they are best placed to represent the interests of their capital. Alternatively, it could reflect the non-metropolitan alarm at additional interventions to encourage metropolitan development (NSW Country Mayors Association 1993). Whatever the cause, it has been argued that this is a weakness within Australia as the capitals (the major focus for economic development within the nation) lack the single purpose authorities that work for growth in the USA and other countries.

The ability to engage in strategic planning appears to be a very important determinant of success in facilitating local economic development. There are two aspects to this problem. Firstly, economic development agencies must be able to plan their own activities strategically. As one respondent noted, he works on approximately 80 to 120 projects a year. It is often difficult to distinguish on the run between projects and activities that have a high probability of benefit and those that do not. Strategic plans help agencies decide which activities deserve the greatest attention and effort. This problem is compounded by the fact that most agencies undertake an enormous range of tasks, including conducting business delegations, commissioning feasibility analyses, helping with site selection and local government development approvals, small business advice and planning, labour market training and many other activities. In the long term, some types of activity are more likely to furnish results than others. For example, a number of respondents suggested that "smoke stack chasing" was generally an unproductive activity while labour market programs tended to be successful.

Economic development agencies able to engage in strategic planning as a body are better able to select out the most appropriate areas of activity. Not all agencies, however, are able to strategically assess their operations. In a number of States a significant number of agencies are on short-term (often annual) funding and cannot plan to operate over a longer time frame. This is a major concern for these agencies. Many practitioners felt that the short-term nature of their funding was a greater impediment to their success than the amount. While agencies always want more funds, it was argued that greater certainty in funding would allow for better planning and a more efficient use of resources. To further complicate matters, many agencies with short funding or poor levels of "core funding" pursue labour market and other programs as a way of securing additional funding. This can result in a further dissipation of effort as the agency and its staff become focussed on the activities they can be funded for, rather than those that are central to the region’s development. Many CEOs complained that they spend too much time seeking funds and were too often diverted from their core business of developing their region. The adequacy of funding is therefore a crucial component of strategic planning.

A clearly articulated set of goals and objectives is important also for the region or locality in which agencies operate. Strategic planning provides a focus for economic development within the area and a set of priorities for action. It also has the potential to strengthen links with the community.

The capacity of economic development agencies to pursue and implement their goals is an important feature of the framework for local economic development in each State and Territory. At a broad level the capability of organisations reflects their size, their linkages with the other tiers of government and the roles and responsibilities. Across Australia, agencies tend to fall across a very broad spectrum, ranging from single person economic development bodies with limited and uncertain resources, through to very large organisations with strong links to the State and Commonwealth political systems, large budgets and a wide range of functions.

Larger organisations appear to have several advantages over smaller agencies. They are likely to have larger budgets and therefore an enhanced capacity to engage in a range of activities, they will attract greater support from politicians at the State, local and Commonwealth government levels and they are likely to survive for longer as budget pressures will not be as acute. In addition, they are more likely to be able to initiate and participate in negotiations with large corporations and through this process attract investment to their region. It is significant that many small organisations are not involved in discussions about large investments. Often the State or Territory Government and the potential investor will not include local authorities in negotiations until a late stage. This limits the effectiveness of these agencies. It sometimes appears that the smallest agencies play a half role in local economic development with their efforts limited to those functions for which they can find additional funding.

The nature and level of linkages between government agencies and economic development agencies is another dimension of capability. Organisations with strong links into one or more Departments will be well placed to gain access to State and Commonwealth programs for locally important projects.

The clear delineation of responsibilities and powers is an important principle for the structure of local economic development. In our research across Australia we found two types of problems. In some instances, particular roles or niches within the local development system are unfilled because the various agencies and government bodies have not co-ordinated their activities. On the other hand, there is sometimes competition between agencies charged with similar tasks. For example, the DPIE’s Regional Partnership Program has established a body for sustainable development in a number of areas that already have regional development boards, and in which RDOs and ACCs were subsequently established. In a number of cases this has resulted in a surfeit of regional vision statements and associated action plans. It has also resulted in separate organisations identifying common sources of future funding and it is quite possible that in the near future a number of agencies from one region will be competing for resources.

Duplication of agencies and economic development structures can result in confusion and conflict over roles. By contrast, organisations that are able to make use of networks and facilities established by other government programs appear to have a higher chance of success. The success of South Australia’s Kickstart program appears to be due in part to its placement within Regional Development Boards.

Competition and conflict over responsibilities may take place in less obvious ways. As will be discussed in later chapters, in both Western Australia and NSW there is tension between local governments and state-government appointed and funded regional development organisations. To a limited extent this has resulted in the development by councils of organisations which parallel the state-created organisations and in part encroach on their areas of activity. In NSW this is expressed through the VROCs, some of the RDOs in that state, and local government created Development Corporations.

For any organisation to survive it must be empowered through "bottom up" support from the community, "top down" support from the State or Commonwealth Government or preferably both. Organisations that don’t receive support from one or both of these levels are likely to fail.

In many ways empowerment is a short-hand representation of the constituency or client-base of the organisations. State and Commonwealth governments can be thought of as a constituent of economic development agencies because they rely upon them to assist with national or state level growth and deliver local economic development. Local governments are probably the most significant constituency within economic development across Australia. They have a strong vested interest in encouraging growth as the investment brought to their region helps with rate revenue, furnishes employment for the area and promotes the locality’s profile at the state and national scale. The strength of their interest is reflected in the very high proportion of agencies who receive base funding from local government. The number of VROCs across Australia is another sign of this commitment. Significantly, we found that few economic development agencies receive strong support from local industry. While there are notable exceptions, such as the Burnie Business Enterprise Centre (BBEC) and the Albury Wodonga Development Corporation amongst others, in most cases agencies relied on public sector funding. Many also reported difficulty in attracting senior persons from the private sector onto their boards. This finding is at odds with much of the North American literature where the private sector appears to play a more prominent role.

During our fieldwork a number of interviewees argued that "bottom up" support is more important than "top down". It was suggested that organisations that rely on Commonwealth or State-Government support were likely to disappear as soon as government policy changes and funding is withdrawn (see the Chapter on Queensland). By contrast, organisations supported from the "bottom up" are likely to survive as local governments, businesses and residents have a clear interest in the success and management of the organisation.

Local economic development frameworks that are simple appear to offer several advantages over more complex arrangements. The ability of business and other clients to gain easy access to advice, grants or other services is one of the biggest advantages of a relatively simple system. It may also contribute to more effective organisations as eligibility criteria for programs become more clear-cut, fewer agencies need to be involved in major initatives and communication becomes easier. Some organisations, including VROCs and some local governments, have withdrawn from direct participation in local economic development as the field is now cluttered with economic development bodies. Under these circumstances, these agencies simply retain a co-ordinating role for the activities of others.

It is important to note that much of the complexity within the current arrangements for local economic development in Australia is the product of Commonwealth Government programs. Many Departments have established their own regional programs and pre-existing bodies have had to adjust to these new arrangements.

Ideally the framework within which local economic development is organised would be flexible enough to deal with change in an elegant manner. Some systems appear to be less flexible than others. For example, the established West Australian and South Australia regional development structures appear to have been relatively inflexible with respect to the areas defined as regions under the Commonwealth’s Regional Development Program. For example, one RDO in West Australia is comprised of the areas of the Development Commissions surrounding Perth, with the metropolitan area a large doughnut in its centre. Similarly, Regional Development Board boundaries were used to create RDOs in South Australia, rather than develop new and more flexible areas. On the other hand, the state’s RDBs are very flexible in dealing with Commonwealth funding programs such as OLMA, BARA and other labour market training arrangements and are well set to make use of RDO funds. In NSW, by contrast, many RDOs are based on new boundaries but there are poor linkages between state-based agencies and some Commonwealth programs.

This Chapter has argued that conventional techniques and tools for program evaluation are not appropriate for assessing the frameworks for local economic development in each of the States and Territories. In all instances there is a broadly defined goal of promoting economic development at the local level but there is significant variation in emphasis between the states, there are very substantial differences in the level of funds devoted to this activity and pronounced differences in the types of arrangements used in each jurisdiction.

We have argued that it is possible to use a number of broad indicators to assess the functional strength of each of the state and Territory systems. Each of these indicators reflects a problem or set of problems that regional development organisations must confront. These indicators or check points, are to varying degrees, inconsistent both within themselves and with each other. For example, an organisation that is highly capable is unlikely to have strong community links and in all likelihood will be inflexible as all of the resources of the agency will be directed to an established set of activities. At the same time, local economic development frameworks that are relatively simple are more likely to have gaps within their membership and activities as a single set of rules is unlikely to suit all circumstances. There can be tensions also with respect to geographic coverage. Systems that attempt to place all locations within a region or regions are likely to create internal divisions as localities with a long history of competition are forced into the same regional unit.

These inconsistencies or tensions within our indicators of functional strength are one reason we argue that it is impossible to identify the "best" system for local economic development or produce a ranking of effectiveness. All arrangements are necessarily flawed. Flaws arise out of wide ranging processes including the competition between localities, the need to remain flexible while at the same time concentrating resources on strategic activities, the need to be representative of the community while working closely with local, State and Commonwealth Governments, the need to be close to both the public and the private sector and the need to find additional financial support while focussing on regional growth strategies. These tensions are evident within the framework for local economic development within each state and Territory and they are dealt with through a variety of strategies. It is hoped that this report will help people within the field become better informed about practices and structures elsewhere, and where appropriate adopt new strategies based on the successes of others.

Over the last five years the Federal Government has had a profound impact on local or regional economic development across Australia. Much of the economic reform and restructuring that has taken place in Australia since 1983 was undertaken with macro-economic goals in mind. Issues of regional or local economic development were either ignored or given little priority in order to address national economic concerns. However, many of these policies had profound impacts on specific regions through the loss of employment in regions which had previously specialised in highly protected industries (such as clothing, textiles and footwear (Taylor 1992a and b) or through the loss of employment associated with the reform of public sector enterprises (such as the closure of rail yards). Despite the aspatial nature of many of the polices pursued by the Federal Labor Governments through the 1980s and early 1990s, the national government has been an important source of funds for local economic development. It has also presented a number of challenges for state frameworks for local economic development as new organisations have been established and national government interest in local economic issues has increased generally.

The Federal Government’s involvement in local or regional economic development issues grew rapidly between 1992 and 1996. Major indicators of this interest include the Kelty Report into regional development (Taskforce on Regional Development 1993); the McKinsey Report (McKinsey 1994); the Working Nation White Paper on Employment Growth (Keating 1994); the establishment of the Regional Development Program (DHRD 1994); as well as initiatives in regional planning for rural communities. Even the Better Cities Program can be considered in part as a response to local economic development issues. The Federal Government’s involvement in local development did not suddenly emerge after 1992. Through the Office of Labour Market Adjustment (OLMA) it has supported financially local economic development since the late 1980s, while the Business and Rural Adjustment (BARA) Program of the Department of Primary Industries and Energy has been operating in rural areas for a number of years.

A number of the regional programs run by Commonwealth Government agencies rely upon the strategic use of existing funding sources. These initiatives take national programs and endeavour to produce a "regional’ package whose total is more than the sum of its parts. The Department of Primary Industries and Energy’s Regional Partnership Program (RPP), the Area Consultative Committees administered by the Department of Employment, Education, Training and Youth Affairs (DEETYA) are two examples of regional initatives that make use of existing funding mechanisms. Other programs have a relatively small pool of "new" funding dedicated to regional development but rely on other programs for major initiatives. The Regional Development Organisations established by the Department of Transport and Regional Development were an example of this form of arrangement. The Department provided three years of core funding and a limited pool of infrastructure funding, but major projects needed to be financed in partnership with the private sector or other State, Commonwealth or local government sources.

Commonwealth programs generally do not provide long term funding for the establishment and running of a regional development organisation or agency. Funds tend to be directed towards specific projects or activities that fall within national program guidelines. A number of people interviewed through the course of this study argued that Federal programs do not make an adequate contribution to supporting the structure of regional development. There are, of course, some notable exceptions. The Office of Labour Market Adjustment (OLMA) has provided funding for a number of community and other organisations to employ staff and meet running costs.

The Commonwealth Government’s participation in local or regional economic development has a different impact on each of the States and Territories. In some instances the relationships are complementary, in others there is competition between Federal initiatives and those developed by the State Government or local government. In a number of cases there is uncertainty over the respective roles of two or more Federal initatives, especially when more than one Department is involved. On the other hand, Federal interest in this area has supported many organisations that would otherwise have foundered because of lack of funds, limited networks or other problems of scale. The interaction between Federal Government initatives and the other elements of the framework for local economic development in each State or Territory is an important theme in all jurisdictions. The relative significance of individual Federal Government programs also appears to vary considerably between the States and Territories and in large part this is determined by the policies and attitudes of the communities, local government and State Government.

The Department of Employment, Education, Training and Youth Affairs (DEETYA) is responsible for Federal labour market programs. It is one of the largest Departments in the Commonwealth Governments and most programs are administered through one of 19 regions or areas across Australia. This regional structure is an important feature of the Department’s activities as regional managers have considerable autonomy, including the delegation to transfer funds between programs. General labour market programs have an important impact on local economic development organisations across Australia through the ability of local and regional organisations to become local providers of labour market programs. These initatives add to the skills base of the local labour market and provide an important source of additional funding.

For more than a decade the Federal Government has used locally-based labour programs to address problems in areas of particular disadvantage. Through the Office of Labour Market Adjustment (OLMA) the government has sought to address unemployment in areas adversely affected by economic restructuring and cyclical change. Funding under this program has been targeted to areas with above average unemployment or other structural difficulties. Both metropolitan and non-metropolitan regions have been assisted through support for local economic development organisations, labour market training programs and education measures. Funding has also been available to support the establishment of business incubators, local enterprise ventures and micro-businesses as well as assist existing enterprises in expanding their capacity (DEET 1995a). OLMA programs have a modest budget when compared with some other Commonwealth Government programs. Total program expenditure in 1994-95 was just $17.5 million, spread across 150 OLMA regions (Deloitte Touche Tohmatsu 1995). Funds are divided into three sub-programs of $10 million for business incubators, $13 million for regional employment initiatives and $4 million for regional employment assistance.

At the local level program and policy development has been informed by 130 OLMA committees nationally, typically comprised of local business people, local government representatives and other community leaders. In Fairfield - Liverpool in Western Sydney the OLMA Committee oversaw the establishment of a Regional Skills Development Council, the establishment of a number of worker co-operatives, investigated the impact of public transport on access to employment and established a food industry development group (DEET 1995b). Since 1995 OLMA programs have been progressively integrated with the employment development initiatives announced in Working Nation and many OLMA Committees have become Area Consultative Committees or sub-committees of those organisations and the program as whole has been renamed the Regional Employment Program.

OLMA has been an important part of the local economic development scene in Australia. This is reflected in the continuing use of the term "OLMA" amongst local development practitioners despite its official change in name. Its importance reflects its contribution to the survival and success of many local development bodies, through the funding of positions and projects. It is generally considered one of the most flexible sources of funding at the Commonwealth level, and one of the few able to provide funds for administrative salaries and other running costs. Organisations of very different sizes and very different constitutions and characteristics have received OLMA funding. The program has often been the difference between the survival or disappearance of a local economic development organisation.

The formation of Area Consultative Committees (ACCs) was a recommendation of the White Paper on Employment and Growth. These Committees were created with the assistance of the CES to work with local communities and make employment programs and training more relevant to local needs. ACCs were established with the central goals of:

• advising on and generating support for the Job Compact, the Youth Training Initiative, entry level training opportunities and New Work Opportunities;

• developing an employment development strategy linked to plans for regional economic growth, including the identification of skills needed for regional growth; and,

• facilitating growth in job opportunities for regional communities. (DEET 1995a p. 1.)

It has been suggested that they

There are 61 ACCs across Australia and they are spread across urban and rural areas.

ACCs are primarily advisory bodies with a membership drawn from business, trade unions and related organisations. Typically they meet one afternoon a month, and the Committee is serviced by a DEETYA officer. Committee responsibilities include establishing priorities within existing programs, raising community concerns and commissioning studies.

The Regional Development Program (RDP) was announced in 1994 as part of the Working Nation initiative. Under the RDP the Commonwealth Government has provided $150 million over four years to facilitate regional economic development. The program largely reflects the work of the Kelty Taskforce and the McKinsey Report Lead Local, Compete Global. The program was established under the Department of Housing and Regional Development within the Keating Labour Government and transferred to the Department of Transport and Regional Development with the election of the Howard Coalition Government.

The Regional Development Program was established with the intention of establishing regions that would have a presence in international markets and trade (Brown 1996; Housing and Regional Development 1994; McKinsey and Co. 1994 and 1996). The program was intended to facilitate the development of regions that could be visible on world markets, either as suppliers of commodities, as tourist destinations or as major centres for business. The RDP’s philosophy and structure emphasised the importance of regional Australia gaining access to world markets and thereby overcoming the limitations set by Australia’s small population and markets. It emphasised the processes driving local economies and wherever possible it attempted to define regions on the basis of common industries and market opportunities, rather than inherited administrative boundaries. It also placed great emphasis on the development of local leadership and strategic planning. In a number of instances regional groupings were created that crossed State boundaries. The Greater Green Triangle, the Mid Murray and the Western Murray RDOs are all examples of cross-border organisations.

The program had a number of component parts. There was:

• the Management and Skill Enhancement component of the RDP was intended to encourage "best practice" approaches to economic development and to improving the skills of those involved in regional development. Activities included the establishment of Best Practice Centres, the distribution of management and economic development education modules and the development of improved skills through formal training, and the provision of cadetships.

• the Commonwealth Government also increased the attractiveness of, and access to, a number of its financial instruments, in particular infrastructure bonds.

The funding under the Structures component of the program was increased during 1995 and 1996 with up to $60,000 in extra funding made available. This divided into three types of expenditure with $20,000 for travel costs (depending upon the size of the RDO), $20,000 for membership costs and the remainder was available as stipends for board members.

The establishment of regions with a strong community focus was an integral part of the RDP. It reflected the intellectual heritage of the program within the work of McKinsey and Co (1994). Regions and the RDOs supported by the program have been defined flexibly by the Commonwealth. Program documents emphasised the breadth of geographic and population coverage of the regions, the ability of regions to interact with all tiers of government, and sufficient scale to be part of a national framework.

The program tended to favour larger rather than smaller regions. In part this reflected the export-orientation of this initiative. Small regions could not have the critical mass necessary to establish a presence on export markets and be able to attract foreign and domestic investment. At a more practical level, the limited pool of resources available within the "Structures" section of the program for RDO operating costs led the Commonwealth to favour a smaller number of more extensive regions. In States such as South Australia and Western Australia, RDO boundaries were usually congruent with the boundaries of regional development boards. Elsewhere the boundaries have been defined according to other criteria, such as a broadly defined community of interest, transport routes or established regional identity. The boundaries of many RDOs follow local government borders. Approximately 40 RDOs were established across Australia, and the network of regions was intended to cover the country.

RDOs were managed by Boards whose members were drawn from the community. Men and women from unions, Aboriginal and Torres Strait Islander communities, businesses within the region, local government and other community-based organisations were recruited or selected for Board membership through mechanisms that varied on a State by State basis. In some instances they were chosen by the Chair and in other cases they were nominees of constituent organisations. Unlike ACCs, the Boards had their own staff to undertake secretariat and other tasks. They were less well funded than ACCs but had a broader brief in that they addressed whatever issues were considered important by the local community, including infrastructure questions, labour market training, the environment, the perception of the region, business information or other factors.

The Regional Development Program was wound up by the Federal Government in August 1996 as part of the budget cuts imposed by the Howard Coalition Government. The abolition of the program was consistent with the recommendations of the National Commission of Audit (1996) which argued that regional economic development was the preserve of State and Local governments. The Commonwealth Government was able to close the program within one year because the agreements signed with the RDOs committed the Commonwealth Government to financial support subject to budget appropriations. The removal of those appropriations ended the program, although current commitments were honoured (Sharp 1996).

The closure of the program affected regions differently. Some areas, such as the Northern Territory, were still in the process of establishing an RDO and therefore lost access to funding from that program. Most RDOs were guaranteed funding for the current year but were given the opportunity to close their offices and return unspent funds to the Commonwealth. To our knowledge, few agencies pursued this path. The majority have endeavoured to continue to operate and seek funding from fresh sources - public or private sector. In a number of instances RDOs received funding with which to undertake the preparation of Development Strategies a few months, or even weeks, prior to the abolition of the program. Some have continued with this activity others have not. A lucky few regions received considerable program funds (several millions of dollars) and they must be considered the handful to benefit substantially from the program. In 1996 Mc Kinsey and Company were asked by the Department of Transport and Regional Development to review the Regional Development Program. They argued for the removal of the infrastructure element of the program as they felt it contributed to a "handout" mentality which encouraged RDOs to focus on gaining access to funds rather than strategic planning and actions. However, the demise of the program suggests that those regions which gained entry to the program early in the life of the RDP and then made use of the infrastructure program will have the most tangible evidence of success.

The Commonwealth Government has a number of programs designed to increase the productivity and competitiveness of Australian businesses. Many of these programs are of most assistance to small and medium sized enterprises. Access to these initiatives is often through a state enterprise centre, a regional development board or equivalent agency.

The National Industry Extension Service (NIES) is a network of information providers geared to improving the efficiency of the manufactured goods and traded

Firm Capabilities & Management Skills

Industry Development

Enterprise Program

Government Purchasing

National Ecotourism Program,

Regional Development

Tax Measures

services sectors. It is principally an information provision service, but it can provide businesses with subsidies for the cost of employing relevant consultants.

Ausindustry and Austrade are the primary vehicles through which assistance is provided by the Commonwealth Government to business and industries seeking to improve their economic performance. Both are important sources of information, offering market research services, information about other government programs, trade promotion opportunities and some financial assistance for firms. Ausindustry in particular operates as an umbrella under which a variety of Commonwealth programs are accessed (see Figure 1).

The Commonwealth Government’s Department of Primary Industries and Energy has a number of national programs that are a prominent feature of local or regional development organisations across non-metropolitan Australia. The Business Advice for Rural Areas (BARA) program provides funding for rural community groups to employ a business facilitator to help establish new business or develop existing businesses (DPIE 1994). The program is run in conjunction with State and Territory Government Departments. Many local economic development agencies are involved in the BARA program, with one or more facilitators employed through Commonwealth funds. Other relevant programs conducted from within this Department include the Rural Adjustment Scheme (RAS) which aims to improve the productivity of farmers through improved skills, interest rate subsidies or farm planning. The program also provides grants of up to $45,000 for farmers who are leaving agriculture (DPIE 1994 p. 59). RAS is particularly significant in regions restructuring their production base, with a range of providers (including BARA facilitators) responsible for program delivery. These programs have remained under the Howard Government although program funding has generally been cut.

The Rural Partnership Program is run by the Department of Primary Industries and Energy in consultation with State and Territory Governments. The program was launched on 18 August 1995 and covers ten regions across Australia, with the first eight drawn from pilot projects plus two other regions to be determined. These areas include South West Queensland, Sunraysia, the Western Division of NSW, the tobacco growing areas of the Atherton Tablelands and the Myrtleford region of Victoria, Gascoyne/Murchison in Western Australia, the Central West of NSW and the Eyre Peninsula of South Australia.

The goal of the program is to create ‘sustainable, competitive and resilient rural industries and communities’ (DPIE 1995 p. 18). There are four components to this objective:

• economic and social development. To maintain economically and socially viable and resilient communities that contribute to national development, and enable rural and remote Australians to share the national resources and opportunities available to all Australians.

• micro-economic and institutional reform. To reduce barriers to, and provide incentives for, increased efficiency, competitiveness, flexibility and development; to increase communities competence and standing as partners in government; to increase equity across social groupings and between generations.

• environmental sustainability and natural resource management. To maintain an environmentally and economically sustainable resource base compatible with ecological processes.

• Adjustment and change. To assist government, industries and communities to understand development processes and the need for change; to provide them with the necessary information and skills to enhance their ability and willingness to assist change.

The program arose out of a number of case studies examining community approaches to rural issues. The case studies examined the issues affecting the major industries within the region and the broader social, economic and environmental concerns affecting the viability of those industries and the communities they support. The pastoral industry in South West Queensland and the SunRISE 21 initiative in the Sunraysia district around Mildura were the initial areas of study in developing the program.

The rural partnership program is based on communities that are self defined. They therefore vary considerably in size, agricultural production and the issues confronting their future. For example, every part of the Eyre Peninsula is included within the partnership program while SunRISE 21 covers only the horticultural districts in and around Mildura. Community-based committees are responsible for each of the regions, with membership drawn from ‘the full range of interests in the community, including Aboriginal and Torres Strait Islander peoples, rural women, people with a disability, and people from a non-English speaking background’ (DPIE 1995 p. 6).

Funding under the Rural Partnership Program is provided through a "cocktail" of existing assistance measures with the major programs being:

• the National Landcare program;

• The Rural Adjustment Scheme (RAS);

• the Ausindustry Agri-business program;

• the Rural Communities Access Programs.

The Eyre Peninsula RPP received some $5 million from the Rural Adjustment Scheme, $1.35 million from the National Landcare Program and $200,000 from the Grains Research Council. The South West Queensland RPP received $3.5 million from the Rural Adjustment Scheme and $1.2 million from Landcare in its first year of operation. The RPP encourages communities to take a broad approach to the issues confronting them, including the use of funding from other government programs.

Projects funded under the program reflect the concerns of the community at large, the State government and the Federal Government. The community is responsible for identifying issues, priorities are established in consultation with the States and the Federal Government is the provider of funding. Generally, projects must fall fairly strictly within the guidelines of the Landcare and RAS programs, although there is some flexibility with respect to education and training and property management. Funding under the RPP is tightly directed to programs, although funding could be made available to support an executive officer for a community committee.

The RPP was established for three years in the first instance, with a review after the initial period of funding. The program is not being actively promoted nationally as the available funds are insufficient to cover all areas. The program has continued under the Howard Coalition Government.

The Commonwealth Government has supported Voluntary Regional Organisations of Councils (VROCs) for some time. Through the 1980s there was substantial growth in the number of VROCs, largely as a consequence of funding available through the Local Government Development Program (LGDP). Funding was initially provided for VROC Secretariats. In 1990 the LGDP’s support for VROCs was evaluated and the resulting report formed the basis for the first Voluntary Regional Co-operation (VRC) Conference. A national VRC Committee was established at that conference, with secretarial support from the Office of Local Government. Three subsequent conferences have been held.

The National VRC program has had a number of phases. Phase One was in effect from 1990 to 1992 and was concerned with the development of demonstration projects and the dissemination of associated reports. These encompassed guidelines for establishing and operating VROCs, economic development, resource sharing; social planning in human services and access to information. The second phase commenced in mid 1992 and finished in 1994 and focussed on promoting the VRC, raising the capacity of VROCs, and encouraging networking (NCRC 1994). The third phase has continued work along these lines.

Since its establishment, the National VRC Committee has conducted a program of demonstration projects for all VROCs. Approximately 45 projects have been funded over the last five years and Commonwealth support for VROCs has been directed to the national Committee rather than individual groupings of Councils. Examples of these projects include research into resource sharing between local governments (Schulze 1992) and the role of VROCs in Regional Development Organisations (Northwood 1995).

The Commonwealth Government has not directed substantial funding into VROCs since 1990 but the program as a whole had a significant impact. As the National Committee on Regional Co-operation has noted, prior to the restructuring of local government in Victoria, there were strong VROCs in every State in Australia and covered almost 60 per cent of the population. Clearly not every VROC is a product of the Federal Government’s measures in this area but its promotion of the general concept of regional development has contributed to the growth of these organisations. They remain a significant feature of local economic development in most States. A recent review of VROCs across Australia (Cutts 1996a and 1996b) has emphasised the importance of networking and information exchange and these are the core activities of VROCs. The same evaluation found that the limited resource base of VROCs is a weakness as the organisations are confronted by expectations far in excess of their capacities.

The Aboriginal and Torres Strait Islander Commission (ATSIC) is the principal Commonwealth agency for Aboriginal and Torres Strait Islander affairs. ATSIC combines representative, policy-making and administrative functions. Its significance for local and regional development is that it provides a range of business enterprise and employment programs for Aboriginal and Torres Strait Islander communities and individuals, along with an enormous variety of social and cultural programs. In addition, ATSIC is itself probably the most decentralised development agency in Australia, with 35 Regional Councils responsible for administering the bulk of ATSIC spending, and for developing regional plans for their areas.

Most of ATSIC's expenditure on economic development-related activities is on employment programs. The most important of these is the Community Economic Development Employment Projects Scheme (CDEP). In this scheme unemployed members of a community or group elect to forego their entitlements to Job Search and Newstart allowances. In turn ATSIC provides a grant to the community to enable it to employ these members in community development and skills acquisition projects. In June 1995, 252 communities were participating in CDEP, employing around 25,000 people. Over 19,000 of these were in remote localities, and the CDEP Scheme is particularly important in assisting communities in areas where opportunities for private sector employment, or for new business development, are very limited. However, one criticism has been that CDEP is being used to provide services that should be the responsibility of agencies of State or local government.

ATSIC also administers three enterprise programs designed to provide assistance to individuals and organisations who wish to develop Aboriginal and Torres Strait Islander enterprises or participate in industry, but the funding for these is only a fraction of that provided for employment programs. The Business Funding Scheme provides concessional finance and professional advice and expertise for the acquisition or development of businesses which are assessed as commercially viable. The Community Economic Initiatives Scheme, on the other hand, provides grants to Aboriginal and Torres Strait Islander communities for small-scale income generating enterprises that may not be eligible on strictly commercial criteria, but which meet important social needs and which can be self-sustaining.

Each of the Regional Councils of ATSIC is required to formulate a regional plan for improving the economic, social and cultural status of the Aboriginal and Torres Strait Islander residents in their region. Almost all Regional Councils have completed and endorsed such a plan, but a 1994 review of the Aboriginal Employment Development Strategy (ATSIC, 1994), which encompasses all the programs described above, concluded that much more needed to be done to integrate these programs into the regional planning process. The development of ATSIC's regional planning capacity, however, raises the question of the relationship between the regional plans of Regional Councils, and the strategic plans of mainstream regional development organisations, as well as the growing regional development activities of some Land Councils. While many Aboriginal and Torres Strait Islander communities will choose to develop their economies separately from the mainstream, others will be unable to realise their goals without coordination with mainstream regional planning.

Over recent years the Federal Government has conduced a number of one-off programs that have been directed at either a specific location or set of regions. For example, the Australian National Rail Regions Local Enterprise Development Program (ANRRLEDP) was established in the early 1990s to assist areas with employment losses associated with the downgrading of railway work shops. Launceston, Pt Augusta, Enfield in South Australia and Port Pirie were some of the regions to receive assistance from this source. This program provided specific funding for employment initiatives in these centres. The Strategic National Priority Regions program was directed towards regions considered to be of national economic significance because of their role in export markets or because of the concentration of economic activity there. Funds were made available through DHARD for strategic and infrastructure planning to increase the productivity of these areas. Melbourne, Adelaide and Far North Queensland were three of the regions to receive funding through this scheme.

Special assistance measures can be very significant at the local level. As will be discussed later, the ANRRLEDP program funded the establishment of the Northern Development Board in Tasmania and has had an on-going influence on that city. However, even short-term funding can be important by providing additional cash, staff or other resources to local economic development organisations.

This chapter has reviewed the Commonwealth’s involvement in local economic development across Australia. It is clear from this discussion that the Commonwealth is active in a multitude of arenas and through diverse agencies and departments. The Commonwealth’s efforts in local economic development are highly fragmented and often tied to specific policy objectives.

The Federal Government is relatively poorly represented "on the ground". The two most significant types of organisation - the Area Consultative Committees and the Regional Development Organisations - have been established in 1994 and in some locations are dependant upon state organisations. Other initiatives are limited to a handful of "demonstration" projects. However, the Commonwealth has had a substantial impact through its financial support of local economic development agencies. Many bodies have taken advantage of one or more Commonwealth programs to acquire additional resources, staff or cash flow. OLMA programs have been particularly significant in this respect. A large number of community-based organisations have received start up funding through these agencies.

The nature of the Commonwealth’s involvement in local economic development has had a number of less transparent consequences. The fact that agencies are able to secure additional resources through Commonwealth programs has inevitably affected the activities of these bodies. It has encouraged skilled CEOs to seek out new funding sources and develop additional functions within their organisations as a way of securing their organisation’s future. Some would argue that this has distracted these bodies from their core tasks of regional or local economic development.

Many regional development practitioners and officials from State Governments are highly critical of the Federal Governments forays into local and regional development. The RDOs and to a lesser extent the ACCs have been frequent targets for criticism as those already working within regional and local economic development feel that there previous efforts may be jeopardised by Commonwealth actions. Communities that have just completed a strategic plan for their regional development board will be intolerant of needing to repeat the exercise for Commonwealth agencies. The situation is worse when there is overlap and duplication between Commonwealth Departments. The need to implement programs, strategic planning processes and the establishment of organisations in the shortest possible time frame also creates resentment amongst practitioners and the general community.

At times the Commonwealth has demonstrated a regrettable ignorance of State and Territory programs for regional and local development. For example, the discussion paper Roles and Responsibilities in Regional Development (1996) released by the Department of Transport and Regional Development argued that

As the following chapters will show, this statement is clearly wrong with respect to both the functions of boards, their accountability and how they are appointed. Similar sentiments were also expressed by the review of the Regional Development Program undertaken by McKinsey and Co. in 1996. We would argue that the political and bureaucratic imperatives that drive Commonwealth programs are often the wrong sorts of processes for regional and economic development: a long-term perspective is an essential component of regional development and many of the Commonwealth’s actions have lacked this essential ingredient.

Local and regional economic development initiatives in South Australia are constrained by the relatively small size of the State’s economy and its relatively low rate of growth over the last two decades. Tasmania too suffers from this structural problem and it is somewhat ironic that the states with the greatest need for local economic development can least afford it. While resources are necessarily limited, the South Australian Government, the Local Government Association of South Australia and individual local governments have systematically considered economic development issues, at least for the non-metropolitan parts of the state. There is a clearly defined and articulated framework for local economic development which emphasises regional self-help and promotion.

The Department of Manufacturing Industry, Small Business and Regional Development (MISBARD) is the crucial State Government agency for local economic development in South Australia. The Department supports regional development initiatives across South Australia, assists manufacturing enterprises through the South Australian Centre for Manufacturing, provides small business advice and advises the government on industry and related policy (including, for example, policy issues associated with the MFP). The current framework for state government support for regional economic development has been in place since the 1987 Green Paper on Regional Business Development Policy (EDA 1995). The current system continues to display a preference to non-metropolitan areas both with respect to the location of regions and the funding they receive. This reflects the program’s origins as a replacement for payroll tax concessions previously offered to firms locating outside Adelaide.

There are fifteen State Government supported Regional Development Boards in South Australia. They are the:

• Eyre Regional Development Board,

• Whyalla Industrial Development Executive,

• Kangaroo Island Development Board,

• Northern Regional Development Board,

• Port Pirie Regional Development Board,

• Mid-North Regional Development Board,

• Riverland Regional Development Corporation,

• Yorke Regional Development Board,

• Murraylands Regional Development Authority,

• South East Economic Development Board,

• Barossa Regional Economic Development Authority,

• Northern Adelaide Development Board,

• Adelaide Hills Regional Development Board,

• Southern Development Board Adelaide,

• Fleurieu Regional Development Corporation.

The role of the Regional Development Boards has evolved through a series of reviews in 1991, 1992 and again in 1995. While there has been some change in arrangements, the fundamental features of the Boards have remained unchanged. The Boards are facilitators of growth rather than active developers and there is joint financial support from local and state governments (EDA 1995, p. 4). State government funding is provided on the basis of $3 for every $1 raised locally, up to a maximum of $150,000 for Boards in country areas. The two metropolitan Boards (the Southern Development Board Adelaide and the Northern Adelaide Development Board) are funded on the basis of $1 of State funds for every $2 of local funds up to a maximum of $50,000 and "dollar for dollar funding for approved projects" (EDA 1995 p. 5). Since 1992 funding has been provided through five year Resource Agreements which commit local governments and the State Government to certain levels of expenditure and allow for a review of performance at the end of the funding period. Development Boards are funded to act as the shopfront for all State Government business development programs in their region. MISBARD provides other funding for regional economic development including financial support for nine of the 13 Business Advisers in Rural Areas (BARA) staff working in South Australia.

Regional Development Boards are funded to be facilitators of economic development rather than developers in their own right. Unlike other jurisdictions - such as NSW - regional development boards in SA do not receive program funding from the State Government to attract businesses to their regions. However, MISBARD does offer business incentives to firms with strategic merit, with each incentive package tailored to the needs of individual businesses. There is no additional incentive for firms to select country locations.

It is worth noting that local government, mainly through the Local Government Association of South Australia and the South Australian Regional Development Association (SARDA) has played an important role in reviewing and refining the current system. For example, SARDA participated in the review of the program in 1992 (EDA 1995) and all but one of the State Government supported Boards is a member of this organisation.

MISBARD is the most significant South Australian Government agency for regional or local economic development but others also exert an important influence. Tourism South Australia provides some assistance for tourism-based local development. There are nine regional marketing boards covering the State - the Barossa Valley, the Fleurieu Peninsula and Hills, the Eyre Peninsula, the South East, the Big River - the Riverland and Lower Murray Mallee, Classic Country - the Yorke Peninsula and the Mid-North, Adelaide, Flinders and the Outback, and Kangaroo Island. These boards receive $150,000 to $200,000 for administration and marketing and can also apply to the Tourism Development Program and the Tourism Infrastructure Program for project funds. The former has funding of approximately $5 million per year while the latter can provide larger sums for infrastructure necessary for major projects. One major development to the south of Adelaide received $13 million in infrastructure assistance. Regional Development Boards are able to apply for this funding but this occurs infrequently. Tourism Roads Grants are another form of assistance available at the regional level. Grants up to $500,000 are available on a dollar for dollar matching basis with local government funds.

The Department of Employment, Technical and Further Education encourages local economic development through the Kickstart and Kickstart for Youth programs. These initiatives offer labour market training geared to the needs of existing and intending businesses. In the Riverland, for example, Kickstart funded and organised relevant training for production line workers for a soon-to-be-established almond processing and packaging factory. Under the program one or two DETAFE staff are located within each of the regional development boards and their tasks include contacting businesses and assessing their needs, co-ordinating programs and administering courses. Many people contacted during this study had a very positive attitude to the Kickstart program because of its integration with other regional development initiatives and its focus on the training needs of business. Unlike some DEETYA programs, Kickstart training is not targeted toward the unemployed or long-term unemployed.

The activities of Primary Industries South Australia (PISA) are seen to be important for regional development because of the agency’s increasing role as a development agency. However, PISA is almost solely concerned with primary industries and is organised and administered along industry lines: forestry, fishing and agriculture. It does not offer funding for regional development agencies although it participates in some programs that are conducted and administered regionally, such as the RAS program.

Regional Development Boards are the most significant and visible local development agencies across South Australia. However, they are not the only types of bodies operating at the local level. There is a small number of agencies that operate in a fashion similar to the Development Boards but are not officially recognised or funded by MISBARD. The Western and Inner Northern Network for Economic Recovery (WINNER) is one example. There are also two Business in the Community (BECs) operating in metropolitan Adelaide. One is based in Norwood and the other is located in Port Adelaide. Many non-metropolitan and metropolitan local governments employ local development officers to encourage growth within their precincts and in some instances the scale of operations exceeds that of the Development Boards (Martin 1995). Others, however, are not active in this field or have only a small role.

South Australia’s Regional Development Boards (RDBs) differ from equivalent organisations in other States in a number of significant ways. As the EDA (1995) noted, RDBs in South Australia are autonomous bodies, their management boards or Chief Executive Officers are not appointed by the Government and their staff are employees of the organisation, rather than the State Government. This is at odds with current practice in NSW and Western Australia. Local governments are an important constituency and force within Regional Development Boards as each resembles a VROC with respect to its make up and structure. For example, the Southern Development Board Adelaide also functions as the Southern Regional Organisation of Councils, with a joint Chief Executive Officer guiding both organisations. This very close link does not apply in all cases, with a number of areas having separate RDBs and regional organisations of councils.

RDBs perform a diverse range of tasks and functions. Many are actively involved in the delivery of Commonwealth Government programs - such as DEETYA labour market programs, BARA and RAS - as well as State Government programs such as Kickstart, the Centre for Manufacturing and related initiatives.

Across most of South Australia there is a direct relationship between RDBs, Regional Development Organisations and Area Consultative Councils. Regional Consultative Groups (RCGs) have been created comprised of Regional Development Board representatives and combining the functions of RDOs and ACCs. The RCGs were developed by bringing together a number of Regional Development Boards. The South Central Regional Consultative Group, for example, is based on the Southern Development Board Adelaide, the Adelaide Hills Development Board, the Murray Mallee Development Board, the Kangaroo Island Development Board and the Fleurieau Development Board. Others include the Barossa Valley-Riverland-Mid North, the Spencer RCG which encompasses 85 per cent of the State’s land area and the Greater Northern Adelaide RCG. The RCGs were established as a way of better co-ordinating economic development activities. The advantages are readily apparent with respect to funding as well as in the execution of functions: each RCG can make use of $72,000 within the first funding period (usually six months) from DEETYA as well as the administrative funding available through the structures component of the Regional Development Program.

Mundy (1994) argued that the creation of Regional Consultative Groups rather than separate ACCs and RDOs would result in compound advantages. He argued it would:

• minimise overlap and duplication of effort between spheres of government

• enable existing structures to improve their performance and play a key role in the regional development process

• meet the requirements of industry, regional communities and government while minimising the establishment of bureaucratic structures

• integrate economic development activity more closely and effectively with employment policy and labour market intervention, with the emphasis being on sustainable development and employment outcomes (Mundy 1994 p. 38).

Most people working in local economic development in South Australia consider that the framework within which they operate is effective, efficient and appropriate to the needs of all major client groups. Many practitioners argue that they need additional resources, but this is a common complaint within most jurisdictions.

Regional Development Boards are by far the strongest and most visible agencies for local economic development in South Australia. There are only two Business Enterprise Centres within the state and direct local government participation in this field is extremely uneven. The strength of the RDBs appears to have resulted in Federal Government initiatives having less clearly defined roles than elsewhere. The Regional Consultative Groups are comprised of representatives of the RDBs and this has introduced a bias into the activities and planning of some RCGs which focus more on the sub-regional level than on region-wide issues. However, this does not appear to be a major concern as the relative strength of the RDBs provides a primary focus for local development initiatives.

It is notable that in common with some other States, most of the metropolitan area is not covered by formally-recognised local economic development agencies. This reflects both the origins of the State Government’s Regional Business Development Policy and the State Government’s direct participation (through one of the arms of MISBARD or the Premier’s Department) in many aspects of local economic development in the metropolitan area. It is difficult to gauge if this gap represents a significant shortcoming within the South Australian framework for local economic development.

Regional Development Boards are not forced to operate on short time frames because of funding limitations. Financial support from the MISBARD is provided over five years and the member Councils are also committed to on-going funding. Potentially, individual RDBs could survive for some considerable time, and we are not aware of any boards that have failed over the last five years.

The Regional Development Boards cover essentially all of the non-metropolitan area, although there are sections of the State not covered by a board. Some LGAs are not involved with their local RDBs because of political or philosophical differences. The central metropolitan area is not included within recognised RDBs. Both the Southern Development Board Adelaide and the Northern Adelaide Development Boards include some of the outer areas within their territories, along with peri-urban areas. The Western and Inner Northern Network for Economic Recovery (WINNER Inc) was established through OLMA but is not recognised or funded by the Department of Manufacturing Industry Small Business and Regional Development.

Regional Development Boards have the capacity to engage in strategic planning, both for themselves and their regions. They have secure funding and a clearly defined mandate to plan for the economic development of their region. The arrangements associated with State Government financial support encourages them to act strategically as their funding is subject to a five year performance review.

RDBs in non-metropolitan areas receive State Government funding up to $150,000 if local governments provide a matching contribution of $50,000. These funds are sufficient to provide security for the organisation but are hardly sufficient to undertake large-scale projects or allow them to engage in a wide range of activities. Many RDBs seek additional funds and functions through Commonwealth funding sources such as the BARA program or DEETYA funded training programs. The Kickstart program has added to the resources and functions of RDBs through the placement of two officers in each to address the training needs of businesses.

A number of RDBs appear to have been very successful organisationally, in terms of staff and their functions, and in promoting growth within their region. While it is difficult to generalise, compared with equivalent agencies in Western Australia and some other states, RDBs are not large organisations and many would not participate in discussions relating to very large developments within their region.

The delineation of responsibilities and powers in South Australia appears clear cut. RDBs are the most active agencies in those areas in which they operate and some local governments have their own economic development units. The creation of the Regional Consultative Groups has removed, or at the very least minimised, any overlap between the Boards, the Regional Development Program and DEETYA’s Area Consultative Committees.

RDBs are empowered through their close links with local governments and their association with the State Government through MISBARD. The Department’s support for RDBs is not limited to an annual grant, as it also provides information, offices within the city as required and linkages with other parts of the State Government. One unit within the Department is devoted to assisting Regional Development Board operations and each board has one of four officers nominated as their liaison with MISBARD and the Government. The central role of local government has ensured strong local interest and involvement in the work of the RDBs. However, they are not generally "community" based organisations and rely heavily on there local government connections for linkages to the broader community.

The local economic development framework in South Australia appears to be both simple and complex. The role of the RDBs is clearly defined and expressed. They are the primary vehicle for delivering local economic development assistance in non-metropolitan South Australia, as well as the northern and southern parts of the metropolitan area. The relationship between the framework created by the State Government and Commonwealth Government initiatives is much more complex. While RCGs have operated in most locations, there are a number of notable exceptions including the central area of metropolitan Adelaide and the area covered by the Greater Green Triangle RDO.

The South Australian framework has considerable flexibility in making use of the diverse funding sources available from Commonwealth Government agencies. It also has sufficient flexibility to deliver a range of State Government programs, with RDBs acting as agents for the Centre for Manufacturing and other programs. However, the creation of RCGs based on Regional Development Boards suggests that there is a degree of inflexibility with respect to the establishment of new types of regional economic associations. The Regional Development Boards are so strongly integrated within the economic and administrative structure of the State that there is little or no scope for new players in the field.

South Australia has a well established and, by most of the check points discussed here, effective framework for local economic development in the non-metropolitan parts of the State. The heart of metropolitan Adelaide is not covered by State Government-recognised regional or local economic development agencies and this could be a significant omission within the current set of arrangements. It is worth mentioning that in the first half of 1996 the City of Adelaide attempted to map out its economic future through the "Adelaide 21" project. This venture generated considerable debate and a heightened awareness of the need to formulate economic strategies and plans for the centre of the city. This inevitably relates to the prospects for all of metropolitan Adelaide. The future of this initiative is unclear (October 1996) as the State Government is preparing legislation to remove the Adelaide City Council and appoint commissioners. Both the Adelaide City Council and the South Australian Government have indicated broad support and commitment to th