Introduction

There have been major policy initiatives in local and regional development by all three tiers of government (Beer and Maude forthcoming). The Commonwealth’s activities have included the establishment of Regional Development Organisations (RDOs) and Area Consultative Committees (ACCs). These well known strategies attempted to cover all parts of the country but the Commonwealth has also embraced less ambitious programs such as the Rural Partnership Program (RPP), which were targeted to specific regions. While the Commonwealth Government’s activities have received considerable attention many commentators have ignored the substantial developments within State and local governments. Within the last decade the Western Australian and South Australian Governments have established regional development frameworks, the Victorian Government has revised arrangements for regional development and the Tasmanian Government has just announced a restructuring of arrangements (Beer and Maude forthcoming; Roodenrys 1996). The NSW Government announced 1996 to be the year of regional development and there is clear evidence of growing local government involvement in this field across Australia, but especially so in that state. This flurry of government interest in regional development and regional development programs has created new organisations and generated new sources of funding for established bodies. It should be reasonable to assume that greater resources have been directed into the sector over recent years than in the past, and this has in turn resulted in increased agency effectiveness.

Discussions with local economic development practitioners undertaken for earlier research (see Beer and Maude forthcoming) suggested that greater government interest in local economic development has not necessarily been translated into more effective development activities. A number of interviewees stated that they had great difficulties securing adequate funds to maintain their office and operate effectively. There were barriers also in securing program funds. Funding was often seen to be short term, it was often considered to be too closely tied to particular types of activities, and agencies faced substantial costs in seeking and administering funds. However, not all practitioners reported these difficulties (even within comparable agencies) and a more systematic data collection strategy was necessary. This paper reports on the findings of a questionnaire directed to local economic development practitioners across Australia and in particular it discusses some of the data on the effectiveness of local economic development agencies and their funding arrangements. Chief Executive Officers of local or regional development agencies were asked to assess their effectiveness or impact on development within their region, provide information on their most significant sources of funds and indicate whether the operation of their agency has been adversely affected by a number of impediments identified in earlier interviews.

Section 1. The Characteristics of Local and Regional Development Agencies in Australia

The names of the local economic development bodies to whom the questionnaire was sent were drawn from a number of sources. The largest proportion came from a listing compiled by the (then) Department of Housing and Regional Development in 1994. Most of the names on that list had been collated from responses to newspaper advertisements associated with the inquiry leading to the Kelty Report. This listing contained the names of nearly 300 organisations who identified themselves as being interested in local economic development and/or regional economic development. There was considerable diversity within this listing: it included local governments, regional development boards, business enterprise centres, community groups, as well as other organisations. Lists of all the business enterprise centres in NSW and Western Australia were a second and third source for the questionnaire mail out. All local governments in Victoria were also sent a questionnaire because recent reforms have given that tier of government primary responsibility for economic development at the local level. All of the Federal Government’s Regional Development Organisations (RDOs) were sent a questionnaire, but Area Consultative Committees (ACCs) were excluded from the survey as they lacked both a general “development” function and a public role. Finally, a locally produced census of local economic development organisations in Tasmania was used to cover the diverse bodies active in that state. The disparate sources used in this survey produced a number of overlaps which were eliminated prior to the dispatch of the questionnaire.

Some 183 questionnaires were returned by economic development organisations. We consider this to be roughly equal to a fifty per cent response rate as a considerable number of the organisations to whom we sent questionnaires no longer exist. Approximately 25 questionnaires were returned because of the closure of the intended recipient. We were also aware in sending out the questionnaires that many of the regional development authorities operating in 1994 no longer exist. Many in Victoria were wound up when local governments took on primary responsibility for local and regional economic development, but some have continued to operate and we felt it was necessary to give all organisations extant in 1994 an opportunity to respond. The estimated response rate of fifty per cent is very high for a postal questionnaire and reflects the commitment of local economic development practitioners to their field.

The conduct of the postal questionnaire has a number of implications for the interpretation of the results. First, it is important to recognise that the data are not drawn from a random sample of local development organisations and they may not be truly representative of this sector. However, we consider the results provide a reasonably robust picture of developments and conditions within the sector, particularly given the large number of responses. Secondly, it is important to recognise that the source of the names of economic development bodies are imperfect and that some types of organisations might have been improperly excluded. For example, questionnaires were not sent to all local governments in South Australia because while some are active in this field, many are either not active or play only a minor role.

Local Economic Development Agencies in Australia

The respondents also reflected the diversity within economic development agencies across Australia. The single largest group of respondents were Business Enterprise Centres (BECs) with a total of 53, followed by 46 responses from local governments, 35 returns from regional development boards and 20 from “other” agencies (Table 2). Six of the nine Regional Development Commissions operating in Western Australia responded to the survey, and there were six responses from Voluntary Regional Organisations of Councils (VROCs).

Respondents were also asked to provide information on the year in which they were established. Figure 1. shows that most agencies were established relatively recently, although some trace their roots back to the nineteenth century. In the main this latter group is comprised of local governments. Overall, however, one is struck by the relative recency of most of these organisations with 131 of the 183 respondent organisations established since 1990, and 73 (or almost one half) established since 1993. The youthfulness of local development agencies is also partly a function of their very high death rates. Agencies are extinguished through a variety of mechanisms including administrative changes (such as the restructuring of local government in Victoria), financial crises, lack of community support or interest, political disputes and changing priorities amongst supporters. Interviews with development practitioners suggest that most are well aware of the high failure rates.

Table 1. Respondents by State

Table 2. Respondents by Type of Organisation

Figure 1. Regional Development Bodies, Year of Establishment, Australia

Most local economic development agencies are small concerns with relatively few staff. Generally they have limited human resources, with two staff being the median and three staff the modal or most frequent response.

Section 2: What Do Local and Regional Development Agencies Do?

The pattern of activities indicated in Table 3 is consistent with contemporary ideas of what constitutes effective local economic development. The majority of work on local economic development - by practitioners and academics - suggests that the most effective strategies are those that build upon the resources of a region or locality. That is, they endeavour to encourage new firm formation amongst persons living within the region and assist the expansion of local businesses. Business development is, by a considerable margin, the largest single category of “core business” and in conjunction with “self employment/business creation” accounts for a third of all responses. This is a remarkable degree of convergence given the diverse nature of local economic development agencies. It should also be noted that the second most frequent response “regional economic development” would also embrace this type of activity.

Table 3. Core Business

Table 4. Which Development Activities Does the Agency Engage In?

Clearly there are a number of important issues within the activities of regional and local development bodies. While business development is the most frequently cited core activity, virtually all agencies operate in a number of different fields using relatively few staff. It is important to ask why they do so and what are the implications of such a range of activities on overall effectiveness?

Section 3: Funding and Effectiveness

We attempted to overcome the problems of gauging effectiveness by asking practitioners to indicate to what degree their operations have been adversely affected by a number of factors and by asking them to rate their own success. In the latter case, the CEOs of local economic development agencies were asked, “ How do you rate the impact of your agency on local or regional development, on a scale of 7 (major impact) to 1 (no impact). The responses are shown below in Figure 2.

The responses to this question were less flattering to development agencies than would be expected from the writings of academics and practitioners. The median response was just 4.8, indicating that most felt that they had a small impact on the growth of their region. This was also the modal response. While seven agencies felt that they had major impact on their region’s development, three answered that they had no impact and seven indicated that they had none. In part the lower than expected outcome reflects the nature of the question. The question is a measure of the impact on the locality rather than agency performance. The CEOs were not asked how well they or their agency achieves its goals, or how well they are managed. Nevertheless, the question does address the broad goals and raison detre of these agencies and it would be gratifying to discover that they can identify significant outcomes. However, this does not appear to be the case in the majority of instances. Importantly, research in the United States has identified comparable trends with Rubin (1988) noting that practitioners when asked about their effectiveness tend to vacillate between professional pessimism and more sanguine attitudes verging on boosterism.

Figure 2.

It necessary to consider why development agencies feel that their impact on the region is so limited. Some light was shed on this issue when we asked practitioners to nominate those factors which represented the greatest hurdles for their agencies. Up to five responses were coded for each questionnaire and the results are shown in Table 6. The data clearly shows that resource constraints represent the greatest hurdle for most agencies. In combination staffing and funding limitations accounted for 218 of the 553 responses.

Table 6. What Limits Your Effectiveness? All Responses

Additional information on whether funding problems limited the effectiveness of an organisation was collected through a series of statements to which respondents were asked to indicate whether they strongly agreed with the statement (a score of 7) or strongly disagreed (a score of 1). The questionnaire asked respondents to indicate the degree to which they agreed or disagreed with the following statements: The agency has insufficient funding to carry out its core functions; The effectiveness of the agency is reduced by the short term duration of much of its funding; The effectiveness of the agency is reduced by the lack of flexibility in the guidelines of its funders. The responses are shown in Figure 3 below.

The Figure provides some important insights into the perceptions of practitioners on what financial considerations impede their effectiveness. Firstly, it is critical to recognise that practitioners as a whole saw financial limitations to be more important than any other category of problem (such as competition between agencies and other factors not discussed in this paper.). Secondly, it is readily apparent that the short-term nature of funding was seen to present the greatest challenges from amongst the three statements. The median response to the statement on the level of funding was five; the median for the statement relating to the inflexibility of funders was four; but the median for the statement that the short-term nature of funding reduced effectiveness was six.

Figure 3. Financial Constraints on Effectiveness

The data discussed so far suggest that the way funds are provided present greater problems for development agencies than the level of funding. This conclusion is reinforced when data on the expenditure levels of agencies were compared with their effectiveness ratings. Agencies were asked to provide information on their five largest expenditures as a way of estimating total budget. On average, agencies spent $230,000 a year but outlays ranged from just $2,000 through to $7.7 million. Table 7. shows the median funding by State and Territory and the average effectiveness rating for that jurisdiction. There is not a simple relationship between the average budget in each State and the practitioner’s perception of the agency’s effectiveness. This runs counter to what we might have expected with the Western Australia - with its very well funded Development Commissions having far higher average scores than the rest of Australia. Interestingly, Tasmania had the same average effectiveness score as NSW, even though agencies in the latter receive on average twice their funding. This observation was further reinforced when a simple regression analysis was undertaken between these two variables. The result R2 = 0.12 was not significant.

Table 7. Median Funding and Effectiveness Rating by State or Territory

Section 4. The Development Practitioners Art

The nature of the problems confronting development practitioners is the first piece of evidence relating to the funding strategies used by agencies. The relationship between effectiveness and funding is the second important piece of data. Clearly bigger budgets do not result in a greater perception of effectiveness (and we must recognise here that practitioners working in agencies with smaller budgets probably have more modest ambitions for their organisation). Once again, the data suggest that greater importance is attached to the method of providing financial assistance. Economic development agencies have to work toward long-term goals and they are hampered considerably when confronted by the fact they can only secure short-term financial support.

I would argue that practitioners are well aware of the issues canvassed in this paper and at the level of the individual this has determined their approach to seeking additional funding. Practitioners are pulled towards two poles, on the one hand they can seek additional funding from a bewildering array of sources - Commonwealth, State, Local Governments, community groups, industry and NGOs. If they are successful the agency will be able to increase its profile within the community through a greater range of activities, more staff, being able to address key problems within the region (such as a shortage of skilled labour), better access to government programs and other benefits. The CEO will also have immediate evidence of his or her success, and this can be used in ensuring political support for the agency, and attracting additional funds. There are, however, disadvantages. Agencies that seek additional funding can be drawn away from their core business as they CEO goes through the difficult and often time consuming task of submitting funding applications. Moreover if the applications are successful the agency may have to take on new functions and meet additional administrative requirements. In the majority of cases the funds gained will be relatively modest and of short duration and the funding cycle will need to recommence in two, three or six months. Agencies can choose to avoid the treadmill of seeking additional funding. This allows them to concentrate on their core activities. However, this approach also has a number of disadvantages. Agencies generally do not have sufficient funds to address their core business such that failure to gain additional funding can be debilitating. In addition, when compared with agencies that actively seek additional funds, there are fewer, and less tangible, immediate indicators of success

The development practitioners art is to balance these competing pressures. Obviously most local and regional development agencies fall somewhere between the two poles presented here. The CEOs are well aware of the pitfalls and dangers of being too close to either end of the spectrum. The overwhelming majority attempt to find a position which allows them to secure additional resources for their agency but does not overly commit them to short-term funding cycles. This then leads us to some questions of policy relevance. Clearly, local development practitioners are well aware of the costs for their organisation of become dependent upon short term funding. Why does it appear to be the case that central government agencies are completely unaware of this same phenomenon? Over recent years both State and Federal Government programs have promoted short-term funding arrangements for their local economic development frameworks. The Federal Government’s Regional Development Program provided administrative funding for only three years (and then on a declining scale) while the Victorian Government has recently moved to withdraw annual support for development agencies but instead make funding available for specific programs. This approach to supporting local economic development does not make good sense.

References

Beer, A. and Maude, A. (forthcoming) Effectiveness of State Frameworks for Local Economic Development, Local Government Association of South Australia, Adelaide.

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Moon, J. and Willoughby, K. Local Enterprise Initiatives: Between State and Market in Esperance, Australian Journal of Public Administration, 49:1, pp 23-37.

Roodenrys, M. 1996 Tasmania, ANZRSA Newsletter No. 3.

Rubin, H. J. 1988 Shoot Anything that Flies; Claim Anything that Falls: Conversations with Economic Development Practitioners, Economic Development Quarterly, 2:3, pp 236-51.

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Wolman, H. Ford, C. and Hill, E. 1994 Evaluating the Success of Urban Success Stories, Urban Studies, 31:6, pp 835-50.

Wolman, H. and Spitzley, D. 1996 The Politics of Local Economic Development, Economic Development Quarterly, 10:2, pp 115-150.