Strategic Local Economic Development: A Guide for Local Governments

STRATEGIC LOCAL ECONOMIC DEVELOPMENT: 1
A Guide for Local Governments

STRATEGIC LOCAL ECONOMIC DEVELOPMENT:
Copyright © 2009 Local Governance Support Program in ARMM
(LGSPA)

All rights reserved.

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

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

ISBN 978-971-94065-9-4

Printed and bound in Davao City, Philippines

Published by:

Local Governance Support Program in ARMM (LGSPA)
Unit 72 Landco Corporate Centre
J.P Laurel Avenue, Bajada
.
8000 Davao City, Philippines
Tel. No. 63 2 227 7980-81
www.lgspa.org.ph

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

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

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

4 STRATEGIC LOCAL ECONOMIC DEVELOPMENT:

STRATEGIC LOCAL ECONOMIC DEVELOPMENT:


Contents
2 Foreword
3 Acknowledgments
13 4 Preface
5 Acronyms
7 Introduction
13 Chapter 1: Understanding the Local Economy
How a Local Economy Works
The Fundamental Components of the Local Economy
21 Chapter 2: Integrating LED in Local Government Processes
When does an LGU do the Strategic LED Process?
21 The Five-Stage Strategic LED Process
Stage I: Organizing the LED Effort
Stage 2: Doing the Local Economy and Competitiveness Assessment (LECA)
Stage 3: Formulating the LED Strategy
Stage 4: Implementing the LED Strategy
Stage 5: Reviewing the LED Strategy
75 Chapter 3: LED in Practice
Tugaya, Lanao del Sur: Culture as an Engine of Local Economic Development
Wao Lanao del Sur: Pursuing Food Security and Environmental Sustainability through the
LED Process
Upi, Maguindanao: Developing the Entrepreneurial LGU through the LED Process
75 Tuguegarao City, Cagayan: Enhancing the Business Enabling Environment for
Community-Based Enterprises
Naga City, Camarines Sur: Good Governance as Catalyst of Economic Growth
Baybay, Leyte: Setting the LED Direction through Participatory Economic Planning
Bohol Province: LED through Investment Promotion and Good Governance

91 Chapter 4: Lessons Learned
98 Reference List
100 Annex A. The LGU Mandates and Related Laws on LED

91 102 Annex B. Data for Local Economy Profiling

Foreword
Assalamo Alaikum Warahmatullahi Wabarakatuho!

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

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

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

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

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

SAJID S. DRUZ ALI
Regional Secretary
Department of Trade and Industry-ARMM (DTI-ARMM)


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

The Local Governance Support Program in ARMM thanks:

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

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

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

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

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


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

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

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

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

Local Governance Support Program in ARMM (LGSPA)


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


MPDC Municipal Planning and Development QUEDANCOR Quedan and Rural Credit Guarantee
Coordinator Corporation
MSME Micro, Small and Medium-Scale RA Republic Act
Enterprise SB Sangguniang Bayan
MSU-IIT Mindanao State University - Iligan SCALOG System on Competency Assessment for
Institute of Technology Local Governments
MTDP Medium Term Development Plan SDC Swiss Agency for Development
NCCA National Commission for Culture and Cooperation
the Arts SEC Security and Exchange Commission
NCR National Capital Region SEZ Special Economic Zone
NEA National Electrification Administration SMART Specific, Measurable, Achievable,
NEDA National Economic Development Relevant, Time-bound
Authority SME Small and Medium Enterprise
NGO Non-Government Organization SMEDC Small and Medium Enterprise
NIA National Irrigation Administration Development Council
NSO National Statistics Office SP Sangguniang Panlalawigan
OBOL One Barangay One Livelihood SWOT Strengths, Weaknesses, Opportunities
ODA Official Development Assistance and Threats
OECD Organisation for Economic Co-operation TCTLDC Tuguegarao City Technology and
and Development Livelihood Development Center
OFWs Overseas Filipino Workers TESDA Technical Education and Skills
OTOP One Town One Product Development Authority
PAHRDF Philippines-Australia Human Resource TOP Technology of Participation
Development Facility TWG Technical Working Group
PAssO Provincial Assessor’s Office UNCDF United Nations Capital Development
PBIA Panglao Bohol International Airport Fund
PCARRD Philippine Center for Agricultural UNESCO United Nations Educational, Scientific
Research on Rural Development and Cultural Organization
PCE Philippine Center for Entrepreneurship UN-HABITAT United Nations Human Settlements
PCC Philippine Carabao Center Programme
PEE Public Economic Enterprise UNIDO United Nations Industrial Development
PESO Public Employment Service Office Organization
PGMA Provincial Government Media Affairs UNWTO United Nations World Tourism
PMS Presidential Management Office Organization
PO People’s Organization USAID United States Agency for International
PPP Public–Private Partnerships Development
PSP Private Sector Participation WB World Bank
PTEZ Panglao Tourism Economic Zone WFO World Food Organization

Introduction
It is at the local level that the greatest potentials for spurring development — for promoting investments,
creating jobs and boosting demand – exist. With the decentralization of certain powers and functions
brought about by the Local Government Code of 1991, the role of local government units (LGUs) in
development have also expanded. It is for this reason that LGUs are now viewed not just as providers of
public goods and basic social services, but more importantly as promoters of local economic development
or LED. The LGUs have a critical role to play as agents of economic development in their respective
communities.

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

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

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

1. It describes the LGU-facilitated LED process as part of the economic sector development
function and integrated in the planning, implementation, monitoring, evaluation and policy-
making systems of an LGU;
2. It gives emphasis to value chain and industry-based LED strategy formulation; and

3. It demonstrates the use of small, medium and enterprise development, performance management,
and poverty-sensitive and gender-responsive strategies in the implementation of the LED plan.

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

The Guide has five major parts:

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

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

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

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

Chapter 3 – LED in Practice is a compendium of LED experiences, innovations and good practices
of selected LGUs in the Philippines including those of Wao and Tugaya in Lanao del Sur, and Upi
in Maguindanao, which are municipalities covered by the LGSPA. LED initiatives of the provincial
government of Bohol, the city government of Tuguegarao in Cagayan, the city government of Naga

in Camarines Sur and the municipal government of Baybay in Leyte are also featured. Useful insights
can be drawn from the different approaches and strategies resorted to by these LGUs in stimulating
economic growth in their respective areas of responsibility.

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

What is Local Economic Development?

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

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

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

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

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


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

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

Goals and Principles of LED

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

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

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

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

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

The LGU Mandates and Related Laws on LED

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

LGUs more power and authority to accelerate local economic development and improve the quality of
life in their communities.

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

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

The LED Stakeholders, their Roles and Responsibilities

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

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

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


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

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

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

Cooperatives (producers, credit, consumers) and microfinance institutions serve as depositories of
community savings; providers of credit assistance, social protection measures such as health insurance,
mortuary packages, and emergency loans; and promoters of frugality, discipline, trust, self and mutual
help, and entrepreneurship.

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

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

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


Chapter 1
Understanding
the Local Economy

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


Understanding the Local Economy

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

How a Local Economy Works

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

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

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

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

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



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

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

Figure 1. Example of Money Flow in a Local Economy

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

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

MUNICIPALITY’S
LOCAL ECONOMY
P
= Crop Production
Local Residents Inputs (Fertilizers,
Shopping in other Cities P
= Seeds, etc.)

Leakage Out of P
= Construction
Materials
the Municipality
P
=
P
= P
=

LGU Expenditures
outside the Municipality Construction Labor
Printing &
Publishing Services

Source: Adapted from McSweeney (n.d.)



Fundamental Components of the Local Economy

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

Labor

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

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

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

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

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



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

Technology

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

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

Infrastructure

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

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

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



establishment of local infrastructures.

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

Financial Capital

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

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

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

Leadership

The leadership triangle in Figure 2 shows that there are three economic development interests that must
cooperate for a successful local economic development. These are the local government or political


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

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

Figure 2. Economic Development Leadership

BUSINESS LEADERSHIP

Successful
Local Economic
Development
LOCAL PROFESSIONAL
GOVERNMENT LEADERSHIP
LEADERSHIP

Source: McSweeney (n.d.)


Chapter 2

Integrating LED
in Local Government
Processes

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


Integrating LED in Local Government Processes

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

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

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

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



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

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

When does an LGU do the Strategic LED Process?

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

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

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



The Five-Stage Strategic LED Process

There are five stages in the LED Process, as follows:
THE FIVE-STAGE STRATEGIC LED PROCESS
Stage 1: Organizing the LED Effort


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


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


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



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


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

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


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

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

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

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



Step 1: Identify & establish the LGU LED Team

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

The following considerations are important in the LED team composition:

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

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

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

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

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

community

locality



processes, project management, financial management and fund-raising

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

Table 1. Sample composition of the LED Team
SUGGESTED COMPOSITION OF THE LGU LED TEAM
Who? Why?
Local Chief Executive/Mayor Can provide leadership and political influence in the formulation
and establishment of structures and systems
Municipal Planning and LED planning is integral in municipal planning; can facilitate the
Development Coordinator integration of the LED Strategy into the CDP ELA and other LGU plans.
,
Municipal Agriculture Officer Most of the municipality’s economic activities are agri-based;
can facilitate implementation of agri-based LED programs and projects
Municipal Treasurer Can provide information on the LGU resources that will be
available for the process.
Municipal Assessor Can provide information on the valuation of land and resources in the locality
Municipal Budget Officer Can provide information on the budget available for the LED activities.
Chairperson of the Legislative Can recommend policies in support of local economic development
Council Committee on Agriculture
Chairperson of the Legislative Can push for the appropriation of budget necessary for LED implementation.
Council Committee on Finance
Municipal Tourism Officer Tourism is also a significant source of income of the municipality; can
facilitate the implementation of tourism programs and projects
Municipal Local Government Can help champion the LED process and guide team regarding LGU mandates
Operations Officer

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

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



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

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

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

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

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



and activities are prioritize and allocated resources.

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

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

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

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

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



Table 2. Example of LGU LED Team Roles and Scope of Work
FUNCTIONS OF THE LGU LED TEAM

analyzing/assessing the economy

of the LED Plan
ACTIVITIES OF THE LGU LED TEAM IN THE LED STAGES

Stage 1:

structures and systems

Stage 2:

Stage 3:

Strategic Plan

Stage 4:

committees to implement the programs and projects

Stage 5:

LED stakeholders group.



c) Determine the appropriate budget for the LED Strategy formulation

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

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

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

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

Step 2: Establish and maintain active participation and involvement of

LGU political leaders

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

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

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


LGU.

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

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

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

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

Step 3: Develop a LED Stakeholders Group

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

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

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

Aside from the private business sector, the LGU LED team also needs to identify stakeholders from the
public sector (including the appropriate regional and provincial line agencies), the labor sector, and the
community and civil society organizations. National, regional and provincial levels of governments have
a key role to play in facilitating an environment that is conducive to local economic development, and it
is therefore appropriate to include these levels of government into the strategic planning process when
necessary (Swinburn et al., 2006).


In the context of the ARMM, the following agencies and offices in the Autonomous Regional Government
(ARG) were included as stakeholders in the LGU LED process: Department of Trade and Industry-
ARMM (DTI-ARMM); Department of Agriculture and Fisheries (DAF-ARMM) and attached agencies like
the Philippine Carabao Center (PCC); Department of Science and Technology; chambers of commerce;
business councils; provincial government; government financing institutions such as Land Bank of the
Philippines; state colleges and universities.

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

Table 3. Examples of Stakeholders in the LED Process
Public Sector Business and Labor Community and CSOs

departments, e.g., entrepreneurs o People’s organizations

Agriculture, Infrastructure, and Finance fisherfolks associations o Women’s associations

Engaging the stakeholders’ group will involve two key tasks:

a. Conduct Stakeholders Analysis

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



Table 4. Example of Stakeholders Analysis for Partnership
Stakeholder Description of Interest Partnership Assessment Key Potential Role in the
in LED LED Process
Barangay Government Units LED impact area, poverty Essential Partner in implementation
alleviation in rural areas

Vendors Association Expansion of client base Essential Strategic planning program/
project implementation

Farmers’ Cooperative Business opportunity, market Important Strategic planning program/
expansion, productivity project implementation
enhancement

Rubber Budders Association Business opportunity, Important Program/project
production and market implementation
expansion

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

Electric Cooperative Expansion of client base Important Program/project
implementation

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

b. Orient and level off with the LED Stakeholders Group

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

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



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

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

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

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



Table 5. Example of LED Stakeholders Group Composition and Scope of Work
Composition of the LED Stakeholders Group
Who? Why?
Rural Bank Can provide information on the economy and participate in
LED strategy implementation

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

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

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

Functions of the LED Stakeholders Group

development mandate to ensure that local priorities are known to them and supported by them

Activities of the LED Stakeholders Group in the LED Stages

for the LED stages Stage 4: Implementing the LED Strategy

Stage 2: Doing the Local Economy and
Competitiveness Assessment (LECA) financial) and technical assistance on
required training and capacity building
interventions

Stage 3: Formulating the LED Strategy Stage 5: Reviewing the LED Strategy

strategy formulation implementation

value chain analysis



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

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

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

Stage 2: Doing the LECA

Step 1: Collect and assess local economic data
Step 2: Conduct Local Resource Inventory and Assessment
Step 3: Conduct a SWOT Analysis of the local economy
Step 4: Conduct Value Chain Analysis
Step 5: Identify priority industries
Step 6: Document the LECA

Step 1: Collect and assess local economic data

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



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

modalities, telecommunication, land and real estate development, and agriculture development
infrastructure.

provincial, regional, and national programs and policies and global trends.

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

Data Sources

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

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

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

For the business enabling environment, the information on this can be generated from the LGU personnel
and the LED stakeholders group through a focus group discussion or survey. LGU self-assessment of
the LGPMS is also an important source particularly for the indicators under the Economic Governance

Strategic Local Economic Development: A Guide for Local Governments

Strategic Local Economic Development: A Guide for Local Governments

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