Strategic planning of local economic development


Over last two decades it has been realized that the existence of healthy economy and society is impossible in the world dominated by poverty and polluted environment. It is much more likely that the social pathologies that make individuals, social groups and nations suffer arise in poverty and unorganized society. Countries with weak economies lack efficient enough state structures that would secure safety to their citizens and all the others that do business in those countries. Phenomena like theatre governments and public institutions, corruption, exploitation and dominance of small oligarchic groups frequently appear in poor countries. Environment pollution, poverty, deterioration of ethical and cultural values, no respect for humanity are typical examples of pathologies that arise everywhere, where there is no enough interest in even a gradual development of the local communities.

Giving up central planning system and restoration of the local government structures were some of most important consequences of political transformation that took place in Poland on the turn of 80’s and 90’s. The period of last a few years is a history of efforts that were taken to establish a solid ground for operations of a sovereign, democratic country, which main goal would be stimulation of the individual and social development. However, a further transformation of the system is impossible, unless the future actions are properly organized and planned for the longer period of time.

Development planning has become a necessity in case of the entire country as well as each individual local government. Looking for efficient and economically effective ways of avoiding all the obstacles to increasing the level of living standard has been one of most urgent issues in the process of municipality day-to-day operations management, since a successful and comprehensive development of municipality heavily depends on the growth rate and the quality of the local economic sector development.

The process of local development is based on the process of improving local community living standard through developing public service, and creating most favorable conditions for the supply of individual needs. Fulfilling own, individual needs engages majority of activities performed by each human being. However, fulfillment of certain needs depend on co-operation between bigger or smaller social groups. Such organization might be of less or more formal character – starting with temporal groups of self-protection, through associations, foundations, local government institutions, state institutions, and, finally international organizations.

Stakeholders of the local government


Institutions of the local government have a very specific role in creating the quality of the living standard due to legally defined structure, revenues and competencies that should make fulfillment of the duties possible. Local governments objectives should be kept in mind that equally important sources of potential activities are common sense and responsibility for collective interest of all officers of local government.

Main elements of the natural and social environments that influence the quality of the local community living standard are same as those that determine the attractiveness of the given region with respect to economic enterprise development. Therefore, there is no contradiction between the actions taken in order to create conditions stimulating developments of the individuals and local groups, and activities performed to grow local economy. On the other hand, prioritization of those actions is optional.

Role of public administration in stimulating local economic growth

It is a generally spread idea that public administration and private enterprises are two independently operating sectors, and the only activity that they share is tax obligation. Such a point of view may seriously question any rationale for the existence of the local governments’ function in the process of stimulating economic development. Private enterprises operating in the free market economy (free competition) independently determine their activities and ways of development. Therefore, is this a misunderstanding to talk about the function of authorities and local government in the process of stimulating economic enterprise development? If we consider that quite recently the national economy was under the central, administrative management, the relation is even more doubtful.

Stimulating economic growth through activities performed by the public administration of different levels definitely is not a fiction. No enterprise operates in the “vacuum”, but in defined physical, social, and legal environment. Although private companies independently decide on their activities, they operations heavily depend on many other factors, and, among the others, on the public institutions. The latter are responsible for determining social and legal order in the state, which is a basis for the economic activities. Moreover, they undertake differentiated activities of regulatory character that match the processes of social and economic development.

Authorities define and protect ownership right giving a solid ground for certainty of made transactions. Legal regulations established by public authorities in the field of financial, taxation, customs, labor and social security law are crucial for the economic enterprise development. Authorities and public administration may also act as a regulator of the economic processes incentivizing industrial sector, and reducing undesirable consequences of free market economy. Influence of the authorities upon the economic processes may be reflected, among the others, in GDP redistribution in the way supporting too weak economic entities that are not able to operate in the environment of free competition.

The State support for the economic sector is realized through implementation of the following:

  • Maintenance of the public social security system,
  • Land development and land management,
  • Roads, bridges, waterworks, sewage systems etc. maintenance,
  • Public safety services maintenance,
  • Educational institutions financing,
  • Subsidies, cheap credits, support programs,
  • Public procurement,
  • Authorities participation in economic undertakings.

Each one, out of the three main actors of the domestic economic scene, is a buyer and a seller at the same time. Households purchase goods and services that are manufactured by the enterprises, while on the other hand, they generate income selling the labor. Public sector (authorities and public administration of different levels) plays a particular role in the system – it acts as a regulator of the economic processes that take place between the two other entities: private enterprises and households. Central, regional and local authorities creating the law, fiscal policy, customs policy and perform other activities that are to the certain extent implement the idea of State interventionism.

Enterprises are a crucial sector of the state system. Weakening of the sector makes the living standard of the community lower through deterioration in the quality of the public services rendered by the public administration of different levels. Authorities and public administration in particular take care about good condition of the sector, since it is equivalent to the activity of households support and all other elements of the state structure.

In order to support development of the local enterprises, one should remember that each company evaluates on regular basis its opportunity to develop. The company has to judge diligently influence of each of the factors on its operational costs together with the investment risk. The more factors are positive, the more willing will be the company to develop its activities.

Stimulating growth of the local economy


Elements of the company environment are as follows:

  • Political factors: law, economic policy of the government, local political groups etc.
  • Economic factors: structure and the level of demand, price of raw materials, inflation rate, trade balance, access to capital, banking rates, GDP etc.
  • Competition: domestic and foreign companies, substitutes, potential competitors
  • Technologies: information, innovation, access to advanced technologies, employees competencies
  • Social factors: demographic trends, level of education, ethical and cultural values, behavior, habits, the average level of awareness of the society etc.
  • Physical factors: access and prices of the land, infrastructure (sewage system, waterworks, electrical energy, heat, gas, communication systems), roads, car parks, communication connections, local mass transportation, access to apartments, rental rates, entertainment, urban environment advantages etc.

Valuation of the elements of the municipality economic environment in the light of its attractiveness should be focused on factors, which municipality authorities are able to influence. The valuation should result with the decision on such utilization of municipality funds and its resources that functioning of the existing companies would be easier and other entrepreneurs would be incentivized to take up activities on the municipality territory.

Elements of the environment associated with localization of a company

Development of the local economic sector directly influences the level of living standard of the community. Development of the companies creates new jobs ⇒ a work is a source of income ⇒ generated income creates demand for consumption goods ⇒ demand stimulates goods and services production etc. Therefore, the fundamental goal of all efforts taken up in order to stimulate the development of the local community is to create new jobs.

Elements of the environment that can be influenced by municipality:

  • Advantages of municipality localization
  • Roads, car parks, communication roads, drives
  • Communication and transportation connections
  • Technical infrastructure
  • Local labor market
  • Local real estate market
  • Access to apartments
  • Communication systems
  • Possibility of recreation
  • Investment and financial policy pursued by local authorities
  • Commercial contacts
  • Advantages of the natural environment
  • Quality of the social environment
  • Quality of the urban environment etc.

Development of private enterprise creates new jobs and generates income (for households and for the public budget). Indirectly, it also gives rise to growing independence of the municipality inhabitants and increases awareness of responsibility for own interests. Creating conditions for favorable development of the enterprise should be one of most important current goals of the local government. Municipality should create its economic attractiveness thorough establishing competitive advantage over other regions of similar character. Remembering about already existing companies, municipality should find new investors offering best conditions for developing economic activity on its territory.

Managing the municipality

Apart from certain differences and specific character of public institutions management, the three levels of management can be easily identified in the municipality structure of management: strategic, tactical and operational. Independent of the character of the realized undertaking and its timing, current problem solving and its management require decision-making based on the same rules that determine activities of well-managed organizational structures. The stages of strategic, tactical and operational decision-making match the stages of the municipality management process. Municipality management is a process of reaching agreements at each level of the management process. The agreements are a base for many contracts made in order to realize current goals and strategic economic programs.

Gathering and categorizing information

Information on municipality presented in the “Report on municipality condition” should be crucial material for the SWOT analysis. The Report should constitute a fundamental material for further works on municipality strategy. Moreover, data gathered in the Report is one of the sources of the information that may be used at the stage of preliminary analysis on conditions and directions of further municipality land development. Data included in the Report should be utilized for identification of the major directions of transformations that take place in the city. The “Municipality Development Convent” should determine its further development direction (a vision of development), intermediate growth goals (crucial problems) and fractional operational plans (strategies).

SWOT Analysis

Municipality development potential is identified in SWOT (strengths, weaknesses, opportunities and threats) analysis. This method is widely used in the private sector, and allows for valuation of the internal and external potentials for growth. In case of applying this method to the process of municipality economic development planning, SWOT analysis should encompass four basic areas:

  • Valuation of macroeconomic conditions,
  • Research on condition of private sector,
  • Research on environment competitive to municipality,
  • Research on internal, organizational conditions of municipality.

Analysis of the information on municipality should include past, present and future development in particular functional stages. While forecasting main directions of the economic development of a municipality, the following key questions should be considered:

  •  What element of the national and regional (provincial) economic system is the local economic system?
  •  What tendencies are appearing concerning the transformation of the local economic sector structure, and what are the main barrier to its development?
  •  What character should have the further spatial development of a municipality?
  •  What costs of the municipal technical infrastructure expansion should be forecasted in each possible variant of municipality’s development?

The final conclusions should provide answers to the following general questions:

  •  What elements of municipality’s environment should be improved so that the municipality could become a place worth working at (running own business) and living in?
  •  What public and private investments should be undertaken so that a municipality could become more attractive as concerns the carrying out of economic activity there?

These analyses should be made originally by members of the Convention for the Municipality Development (for the needs of the strategy), and then by a specialized team (office for town’s development) with the involvement and broad cooperation on the part of all municipality organizational units and other public and private institutions.

Basic structure od a strategy of local economic development

There are three basic levels in a structure of a strategy of local economic development: mission, key issues (crucial problems) and strategic action plans.

A vision on the municipality development

Identification of the municipality development is a trial of determining its desired condition after the spell of 15-20 years. The vision of development is a consistent definition encompassing basic values of municipality public life, and main strategic goals of its growth. It should be defined clearly in several sentences and be legible for the average municipality inhabitant. It should be remembered that the mission of municipality development should not be set of unrealistic wishes, but result from previously carried out analysis of the conditions of municipality growth.

Identifying key problems

The stage of crucial problems determination is the stage of identifying and defining intermediate strategic goals, i.e. matters that are crucial for possibility of achieving main goal determined in the vision of municipality development. The matters may refer to necessity of removing obstacles and neglects; or focusing on utilization of the potential municipality advantages. The level of generality in determination of crucial problems to further development should reflect its particular functions:

Example: Superior goals in the “Development Strategy for the City of Bialystok”.

  • Improvement in the standard of living,
  • Creating a supra-regional economic center,
  • Creating an educational center (XXI century),
  • Establishing of the cultural and tourist center,
  • Establishing of the center of international co-operation (West-East).

Strategic action plans

Determination of the strategic action plans is the last stage of the procedure of strategic planning of municipality development. A set of municipality strategic action plans that should be presented in form of concrete projects is the main subject of municipality development strategy. They should be consistent with the previously determined vision of municipality development and refer to issues that were identified as crucial for its further development.

Strategic action plans are instruments of implementing strategic agreements. At the stage of introduction, municipal economic programs should implement decisions of municipality development strategies assuming the form of implementing projects concerning the following:

  • Yearly and many-year investment plans,
  • Municipal financial programs (guidelines of many-year budgets, bonds emission, shares, subsidies, grants, other sources of financing),
  • Rules of managing the municipal property (trade in real estate, apartments, contracts),
  • Projects of improving the organization of municipal organizational units,
  • Projects of improving the rules of managing information systems,
  • Projects of improving the methods of managing a municipality and systems of controlling the functioning of municipal organizational units,
  • Municipality’s spatial development,
  • Programs promoting a town and assisting the local sector of small and medium-size business.

The contents of municipal economic programs should include:

  • Goals and aims that should be implemented within the program,
  • Recommendations concerning organizational conditions indispensable toimplement the program,
  • Stages of program’s implementation,
  • Systems of monitoring and controlling the implementation,
  • Dates of implementing individual stages and the date of conclusion, sourcesof financing.

Determination of a vision of municipality development and related subjects of economic plans should be based on macroeconomic projections and a creative search for optimum methods of development. Strategic planning should be a creative process determining main problems of the local community and making local authorities utilize all local potentials effectively.


Strategy of local economic (sustainable) development should be a common achievement of all the residents of a municipality. Strategic development programs should reflect a common point of view of local communities which leads to agreed common view on the development of a municipality. The best representatives of local communities, who are truly respected and recognized, but also can actually influence the outlook of the city, should be involved in work on the strategy. Such involvement aims primarily to make use of local representatives’ broad knowledge of the municipality and their strong links, due to family ties and/or many years’ of residence and professional work in the area.

Formula for the creation of strategic development programs for municipality with the involvement of representatives of local groups and communities proved effective and is approved in many countries. Wherever such programs are constructed in open partnership, their chances for implementation grow considerably, as a strategy prepared in this way becomes public property.

The strategy should not become a political program; its contents should not be formulated under political pressure and struggle over individual local interests. Political neutrality, the will to co-operate and strive for mutual understanding within a community should be the key methods employed by all those involved in the work on strategic development of a municipality.

Municipality development convention

The group of a municipality inhabitants who is involved in strategic planning process we call in Poland Municipality Development Convention. Mostly, the Mayor or the City Board appoints the Municipality Development Convention from among most influential persons who are relied upon by a several local leaders. An invitation to join the Convention should be treated as an honor and expression of respect. For this reason, Convention should have a nobly sounding name, such as the Council of Local Leaders, Committee for City Development Strategy, City Development Forum etc. It should consist of :

  • representatives of self-government and government administration,
  • local business leaders and major employers,
  • representatives of local educational system, culture and associations,
  • representatives of the municipal services (water supplies, sewer systems,electricity, gas etc.),
  • representatives of other local institutions and milieus.

The list above serves only as a suggestion of groups of residents who should be taken into account while establishing the Convention; it should be, however, tailored to individual conditions. Its composition should be balanced and numerous enough to perform its tasks in an efficient way. Herewith exemplary list of basic tasks for Municipality Development Convention:

  • Analysis of strong and weak points of a municipality,
  • Assessment of conditions for development of the municipality,
  • Creation of a perspective for development of the municipality,
  • Identification of medium-term strategic goals and operational plans,
  • Feasibility study for various operating programs,
  • Compilation of a list of basic tasks (action plans).

Tomasz Domański
International Citi/County Management Association, Bucharest 1999

© Materiał chroniony prawem autorskim – wszystkie prawa zastrzeżone.
Kopiowanie bez zgody autora jest zabronione.
W razie potrzeby, proszę o kontakt.