In regional economic development there has been an increasing recognition that top-down approach to local development does not work.  Consequently, there has been a shift away from central government responses to market failure as top down programmes have often failed to lead to the anticipated trickle down effect from improving infrastructure or trying to support declining sectors. (Bennett and McCoshan, 1993; Demaziè and Wilson 1996; Pecquer 1989). 

The Grow the Bay project initiated in the Hawke’s Bay is intended to mirror this emphasis, utilising the local knowledge, expertise, commitment, and enterprise of local businesses and local people.  The governing philosophy is that those who live there are committed to its development and have available the best and most reliable networks for initiating change.  Though external validation, support, and input is necessary, local actors assume control and direction for their independent economic and social prosperity.

 

A bottom-up approach, like this has been shown to support long term development for

 

Consider the example of Jerez, Spain.  In the late 1980s, the region’s Sherry industry failed to respond to changing consumer tastes. Demand for its products declined and employment in the wine industry plummeted from 10,000 to 3,500.  Unemployment skyrocketed to 42 percent, one of the highest levels of unemployment in the European Union, and population numbers fell as families left the region. The response was a raft of activities based around creating wealth from new ideas and all regionally-based and controlled initiatives. 

 

Regional leaders built a new business school so that ideas might more readily transfer from intellectual knowledge into industry application. New enterprise schemes were started to promote the development of new firms, and existing businesses underwent business training so they could apply new techniques and knowledge to improve productivity. A transport hub was developed to speed up deliveries, saving time and money.  The region invested in urban renewal, promoted conventional tourism and diversified into viti-tourism. Over six years, the number of visitors increased 120,000, 4,600 new jobs were created in small and medium-sized enterprises, and unemployment dropped 40 percent. The effective delivery of innovation and the stimulation of enterprise had transformed – and rescued -- the region.  The message is clear: while some external support and validation of initiatives is useful, action by local actors assumes ownership and direction for their economic transformation.  The seeds of economic renewal are released within.

 

Grow the Bay – A Snapshot

Commenced in mid-2009, The Grow the Bay Project brings together Venture Hawke’s Bay’s existing Recession Recovery Plan with Dr Hunters suggested interventions in light of the present financial crisis.  Following discussions with regional stakeholders and presentations in the region, a number of key objectives were established that are now being pursued:

 

A key component of the Grow the Bay strategy is establishment of a Regional Development Fund.  This fund differs substantially in its nature and purpose from Venture Funds, ICE ANGEL funds, or Equity Funds. 

 

Recognizing the need in a recessionary climate for quick wins, and to halt the erosion of further job and skill losses, the Regional Development Fund is designed with existing businesses in mind, to quickly leverage their existing markets and capabilities to generate additional wealth and to create additional jobs.  This does not decry the work of activities such as Business Incubators, rather it is a frank assessment that the demands of the present recession do not allow the time return that brand new ventures by inexperienced entrepreneurs or business incubators demand before payback.  Quick results are needed to stem job losses and create wealth, therefore existing firms are targeted  - also because of the inevitable credit shrinkage in a recessionary climate.  This locally-based fund, will target local firms, with its aim to stimulate the immediate economy.  The flow-on benefits of this spread wider.

 

The Regional Development Fund is a sustainable and local source of funding targeted initially at successful, established businesses as a mechanism to provide quick intervention. The aim of the fund is to assist established Hawke’s Bay firms to pursue growth opportunities that will create jobs and generate wealth in Hawke’s Bay.

 

Similar initiatives overseas have proven successful:

 

A unique feature of the proposed Hawke’s Bay Regional Development Fund is its reliance on experienced local business people in its governance, and its use of mentors attached to firms that receive funding.  In this way, local knowledge is brought to bear on funding decisions, and more than a monetary transaction takes place.  In addition, through its existing government and industry relationships, Venture Hawke’s Bay is able to direct experience and resources to provide non-financial assistance to targeted firms and opportunities for support for research and development.

 

In brief, the characteristics of the fund are as follows:

Over the past 40 years, economic agencies around the world have worked to stimulate regions that have either been affected by some sort of market failure, such as economic recession, or failure of a particular industry, such as the Sherry industry in Jerez Spain in the 1990s, or the British car industry around Birmingham in the late 1970s.  Some regions, too, for historical, economic, or social reasons, seem to lag behind other areas in an economy.  The key question is: what can you do to reinvigorate these regions.  The answer is, of course, many things.  From enterprise assistance schemes, to infrastructure development, to small business training schemes, to urban renewal, trade fairs, grants to new businesses, innovation assessments, and many other measures.  If you look across the board at these sorts of initiatives ten key characteristics emerge, that I believe, categorize the most successful programmes in regional economic development.

 

1.     Clear Leadership – a single group acts as a hub in the centre of activities, coordinating the work of the various groups involved.  Often this leadership group has a local government connection.

2.     Clear Strategy –Based on an assessment of the regions strengths and weaknesses, there is a clear strategy articulated for growth.

3.     Reflect Local Needs/Resources – Any intervention must be compatible with local needs and resources.  There must be an empathy or understanding of regional differences.

4.     Partnership – There is a interlinking of people/ideas/resources.  Usually there is a strategic partner in the background providing information and validation to the development activities.

5.     Based around Innovation and Entrepreneurship – enterprise, generating wealth from new ideas, new businesses, new markets and growth is fundamental. In this manner, development is founded in the ‘real economy.’

6.     Aimed at Sustainable Development – activities are aimed at deepening local markets/communities/capabilities.  That the people and economies of the region become increasingly self-sustaining – including greater capacity to address future challenges. 

7.     Integrated Response – interventions are not based on a single industry, nor an industry that is vogue in the moment,  Rather across industry and sectors.

8.     Aspirational- economic growth has a social and cultural aspect.  Activities must be undertaken that raise expectations and possibilities in the minds of the people

9.     Robust Funding – there should be a robust and continuous funding mechanism.  Locally-based funding is best, that the project may be directed from the ground at the location and becomes increasingly independent.

10.   Action-based – the most successful programmes are those where there is a very short time delay between planning and doing.  Effective programmes are action orientated.