1. Learning the local business Workshop I. Good governance – role of local governments in LED and their efficiency 23 March, 2011, Gödöllő Gábor Péteri gpeteri@lgidev.com

2. 2 Local governments on the market Legacy: direct government intervention Subsidy to local companies Local investments in profit making sector Subsidized user charges Loan guarantee Local lending to entrepreneurs They are the least preferred actions today!

3. 3 Why do new enterprises start in your city? 1.wages, salaries 2.transportation, access 3.qualification of labour force 4.price of plots, real estate for investments 5.local taxes 6.contacts to the local government 7.zoning regulations Local business climate matters!

4. 4 Transformation of LED: indirect influence 1. Capital: municipal property, business park 2. Labour: comprehensive education, LLL 3. Infrastructure: physical, telecom, banks 4. Finances: local taxes, partnership 5. Regulation: urban planning, zoning, licensing 6. Doing businesses with LGs: procurement, CoI 7. Managing LED: marketing, agency/company 8. Planning: strategy, program, EU projects

5. From “brick-and-mortar” to financial instruments 5

6. 6 Attracting inward investment Most preferred actions by cities (HU, 2006): 1. Building public utilities 2. Contacting foreign investors 3. Listing available sites and buildings 4. Approaching national government 5. Creating new sites, plots 6. Re-zoning

7. 7 Establishing partnerships Narrow definition of PPP (risk sharing): Contracting out: services, management, leasing Institutionalised forms: supplement, share with private capital (BOT => concession) Broad sense: Contract based urban development Dynamic process: LG as owner (land, buildings), regulator (tax, charges, zoning), service provider

8. Responding on the crisis: economic stimuli or restrictions Sources of financing development 1. EU grants: bringing forward projects; higher advances; simplified procedures; lower tender prices 2. National investments programmes: “Green Growth” 3. Municipal borrowing: bond issue to co- finance; new limits; restructuring 4. PPP: declining resources 8

9. Re-inventing LED Municipalities go beyond mandatory functions: – create jobs – increase local tax base – share local infrastructure financing Long adaptation process: – EU limits on state aid lifted (€200K=> €500K) – simplification of administrative procedures – local tax reliefs – national loans for paying local contractors – special funds Utilising municipal property: access + management 9

10. 10 In search of new policies 1980s: improved efficiency: through market and private sector Present attitudes: market creates monopolies and social inequalities; emergency measures of intervention state should be owner, not only a regulator LED (decentralisation) is at the crossroads:  finding endogenous sources of growth  horizontal cooperation, vertical communication  network development, support to business innovation  energy efficiency  inclusive development  new EU policies: place based development