The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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1. INTRODUCTION

1.1 Background

As a result of political and economic transformation, Local Government Units in Armenia will have to adopt a strategic approach to municipal management and develop activities to influence local economic development. The objective of this work is to present to municipal officials, citizens and entrepreneurs in Armenia an Economic Development Strategy for the City of Ijevan for the period 2003 to 2006.

One of the key goals of the program was to increase the capacity of municipal officials, citizens and entrepreneurs in the City to use the strategy planning process to develop a long-term vision of City activities that will lead to growth of the local economy and, to prepare, implement and monitor the necessary action plan to achieve the vision.

The program to prepare the Economic Development Strategy was a joint co-operation between consultants from the United States Agency for International Development (USAID) funded Local Government Project (implemented by The Urban Institute (UI)), City Officials and members of the community. The preparation of the Strategy was carried out during July and September 2002.

This document presents the following:

• Methodology used to prepare the Economic Development Strategy.
• Vision Statement for the City of Ijevan and targets that have to be attained to achieve the Vision.
• Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis.
• Critical Strategic Issues that need to be addressed to achieve the Vision.
• Tasks that need to be performed to address the Critical Strategic Issues.
• An Action Plan to complete the tasks that are necessary to solve the Critical Strategic Issues.

1.2 What is local economic development?

Definition—Among many definitions found, the most appropriate reads:

"Local economic development is a process during which local government improves citizens' quality of life, which creates a new community and stimulates economic progress".

Local government attains this goal by:

• Supporting the private sector, as it has a fundamental role in stimulating economic progress.
• Using local resources effectively.
• Promoting the creation of new jobs.
• Managing public funds effectively.

Local economic development is a predictable process, planned and implemented together by the private sector, public sector, and local government from compatible actions and programs.

Local economic development is a process that influences prosperity of the local government and the community. Therefore, the local government's role is to enable the use existing resources in a variety of fields to foster economic development. There are several factors that increase the probability of a successful economic development strategy:

• Knowledge of strengths and weaknesses in the local economy and its hidden assets.
• Leadership that unites human resources, knowledge and funds of the local government, community and the private sector in order to meet common goals. Local government is not capable to succeed in economic development on its own. Therefore, cooperation among three sectors is required.
• Delivery of assistance and/or services in those areas where individual industries and institutions do not meet local government's needs. Public sector efforts should not substitute the private sector in the area where the private sector wants and is capable of undertaking the necessary actions and investments.

Who supports economic development?

Economic development is a result of cooperation among the following partners: public sector, private sector, and local government.

Local governments are fundamental institutions supporting local economic development. They have the following roles in the economic development process:

• Leaders in development of comprehensive policies regarding local economies.
• Administrators of economic policies, programs, and projects.
• Initiators of economic development programs through distribution of public funds, investment incentives, creation and retention of a favorable economic environment that stimulates growth in entrepreneurship, promotion of industry, small and medium businesses, local regulations.

Moreover, local governments are also responsible for the development of local infrastructure, municipal services and other elements related to the economic environment.

Finally, local governments provide the private sector with important information about investment possibilities, regulations, services and available funds.

Fundamental issues in local economic development are:

• Assistance in establishment of new businesses.
• Development retention and expansion of existing businesses.
• Attraction of new investors because entrepreneurship is the engine of economic growth.

The role of a local government in promoting economic development is limited by the State's economic strategy and economic priorities of the Marz authorities. However, local governments may actively influence their current and future prosperity through creation of conditions for new businesses, development of the existing ones, and attraction of outside investors. These conditions include:

• Local legal and tax system: the system should give financial incentives for the local private sector and outside investors; it should be stable and transparent.
• Land management: quick and reliable inventory of municipal resources, efficient solving of legal problems before sale, lease or establishment of a public private partnership, rational selection of land management methods and criteria that investors have to meet.
• Spatial planning: general spatial plan should clearly define principles of spatial policies in relation to the adopted economic development strategy and promoted businesses, environment preservation, development of local economic zones.
• Professional and transparent operation of the municipal office for local and outside investors, efficient procedures for formalities, easy access to information.
• Support of local government for civic initiatives and entrepreneurial operations.
• Active participation in aid programs which may result in strengthening a professional approach to operation, using international funds to finance infrastructure development in municipalities.

All of the above conditions are defined as a favorable economic environment that attracts investors. Successful investment projects create jobs, increase citizens' income and public funds and, improve the fiscal capacity of local governments. Therefore, the role of a local government in promoting economic development should achieve four objectives:

• Prosperity of the community
• Stable financial situation of the local government
• Delivery of quality public services
• Optimal utilization of geographical location, natural environment, cultural assets, etc.

The above-mentioned elements influence the economic environment that is evaluated by investors.

This document presents the 2003 to 2006 Economic Development Strategy for the City of Ijevan.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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