This development has brought both risks and opportunities to local economies: it increases pressure on local economies to compete internationally and adapt to global economic forces. At the same time, it opens opportunities to attract new markets and investors.
Decentralisation and LED
LED's popularity as an approach to economic development also coincides with the global trend of decentralising power from national to local government. Decentralisation refers to functions of government being handed over to other tiers of government, e.g. regional or local. Decentralisation is often a function of democratisation processes and the desire to allow a broader participation of citizens in the design and control of political processes that determine their livelihoods.
LED can be described as a decentralization mechanism which allows local and regional governments and their communities (business, labour and society) to shape their environments, improve competitiveness in their local economies and to participate in economic decision making which explores creativity and builds entrepreneurship at all levels of society.
Failure of other economic development policies
Furthermore, the failure of existing industrial policies in numerous developing countries to create competitive and dynamic industries has contributed to the popularity of innovative LED concepts. The same counts for the Structural Adjustment Programmes and the macroeconomic reforms introduced in the 1990s, which in most cases failed to have the majority of the population benefit from economic growth.
LED as the answer
These experiences and changing framework conditions have motivated a critical reflection of traditional approaches to economic development. Local and Regional Economic Development has emerged as an innovative approach to address the challenges localties and regions are faced with.
LED offers a non-traditional, inter-disciplinary mix of approaches which allows practioners to deal with multiple and interrelated obstacles such as low skills levels, lack of entrepreneurial culture, inappropriate or weak support mechanisms, disabling regulatory environments or a lack of access to financial and business development services at a local level rather than at a national level.