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Reimagining Local Economic Development for a Green, Resilient, and Inclusive Recovery

Created Sep 06 2022, 6:27 AM by Anastasiia Krasilnikova

Ashutosh Raina, Camila Linneman, Jana El-Horr, Parmesh Shah, and Susan Wong

Two years into the pandemic, growth in emerging markets and developing economies (EMDEs) is projected to remain substantially below the pre-pandemic trend, as noted in the latest World Bank flagship report - Global Economic Prospects. And while national governments have significant work ahead, local and regional governments will be on the frontlines of supporting long-term local economic recovery due to their close proximity to their constituents. 

The pandemic has underscored the need to invest in local economic development (LED) while teaching us important lessons about how to proceed:

  1. It is important to complement emergency social protection investments that mitigate immediate impacts with comprehensive support to transform local economies and drive longer-term economic recovery and job growth.
  2. To build a more inclusive recovery moving forward, special assistance needs to be targeted towards especially marginalized groups. By supporting marginalized groups and lagging areas, we can help build more equitable systems and economies with greater opportunities for the poor and vulnerable.
  3. Community-driven development and LED projects emphasizing community control over planning decisions and resources can be leveraged to create jobs and deliver income support to informal workers, the poor, and small and micro enterprises. Projects like the Development Responses to Displacement Impacts Project (DRDIP) in Uganda scaled up support for savings groups and livelihood activities in host and refugee communities, supporting over 63,000 households across 1,212 villages as of May 2021.  
  4. Donor financing alone is not enough to provide the necessary resources and partnerships, especially in rural, lagging, or conflict-affected areas. In contrast to metropolitan areas, these areas often have higher poverty and inequality rates, weaker economies, and fewer resources to respond to these challenges.
  5. Non-traditional partners such as social and digital enterprises, foundations, impact investors, and financial institutions can play a powerful role in unleashing new financing and opportunities for underserved areas and populations. Under India’s National Rural Livelihoods Mission, partnering with commercial banks induced $40 billion in loans to women, 20 times more than World Bank-supported financing for the project.

How can we apply these lessons to support post-pandemic recovery?

Traditional LED interventions focus on strengthening local government and supporting value chains for different livelihoods to build an area’s economic capacity. Applying these lessons requires reimagining LED to be a more inclusive approach that mobilizes the power of partnerships and platforms to achieve long-term objectives. This involves broadening the network of actors working collaboratively to strengthen local economies, including non-traditional partners like digital enterprises, private sector actors, social enterprises, and financial institutions. Engaging a broader range of stakeholders can mobilize greater resources and technical expertise, create new economic opportunities, and facilitate last-mile service delivery. By supporting platforms where these stakeholders can engage with and learn from one another, this reimagined approach is expected to encourage faster recovery and catalyze greater impact by creating synergies and leveraging the strengths and resources of these stakeholders. 

To operationalize this vision, the World Bank is piloting LED platforms at the local and regional government levels in East Africa. Under the leadership of the local government, platforms will bring together committed stakeholders, both traditional and non-traditional, to increase the intensity and density of support to communities and local economies.

These platforms can be instrumental in maximizing development finance and enabling working at scale by facilitating coordination and collaboration among identified partners. This collaboration mobilizes more resources and expertise and facilitates the more efficient use of existing resources by avoiding duplication and identifying opportunities for complementary interventions. This approach prioritizes building on existing community institutions and investing in digital technologies and complementary productive infrastructure to deliver comprehensive and sustainable support in the form of financing and technical assistance. Importantly, by tackling economic recovery with a collaborative ecosystem of actors, local governments can take a longer-term and more holistic approach to local economic development, mitigating the siloed and shorter-term outcomes focus of traditional interventions. 

Building a community committed to green, resilient, and inclusive local economic recovery

In January 2021, the World Bank launched the LED Knowledge Silo Breaker (KSB) to develop and promote this reimagined approach. This community connects peers, thought leaders, and practitioners across governments, agencies, and academia to share their ideas and experiences related to LED. With the collective power of an expanded community of partners, we believe this inclusive approach to LED can be transformational in delivering green, resilient and inclusive local economic growth and accelerating COVID-19 recovery. 


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