CASE STUDIES

1. Hradec Kr?lov?, Czech Republic: Community Profile

The municipality of Hradec Kr?lov? is a city of 100,000 inhabitants situated in eastern Bohemia, about 150 kilometers east of Prague. It is one of the 10 largest cities in the Czech Republic, a traditional center of culture, science, administrative, and light production economic activities. Although it was several times voted one of the best cities to live in the Czech Republic, the city has had problems organizing its economic development efforts.

The Problem

• Lack of information and promotional materials to provide to investors, tourists, and citizens.
• Lack of data to inform planning and evaluate results of any kind of LED activity.

The Solution

The first thing the city decided to do before any organized activity in LED began was to gather all currently available economic, social, and demographic data on their municipality, region, and for the national level, to allow comparisons. They used a format of a community profile that their newly established Office of Municipal Economic Development prepared based on review of several similar documents from Czech and foreign cities. In addition, they prepared an executive summary and tabularized the major data of all chapters into a one-page final overview.

The works on the community profile took approximately two months. The MOED did this without any external help from consultants, and the whole department was engaged in data collection, selection, interpretation, and drafting of the chapter texts. Different chapters were edited by different departments, but the MOED was responsible for coordination and the final editing.

The Results

The city invested its staff time and energy into an exercise that could be contracted out to a researcher, university or a consulting firm. The resulting document might have been of "better" quality if it had been completed by a professional, but the following results would have not been achieved:

• The MOED staff did one of their best self-development and training exercises.
• Interdepartmental communication links and cooperation on LED issues had been established.
• The understanding of the basis of LED was anchored within MOED and dispersed throughout the City Hall.
• The new MOED had its first visible product and could justify its existence and payoff.
• The community profile was distributed to schools, public libraries, other city institutions, and important companies and was displayed on the city's Web sites — professionals and general public had access to fresh economic information about their city.
• The city’s political leadership received information for its executive decisions that was well understood by the administrative staff.
• The next product of MOED was promotional leaflets that were produced using data from the community profile.
• The city realized that it had economic development problems and initiated a strategic planning process that used the community profile in many ways through the project lifecycle.

Community profiles are an important tool for alerting communities about their economic development issues, mobilizing their understanding of LED, promoting their strengths to outside partners, such as investors, tourists or citizens who consider moving in these cities. At the same time, active participation of the City Hall staff, especially the office of economic development, achieves much more than collection of data in one document. It is the beginning of systematic and strategic work for smart and informed development of communities.

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14. Slavutych, Ukraine: The Implementation of the City’s Economic Audit Mechanism

The Problem

Historically, the city of Slavutych depended solely on a single budget-generating enterprise: the Chernobyl Nuclear Power Station. The decommissioning of the power station occurred during a period of economic change in Ukraine. The local government suddenly was faced with a series of serious problems related to the need to prioritize sectors of the city’s economy for the development. The city decided to undertake a large-scale market research project. The objective was to understand the economic potential of the city and its place within the Ukrainian economy.

The Solution

The road of development chosen by the city was based on diversifying the city’s economy. This process was aimed at creating and developing enterprises that could support the city’s financial needs and to create jobs. Thanks to the local authorities’ perseverance, the city managed to attract outside resources to Slavutych and to effectively promote the development of the city’s economic potential. Substantial assistance in this process was received from international social and economic development projects and from a number of nationally sponsored programs.

Specifically, the Agency for Business Development conducted market research focusing on Slavutych’s economic potential. In the course of the research, efforts were made to determine the most attractive sectors of the city’s economy, as well as the available resources and opportunities in the Slavutych region. The competitive advantages of Slavutych were better understood, as was its economic position both in the Kyiv region and in the entire nation.

The results of the study were published as a “Resource Potential of the City of Slavutych.” The purpose of the report was to provide up-to-date and reliable information on the current social-economic situation in Slavutych. A comprehensive analysis was performed of the city’s economic dynamics, and a comparison was made between Slavutych and similar cities in the Kyiv Oblast and in Ukraine as a whole. This permitted the evaluation of Slavutych’s potential, as compared with other regions of Ukraine. The analytical report was targeted at an audience of entrepreneurs, market researchers, investors, government officials, and other interested parties. It will also become handy in the development of business plans, investment projects, and strategic development plans for the entire region.

The report was prepared with financial support from the Ministry of Trade and Industry of the United Kingdom, under the framework of the project “Enhancing Business Opportunities for Small and Medium-Sized Businesses in the City of Slavutych.”

The results of the market research project by the city of Slavutych allowed it to begin coping with the problems of massive economic change in a socially proactive manner through cooperation between local government agencies, the local business community, and the general public.

In 2004, independent experts from the non-government analytical center of the Institute of Reforms evaluated and ranked different Ukrainian cities’ and regions’ social and economic development. The experts ranked Slavutych second in the entire country.

The process of diversifying Slavutych’s economy is still in its developmental stage. The city still requires ongoing analysis of its economic potential. The results are used to make adjustments to the management of the city’s economy and to continue to achieve sustained economic development.

The Results

1. As a result of the work done, it was possible to implement a systems approach to the attraction of outside resources and the development the internal potentials of the city. This was done by creating a municipal economic audit mechanismand disseminating public relation information on the Slavutych region to newspapers and the electronic media.
2. A Slavutych regional Web site (www.investing.org.ua) was created that presents the current state of the city’s social and economic development. The city’s Economic Department compiles a quarterly report on the Slavutych region’s social and economic development. The report is posted at the web site, allowing potential investors, business people, and all interested citizens with an opportunity to receive comprehensive and reliable information on the economic potential of the city of Slavutych.

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Business Attitude Survey

We now move on to another important source of information that must be acquired and evaluated, the collective and individual attitudes and perceptions of those firms which create the jobs that employ the community’s citizens.

The best way to learn what employers think about the community is by meeting with them individually to seek answers to carefully crafted questions. Commission members are ideally situated to conduct these interviews and can learn a great deal about how strong the ties of job creators are to the community.

Business calling programs are an essential part of every city’s economic development program. However, some communities, as yet, have not organized such programs, and most employers have never been asked what they think about municipal services, labor force productivity, or the future of the community. Now is the chance to do that and, at the same time, inform a key segment of the community about the strategic planning effort. The Commission should prepare, in cooperation with the consultant, a survey questionnaire that will simplify tabulation and evaluation of answers.

The survey should include all major businesses and entrepreneurs in the municipality and in surrounding areas who employ residents of the municipality. It should discuss these issues: the history and description of the company, types and location of customers, current and future employment levels, future investment plans, need for public improvement, and opinions about local business climate issues, including local government services. An opportunity to express both positives and negatives should be offered.

Commission members will not have had prior experience in conducting such an interview. The consultant should therefore offer an orientation session on the techniques of interviewing. He or she will emphasize the importance of telling interviewees that their answers will be aggregated with all the others and without individual attribution, thus insuring confidentiality.

The number of interviews will depend upon the size and nature of the employment base, but should include at least the 25 largest employers and several entrepreneurs. Participation in these interviews is a rewarding experience for both Commission members and the companies. For the strategic planning process, it provides credible and, usually, very accurate and honest information concerning the good and bad points of doing business within the community, thus focusing on economic development issues that may become part of the strategic plan. For employers, it provides the opportunity for an off-the-record, peer-to-peer discussion about the community’s future and an opening to participate in planning for that future, if they are so inclined.

The reader may be interested in some of the concerns of the hundreds of companies who have participated in similar surveys completed in the Czech Republic since 1995. The surveys helped the Commission understand what the respondents consider as positive or negative elements of the city’s business climate. Although the answers differed from city to city, there are elements common to most. Again, we thought the reader might be interested in some examples.

The most frequently mentioned ideas for improvement, as well as positive and negative features of city’s business climate are provided in Annex 1.

Case Studies

15. Pre?ov, Slovakia: Business Attitude Survey

The Problem

The city aspired to create a favorable business climate that would encourage private companies to create more new jobs and contribute to economic development of the city. At the same time, City Hall knew little about existing companies, theirsuppliers and concerns, future plans for development, or their feelings about and reasons for being located in Pre?ov, nor did they know opinions of the business managers about the government and critical issues that the city faces. Moreover, development plans had been prepared by public sector or their contractors with little interaction or feedback from the private sector.

The Solution

A business attitude/climate survey that was conducted as part of the USAID-sponsored SLED program and as an integral part of the city's economic development strategic process helped to develop an important understanding among business leaders and public sector officials about the concerns and problems felt by the employers and investors who were already located and did business in/from the city.

The important component of the success of this exercise was the method of data gathering for this survey — it was a participatory, one-on-one interview process, in which senior public officials and business leaders visited personally with the company directors of the largest enterprises and focused on going over a structured business climate survey form. The aggregate results of the survey were processed and analyzed by an externally hired consulting firm who also made the case about the findings during a well-attended public presentation. Because the community leaders were personally and actively involved in the survey, they also understood the aggregate results and the final report and were able to actively use the experience from the surveying in further influencing the strategic planning process in steps such as critical issue selection, SWOT analysis, action planning, and the like.

The Results

Pre?ov received an honest picture about the status of business in the city, its prospects, and potential problems that must be dealt with in the planning process. Pre?ov businesses learned about the sincere interest of the public sector in assisting their growth and responding to their concerns in the city's economic development strategy. A new spirit of partnership has been born to be used in the implementation of the resulting plans. From conducting the survey alone, the business climate in Pre?ov has improved, even before any specific measures have been taken.

Business climate/attitude surveys have proven to be a very efficient method of capturing the unpublished and subjective information important to inform any economic development efforts at the local level. In addition, if repeated regularly, these surveys can provide very important comparative data for evaluating success of any public policies as perceived by the business community. References on positive business climate to potential external investors are likely to originate from companies that are already located in the city, and thus a well-thought-out and structured concern for local business climate is a must for any community that aspires to attract new job-creating investments from outside of the city or region.

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16. Slavutych, Ukraine: Analysis of Local Economy: Entrepreneurs Opinion Survey

The Problem

When starting and expanding their businesses, local businesspeople in Slavutych were facing problems which, they felt, were directly tied to the municipal government's lack of attention to matters of business development.

The Solution

In October 2003, the Business Support Fund contracted the Slavutych Socio-Psychological Center to conduct a survey intended to identify the most pressing problems local entrepreneurs were facing and to look for possible ways to improve their relations with the local government.

Survey tasks:

1. To identify individuals’ motivations for starting a business.
2. To identify the main problems and weaknesses of the business registration process and identify steps to simplifying the process.
3. Identifying the core of local governmental institutions that businesses have to deal with.
4. To evaluate the performance of these institutions in supporting business activity.
5. To identify the key problems emerging in contacts with these institutions and find ways of address these problems.
6. To gauge entrepreneurs’ assessment of business environment of the city.
7. To assess the role of the Chernobyl Nuclear Power Plant (CNPP) and the Slavutych Special Economic Zone (SEZ) in the development of business activity.
8. To evaluate the degree of satisfaction with the existing lending procedures.

Survey results:

1. The main reason for starting a business was quoted by the majority of respondents as “simply a matter of survival” (41.5%).
2. The key problems experienced during business registration were stated as an excessive amount of red tape in the registration process (46.0%), and an indifferent and unprofessional attitude of officials (32.1%). To eliminate the registration problems, 19.6% of respondents suggested simplifying the registration process and 12.9% conducting registration at a single location (). The suggestions of possible ways of simplifying business registration made by the respondents could be categorized into two groups:
   • Measures aimed at simplifying the registration procedure.
   • Measures aimed at improving relations between officials and entrepreneurs.
3. In their contacts with local government units, business people stated that they had the most frequent difficulties with the Chief Architect’s Department (55.4%) and the Fire Safety Inspectorate (54.3%).
4. The problems the respondents experienced when communicating with local government units are, in many instances, similar to those the respondents reported in dealing with the process of business registration. These included red tape, official delays, corruption, a hostile attitude, and the lack of professionalism among officials.
5. The respondents suggested ways to improve relations between the local government and businessmen, including a more considerate attitude to visitors, simplifying the interaction procedure, improving information, making the work of officials more open and transparent, and increasing the accountability of officials for performance of their official duties.
6. Almost a third of respondents (31.3%) have not noticed any influence of the Special Economic Zone on economic situation in the city, whereas 29.4% noted its positive impact.
7. The greatest support to local businessmen from among the local institutions is provided by the Business Development Agency, the mayor, and the Department of Trade, Consumer Services, and Protection of Consumer Rights. The entities that are hampering business development in the city include the Fire Safety Inspectorate, the Sanitary and Epidemiological Station, the CNPP management, and the Chief Architect’s Department.
8. Only 2.2% of respondents emphasized SEZ’s positive impact on their businesses, whereas 51.3% believe that the SEZ has no influence on their businesses.
9. 39.7% of entrepreneurs pointed to the negative impact the CNPP closure has had on their businesses.

The Results

Based on the survey findings, the following projects have been developed and implemented in Slavutych:

1.      The Creation of Regional Development Department Project.

Goal:To attract targeted investments and promote Slavutych businesses beyond the Slavutych region in 2004-2006 and to improve the business support tools in the Slavutych region.

2.      Increase Business Competitiveness in Slavutych through Capacity Building of the Slavutych Business Development Agency.

Goal: To improve the competitiveness of the Business Development Agency by raising the staff’s qualifications, improving the training facilities, implementing an effective financial management system, and offering new services to the businesses of Slavutych.

3.      Improving Business Opportunities for Entrepreneurs in Slavutych.

Goal: To Identify and implement effective actions aimed at ensuring the continuation of the city’s socioeconomic development, to address urgent problems created by the closure of the Chernobyl Nuclear Power Plant, and to support the financial sustainability of companies, expanding their operation and economic potential for satisfying the needs of the public, and raising the city’s standard of living.

4.      Program for Enhancing Capacity of Slavutych Citizens

Goal: Enhance the potential of Slavutych citizens through an improved system of social services, expansion of the local market for goods and services and the development of NGOs and improving the effectiveness of their interactions with the general public, other organizations, and governments at all levels.

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