Regional Economic Development Planning in New Zealand: Who Owns It?
Professor Paul Dalziel
Professor Caroline Saunders
2. What Does Ownership Mean?
Ownership is a fundamental concept in any economy. A system of enforceable and clear property rights for ownership - that is, a system of rules for the use and management of a country's resources and output - is essential for efficient resource allocation and to create incentives for ongoing wealth creation. For most goods and services within a market economy, property rights affirm private ownership. In these cases, individual citizens or organisations are free to use or sell their property, subject to general rules often designed to protect the common good (such as avoiding injury or interfering with another agent's property rights). For some goods and services, however, private ownership is infeasible or undesirable, and the definition of property rights must reflect common ownership. This section argues that regional economic development planning is an example of a service that requires common ownership property rights, with important implications for the issues of who defines these property rights and who benefits from, or is affected by, ownership of regional economic development planning.
The clearest example of a good or service requiring common ownership is a pure public good that has two characteristics. First, it is impossible to exclude people from the benefits of the public good if the good is provided at all. Second, there is no rivalry in consumption, so that one person benefiting from using the public good does not reduce the benefits that can be enjoyed by others using the same good. Private ownership is not feasible for a pure public good. Because there is no rivalry in use, the aggregate value of the public good can be extremely high; because the good is not excludable, howeverm individuals cannot insist on payment for supply. Hence private ownership does not provide the correct incentives for its production. A system of common ownership is required instead.
Pure public goods are rare, but reasonable numbers of goods and services share one or both of these characteristics to some extent. Regional development is such an example. It is possible for rising prosperity in a region to be captured exclusively by only a subset of the local population (particularly by those who are already well-off), and the way in which benefits from regional development are accrued by one sector may reduce the benefits that are then available to other sectors. It is also possible, however, for regional development to create benefits for all of the local population in a non-excludable, non-rival manner. This alternative is highly desirable from a human development perspective, but requires careful institutional design to be achieved.
Responsibility for creating and monitoring common property rights generally falls to central government (itself a common property institution in participatory democracies), which explains why governments around the world have initiated regional development programmes. It is important to emphasise that the central government's role in creating these common property rights does not mean the government owns regional economic development planning.1 Instead the government's key task is to determine who in a region should own the region's economic development planning process, and then to confirm an institutional structure that protects the common property rights of these owners. The resulting structure needs to take into account the economic, social, cultural and environmental context of each particular region, which makes it impossible to provide simple recipes for institutional design. Nevertheless, the common element in current practice is that regional economic development planning should be ?owned? by some form of regional partnership created for that purpose.
New Zealand's regional partnership programme is typical. It acknowledges a particular partnership structure in each region, recognised by central government as being the lead agency for local economic development planning. This bestows common property rights on the members of the partnership. In particular, this group is given rights to exclude others from involvement, and may face conflicting incentives depending on how members of the local partnership structure are chosen and to whom they are accountable. If the partnership is to achieve its full potential and maximise socio-economic benefits, it is important that its structure and operation be carefully designed.
In this paper, the authors concentrate on three factors that are particularly relevant to the critical question of ownership: (1) the objectives and structure of the partnership; (2) legitimacy and accountability; and (3) the culture and leadership of the partnership.
2.1 Objectives and structure of the partnership
The design of a regional partnership depends on the high-level objectives it is intended to pursue. In some cases, the purpose may be to increase per capita incomes generated by the region's businesses. This appears to have been the core objective of the regional partnership programme in New Zealand. In other cases, the policy may include wider objectives such as enhanced social cohesion or better integration of groups that are on the margins of the regional economy (such as young people, single parents or members of an ethnic minority). The ?whole of government? or ?joined-up government? approach to regional policy interventions is a good example of the latter (see for example, Podger 2002). It is also likely that the goals and objectives of a regional partnership will change as local development proceeds, and so it is desirable that the structure of a regional partnership is able to evolve over time.
There is no universal model of regional partnerships but it is common to create a structure that includes members drawn from local business and employers, trade unions, farmers, tertiary education institutions, local politicians, local authority officers, government department employees, community non-government organisations and local volunteer groups. If the objective is to increase income from business then it is essential for the business community to be included. If there are wider goals to enhance social cohesion, then there needs to be an equal emphasis on participation by community groups. In either case, decisions must be made about who will be invited into each partnership, using sometimes contradictory criteria such as inclusiveness, availability, flexibility, balance and effectiveness.
Inclusiveness refers to the principle that a partnership should be open to all groups that have something useful to contribute to its work or who are affected by decisions made by the partnership. It often specifically refers to the involvement of non-government community organisations and volunteer groups. A city or region may have a very large number of such organisations, however, and so it is not obvious how (or by whom) the choice of representation should be made. On the other hand, inclusiveness can be an important mechanism for breaking down rural or social isolation by involving groups who are normally excluded from involvement in regional planning.
Availability refers to the difficulty some partnerships have in obtaining appropriate representation from all the desired groups. It often refers specifically to the involvement of business leaders (see, for example, Wong, 1998, and Liddle and Townsend, 2002). If the partnership resides in an economically depressed area, there may be a shortage of business expertise that has the time or willingness to become involved in a public service role on a regional partnership. The difficulty in obtaining the support of business leaders is likely to be accentuated if membership is unpaid or carries with it an open-ended commitment to provide time or other resources to the process. Partnerships may also have difficulty in obtaining representation from disadvantaged groups if they do not have the financial or human resources to participate.
Flexibility refers to an individual's ability to participate in a consensus decision-making environment. A partnership can be totally disrupted if one or more members participate with a fixed agenda with no flexibility to accommodate other points of view. Balance refers to the desirability of ensuring that no individual sector comes to dominate proceedings through over-representation. There are numerous examples where domination by a key group (particularly local authority officials) or the absence of a significant partner (particularly business representatives) reduces the effectiveness of a partnership. If one group is perceived as driving the whole process for its own objectives, this reduces the motivation for other participants to remain involved. Effectiveness refers to the increased difficulty of maintaining consensus and achieving objectives as the size of the governing board gets larger and larger. One way to approach this problem is to have a relatively small Board overseeing a larger structure of subcommittees and working groups (see section 5 below).
2.2 Legitimacy and accountability
Appointments to a regional partnership are often made by central government, although perhaps on the advice of local organisations. Members appointed in this manner can lack local legitimacy, especially if it is perceived that the regional partnership is really owned by central government rather than the nominees. This perception can be offset by the close involvement of local politicians with a legitimate democratic mandate to represent the local citizenry in regional planning. This argument has been influential in recent initiatives to bring local government and economic development agencies closer together in Ireland and the United Kingdom. In the later, it has led to a government proposal to make Regional Development Agencies accountable to fully elected assemblies rather than to appointed chambers (HM Government, 2002).
Accusations of weak legitimacy can have other adverse implications for local ownership of a regional partnership. The partnership may be criticised for being
insufficiently accountable to its regional populace because it is bound by national policy guidelines or external funding criteria. Alternatively, there can be a perception that business or worker representatives are too strongly influenced by sectoral and/or national debates as they participate in local planning. Further, if a local authority becomes dominant in a regional partnership, this can lead to a loss of ownership by other partners. This may be particularly acute if the partnership has no formal authority to implement changes, but is reliant on its ability to persuade member organisations about the validity of its strategic planning. In a worst-case scenario, the existence of a ?lame duck? partnership, or a partnership dominated by local government, may become little more than an excuse for inaction by other agencies in the region.
Members of a regional partnership face conflicting accountability demands to potential owners in four dimensions:
- How accountable should each member of the partnership be to the particular organisation or community group it has been drawn from?
- How accountable should members of the partnership be to each other?
- How accountable should the partnership be to the wider community?
- How accountable should the partnership be to the central government?
Since local partnerships typically receive some of their funding from central government, the fourth question is usually addressed clearly in the programme's funding criteria and reporting requirements. It is not so clear, however, how mandates should be given and observed in each of the other three dimensions. Indeed, conflicts of interest may often emerge between the interests of a particular organisation, the interests of the partnership and the interests of the wider community. The literature suggests that perhaps the best that can be hoped for under these circumstances is that the work of the partnership is undertaken in an environment of openness and transparency in order to minimise opportunistic behaviour by its members.
2.3 Culture and leadership of the partnership
If a partnership is to develop property rights to maximise benefits for those who own regional economic development planning, it needs to find a way of working effectively. A broadly representative partnership drawn from diverse working cultures can find this difficult. At the risk of reflecting stereotypes too rigidly, business leaders may be accustomed to operating in an entrepreneurial culture, trade unionists within a rule-based solidarity culture, local authority officials within a bureaucratic culture, community workers within a participatory culture, and indigenous representatives within an evolving tribal culture. Cross fertilisation from these different backgrounds can be an important source of strength for a regional partnership. If these differences are not acknowledged, however, they may also become a source of conflict and tension. If one way of operating becomes dominant, it is likely to lead to some members of the partnership becoming sidelined. It may lead to a partnership becoming too narrow in its focus, say by concentrating on economic development defined in strictly commercial terms without considering the need to address social inclusion (or vice versa). This suggests that mechanisms for acknowledging and addressing conflicts of interests by the partners are desirable, and reinforces the exceptional skills that may be required to manage a partnership.
Indeed, many partnerships are built around the strong leadership skills of a particular individual, often associated with one of the partners. The absence of a strong leader can leave a partnership floundering in a sea of paperwork describing goals, objectives and strategies with no clear purpose or direction. The leader also needs to have diverse skills in relating to the needs, aspirations and personalities of each participant in the partnership. A particularly strong leader, however, can be a weakness if the partnership becomes too reliant on the individual rather than embedding good processes into its operating mechanisms.
A key issue in this area concerns remuneration. In many examples, membership of a regional partnership is unpaid (or becomes part of the representative's duties defined by his or her employing organisation). This can severely reduce the pool of available applicants for leadership (either as chairperson or chief executive officer). It may also leave the incumbent vulnerable to accusations that he or she is really promoting the interests of his or her employer, rather than the general interests of the partnership. This in turn raises issues about ?resource dependency?. If, on the one hand, the bulk of the funding is provided by the central government, the partnership may end up becoming a quasi-government agency rather than a true reflection of the region's local knowledge and aspirations. If, on the other hand, there is little funding available and participants are unpaid volunteers, this restricts the ability of some groups to participate. A particular issue is who provides the secretariat, since this often creates a bias in the operations of the partnership depending on whether it is central government, local government, a regional economic development agency or a local business organisation.
There are also widely reported concerns that insufficient training is available for leaders and participants in regional partnerships. This may not be surprising given the relative newness of this approach to economic development policy. In some countries, regional development agencies have set up their own national organisation to improve their effectiveness. Examples include the National Association of Development Organizations in the United States, the Pan Canadian Network in Canada and the Economic Development Association of New Zealand.
1 This is the same as for private property rights. Even though governments set up systems to defend and arbitrate private property rights, this does not mean that the government owns all the economy?s property.
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