Stimulating Local and
Regional Economic Development
A Summary of PACA
Christian Schoen
Jörg Meyer-Stamer
Types of initiatives to stimulate
local/regional economic
development
 improvisation / fragmentation of activities
conducted by various organizations
 one big project = fixed idea
 strategic planning
 Participatory Appraisal of Competitive Advantage
(PACA)
What is Participatory Appraisal of
Competitive Advantage (PACA)?
Participatory
 Involve local stakeholders
 Motivate local stakeholders to take an
active role in an LED initiative
 Transfer know-how to local stakeholders
and businesses
Appraisal of
 Do a quick scan of the local economy
 Assess and refocus ongoing local
economic development activities
Competitive
Advantage
 Identify strengths, skills, talents and
opportunities
 Identify business and LED opportunities
PACA is an activity ...
 ... which seeks answers to a critical question:
how can the local economy, by means of
collective action, create a competitive
advantage?
What is a local economy? For
instance, it may be like this:
Farmers and small
food processors
Wood value
chain
Textile + garments
value chain
An integrated
furniture cluster
A garment
cluster
A large metalworking company
Regional service providers:
• Health care
• University
• Wholesale trade
Local producer services:
IT, transport, construction, ...
Local consumer services:
Retail, beauty, ...
Global buyers
Training
institutions
Business
promotion
Finance
institutions
Government
What is Local Economic
Development (LED)?
Activities by
 local government
 local business associations
 local companies
 other stakeholders
which
 remove bureaucratic obstacles and transaction
costs for local firms
 strengthen the competitiveness of local firms
 create a unique advantage for the locality and its
firms
How does local economic
development relate to other
activities?
Local development
Local economic
development
Infrastructure
Community development
Employment
creation
Transport
SMME
SME
promotion
development
Energy
Investment
promotion
Technology
Health
Poverty alleviation
Schools
Water / sewage
Skills
development
Housing
Urbanization
Education
Leading principles in local
economic promotion
 Creating a specific locational advantage
 Strengthening strengths, dynamizing existing
potentials -- instead of fruitlessly addressing the
biggest possible challenges
 Networking among local firms and between firms and
supporting institutions to create collective efficiency
and effective markets
 Active integration into international value chains
Build on locally available resources
Do something instead of writing a strategy document
Go for quick, visible impact
What is the objective of PACA?
 Identify, with a rapid appraisal, the main strengths
and weaknesses of the local economy and its
main sectors (duration: 1 - 2 weeks)
 Identify options for practical activities to
strengthen the competitiveness of firms -Criteria:
– feasible with local resources
– quickly implementable (starting next week)
– quick, visible results (with 3 months)
Who is involved in a PACA?
 A “Champion” who suggests and coordinates the
PACA
– provincial or local government agency,
Chamber, NGO, somebody else
 Other local organizations who take an active role
– financing
– making staff available for the PACA Team
 The PACA Team
 Various local stakeholders who participate in the
kick-off workshop, interviews, mini-workshops
and the presentation
What is the PACA Team?
 1 - 2 external consultants who are familiar with
the PACA method and LED
– to introduce a fresh view at the local reality
– to transfer their know-how to local members of
the team
 3 - 5 local members
– for instance: professionals from the local
business promotion agency, the local
Chamber, the local university
– not too young, too junior
– with experience in economic promotion and in
dealing with private business
What is the sequence of activities
in a PACA?
Preparation: Kick* Advance
off
info
work* Hypotheses shop
Interviews
Mini-workshops
FindingsWorkshop:
Elaboration
of Diagnostic
+ Proposals
Fieldwork (1-2 weeks)
PACA-Exercise (2-3 weeks)
PACA-Project
Presentation
of Diagnostic +
Proposals
Implementation
What about the fieldwork?
Formats:
 Qualitative interviews
(“conversation”)
 Mini-workshops
Tools:
 Guideline (always)
 Mapping (sometimes)
 Life-line (sometimes)





Diamond
Five Forces
Transaction Matrix
SWOT
Metaplan to define
possible action
– if participants are
strongly motivated
Diagnostic and proposals
 Results workshop to elaborate diagnostic a
proposals = 1-2 day exercise of the PACA Team
 Immediate presentation of findings to local
audience
Elaboration of diagnostic and
proposals
What is the immediate result of a
PACA?
 A diagnostic of the local economy
 A set of proposals for practical activities
– to strengthen the local economy
– to stimulate the competitiveness of companies
– to create new business opportunities
 Numerous local stakeholders who have a clearer
idea about Local Economic Development
What about the follow-up?
 immediate workshop with local stakeholders to
define priorities, activities and responsibilities for
implementation and monitoring
 implementation of activities by local stakeholders
 workshops for evaluation and definition of further
activities, possibly facilitated by external
consultants
Implementation
 creation of working groups
– for given sectors
– around project ideas
 working groups initially operate independently
 coordination between activities
– initially informally
– later, as complexity increases, via a
Stakeholder Forum or similar fora
What again was the basic idea of
Local Economic Development?
 Create a business-friendly environment
 Improve the quality of the location for firms
 Stimulate upgrading in companies
– through inter-firm learning
– through support in fields like training,
management, technology
• refocus and strengthen supporting
institutions
• stimulate closer interaction between
companies and supporting institutions
 Attract new companies, stimulate
entrepreneurship
Understanding local
competitiveness:
Michael Porter‘s „Diamond“
Main companies
and rivalry
Supporting
institutions
Factor (input)
conditions
* training
* technology
* finance
* infrastructure
* A local context that encourages
appropriate forms of investment
and sustained upgrading
* Vigorous competition among
locally based rivals
Related and
supporting industries
* A critical mass of capable local suppliers
* Clusters instead of isolated industries
Demand
conditions
* A core group of
sophisticated and
demanding local
customers
* Unusual local
demand in specialized segments
that can be served
globally
* Customers whose
needs anticipate
those elsewhere
Assessing the Local Economy of
Lukhanji Municipality
What are the Strong and the Weak
Points of the Local Economy / Main
Sectors in Lukhanji ?