Handbook on Urban Economic Base AnalysisPart IIIEconomic Development Information and Publications Information: The Foundation of Successful Local Economic Development Successful economic development is always based upon a thorough understanding of the local economic environment, and how that economic environment relates within the broader economic context of a geographic region or country. Economic systems are extremely complex; and systems at the local, national, and global levels have become increasingly interwoven and interdependent. The tool used to begin to understand the relationships of a local economy to the broader national and global economies is information. Information has many applications in economic development. One of the main purposes of this handbook is to describe how to use information to analyze and document the urban economic base. The interpretation, meaning, and true value of this economic base analysis can only be brought to life within a broader context of local economic development initiatives and efforts. The economic base analysis by itself, in the absence of this broader context, is difficult to interpret and provides little meaning to the user. It is important then to understand how information is used in some of the other aspects of economic development; this will help provide that broader context for understanding. Information Need: Strategic Economic Planning and Understanding the Local Economy Strategic economic planning is a process that results in a product—a community strategic economic plan. The quality of the plan is highly dependent upon the quality of the information utilized in the early phases of the strategic planning process. The strategic economic planning process begins with the development of an understanding of the broad economic environment (both current and future) in which the city exists. A thorough analysis of the city in this context will permit an understanding of its comparative and competitive position with respect to other cities. This analysis includes an examination of strengths, weaknesses, and opportunities. To help understand the external economic environment in which the city exists, an overview that includes observations of changes and trends in the broad economic environment is prepared. The direction of the change or trend is noted, and whether these changes/trends represent opportunities or challenges to the local economy (or both). In addition, economic forecasts of private and government forecasters are collected and summarized. The forecasts are used to assist in the development of the city's economic vision and to identify opportunities and threats to the local economy. The Baltic States and Their Capital Cities: Economic Development, Economic Forecasts, and Perspectives, which is included as appendix E of this document, is an example of a publication detailing the external economic environment. To understand the local economy, a complete and accurate information database needs to be compiled. This database should include as much of the most current information outlined in the following table as possible. Other information that should be maintained in the database is summarized below, in the section "The Community or Economic Profile." Some Variables to Be Included in a Local Economic Information Human Resources Population * size, growth rates, characteristics * age and sex distributions * population projections Household and family * household size * family structure, number of children Employment * employment/unemployment rates and numbers * employment by industry * employment by occupation * employment/unemployment rates by occupation, age, and sex Labor force * labor force participation by age and sex * labor force by industry classification * labor force by occupation * labor force by skills classifications * education levels * degree of unionization * strikes, numbers of workers and days lost due to labor disputes/strikes/unrest Miscellaneous * income characteristics by person, household, and family Physical Resources Natural environment * location in relation to markets * climate * topography * natural and scenic resources * primary resources (minerals, forests, land, water) and resource processing Built and urban environment * land designations by type, built and vacant * heritage resources * building permits by type, value, and number * nonresidential building inventory by type, vacancies, lease rates, price structure, size, use, age, absorption rates, location, parking * residential building inventory by type, age, quality, vacancy rates, price, and rental rates * tourist facilities * transportation infrastructure: road quality and service levels; rail access, frequency, location; airport and airline service, ports, harbors and shipping service; bus and trucking services * piped and buried infrastructure: quality and available capacity of all piped and buried services (water, storm and sanitary sewers, gas) * quality and available capacity of communications, telecommunications, and energy infrastructure Organizational Resources Business * number of businesses by type and size * listing of largest employers * listing of all businesses by type, number of employees, products/services, address, contacts * business services: financial services (commercial banking and lending institutions, venture capitalists); professional services (lawyers, accountants, etc.); trade and shipping services; accommodation; wholesale and retail trades * business organizations, associations, and groups Institutional * schools, universities and colleges/technical universities by size, type, enrollment, programs offered, research capabilities, business- and labor-related programs, adult education programs * government resources and services * medical facilities * recreational, leisure, and cultural resources and facilities * social services A synthesis and summary of all the information collected above provides a solid base from which an identification of strengths (resources), weaknesses (and constraints), opportunities, and threats (SWOT) can be developed. Completion of the SWOT analysis provides an understanding of the city's comparative and competitive position with respect to other cities, and identifies critical issue areas to be addressed. Continual observation and tracking of external and internal economic conditions (the external economic environment and the analysis of the local economy) signals when conditions have changed sufficiently to warrant a verification of strategic directions, a change in priorities, or a complete recycle of the strategic economic planning process. Monitoring changes in the local economy is also a means of measuring and evaluating the success, effectiveness and effi ciency of a local strategic economic plan and its results. Information Need: Economic Development Programs The purpose of all economic development programs is to attempt to increase the share of desirable growth activities while limiting vulnerability to the inevitable decline that will occur in other economic activities. This is usually achieved by attempting to diversify the local economy to maximize the number of industry-specific business cycles so as to minimize vulnerability to individual industry-specific downturns. Without ongoing measurement of changes in the local economy, it would be hard to judge the success of economic development programs. Monitoring changes in the local economy is therefore essential to permitting evaluation and adjustment of economic programs. Monitoring is also a means of measuring and evaluating the success, effectiveness, and efficiency of programs and their results. Information Need: Marketing1 Generally, there are two broad marketing needs for information in local economic development: the need to market within the city, and the need to market the city to the outside world. The idea behind marketing is to influence a decision to be made by another person or organization. For the purpose of describing marketing in the economic development sense, the following could be used: marketing is providing the "right product" at the "right price" to the targeted decisionmaker at the "right time and place" using the "right messages." In economic development, the right product is most often information (not raw data). Marketing to one's own city is often an attempt to influence the community's attitudes about a specific subject or idea. For example, the need for a strategic economic plan must often be "sold" to key community and political leaders to build sufficient support to undertake the strategic planning process. Another example would be a marketing strategy to attempt to convince the local population to "buy local" or to "welcome tourists." A completed strategic economic plan results in specific economic development programs or actions to be undertaken to influence decisionmakers outside of the city. Examples might include attempts to influence tourists to visit a particular city or to market the city as a location for economic activity, such as encouraging particular types of business enterprises to invest or expand locally. The key ingredient to any successful economic development marketing attempt is information; in some cases, the information needs to be fairly sophisticated and in-depth (as well as accurate) if the decisionmaker's decisions are to be influenced. Economic Development Publications The information needs described in the previous section are met by compiling and sharing information with people who have the need to know the information. The most frequent means of sharing the information is to publish it in a document that can be easily distributed. There are three types of economic development publications that are the mainstay of the economic development "tool kit": * the general, or "lure," brochure; * the community or economic profile; and * the business directory. There are many other types of publications that are more specialized or serve a specific purpose, such as land or building inventories, brochures serving a specific sector such as manufacturing or tourism, a directory of business resources and regulations, and specialized marketing material. 1The concepts in this section are based on material presented by Bryant, Preston, and Dudycha (1988). Economic development agencies have been quick to utilize computer technology and multimedia capabilities, such as CD-ROMs and World Wide Web sites, to communicate information that was previously in published form. The advantages are relatively inexpensive publication costs, immediate access worldwide, and the ability to keep material constantly up to date. The following section describes some of these publications in more detail. Where the documents have been prepared in Vilnius, a description of how the document was prepared, the issues and problems encountered, and the solutions and sources of information used are presented. This provides valuable information on the difficulties associated with preparing these publications for Vilnius—which are likely to be very similar to the problems one could expect to encounter in any Central or Eastern European country. The "Lure" Brochure The lure brochure is a general brochure promoting the most positive aspects of the city. In the broadest sense, it describes the total environment of the city and its positive attributes with respect to business, social, cultural, academic, and city life. It is not a "facts and figures" brochure, but rather is meant to convey an impression of what the city is like, what it values, and what is unique about it. It contains more graphics (mainly photographs) than text, and is a polished, "glossy" brochure. Of course it will contain important information on where the reader can follow up to obtain more information on the city. An air of credibility is usually created by illustrating important companies and economic activities located in the city, and by "testimonials" from VIPs (very important people). The testimonials are commonly from the mayor, respected business leaders, and—occasionally— respected national political leaders. Generally, large print runs are made of these brochures with an intended life span of up to two years. In using testimonials, one must be aware that should one of the people giving the testimonial lose their office or for some reason no longer be held in the highest esteem, the brochure may be rendered useless. The Community or Economic Profile The community or economic profile is the "facts and figures" publication that more concretely describes the city and may provide comparable data for other cities. Its purpose is to provide specific information the reader may require as an aid in decisionmaking, such as obtaining preliminary market information before investing in the city or before making a potential move to the city. The economic profile lends itself to publication in electronic format, such as on a diskette, CD-ROM, or World Wide Web site. Much of the data for the profile would have been obtained during a strategic planning process if the city undertook such an exercise. The type of information conveyed in a profile would generally include: * location, climatic, and geographic information—distances and locations with respect to other major urban areas—and a brief history and heritage description of the city; * a sociodemographic profile; * a description of the general structure of the local economy; * an employment profile, and a description of each major group of economic activities (primary, manufacturing, construction, wholesale and retail trade, education, etc.); * education and labor force characteristics (employment/unemployment, employment by occupation, labor force participation rates, wages and salaries, etc.); * communications infrastructure; * transportation infrastructure; * utility infrastructure; * financial support infrastructure/resources; * business professional resources: financial, accounting, consulting; Preparing the "Vilnius Economic Profile" The "Vilnius Economic Profile" (included as appendix B of this document) was designed to meet an increasing demand for information from foreign embassies, foreign businessmen, international economic institutions, and international organizations. It was the first publication of its type in Vilnius; therefore, the main goal was to describe to the greatest extent possible the important aspects of the city's economy. To develop an appropriate framework, a number of economic profiles from various international cities (in Canada, Austria, the United Kingdom, etc.), paying special attention to cities similar to Vilnius. The following typical elements and characteristics of a local economic profile are presented in the "Vilnius Economic Profile": * geographic characteristics, * demographic indicators, * area characteristics, * labor force characteristics, * indicators of quality of life, and * characteristics of the main aspects of the local economy. Special attention was paid to the aspects of the local economy that: * have a great importance (current and potential) in Vilnius's development (e.g., financial sector, tourism and culture, including urban heritage); * are of importance to foreign investors (e.g., foreign direct investment, securities market, real estate market, legal environment for business). The main problems encountered in the preparation of the profile and how they were overcome follow. * At this time, a most important economic indicator—the city's economic output (gross domestic product) is not calculated. Therefore, the importance of the city's economic output within the country is not known; consequently, comparative analysis with other cities in the country based on this indicator is not possible. Other available comparative indicators were used (e.g., manufacturing output, employment, etc.). * At the individual city level, a number of important indicators are not available (e.g., household income and expenditures). Therefore, national information that is compiled for all urban areas was utilized, making adjustments based on expert knowledge and opinion of Vilnius's situation. * In some economic sectors, there is a notable lack of data. The biggest gap in this respect was related to the transportation sector and its infrastructure. Official statistics on transportation companies within the city are fragmented and incomplete with no relevant information on business turnover, profits, number of employees, and other important indicators. Some data on this sector was received from state institutions engaged in transportation. However, the transportation sector needs further investigation and a more in-depth analysis. * natural resources; * academic resources; * tourism and cultural resources; * foreign investment and trade; * the local real estate market (residential, commercial, industrial, and investment); * a description of the quality of life in the city and its components (living standards, health care, social insurance, environment, etc.); * the legal business environment (legal framework for business, restrictions on foreign investment, taxation, licensing, import/export regulations, business registration, other information of interest to investors, etc.); and * organizational resources, such as chambers of commerce and economic development organizations. The Business Directory The business directory is essentially a listing of businesses in the city and information related to those businesses. Frequently, it contains information on all employers (public, nonprofit, institutional) in an area, not just businesses. Ideally, it is compiled on a computerized database, so that it may be sorted by any criteria contained in the database. It is usually used for "business to business" contact information, but has many other uses as well, including checking for the presence of competing businesses, supplier/purchaser contacts, employment searches, and potential partnership/cooperation arrangements. Information commonly found in business directories includes: * names of businesses listed alphabetically; * names of businesses listed by type (in North America, Standard Industrial Classification codes are commonly used); * frequently, a brief description of main products and/or services; * key contacts; * address, phone, fax, e-mail, Web site address; * number of employees; * a list of the largest employers; * number of years in business; * sometimes, notes regarding export activity, investment opportunities, or other needs; and * sometimes, all employers, regardless of economic activity (e.g., governments, educational institutions, etc.). The directory is usually organized in a fashion that allows the reader to find companies by name or by type of business. Analysis of the External Economic Environment In assessing the potential of a city's economy, it is necessary to consider the potential of the national economy. The development of the city and national economies are inextricably linked. Similarly, it is important to consider the economic position of both the country and the city within an international (regional) context. The possible impact of trends occurring in the larger economic environment must also be assessed. A combined examination and explanation of these factors can be referred to as an analysis of the external economic environment. Such an analysis was carried out to assist the Baltic capitals. The main objectives of this study, "The Baltic States and Their Capital Cities: Economic Development, Economic Forecasts, and Perspectives" (included as appendix E of this document) were: * to provide the background of recent economic development in the Baltic states; * to present macroeconomic forecasts and analyses for the Baltic states over the medium term; and * to analyze the existing situation in the Baltic capitals, and to provide insight as to the potential economic impacts of national and regional trends and forecasts on each capital. The "Vilnius Market Profile" In transition economies, local business people and investors have an advantage over foreign Preparing the "Vilnius Directory of Business Services" For the past several years, the service sector has developed rapidly in all transition countries, including the Baltic states. This process is even more rapid in capital cities because of their increasing role as business centers. The cities are experiencing rapid growth in the number of business services entities and an increase in the range of services provided. In this context, the necessity for a database on local business service enterprises is becoming more and more obvious, especially in larger cities. The development of such a database (in whatever form) is important in many respects, including to: * serve as a means of recording the business services resources available in a city; and * provide both local and foreign business people with an awareness of the presence of, and therefore with access to, local business services. These were the main goals in preparing the "Vilnius Directory of Business Services." Information provided in the directory was gathered from the following sources: * earlier projects that contained information on the activities of business services entities, * various information catalogues, * the Enterprise Register, and * mass media (economic newspapers). The main problems encountered in collecting information for the directory follow. The first source (previous projects) includes, as a rule, only information on the largest business services entities in the country. Therefore, only a fraction of all entities in a particular city are represented in these documents. In addition, because business services have been expanding at a rapid pace, information is quickly outdated. Projects carried out more than a few years ago are of little value now. Information catalogues (the second information source) are issued frequently and provide the most recent data on a great number of business services companies. There are problems related to these sources, however, mainly with respect to data reliability. A portion of the companies cited in the Enterprise Register as providing particular business services (as indicated in officially filed registration documents) are actually totally or primarily engaged in other types of business activities (e.g., trade). Preparing "The Baltic States and Their Capital Cities" There have been a number of economic studies on the Baltic states, prepared mainly by international organizations. In almost all cases, however, the studies analyzed particular aspects of the economy (e.g., economic reforms, fiscal policies, manufacturing sector restructing) or provide an analyis of macroeconomic indicators. In addition, none of these studies analyzed the impact of national (or international) economic trends on the development of a city within a country. There have been only a few economic forecasts for the three Baltic states due to the short history of their independent existence and the rapid change and restructuring of their economies. The main data-related problems encountered in the preparation of this study involved not so much a lack of statistical data, but data incomparability. * There are inconsistencies between local data sources. Data from local statistical sources also differ substantially from data presented in international statistics (e.g., International Financial Statistics, International Monetary Fund). To ensure compaarability across countries, data from international statistical sources were used. * Problems exist regarding time-series data, specifically when comparing the early transition period with more recent periods. Low levels of statistical comparability are caused by major changes (such as the introduction of national currencies) in a country's economy. Consequently, any economic analysis based on time-series data starting with the initial point of transition requires additional interpretation an dpossible data adjustments. This in turn requires expert understanding and evaluation and the use of indirect indicators for verification. * For the above reasons, one of the most appropriate ways to assess the economic development prospects of a transition country is to consolidate economic forecasts prepared by local experts and authorities with those of international financial institutions. The forecasts in this study were made using projections for the Baltic states prepared by local experts consolidated with information from the International Monetary Fund and the World Bank. The study therefore represents expert opinion of potential growth, rather than empirical economic projections. The other area of problems in study preparation related to the fact that an assessment of a country's economic future cannot be forecasted using numbers only. There must also be an evaluation of policy-related matters, which in some cases (especially in rapidly restructuring economies) is even more important than historical statistics. In summary, the research was based on a compiled analysis of: * current and forecasted macroeconomic indicators, and * policy trends affecting economic processes and reforms. This approach provided the most relevant framework for describing the economic trends and prospects of a country. It also provided the most applicable basis for discussing the impacts of those trends and prospects on the local (city) level. * So far, there are no economic forecasts related to local (urban) economies. * There have been notable improvements in the data classification, collection, and processing systems at the state level, which are being brought in line with international standards. Unfortunately, these changes on the local level are lagging behind, causing a lack of comparability of data between the country and city levels. * Economic development strategies for cities have not yet been prepared (although some are being prepared). During the course of the study, it became obvious that there were several important characteristics of a city's economy that influenced its development: * the size and density of population; * the status of the city; * its geo-economic location; * its historical economic development; * its urban development characteristics; and * its economic potential, including its industrial potential. To examine the potential impacts of international and national trends on the capital cities, economic forecasts at the country level were adjusted to account for the particular characteristics of each city. The conclusions reached on how urban economic development would be affected in the three cities follow: * continued service sector expansion, * continued old town restoration/renovation, * upgrades to technical infrastructure (associated with foreign investments), * new "greenfield" investments and the associated development of new industrial areas, * growth of housing in the suburbs together with high-quality housing development adjacent to central districts, and * further transportation infrastructure development. The main sources of information that were used follow. For policy-related information: * government programs, * operating in a more or less clear, consistent, and familiar economic environment; * operating within a familiar legal environment; * an absence of language barriers; * an awareness of the behaviors to expect within the business environment. In contrast, working in foreign markets and/or with foreign partners is quite new for local business people and the local governments of transition economies. The "Vilnius Market Profile: Foreign Investment and Export Markets" (which is included as appendix A of this document) was designed to close these information gaps for both local and foreign business people.Like the "Economic Profile," the "Vilnius Market Profile" was the first of its kind in Vilnius. The difference between the two projects is related to their character. Whereas the "Economic Profile" is a more descriptive publication, the "Vilnius Market Profile" is an analytical study originally intended for internal use of local government. Nevertheless, the "Vilnius Market Profile" will be of interest to business people, especially to foreigners who seek more detail on the Vilnius business environment Preparing the "Vilnius Market Profile" There are two main aspects to this study: * Vilnius as a marketplace for international business—in particular, the market characteristics of the Vilnius economy and the nature and characteristics of foreign investment in Vilnius; and * export characteristics and the main foreign markets of Vilnius's manufacturing industries. On the first topic, issues related to foreign investment were analyzed in great detail, as foreign capital inflow is a very important economic indicator in a transition urban economy. It also helps to place the development of the Vilnius economy in an international context. On the second topic, the focus was on the characteristics and export development potential of Vilnius's manufacturing industries, versus a review of export trade in general. Manufacturing industries that produce and export goods are basic economic activities that result in growth in the city's economy. There are, however, some important aspects of the Vilnius marketplace that this study does not cover. * While manufacturing exports are covered in detail, the other very important aspect of trade, imports, is not covered. Vilnius imports were not analyzed because statistical data related to imports at the region/city level are not yet recorded. * The absence of statistical data is also the reason that service sector exports could not be analyzed. * It was also not possible to carry out a detailed analysis of foreign portfolio investments in Vilnius, although some statements based on expert opinion/evaluation are presented in the study. The biggest problem in preparing the study related to the fact that the objectives of the project required analysis at both the economic sector and enterprise levels. Statistical information on the city's economic sectors came from official statistics, with some exceptions (e.g., data on imports); in general, it is comprehensive. However, information collection and analysis at the individual enterprise level is complicated for the following reasons: * There is a lot of information on enterprises but it is dispersed in many different sources—e.g., various catalogues, the stock exchange database, enterprises' annual reports, mass media (newspapers), etc. |