A GUIDE TO FINANCIAL INCENTIVES FOR ECONOMIC DEVELOPMENT OFFICERS
By Kai Liepins
INTRODUCTION Are you a local economic development officer struggling to understand what tools are available to implement meaningful change in your community? Have you faced challenges in working with the business community on revitalisation programs? Have you heard about financial incentive policies or programs, but are confused about what they are, how they work, and their potential risks or benefits? If you answered yes to the above, then this article is for you.
The aim of this article is to discuss the important role financial incentives play in shaping economic development globally and to outline a practical guide geared towards Economic Development Officers( EDOs) at a municipal level so that they can begin to harness the power of financial incentives within their communities.
FINANCIAL INCENTIVES AND THEIR ROLE IN ECONOMIC DEVELOPMENT Incentives matter. A lot. From an economist’ s perspective, incentives are the bedrock of our modern economy, driving the actions we take as individuals such as the jobs we take, where to live or how hard we work. Similarly, businesses choose where to invest based on a multitude of incentives such as the proximity to customers, availability and cost to access key resources( e. g., labour, capital or land), and the ease and stability of navigating the regulatory environment.
It is imperative, therefore, that EDOs consider the types of incentives or disincentives affecting businesses and to implement favourable incentive policies that seek to attract, retain and or grow economic investment within a specified area. However, for many EDOs, incentive schemes do not receive the attention they deserve.
Broadly speaking, the most common tools used by EDOs to stimulate growth include:
• Facilitation: Supporting new and existing business investments to navigate the regulatory environment and site selection process.
• Incentives: Offering financial or nonfinancial benefits to attract and support businesses.
• Liberalisation: Reducing government regulations to encourage private sector participation and or advocating for policy changes that support growth.
• Promotion: Marketing efforts to attract businesses, tourists, residents and workers and investors to a region.
• Other: Includes business support services and engagement, workforce development, publicprivate partnerships, and community development initiatives.
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