Australian Local Government Association

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Regional business development

24 October 2002

This submission is a commentary consistent with ALGA general position of support in principle for enterprise zones. Regrettably due to time constraints the submission has not been fully considered by ALGA Executive and therefore should in no way be taken to reflect ALGAs formal position on the matter of enterprise zones.

Contents

• Introduction
• Executive summary
• Local government economic development and business in regional Australia
• Comments on areas of interest to the Panel
• Regional business development literature review
• Objections to enterprise zones in Australia
• Proposal for the way forward
• Recommendations
• Contact regarding this submission

Introduction

We welcome this opportunity to make a submission to the Regional Business Development Analysis Panel. The ultimate challenge for Australia is to improve economic activity resulting in new job growth in its regions. ALGA submits that the principle impediment to business in regional Australia is lack of a coherent policy which works to encourage and stimulate the private sector and which is effective at microeconomic level. ALGA trusts that the Panel will work towards change mechanisms to improve regional economic performance, which will be deliverable and effective in improving the key performance indicators.

ALGA recognises there are a variety of regions in Australia, a number of which are under-performing. Now is an appropriate time to consider a new approach which recognises that a more direct and assertive process is needed. Policy and mechanisms should be clearly focussed on how government can help business achieve better bottom lines, but not at the expense of reasonable efficiency. We submit however, that concentration on efficiency alone will return the Federal Government's policy focus to that of market forces, the results of which we see now.

Economic development issues are broad based concerns held by many regional local government authorities and while measured with the full resources of the Australian Bureau of Statistics, are felt at the local and visceral level as either employment and population issues. For many regional areas those figures are of deep and abiding concern.

It is pleasing that the Federal government has initiated a focus on identifying obstacles that impede business growth in regional Australia and has committed to investigating options to overcome these obstacles. Such a focus provides an opportunity for stakeholders to concentrate on relevant issues rather than the very broad approach used by many inquiries (government and otherwise) in the past. Therefore ALGA has concentrated on the principle issues of assisting businesses to improve their performance, and direct job generation. We submit that regional Australia has for many years lacked real tools to improve these critical factors.

The theme of this submission is as follows:

Solutions to business impediments must be focussed on the needs, hopes and aspirations of business in line with community expectations.

ALGA commends the panel for its consideration of this task and trusts that its deliberations will be instrumental in effecting a positive change to the role that government will play in regional economic development.

Executive summary

Local government has a long-standing commitment to economic development. It is charged with nurturing the economies of its respective areas yet it has limited tools to provide substantial remedies.

Local government through its state and national associations has become focussed on the realities of market failure in regional Australia, including population loss and accepts that new economic development tools are needed, otherwise market forces will continue to drive performance downward.

The widespread use of enterprise zones, principally in the U.K., USA and Europe attracted the attention of ALGA and many in local government. While not a single 'magic bullet' for regional Australia, ALGA considers it is a substantial tool, which must be made available to stimulate business activity and to counter the effects of market failure.

There is a sense that involvement in regional economic development has attempted to stimulate forces beyond realistic spheres of influence through the use of very low key mechanisms. There have been a plethora of reports, conferences and taskforces over many years. In a number of cases recommendations for change, desired by regional communities, from government commissioned studies have been ignored.

Local, state and federal government and regional areas cannot substantially control the decisions of individual businesses. They can however create a climate within their area of responsibility that encourages investment. Each level of government has specific abilities to do this and also has limitations. The Federal Government could initiate a whole of government approach (the three tiers) to create such an environment, but it has to be a new approach geared towards the needs of business. We have to move beyond rhetoric to the realities of the business world.

Local government at its grass roots level is faced with economic development issues and is increasingly concerned that much of what is offered by way of solutions is promotional, rather than addressing the issue of why the private sector is generally disinterested in regional Australia. We must develop new and powerful economic development tools to positively influence the private sector's interest in transacting business in regional Australia.

There are significant barriers that have contributed to lack of private sector interest in regional areas. Some are perception based but others relate to genuine concerns that returns on investment are low, and that distance, costs, staffing, skills shortages and lack of rewarding activities mitigate against regional areas as a desirable location.

In developing new economic tools it is important to objectively analyse likely areas of success. There are areas where government can be strong and others areas where it will be weak. New legislative powers via the enterprise zone model typically practised overseas, can substantially influence the likelihood of success.

The notion that 'regional areas' can somehow organise themselves as regions to substantially reverse the effects of market failure is mistaken. Currently there is no facility to do this in Australia. International precedent on the other hand shows that enterprise zones and similar can provide the stimulus for areas to combine, knowing they will have some real tools for their future.

ALGA offers additional resources not covered in the literature review in support of the proposal for government to take a more assertive approach rather than the passive market based approach at present. It is difficult to find a modern democracy that does not use mechanisms similar to those in enterprise zone models.

Enterprise zones offer a way forward for regional communities on the basis that their benefits to businesses in approved areas are not a gift, but subject to communities making a concerted effort to present themselves as progressive having prospects, and capable of growth. In that way enterprise zones would support the Federal Government's desire for increased local and regional responsibility.

Objections have been raised in respect of enterprise zones but these exist we believe, due to the fact that the idea was virtually unknown in Australia before 1999 and the concept is widely misunderstood. There are a wide range of models and mechanisms that Australia can use to design a model acceptable for our circumstances.

ALGA has based its proposal for the way forward by suggesting a new type of economic tool for Australia. We look to business to increase investment and jobs but a market forces based approach has not been successful. ALGA's proposal is based on the successes of overseas regional areas and we commend it to the Panel.

Local government economic development and business in regional Australia

For decades local government has demonstrated a commitment to find suitable remedies for declining regional communities. The principle issue has been job creation, as all measures of economic development ultimately relate to that single measure. Local government economic development activity has found expression in a range of activities from discussion papers seeking to influence government policy, to simple enthusiasm, and 'talking up' their areas, promotion of new opportunities, providing investment and incentive packages, appointing economic development staff and building industrial estates. Local and regional organisations, often under state government encouragement, were formed and attempted to influence the private sector to re/invest in regional areas with the aim of reversing negative population and employment trends.

Local government has sought the assistance of community representatives, academic institutions and government agencies to find economic development solutions. In many cases local government's involvement was as an agent to alleviate the adverse effects of market failure in regional areas. For many years well-intentioned people formed organisations trying to turn the tide with little success, yet a few regional areas appeared to boom. Many sought an explanation for these patterns; was it local leadership, did we lack entrepreneurs, was dry land agriculture in decline, was irrigation a guarantee of success? Within a general framework of economic rationalism, regional areas continued to take casualties in employment and population with the private sector tending to rationalise operations and new investment at metropolitan and coastal level and overseas.

While Australia's overall economy restructured and performance improved, regional areas were diverging from this general pattern of success and many were stagnating or declining. This raised many questions -was regional Australia to be a necessary and unfortunate economic casualty or was there hope of bringing regional and rural Australia along as a partner in the nations future? What was local government's role? Local government, as individual authorities or via their state and national associations was seen as a vocal critic yet it may well have been forced into this role through its day to day concerns.

During this period ALGA became focussed on the reality of market failure in regional areas and how this might be remedied. While the typical approach in such a situation was a call for "government intervention", there was a recognition that the old economic development tools were tired and ineffective. Something new and substantial was required to change the business climate in regional areas. It was clear that market forces would provide continuing downward pressures on key economic indicators especially as regional areas were primarily producers of agricultural and mining commodities, and subject to generally low prices in a global market.

The widespread use of enterprise zones in the United Kingdom, the USA, similar mechanisms in European countries and then by the European Union, attracted our attention. Local government in the USA focussed on economic development because increased local capitalisation increased the taxation base for local councils. Local government also administered parts of the Enterprise Zones program and received fees in return. The European Union and USA embassies in Canberra assisted us in our investigations. Interest was aroused because of the longevity of Enterprise Zone Type Mechanisms (EZTMs) as a policy tool and their apparent success and popularity at both structural and political level.

This submission considers that Enterprise Zone Type Mechanisms¹ (EZTMS), may provide a significant stimulus for both existing and new businesses in regional Australia. ALGA wishes to make it clear that enterprise zones are not proposed as a single solution to the impediments for businesses in regional areas. Overseas experience is adamant that Enterprise Zones, while a significant and necessary tool, can only be successful when combined with other new and existing programs together with commitment by the respective community. EZTMs however are a departure from traditional indirect and competitive grant programs and are available to individual businesses should they chose to meet the obligations imposed by them.

It is important to state at this point, that as enterprise zones do not exist in Australia at present, we have an opportunity to fairly and objectively assess the way they may assist regional areas. The Trade Zone² at Darwin has been mistakenly referred to as an enterprise zone however it does not operate in the same way as the typical enterprise zones found overseas.

We believe that EZTMs are potentially the most significant new policy mechanism for regional Australia. They have not been universally accepted in the short period that the idea has been promoted, however we feel that this has principally been due to a misunderstanding of the mechanism and how they might work in Australia. Their introduction will be a paradigm shift for government and the experience of other countries in developing their enterprise zones is instructive. Stuart Butler, a policy analyst with the Heritage Foundation in Washington D.C. noted that the policy to introduce Enterprise Zones in the USA was "a bold departure from the traditional and failed policies of the past. It would remove the shackles erected by the planners and bureaucrats over many decades and clear the way for the small entrepreneur to tackle the problem".³ Hardisons book on economic development in the USA in the early 1980s assists in the understanding of this period in the USA's history. It provides some insights into the USA's concern with urban degradation and the frustration felt with existing economic development mechanisms.

As ALGA's submission has a strong emphasis on EZTMs it is worthwhile examining various definitions of enterprise zones.

USA

An enterprise zone is a local-option, and economic development tool that allows a community to partner with the State to offer a package of local and state tax and regulatory benefits to new or expanding businesses in economically distressed areas.

An enterprise zone is a defined geographic area within which businesses can obtain tax benefits and other incentives designed to stimulate business investments. The reason for promotion business investments within the zone is to increase the number of jobs available to area residents, because the best economic development is a job.

An enterprise zone comprises an area identified by local elected and economic development officials and designated by the state. Under the program, certain types of businesses locating to, or expanding in a designated zone may claim tax credits provided in the law.

The Illinois Enterprise Zone Program was signed into law December 7, 1982. The purpose of the Act is to stimulate economic growth and neighbourhood revitalisation at the local level. This is accomplished through state and local tax incentives, regulatory relief, and improved governmental services.

United Kingdom

The government has announced its intention to legislate for the creation of enterprise zones. The purpose of these zones is to test as an experiment, and on a few sites, how far industrial and commercial activity can be encouraged by the removal of certain fiscal burdens, and by the removal or streamlined administration of certain statutory or administrative controls. Some of the measures to be applied in enterprise zones will be discriminatory and will not be suitable for wider application.

Companies located in the enterprise zones (East Durham - UK) can take advantage of the following financial assistance: freedom from business rates for the 10 year life of the enterprise zones (December 2005), 100% tax allowances on the costs of industrial/commercial buildings, a streamlined planning process and possible rent free periods from developers.

It is necessary to point out that EZTMs are used at both state and federal level in other countries, often because the company taxing role is sometimes shared at both levels. EZTMS that refer to State programs, we submit should, be considered by the Panel as a potential mechanism in an Australian federal context. Similarly, as will be identified later in this submission the Regional Business Development Literature Review (June 2002), deals with mechanisms at Federal level when reviewing overseas examples.

In looking at the range of definitions of EZTMs it is important to understand that they are a mechanism which:

1. Is growth based and provides the incentive on the additional growth not on the base business activity.
2. Uses a suite of incentives often tailor made for a particular region.
3. Relates to individual businesses in regional areas and the tax incentives are only activated when the businesses achieves pre-determined goals (new employment and investment etc)
4. EZTMs reward the risk borne by an individual business and only provides the actual tax credits after the result has been achieved. The mechanism allows the business to factor these future credits into their business plan/cash flow.
5. EZTMs are not largesse based, but are 'funded' on the principle of future taxation revenues foregone. Each business funds itself in proportion to its own risk and its level of investment/job creation etc.
6. The guiding principle for EZTMs is to recognise the private sector as the provider of the solution for job generation.
7. Enterprise Zone benefits are generally only applicable to manufacturing and value adding businesses rather than basic agriculture, retailing and service industries. Some exceptions are made in special circumstances.
8. Notwithstanding EZTMs, other policy mechanisms are available in the overseas examples provided, including export incentives, research and development grants, infrastructure and community economic development programs.

Local government in Australia encompasses some 700 authorities, many of which are in regional and country areas. For the last four years, the Australian Local Government Association has delivered the State of the Regions report on 64 regions covering all of Australia. It is an annual stock-take of the economic well being of Australia's regions and their prospects for economic development and employment growth. Local government has a strong role in regional economic development in the principal areas of promotion, enhancement and augmentation of appropriate local infrastructure and developing local incentive packages. To a very great extent, local government carries a significant burden in this regard as there are few programs at federal level which directly encourage the expansion of existing businesses or the relocation of businesses from city to country. The lack of programs is in direct contrast to the experience of government agencies in the USA.

Ian Manning found : It is noticeable that, in Australia, the Commonwealth directly matches only two of nearly fifty US programs relevant to regional business development: the export development program and the indigenous land purchase program. Should the Commonwealth initiate enterprise-zone programs for disadvantaged and economically distressed regions, the following gaps in its program coverage are likely to become acute:

• the lack of programs to provide loan guarantees and venture capital for small to medium business and for local government,
• the lack of grants for local economic development planning, investment attraction, business development and community development and
• the lack of assistance with business development (including management and technical advice to bring small to medium businesses into the knowledge economy) and assistance with government procurement.

The full economic impact of regional business decline has little effect on the national economy, but significant effect at local level where it is not unusual for local councils to have to find the resources to rejuvenate their areas in conjunction with state governments. These funds however are depleted by Federal taxation whereby, any industry based incentives provided by local government ratepayers are taxed by the Federal government at 30 cents in the dollar.

There is a sense in local government circles that previous attempts at economic solutions have tended to focus on development of plans and strategies but have provided little in the way of means to the private sector. 'Talkfests' and 'paralysis analysis ' have been referred to in such circles. The private sector does not operate under the same set of rules as government. It is the invisible hand of the market that is its major influence. Government influence, be it Federal, State or Local has not had sufficient impact to alleviate the effects of market failure in Australia's regions.

Some initiatives however have had positive outcomes. The 60/30/10 scheme (may need explanation) can still demonstrate a number of long term industries established which continue to operate today. The Bathurst/Orange and the Albury/Wodonga experiences have been overall positive. The relocation of the Department of Agriculture from Sydney to Orange has been successful. The establishment of regional universities in Wagga, Bathurst, Lismore have seen population growth rates far exceed those projected from the 1960s.

ALGA investigated the track record of EZTMs and concluded that as an interventionist mechanism their results over 20 years were positive. ALGA concluded that EZTMS provided a way forward for Australia's regions but it also accepted that a significant change in paradigm would be required to move Australia from an essentially low key, non-interventionist and grants based system of regional economic development at regional level to a more targeted approach.

Local government is optimistic about regional Australia if a new and realistic approach to economic development is undertaken with new economic development tools that are:

• substantial and direct enough to stimulate business interest,
• simple enough for all participants to understand,
• transparent enough to see them in action
• inclusive of strong elements of mutual obligation with communities playing a part in managing their futures

There are some practical issues of concern such as state payroll tax. This truly is tax on employment and we believe there is anecdotal evidence that many businesses may deliberately choose to maintain their employment levels below the employment threshold. A tax based on increasing employment numbers seems to run counter to any philosophical commitment to assist business to expand.

Local government therefore believes that proposed solutions, which we will detail later in the submission, must consider the following:

• What types of mechanisms at government policy level will directly influence the business investment decision ( ie an individual business in regional Australia)
• Real legislative, administrative and taxing powers are at the Federal level and if local government is to be an effective conduit it needs to have increased decision making and autonomy at local and regional level.
• Local government or other well-intentioned groups cannot determine or order the structure of the local or regional economy. What it can do is assist in providing a climate which makes areas attractive for businesses. This 'climate' however must be more than just 'having an attractive town' and adequate infrastructure; it must extend to the core reasons for businesses deciding to expand or locate. This is not to dismiss mainstreet programs and their like, but to recognise the difference between focussed economic development programs which stimulate business activity compared to indirect programs to identify opportunities. An objective analysis of present Federal programs for businesses in regional areas will find them to be lacking in substance and applicability for the great majority of small businesses in regional areas
• The notion of 'the community' taking charge may be desirable but unlikely. 'Community' at local level is represented by local government. That is its role and the residents of regional towns and areas elect them for that purpose. While many organisations such as chambers of commerce, action groups, progress associations and similar, rise and fall within regional areas, the one constant is local government. Local government should be nurtured and encouraged by government as it is potentially the strongest ally it will have at local level.
• The three levels of government need to develop a cohesive and holistic approach to overcoming a cultural divide in Australia comprising awareness programs firstly for new migration to regional areas and secondly to demonstrate that regional areas are attractive places to live and work.

Comments on areas of interest to the Panel

The following responses combine local governments' research and experience over recent years. In providing these responses however we pass on comments we have received that while the questions may be necessary information for government, they are complex, repetitive and not necessarily of interest to the private sector. There are however some significant issues raised and rather than answer each question we have provided comments within each section.

A significant barrier we believe is the general low return on investment for business activity in regional and rural areas. On a per capita basis the following table shows the general divergence of business incomes .

Area	Business Income $ per capita
Central West	293
Far and North West - New South Wales	236
Murrumbidgee	247
Murray	194
Global Sydney	2241
Sydney Inner West	590
Sydney Outer North	1952

There are a significant number of opportunities already recognised by investors. Businesses that naturally arise in regional areas are those that add value to primary production from the immediate and hinterland areas. Many regions have such industries (abattoirs, early stage wool processor, food processing, light manufacturing). However, significant opportunities are lost to metropolitan regions. For instance tomatoes are grown in rural Victoria but value adding processes such as pulp, paste and sauces etc, take place in Sydney. The considerable amount of gold slurry extracted in the Central West of New South Wales is refined overseas. It would seem to be less cost effective to transport large volumes of primary products away from their source for value adding.

Due to its open spaces and rural and agricultural base, regional areas are more likely to tolerate industries with odour and noise than a metropolitan authority.

Country areas are generally well serviced by 'door to door' road transport that appears to respond well to demand. Distance and the perception of distance from metropolitan areas, is often a significant physical and cultural barrier. This is reflected in the time taken and fuels costs for travel to country areas.

Local government believes these barriers are significant, however it is difficult to determine whether business rejects operating in rural areas or whether it chooses metro or coastal local because of familiarity, market proximity or Australia's general propensity for a coastal/metropolitan lifestyle.

Local government has experience of overly complex and lengthy procedures for government approvals of grants. Grants at Federal level are generally not available for individual businesses. This we believe should be reviewed, because it is individual businesses that make individual decisions about expansion, relocation and employment. The notion of the 'community of businesses' in a region making these decisions is not based on reality but more a desire that such an aggregation exists for the purpose of policy making. Assistance to individual businesses is generally available at state government level and sometimes at local government level.

Barriers to business success

Barriers to business fall into the following general categories:

• Distance from metropolitan/market centres
• Cultural perceptions of regional and country areas
• Perceived low level of economic activity and support services
• Perceived or actual skills shortages
• Lack of trained staff
• Perceived lack of professionally rewarding careers
• Low returns on investment

Comments on specific issues

• The barriers are significant and anecdotal evidence indicates that the development and relocation of new businesses to regional area is very limited. Major retailers and fast food outlets choose their locations by 'proving' the likely customer base, hence income stream with a high degree of reliability. If the numbers are not indicative of success,, the business will look elsewhere.
• New business development statistics are not always easily located and should be investigated. Anecdotal evidence suggests that new development activity is low. One can argue that this is simply a factor of market forces making a locational decision or alternatively it can be argued that market failure has occurred. Government policy must be framed in light of the private sectors' need for return on investment. Businesses will be influenced by costs and overall returns and policy must reflect these business needs.
• There is a generally low cost structure in place in regional areas in relation to labour and construction. Amenity, lifestyle and safety are personal issues for business owners that are positive incentives. Local government approval processes in regional areas are generally speedier and less divisive than in city locations and industries which might be considered 'noxious' in metro areas are often welcomed in regional locations due to their employment potential. Some local governments are able to offer incentives for such industries and assist in leveraging state government assistance.
• Access to raw materials from the local area plus surrounding areas is a consideration.
• Many local governments would provide anecdotal evidence that they have sufficient infrastructure to provide for expansion and relocation of businesses in their area. Councils may make a range of decisions in regard to necessary augmentations however the principle of user pays dominates. Councils may consider contributions in specific cases where the business is seen as beneficial to its area, it may defer payments, provide rate holidays and it may provide loans. In some councils, incentives based on employment may be used by the business to offset its development costs.
• Businesses are attracted to or decide to expand in a regional area because of the bottom line of return on investment. Government may have some very small role in promoting opportunities or advertising but the real decision is made by the business.
• There is a lifestyle component and comfort factor as well. Some people will stay in a business even if returns are low because they are comfortable with that type of activity.
• As regional areas deplete their population they will lose potential entrepreneurs..
• If government wishes to influence the process it will need to change the profitability equation. Presently there are no policies at Federal level which will have significant impact at this time. Unless new policies are introduced that address this issue of business location and expansion, regional Australia will continue to diverge from metropolitan and coastal areas

Attracting and retaining skilled people, executives and professionals

ALGA believes that business activity will ultimately drive the availability and retention of people in all work categories. The issue of amenity in regional centres is important as are cultural and social activities. ALGA considers however that it is not practical to place the emphasis on regional areas improving such amenities with the hope that business investment will improve as a result. We believe that stimulating the business sector will ultimately provide the resources for amenity improvements. Programs such as enterprise zones and migration schemes linked to business in regional areas are we believe, likely to achieve sustainable outcomes. In short this is a long-term problem unlikely to be overcome with the status quo. Success is more likely through regional areas having mechanisms to trigger higher levels of economic activity.

Attracting investment

Investments must stand or fall on their potential to generate satisfactory returns. The issue of tax advantaged municipal bonds has been raised in recent times as a way of regional residents raising funds for regional infrastructure projects. Government can assist by initiating a promotional program to encourage investors to consider regional projects. At the other extreme, Governments could legislate in a similar way to the USA's Community Reinvestment Act, requiring lending institutions to conduct part of their business in regional areas. In some USA enterprise zones tax credits are earned by banks which conduct certain percentages of their business in regional areas.

Improving access to finance for small and medium enterprises

Banks and Finance institutions appear to have concerns about regional areas and the potential for return on investment. There are however some legitimate concerns about these businesses presenting professionally prepared business plans in order to gain finance. There are likely to be sufficient existing resources (accountants and advisers) to assist businesses to prepare such plans however the need to present information in a clear fashion needs to be communicated back to the private sector.

On the supply side however mechanisms exist in the enterprise zones model for banks to be encouraged to lend into regional areas. Tax credits are provided back to the lender for the amount of business conducted in regional areas. The USA's Community Reinvestment Act has requirements to force banks to conduct businesses in areas they had previously black listed. The general view of the USA is that it is a laissez-faire market economy. This is not the case as the federal and state governments respectively have chosen to use a range of interventionist policies to share the nation's ability to access the positive effects of market forces.

Accelerating new business and investment proposals

ALGA believes this cannot be forced by government at any level but it can be encouraged, especially through a whole of government approach. Encouraging speedy response times from government agencies together with co-operation from local government could assist developers. We have been advised from our contacts in the USA that the enterprise zone system has a considerable promotional impact on likely investors in that it highlights government intention to promote activity in these areas.

Regional business development literature review

The Panel is to be congratulated on the literature review. In particular the presentation of information in a succinct but formal way is very useful together with the Key lessons sections. The aim of the literature review is to summarise and interpret recent literature and experience in regional business development. ALGA and individuals within local government have undertaken similar research since 1999 and we would like to offer our comments and provide you with additional resources.

Please see appendix A for copies of literature forwarded with this submission. We request the return of this material.

Key Themes to emerge from the Literature Review

A key theme is for government to realise that there are areas in regional economic development policy making where it can be strong and areas where it will be weak. Government should concentrate particularly on stimulating the market mechanism in areas where socio-economic results are not to the level expected by residents. Abandoning regions to the deleterious effects of market mechanisms is not an option within our Australian society.

Review of international experience - Page V

This section is limited to USA Federal mechanisms.

We submit that due to the different taxation arrangements and responsibilities at State and Federal Level in the USA, the enterprise zone mechanism at state level needs to be examined as a potential federal mechanism in Australia.

• The review of the USA's Federal Empowerment Zone and Enterprise Zone Community (EZ/EC) Programs is superficial and the long standing State Enterprise Zones practised in most states of the USA have been ignored. The statement on page vi that "...the effectiveness of the program is unclear" is questioned in light of our own research.
• Standard and Poors reported that the creation of empowerment zones, along with other economic development tools, can assist cities in moving towards their economic goals. Empowerment zones are also located in rural areas.
• The Californian Trade and Commerce Agency reports that its program is a success and since the designation of the first enterprise zones and economic incentive areas over 12 years ago, they have contributed to the creation of over 88,000 jobs.
• A study on Colorado's experience shows that enterprise zone programs have had a positive and significant impact on both employment growth in target areas and the level of per capita income.
• In a study undertaken by the USA Department of Agriculture while recognising that some areas may not benefit from interventionist methods, nevertheless concludes that enterprise zones have been effective at stimulating economic development.
• Frank Beck points out that state enterprise zones have experienced growth, and zones had more businesses operating than prior to designation, taking into account natural growth factors.
• Karen Mossberger notes the emerging consensus over the positive effects of tax incentives via enterprise zone programs on business location decisions.
• Timothy Bartik concludes that state and local policies can significantly affect the long-run level of business in a local economy. Business tax reductions may increase economic activity but so may increases if used to fund infrastructure and public services required by business.

In regard to key considerations from an examination of USA models, ALGA has concerns that much of what is suggested in the literature review is supportive of government not increasing its role in regional economic development policy. We agree that community planning and community responsibility is critical to the improvement in economic performance indicators, but only where that community has some real tools with which to work. Ideas, visions and community plans must be able to be translated to business activity. It is that linking mechanism which is missing in the current Australian government/business relationship in regional Australia.

Europe

The literature review on the EU is also limited. The EU is quite specific in its own documentation about why it needs a regional policy - "...it is unlikely that free trade and market forces will ensure balanced development, resulting in the position of poorer regions getting comparatively worse" . No mention is made in the review of the programs by individual countries within Europe, Scandinavia, UK and Ireland. The UK announced in 1980 that it intended to legislate for the creation of enterprise zones to test as an experiment, how industrial and commercial activity can be encouraged by the removal of certain fiscal burdens. In 1995 a study was undertaken to review the UK's enterprise zones program and it indicated among other matters, that 58,000 jobs had directly resulted from the zones with considerable additional economic activity having been generated. In a further study the public sector cost of instituting enterprise zones was seen as justified because of the successful leveraging effect it had on private sector investment.

The following general pattern of regional development in the following European countries is shown below .

Belguim

There are regional investment incentives for small, medium and large companies in designated development areas. Interest rebates for loan financed investments in such areas are available or where funded from a company's own funds, a capital grant may be provided. Subsidies are provided on the basis of employment numbers. There is also support for additional employment, start ups, relocation, strategically important renovation in urban area and ecological investment. General incentives are available for targeted industries.

Finland

Finland has a regional policy that aims for balanced regional development throughout the country. The legislation promotes the equitable and independent development of different parts of the country with government assisted programs and graduated support according to the geographical location.

France

Subsidies and grants on a per employee basis, with varying rates depending on "remoteness". Grants provided for targeted business in "hi-tech" industries.

Germany

Regional areas control the local business tax and these can be alleviated to encourage businesses.

Ireland

There is lower business taxation in designated areas. Ireland is perhaps the most significant example of government policy being a major contributor to economic improvement.

Italy

There is a tax credit system for new investments in "less-favoured" areas in Italy. The incentives consist of a tax credit that enables firms to offset both direct and indirect taxes.

Norway

There are three major tools for regional areas: Individuals are given reduced income tax; the employer tax (payroll) is reduced depending on the remoteness factor; there are a variety of schemes to encourage business development in rural areas.

Spain

Incentives are provided by the central government in accordance with EU agreement. Financial assistance incentives are available for particular geographical areas based to assist in achieving economic equilibrium through investment projects.

Sweden

Taxation relief for foreign nationals employed in Swedish businesses. Employers receive concessions on Social Security contributions. Business tax relief is also available in regional areas

Regional responsibility in Australia

Australia's Regions while being areas used for statistical measurement have no organised structure apart from loose knit associations of Regional Organisations of Councils (which are not legal entities) and these vary in effectiveness. Other government or quasi-government agencies may have specific responsibilities in designated areas such as Area Consultative Committees. 'Regions' cannot order and structure their economies. At best they may provide a promotional and marketing role however they cannot act as a leader of overall private sector aspirations as the private sector is not unified but an aggregation of individual businesses each striving for their own results. Regions have no ability to raise funding and are beholden to higher authorities. Therefore government policy which talks about regions taking responsibility for their future and regional businesses somehow doing the same, have little basis in reality.

Australian Government assistance (to business)

There appears to be an assumption on page xi and in the review generally, that the Australian Government provides assistance to regional businesses. While the Federal government provides information which indicates such assistance is available, there are only a small number of generic programs, no regional based programs for business and no needs based assistance for business. For instance, the Regional Assistance Program indicates the program achieves its goals by "encouraging business and communities to take action, in partnership with government, to build business growth and to stimulate employment. Assistance to regions is provided through seed funding to not-for-profit organisations..." Local government considers that mechanisms which are so indirect will have poor results overall. Local government is unaware of any general federal government assistance to businesses apart from import concessions and Research and Development Allowances as follows :

AusIndustry

AusIndustry provides a range of products that allow Australian businesses to receive favourable tax or duty concessions to encourage research and development, international competitiveness and economic growth.

Automotive Competitiveness and Investment Scheme (ACIS)

The Automotive Competitiveness and Investment Scheme (ACIS) encourages new investment and innovation in the automotive industry.

Enhanced Project By-Laws Scheme (EPBS)

The Enhanced Project By-Laws Scheme provides tariff duty concessions on eligible capital goods of significant sized projects in the mining, resource processing, food processing, food packaging, manufacturing, agriculture and gas supply industry sectors.

Policy-By-Laws (PBL) Scheme

The Policy-By-Laws Scheme provides import duty concessions on capital equipment used in major projects in mining, resource processing, manufacturing and agriculture-based industries.

Pooled Development Funds (PDF) Program

The PDF Program is designed to increase the supply of equity capital for growing Australian small and medium-sized enterprises (SMEs). PDFs are private sector investment companies established under the PDF Act which raise capital from investors and use it to invest in Australian companies.

R and D Tax Concession

R and D Tax Concession is a broad-based, market driven tax concession which allows companies to deduct up to 125% of qualifying expenditure incurred on R and D activities when lodging their corporate tax return. A 175% Premium (Incremental) Tax Concession and R and D Tax Offset are also available in certain circumstances.

Tradex

The Tradex Scheme provides relief to persons or organisations via an up-front exemption from Customs duty and GST on imported goods intended for re-export or to be used as inputs to exports. The Scheme removes the need to 'drawback' these charges after export.

It is interesting to note that the link from the Commonwealth Governments "Regional Australia" website has the following disclaimer when some items controlled by other Federal Government departments are selected. 'The link you selected is outside the control of the Regional Entry Point. It may also not be managed by the Commonwealth Department of Transport and Regional Services or other Commonwealth Agency. The Department of Transport and Regional Services accepts no responsibility whatsoever for the content of this external page. The message of a whole of government approach and interdepartmental cooperation is therefore ambiguous.

Most assistance is available for development of strategies via community groups but 'for profit' businesses are specifically excluded. Export grants are available but there are limited numbers of exporters in the regions.

There appear to be assumptions flowing through the literature review that the market ultimately delivers the right result. These results however are not demonstrable according to many different measurements. ALGA suggests that the Federal Government should become comfortable with the notion of letting individual businesses take risks and rewarding them when they are successful in achieving what government sees as desirable for a region: new jobs and moving people from welfare to work. One goal of the USA Enterprise Zones program is to encourage risk taking.

ALGA believes that the real opportunity for job creation is from existing industries being encouraged to expand rather than city industries relocating to regional areas

In respect of the conclusions in the Executive Summary of the Literature Review, ALGA agrees that a change to a more interventionist approach must be based on existing strengths and sound prospects.

Other comments from Literature review

• Import replacement incentives are important.
• Agree that the market's allocation of resources to investment in physical and human capital and innovation can be sub-optimal, ie the effects of market failure are apparent in regional areas.
• Government can play a pivotal role in industry expansion if it rewards successful risk taking by private sector individuals.
• Agree that regional policy should be designed to catalyse and co-ordinate (page 16) but real and substantial tools are needed to stimulate the business and investment decision.
• While the Literature Review quotes the McKinsey report, McKinsey does not quote the considerable positive experience on intervention via EZTMs from the USA.
• Lifting business aspirations via policy (page 20) needs to take place via policies to which business can relate. Incentives should reward successful risk taking.
• Government recognises a national benefit in regulating media outlets, numbers of taxicabs and Medicare numbers etc. Government's concern with the national interest can be extended to improving performance in regional Australia. Government may see a parallel with investment in the Australian Institute of Sport and the subsequent success of our athletes in Olympic and Commonwealth and World Championship level.
• The Literature Review appears to hold up 'do-it-yourself' themes for regional economic development. This may imply the status quo in respect of the Federal Government's role. DIY should be required by a locality or a grouping of localities to develop a plan for their future. Many would already have such plans but what they have always lacked is a conduit for private sector uptake.
• Silicon Valley is often mentioned as a success story where the private sector has been instrumental in making the market work through networking clustering and innovation. What is missing from text box 3.1 is that San Jose the Capital of Silicon Valley also has Enterprise Zones, hence government policy is an important contributor to the Silicon Valley success story.
• The areas of San Francisco, San Diego, Seattle, Salt Lake City, Phoenix, Denver, Austin, Atlanta, Northern Virginia, Boston, and Research Triangle as shown on page 42 all have Enterprise Zones.
• The phraseology in the Literature review is often generalised. Terms such as Regions need to take a strategic approach to securing investment for the region. This includes identifying inefficiencies across all sectors and working towards strategic visions and initiatives to address those inefficiencies. 'Regions' exist mainly as a desire by policy makers, not as an administrative entity.
• Creating a whole of government policy is required (page 97) but should be geared to provide autonomy at the local level. If tax incentives based on achieving certain goals are to be part of such a policy, they should simply be 'available' via taxation legislation and not subject to a lengthy approval process.
• ALGA expresses surprise that tax incentives via enterprise zones as outlined in the literature review have not been promoted as a potential area of investigation. Government already recognises that some regions need special assistance and has provided direct funding for the disadvantaged regions of Wide Bay Burnett, South-west forests in Western Australia, Specific regions under Rail Reform programs, Newcastle NSW, Eden NSW, the Kimberly and Atherton Tablelands. Government concern should extend to all those areas that exhibit poor economic performance.
• Zonal taxation (page 98) should be examined on its ability to stimulate business activity. The present Zone A/B system is a rebate for employees not employers and as such provides little incentive to the private sector.
• Local Government is becoming increasingly cynical about grant programs for regional economic development. Such programs are competitive, slow and pit area against area for limited funds and while useful in identifying opportunities, produce little interest from the private sector as the inherent difficulties in operating profitable businesses in regional areas are unchanged.
• The reference to The Regional Australia Summit is noted however the resultant Regional Solutions Funding Program excludes the 'for profit' sector. The summit targeted employment as a principal concern yet the assistance programs exclude dealing with businesses.
• The statement "Capitalise on the strengths of local rural communities by fostering greater community involvement" is of concern. Local rural communities are represented by local government. Many communities expect local government to undertake that role yet local government has no real access to the funding or power needed to fulfil that role. It cannot direct either individuals or 'regional business' to do anything, but may have a very minor promotional and awareness roles.
• Government has to be careful that providing grants is simply not a stalling tactic. Providing a grant may not address the real problem, which is the lack of economic activity.
• There are some generalised statements that concern local government such as "Industry Assistance policy has a questionable impact on economic development." Page 108. This defies international experience (refer to local government's reading list and research previously dealt with in this submission). Many local governments who have used their own resources to assist business to stay and expand within their communities. Most Industry assistance in Australia is hidden under commercial in confidence and has been made available only to very large businesses (Mitsubishi, Kodak etc)
• Mention of getting the business climate right is a common theme. The difficulty for regional areas is that this theme drives the current policy development which is not improving regional performance. If Australia's overall economy is performing well, inspite of regional casualties, there appears to be little interest at government level to fix the regional component. It has been said, perhaps unkindly that the national economy is served well by economic serfdom in country areas!
• ALGA challenges the generalised statement on Page 115 that business incentives can be politically dangerous for local councils and offering incentives for one business creates precedent and local businesses may create a demand for the same treatment. The statement could easily pass for fact and be taken as a reason not to use such tools.

Incentives if used constructively and tied to performance have had a major impact on a number communities. Cowra NSW by way of example, faced the closure of the Edgells Factory in 1992 with the loss of 450 jobs. The Council committed to a 10 year incentive program to provide a payment of a maximum of $55,000 each year if the new business created and maintained at least 55 full time equivalent employees (FTE) each year. That business went from zero turnover in year one to around $12 Million per annum before a friendly takeover by Windsor Farm Foods which has closed down three of its Sydney factories to relocate to Cowra. Total employment will be in excess of 140 FTE. Incentives have been used by numerous other industries in town and are available to both existing and relocating or new businesses. The reality however, is that most new jobs created in Cowra are by existing businesses.

Local government can become 'unstuck' if it simply provides a handout with no conditions. Incentives are paid generally only at the end of the 12 month period after application has been made and the scheme has been approved. No funds are provided in advance.

It is a myth that there are many companies wanting to locate around Australia trying to play one local government area off against another because of incentives is believe incorrect. Industry in Australia is contracting and a number are relocating off shore. We have been advised that in the last 12 months the following industries have relocated as follows:

Email Metering Div – China
Unilever Liptons Tea – Indonesia
Atofina Gas Storage Tanks – Split throughout Asia

Aust. Pty Ltd and distribution net work
Albion Steel - St Marys NSW – South America.
(Reinforcing mesh for concrete)

York Int'l (Air-conditioning) – China
CAPRIL COLD ROLL MILL – Indonesia
Capril Hot Roll Mill – China

There is little reason for local government to become regional if they do not have the tools or financial encouragement to do so.

• The statement that financial incentives are of no net community befit is erroneous.
• ALGA agrees with the statement that governments must be interventionist when there is the first sign of economic decline.

ALGA recognises that many local government authorities are involved in assisting relationships between businesses. In the end however, such networks and relationships are driven by developing profitable enterprises and the level of co-operation and involvement in government driven processes will be a voluntary one. It is not therefore a consistent factor across all regions or one that can be used to base a significant part of the Federal Government's regional economic development policy.

There is a strong role for regional communities where intervention is required. Mossberger advises : Chambers of Commerce were often involved in initiating the effort to get enterprise zones in their states. In my case studies of 5 states, representatives from local chambers were involved in pushing for and sometimes helping to formulate state enabling legislation. To guarantee private sector input at the local level, a number of states required the formation of a non-governmental organisation to run the zone. Indiana perhaps took this furthest (allowing this body to keep a portion of tax revenues and make decisions about investments in the zone), but a number of other states have some type of association similar to Indiana's. There is usually a requirement for a board (and perhaps a larger association) that makes decisions about eligibility for benefits and, within state guidelines, decisions about planning and administration. The board is generally composed of representatives of local government, businesses within the zones, and zone residents.

A somewhat different way of making sure that incentives are attractive to businesses is to have some flexibility. A large, multi-state study by Erickson and Friedman (1989) concluded that the more successful states had a flexible array of incentives, addressing different types of taxes and various types of loans. The state of Massachusetts went further in allowing flexibility by permitting local zones to use either a tax break or tax increment financing (to provide infrastructure) as the business incentive as follows:

The benefits are negotiated between local governments and businesses - not only the type of tax incentive, but also the level of the incentive and the number of years. Clearly this gives the local government some leverage to negotiate provisions, for example, to hire local residents. But, it also gives some choice to businesses in opting for improved infrastructure or a tax break.

Objections to enterprise zones in Australia

The proposal for enterprise zones emerged in 1999 and was highlighted by the release of a report prepared by National Economics, at Parliament House Canberra in April 2002. The report was instigated by CENTROC, and prepared on behalf of the LGSA of NSW and ICAA The idea of special intervention by government in areas which were economically distressed created generally positive interest because of the possibilities the mechanism presented and its successful overseas record. The idea had its detractors however it is thought that a number of the objections resulted from a lack of understanding of the way in which Enterprise Zones worked overseas. Some of these objections are shown below.

Enterprise zones are 'picking losers'

Economic performance is measured within statistical regions and some areas are losing out. The reality is that when comparisons are made, key performance indicators for many regional locations will vary significantly from the average and from what communities might find acceptable. The choice for government is to allow market forces (ie effects of market failure) to continue or to assist the communities find ways to prosper. 'Picking losers' is disparaging but some Enterprise Zones, as they are operated in the USA, operate in lagging areas. Unless we accept that Australia has similarly lagging regions we will tend to rely on market mechanisms which in the past have provided little chance of an overall positive result. Enterprise Zones however are not simply a gift. Areas wishing to become designated in the USA have to prove their case by not only demonstrating they are under-performing, but also their commitment to the entire process of rejuvenation.

Zones are lines on maps

Lines on maps are a general difficulty for governments. There is some concern that enterprise zones may cause division between areas which have benefits and those that do not. The reality is that most of regional Australia would qualify for an enterprise zone based on the typical criteria for such areas overseas. The important issue is that overseas, enterprise zones are not automatically designated. They require commitment from the area in developing an economic development plan and they must demonstrate prospects for the future. Larger regional centres (because of their economic results) would normally be excluded, however Enterprise zones can be designed to provide tax credit benefits for industries targeted by particular communities such as higher technology industries in larger centres and value adding industries more closely linked with the raw materials from smaller population areas. One model of interest to ALGA is that used in Kansas USA where the whole of the state is an Enterprise Zone except for the metropolitan areas. A sliding scale of tax benefits is applicable based on the populations of the rural areas. Australia is in the unique position of being able to design its own enterprise zones mechanism based on the experiences and lessons from overseas.

Differentiating between areas will divide Australia

Australia is already divided by economic results and there are both political and social ramifications as a result. Australia is not unique in this situation however many other countries have found methods to balance their economies in regional areas. Being overly concerned about what may happen in respect of policy changes is not a reason to deny regional Australia the tools it needs.

There can be no 'magic bullets' or single solutions for regional Australia.

ALGA agrees wholeheartedly. What is needed is a new type of mechanism that complements existing programs and works with the sector which will create the new investment and new jobs. Enterprise Zones have become a focus for local government and other interests because they are new, because they are innovative and because they appeal to the need to stimulate the private sector. Other areas of government assistance will be required, as will programs from state government and local government. ALGA believes however, that enterprise zones will, with active involvement and participation of government and community, provide a completely new impetus. The Federal Government will feel justifiably proud to have introduced this mechanism for Regional Australia.

Enterprise zones will create uncompetitive industries.

A government which has the responsibility of caring for its nation cannot ignore the under performance of many regional areas and the reality that businesses find it difficult to operate in that environment. The enterprise zones system has a long and successful track record overseas. It is a low risk mechanism for government but rewards successful private sector risk takers. The Federal Government already recognises that some localities in Australia need assistance (Sustainable Regions Program) and it regulates many aspects of commercial life for the benefit of all Australians. Similarly EZTMs intervene to provide a stimulus to the natural market mechanism, to improve investment and employment.

Enterprise zones require huge amounts of funding.

Enterprise zones are not based on government expenditure but rather on future taxation foregone where the incentives (tax credits) generate new taxation revenues from increased business operations, increased GST and increased PAYG together with savings on welfare payments. Minimal 'up front' administrative funding is required but the real power of the proposal is a legislative mechanism incorporated into the tax act which is available and 'triggered' by any qualified business which achieves set targets in investment and employment. The risk is borne by the business not government. Enterprise zones however are not the entire answer and need support from traditional infrastructure assistance and other regional economic development programs.

The Australian Constitution would prevent enterprise zones from being established

Special Counsel Constitutional advice finds there would be no constitutional impediment to establishing enterprise zones and in particular would be no impediment to the Commonwealth providing for tax incentives in such zones .

Enterprise zones will be pitted against non-enterprise zones

One strict test for an enterprise zone benefit is that a business cannot simply move from a non-zone to a zone, to earn benefits. In the USA the controls are strict and realistically the level of benefits would not justify factory relocation. In Australia's regions most new jobs will be generated from existing businesses. Enterprise zones provide a way to stimulate those existing businesses to think about expansion.

Will all businesses in an enterprise zone be able to receive enterprise zones benefits?

No, benefits are not received unless they are earned through the rules set down by government; typically the level of new investment and employment after a certain designation date. As government is endeavouring to stimulate manufacturing and value adding, it is these types of businesses that normally become qualified for enterprise zones 'benefits'. Other support industries such as retail and the service sector will benefit through general increased economic activity.

Proposal for the way forward

Local government through its research and grass roots involvement and understanding of its communities can assist in the development of a new range of policies for regional Australia. We recommend a very close examination of the policies based on EZs, modified for Australia's needs. Typically such tools provide incentives which are low risk to government and only reward success and are in proportion to the level of new investment and new job creation in non metropolitan areas. Typical tax incentives found in EZTMs overseas include the following:

• Machinery purchase credits where Australian made machinery equipment is purchased or leased. Additional credit where regionally made.
• Gas and Utility Authorities be given company tax credits for providing the additional energy required after designation date of expanding EZ businesses. This energy be provided at a discount. In the case of water this be provided at a discount which is compensated in full by the Commonwealth.
• Local Inventory credits - purchases from within the Zone.
• Accelerated depreciation.
• All paid local government fees and charges for the expanded activity after EZ designation will receive an additional taxation deduction.
• Payroll tax for the new activity after EZ designation shall be strongly discounted for a period of 20 years.
• Government grants - tax free
• Businesses voluntarily subscribing funds to a Community Revolving Loan Fund will receive taxation credits.
• Taxation credits provided for skilled jobs.
• EZ credits are additional to those under existing company taxation rules.
• EZ's are designated for 10 to 15 years
• Redirect 50% of current job search fees now paid to employment companies direct to the business hiring the employee.
• Credits for employees would generally be available only for those residents within the EZ area.
• Banks would be asked to adhere to EZ investment guidelines and in doing so for newly designated EZ activities would be provided with company credits.
• Target industries can be included with an enhanced range of benefits. This will benefit a community seeking to attract a desirable type of industry to its area.
• Communities can apply for special designation subject to them developing a plan to target specific industries.
• Designation will be automatically approved if the criteria are met.
• The overall EZ scheme must recognise the Job creation needs of the community and the Private Sector profit nexus.
• EZTMS benefits provided on local government area population basis
• Minimum area to be LGA. Combinations of LGA's can apply. Where LGA's which do not qualify, have villages or small townships these may apply on a special consideration basis?
• Economic Development policies are likely to assist high unemployment areas but for those with average unemployment will need to pursue low cost job creation.

What are the benefits to government?

ALGA submits that enterprise zones will be an effective adjunct to existing regional economic development policy. Communities, which have identified opportunities, will be able to present themselves for designation as an enterprise zone and if successful will then have a mechanism ready for the private sector to take those opportunities forward.

The Federal Government will have a higher confidence level in its ability to support regional areas in their commercial endeavours and provide a stronger measure of equity to regional citizens. It will see the benefits in the medium to long term of people moving from tax taking to tax paying as people move from welfare to work. It will also see increased revenues from businesses which expand and increased GST, as individuals increase their ability to spend more. It will also see greater success in other grant programs, which will then have mechanisms to convert ideas, visions and plans to commercial realities.

Recommendations

• That the Federal Government recognise its fundamental role for regional Australia is to develop long term programs that assist in private sector investment and job creation.
• That the Federal Government provide tax free status for local government and state government grants to business.
• That the Federal Government develop policies which benefit individual business in regional areas that are prepared to commit to expansion and investment and are rewarded on the basis of their results.
• That the Federal Government commit to developing and working with state and local government and business groups to develop a model of an enterprise zone for implementation in 2004 .

Additional reading list recommended by the Australian Local Government Association

• Building Communities Together, The Presidents Community Empowerment Board, 1998
• Central Western Regional Organisation of Councils, Enterprise Zones - a policy to promote regional balance in rural and regional Australia, Western Research Institute, June 2000
• Centre for Economic Analysis Department of Economics, Enterprise Zones and Economic Development in Colorado, May 1998
• David Hardison, From Ideology to Incrementalism - the Concept of Urban Enterprise Zones in Centre , 1981
• Department of Economic Development Iowa, Enterprise Zone Program-an incentive for business expansion, 2001
• Dr Anton Butter, The Road to Full Employment - an essay on regulation, deregulation, Enterprise Zones and the producibility of Jobs, , B.R. Grunner Publishing Co Amsterdam 1982
• European Commission, How is the European Union Meeting Social and Regional needs?, 1996
• Franck D Beck, Illinois State University Department of Sociology - Anthropology, Do State-Designated Enterprise Zones Work?
• Jonathan Potter and Barry Moore, UK Enterprise Zones and the Attraction of Investment, Urban Studies, Vol. 37, No.8, 1279-1312, 2000
• Kansas Department of Commerce and Housing(Business Development Division), Kansas Built on Character, 1998
• Local Government and Shires Associations of NSW, Enterprise Zones Questions and Answers, 2001
• Lon Hatamiya, California Trade and Commerce Agency, California Enterprise Zones 1998 Annual Report, July 1998
• Marten Johansson, Regional Policy from a Nordic Perspective, Extract from Regional Development in the Nordic Countries NOGRAN Periodic report 1994/95
• Martin Shields, Helping Keystone Opportunity Zones work in Your Community, Rural Development Views Pennsylvania State University, Spring 1999
• Office of Economic Development San Jose CA, Capital of Silicon Valley Enterprise Zone
• Oregon Economic and Community Development Department, Enterprise Zones in Oregon, Oregon Dept of Revenue 3rd Ed; July 2000
• PA Cambridge Economic Consultants in association with Richard Ellis and Gillespies, Final evaluation of Enterprise Zones, London, 1995.
• Rhode Island Economic Development Corporation, The Enterprise Zone Program helps businesses to invest in themselves, 2002
• Richard J Reeder, US Department of Agriculture, Rural enterprise Zones in Theory and practice: An assessment of their Development Potential, March 1993
• Richard J Reeder and Kenneth L. Robinson, Enterprise Zones: Assessing Rural Development Potential, Public Studies journal, Vol. 20, No.2 1992
• Roosevelt D. Butler, Enterprise Zones and development organisations: are they the answer to economic problems? Trenton State College.
• Sheilha S. Watson, Using Public-Private Partnerships to Develop Local Economies: an Analysis of Two Missouri Enterprise Zones, Public Studies journal, Vol. 23, No.4 1995
• Standard and Poor's CreditWeek Municipal "Report Card on Empowerment Zones" (December 22, 1997)
• State of Texas, Texas Enterprise Zone program-Program Benefits, 2001
• Texas Economic Development Agency, Texas Enterprise Zone Annual Report 2001
• The Centre For Enterprise, Enterprise Zone Benefits, Santa Ana California USA
• The Institute of Chartered Accountants in Australia and the Local Government and Shires Associations of NSW, Enterprise Zones - Creating Jobs and Prosperity in Regional Australia - Dr Ian Manning 2001
• United States General Accounting Office, Rural Development-New Approach to empowering Communities needs refinement, March 1997
• US Department of Housing and Urban Development, Tax Incentive Guide for Businesses 2001

Additional reading from USA Sources

• "Are proposed Kemp-Garcia 'Urban enterprise zones' a sound approach to U.S. urban revitalization?" Congressional Digest, vol. 61, P. 76, March 1982.
• "Do Enterprise Zones Work?" Patrick G. Marshall, Editorial Research Reports, Vol.1, No. 16, p. 230, April 28,1989.
• "Enterprise Zones," Congressional Digest, Vol. 64, p. 131, May 1985.
• "Enterprise Zones," Stuart Butler, Universe, October 1981.
• "Enterprise Zones as a Means of Reducing Structural Unemployment," Stuart E. Weiner, Economic Review, Vol. 69, No. 3, pp. 3-16, March 1984.
• Enterprise Zones: Pioneering in the Inner City, Stuart M. Butler, (Washington: Heritage Foundation, 1981).
• "Experiments in Employment-A British Cure," John E. Schwarz and Thomas J. Volgy, Harvard Business Review, Vol. 66, p. 104, March/April 1988.
• "Financing Urban Development: The Joint Efforts of Governments and the Private Sector," G. Edward DeSeve, Annals of the American Academy of Political and Social Science, p. 58, November 1986.
• "Fiscal and Employment Impacts of Enterprise Zones," Richard Funkhouser and Edward Lorenz, Atlanta Economic journal, Vol. 15, No. 2, pp. 62-76, July 1987.
• From Ideology to Incrementalism: The Concept of Urban Enterprise Zones in Great Britain and the United States, David Hardison (New Brunswick: Transaction Books, 1982).
• "The Impact of the Enterprize Zone on Urban Areas," Benjamin M. Hawkins, Growth and Change, Vol. 15, No. 1, pp. 35-40, January 1984.
• "Judgement Policies Used in Assessing Enterprise Zone Economic Success Criteria," Paul Miesing and Thomas C. Dandridge, Decision Science, Vol. 17, No. 1, pp. 50-64, Winter 1986.
• "Kemp's Rx for Inner Cities," Sidney J. Tanne, Journal of the Institute for Socioeconomic Studies, Vol. 6, No. 2, pp. 94-106, Summer 1981.
• "The Process of Industrial Development in Smaller Communities and Rural Areas," Fred J. Gassaway, Business and Economic Review, Vol. 29, No. 2, pp. 33-40, November 1982.
• "Public Incentives vs. Private Decisions: Does the Proposed Enterprise Zone Legislation Offer the Appropriate Inducements?" Robert D. Hamilton, III, and Rajeswararo S. Chaganti, International Journal of Public Administration, Vol. 10, No. 1, pp. 1-19, August 1987.
• "A Short History of Enterprise Zones," Madsen Pirie, National Review, Vol. 33, p. 26, January 23, 1981.
• "State Enterprise Zones," Congressional Digest, Vol. 64, p. 132, May 1985.
• State Urban Enterprise Zones: A Policy Overview, Steven Gold (Washington: National Conference of State Legislatures, 1982).
• Urban Enterprise Zones: A Selected Review of the Literature With Annotations, Andrew Gargooian (IAAO, 1984).
• Enterprise Zones and the Inner City Poor, Bret C. Birdsong, Statement before the Committee on Way and Means, U.S. House of Representatives. October 17, 1989 10 pp. Discussion of relevant tax incentive research literature in relation to probable consequences for inner city poor.
• "Expanding Civic Opportunity: Urban Empowerment Zones", Marilyn Gittell, et al. Urban Affairs Review, Vol.33: pp.530-58, March 1998.
  Abstract: Examines findings of the first year of the 1993 federal Empowerment Zone and Enterprise Communities Program (EZ), focusing on community organizations' participation in developing EZs, and their ability to address community problem; US. Some focus on the Atlanta Empowerment Zone Corporation (AEZC), the Empower Baltimore Management Corporation (EBMC), and the Camden Empowerment Trust Commission (CETC).
• "Will You Be Better Off In Four More Years?" Eric L. Smith, Black Enterprise, Vol.27: pp.54-8, Jan. 1997.
  Abstract: How the Clinton administration has affected the economic conditions of Blacks; empowerment zones and other issues.
• "People, Power, Politics: An Assessment of the Federal Empowerment Zones", Renee Berger, Planning, Vol.63: pp.4-9, Fall 1997.
  Abstract: How the first six cities in the federal Empowerment Zones/Enterprise Communities program have planned and implemented programs to create jobs and economic opportunity; US. The Empowerment Zones/Enterprise Communities Program, authorized in 1994, provides tax advantages to businesses, flexible financing tools, and community development grants in disadvantaged urban neighborhoods; examples from Atlanta, Baltimore, Chicago, Detroit, New York City, and Philadelphia/Camden.
• "Understanding Urban Unrest: from Reverend King to Rodney King", Dennis E. Gale, Sage Publications (LC 95-50225) (ISBN 0-7619-0094-2) $48; (ISBN 0-7619-0095-0) pa, 1996, xii+228p.
  Abstract: Compares federal programs to reduce urban poverty and other causes of interracial mob violence, since 1966; some focus on the Model Cities program, 1969-75, and the Empowerment Zones-Enterprise Communities programs (EZECs) of the 1990s.
• "From Enterprise Zones to Empowerment Zones: the Community Context of Urban Economic Development", Gerry Riposa, American Behavioral Scientist, 39:536-51 Mr/Ap 1996.
  Abstract: Compares the federal "enterprise zone" program, offering only tax and regulatory relief, and "empowerment zones", which promote development while emphasizing community participation and social services; US.
• "U.S. Seeks to Rebuild Battered Inner Cities", Andrew Cuomo, Forum for Applied Research and Public Policy, 10:92-5 Winter 1995.
  Abstract: Describes federal assistance available to communities designated "Urban Empowerment Zones" and "Enterprise Communities" by the US Department of Housing and Urban Development, 1994. Benefits include tax-exempt facility bonds, social-service block grants, and tax credits for wages and depreciable tangible property.
• "The strange career of enterprise zones", William Fulton and Morris Newman, Governing, 7:32-4+ March 1994.
  Abstract: Examines state and local efforts, political debate surrounding the concept, and Clinton administration plan to focus federal assistance on nine urban and rural "empowerment zones"; US.
• "The administration's empowerment zone and enterprise community proposal: hearing, May 27 and June 8, 1993", U.S. House of Rep. Comm. on Banking, Finance, and Urban Affairs, Subcomm. on Economic Growth and Credit Formation, Supt. of Documents (ISBN 0-16-041744-9) 1993, iv+211p. ; 103d Cong., lst session, Serial No. 103-33
  Abstract: Examines President Clinton's proposal to promote urban economic growth through the creation of ten empowerment zones and 100 enterprise communities. Stresses tax incentives for job creation, active federal investment in the zones, and boosting law enforcement resources.
• "Enterprise zones struggle to make their mark: Clinton's plan for aiding depressed areas may prevail; bipartisan support keeps the concept alive", Jeffrey L. Katz, Congressional Quarterly Weekly Report, Vol.51: pp.1880-3, July 17, 1993.
  Abstract: Reviews previous legislative initiatives and compares administration plan for "empowerment zones" and "enterprise communities" with congressional proposals. Outlines Clinton plan to coordinate government aid rather than rely solely upon tax incentives, and to decrease number of urban and rural areas covered.
• "Empowerment Zones and Enterprise Communities: Reinventing Federalism for Distressed Communities", Edward G. Goetz, The Journal of Federalism, Volume 25, Number 3 pp. 117-132, Summer 1995
• "Governance in Empowerment Zone Communities: A Preliminary Examination of Governance in Fifteen Empowerment Zone Communities", Robert J. Chaskin and Clark M. Peters, January 1997 Discussion paper at The Chapin Hall Center for Children at the University of Chicago
• EZ status lead to an improvement in an issuer's credit rating and local economy. Decline in job less rate in Detroit from 11% in 1994 to 8.7%. Retention and attraction of large businesses such as Sylvan Learning Systems and Chesapeake Biological Laboratories, Inc. in Baltimore, years of disinvestment in inner cities, unemployment, limited access to capital and shrinking of tax base make growth a challenge. Lack of partnerships between community groups, failure to coordinate services among levels of government.

Contact regarding this submission

Andy Hrast
Director, Transport Policy
Australian Local Government Association
Tel: 02 6122 9432   
andy.hrast@alga.asn.au