Michael Enright — business school professor, private sector strategist, competitiveness and development expert — has stature in international public policy circles from the US to Australia, New Zealand and Asia. Described as “a reigning strategy guru” by the Academy of International Business — the premier club of the world’s business scholars and specialists — Enright was a guru to a smaller audience at the University of Cape Town’s spanking new Graduate School of Development Policy and Practice, at an executive course on regional economic development earlier this month.

While governments around the world are tempted to focus on grand national strategies for economic growth — South Africa being particularly fond of growth paths and plans — Enright’s approach is to focus attention at the regional level, where economic relationships develop and the connections between economic actors are built.

“Economic development occurs through the development of markets,” he says. “It comes about through connections between businesses and customers, connections between businesses and each other and the emergence of supply chains to serve them and of other industries that are similar or have a similar customer base. These relationships are local or regional in nature.”

While regional economies “live within national economies”, making national economic policy a critical factor in the business environment, regional factors — such as a common labour pool or being linked together in a supply chain — are crucial to growth and development.

“If this is how economies develop, to promote that development we need to be able to connect with them at that level. When we do that then we intervene in a different way … in order to further encourage relationships between businesses themselves and between business and government.”

In this context, the much-discussed question in South Africa of what the government must do to promote growth, takes on a different complexion. The role for the government is “not very aggressive”, Enright says.

“Much of the growth in developing nations and regions can be traced to creating the right basic conditions for business and doing fewer silly things. Set the basic rules with legal and regulatory structures; don’t get in the way of business development and provide basic public goods like education.”

Beyond these, there are three further roles governments in successful regions play: provide “impacted information” about markets; help overcome “managerial myopia”, which involves interpreting information that companies have but don’t know what to do with; and overcoming co-ordination failures. “If the government can do these things, then globally we find that it has gone very far in doing what is needed to foster development.”

However, governments are often not geared towards working with regions or enabling regional autonomy. The regional policies of national governments tend to be one-size-fits-all and ultimately unsuitable in general. City governments tend to be concerned with different things — housing, infrastructure, transport and utilities — and don’t pay the right attention to regions and economic development. This has prompted some economic regions, Gauteng being one, to establish new institutions to focus specifically on providing the sorts of information and co-ordination that regions require, aligning government resources more closely with the way the economy actually works.

In light of the importance of a local and regional approach to development, how then does Enright view South Africa’s R4-trillion infrastructure build programme, viewed in government circles as the single-most important factor on which economic growth will turn? Few of the 18 strategic investment programmes identified by the presidential infrastructure co-ordination committee have a regional economic development focus, and they were mostly conceptualised with political boundaries of provinces in mind.

“Appropriate infrastructure is a necessary condition for growth. Particularly today, development is all about connection: economies must have good connectivity internally; they need to connect with their hinterland; and regions need to connect with each other. A lot of this is about transport systems but it is also IT. Increasingly, what we see is that regions that are connected are able to access global markets and global production systems are regions that succeed. This is true to a greater extent than ever before.”

In South Africa, where neighbouring countries have weak connections to each other and with the rest of the world, connective infrastructure is even more important. But while infrastructure is a necessary condition, it is not a sufficient condition for development.

“You also need the businesses that can use it; need to have the skills and the improved connections so that businesses can leverage into the global market. So for infrastructure to be able to be a sufficient condition, it must be used to build businesses, locally, regionally and internationally.”

It is in understanding the nexus between the private and the public sector that Enright has focused much of his work, making him one of the few business and government consultants who straddle this divide. This made him an extremely appropriate guest on the new school’s programme, which aims, among other things, to build the connections between government, business and the world of academia.

The school is modelled along the lines of Harvard’s Kennedy School of Government as a graduate school that seeks to develop strategic thinking and knowledge among senior officials, particularly although not exclusively, working in the public arena.

Enright, a former Harvard Business School professor now at the University of Hong Kong, is a strong believer that universities have a special role to play in regional economic development through linking up with government and businesses operating in the same region. Within this relationship, universities provide skills, research on both policy and strategy and can perform an important go-between role between business and the government, which tend to “engage episodically” rather than with a long-term time horizon. To get these things right, Enright is often asked “what needs to happen first, second and so on”.

“The first is that people need to have an understanding that regional development is crucial to national and regional well-being. Second, people who share that understanding need to come together. And third, a focus on regional development needs to be institutionalised within governments, business groups, universities and other groups in the community.”

In South Africa, despite the strong emphasis on national economic policies and the call for stronger state intervention in the economy, the emergence of the school of development policy and practice, as well as the initiatives around the Gauteng Global City region, are encouraging signs that the regional development school of thought is gaining at least a little traction.

http://www.bdlive.co.za/business/management/2012/11/19/economic-growth-starts-at-regional-level