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Support systems for new activities in rural areas
Part 1 - The support system
How to use this guide & Table of Contents
Agri-food projects, projects targeting
It is possible to distinguish at least five main types of projects and project promoters:
1) Farmers and agri-food projects
These are particularly intensive in up-stream animation and group building and tend to require in-depth technical training (e.g. in terms of improving production, processing and marketing).
2) Projects promoted by specific population groups
Many LAGs encourage initiatives among certain target groups (women, young people, the long-term unemployed, etc.). Once again an enormous amount of up-stream confidence and capacity building is required. It is important to be totally realistic about the time, cost and levels of support required to generate economically viable and sustainable projects.
3) New SME start-ups
These are the classic bread and butter businesses of most development agencies. However, there is a major difference between support systems for self-employed tradesmen who sell simple services on the local economy and medium-sized companies that have to survive on national or international markets (see the LEADER dossier entitled "Support for small and medium-sized rural enterprises", LEADER European Observatory / AEIDL, 1994).
4) New activities by existing enterprises
These generally require very specific expertise which the firm in question will normally have in-house or contract in from the private sector. The main role of LAGs in these cases is to act as brokers in orchestrating outside support or facilitating the mobilisation of public funds.
5) Mixed projects
LEADER groups are increasingly involved in a series of innovative initiatives which test out the frontiers of public, private and community sectors (this is often the case of projects linked to the environment or to services for the community). Very few people or agencies have much concrete expertise in this area and it is one of the fields in which LEADER groups have the opportunity to pioneer new approaches with potentially wide-ranging social implications.
However, it is important to take account of certain basic principles:
a) the support strategy for mixed projects depends principally on the objectives of the project itself: certain mixed projects aim mainly to mobilise private funds for essentially collective services (nursery, home help, etc.); in other cases, it involves creating conditions which are favourable to the emergence of new activities which are normally the responsibility of the private sector (tourist infrastructures, leisure facilities, etc.);
b) it is then important to plan an exit strategy adapted to the project's needs and objectives: for example, long term public financial assistance may be justifiable in the case of a nursery or home-help service, but projects intended to create new private activities must normally be able to be self-funding in the long run;
c) it is essential to assess the cost-benefits of mixed projects, to compare the positive effects that the project can have with the negative ones (in terms of substitution, delocalisation) that it can create: a mixed project to create leisure facilities can wipe out existing or potential private initiatives. In thise case public funds will be mobilised unnecessarily and simply replace the jobs eliminated in the private sectro;
d) as in the case of new private activities, the creation of mixed activities almost always involves taking demand into account as much as supply. Public-private projects are often justified by the fact that neither the public nor private sector can alone generate sufficient demand to justify the project's costs. Mixed projects often, therefore, require significant marketing (involving training, animation, advertising), so as to benefit from public and private demand and to ensure the project's profitability. It may be that a gardening business, for example, is only viable if it simultaneously holds public contracts for the maintenance of open spaces belonging to the municipality and private contracts (maintaining gardens of holiday homes, hotels, etc.);
e) as far as supply is concerned, setting up a mixed project often involves suitably distributing public and private human and material resources. This is, for example, the case of a publicly-owned building which has been converted into a cultural centre thanks to private donations and is managed by an association which covers part of its operating costs by providing a cafeteria, organising exhibitions, cultural events, etc.;
f) whether from local, national or European funds, the public contribution can take the form of subsidies, contributions to operating costs (salaries, rent, charges), etc. Most often, the highest proportion of public contributions is used during the initial stages of the project, in the form of the provision of buildings or other collective properties to the operator, whether an association or private entrepreneur. Generally, the public sector then tends to reduce its commitments to a minimum;
g) finally, the legal status of the mixed initiatives may vary considerably from one project to another (limited liability company, association, cooperative, etc.), the main thing being to find the right decision-making balance between the financial backers and the operators. The directory "Innovative actions of rural development" (LEADER European Observatory / AEIDL 1997) gives several examples of methods tried out by local action groups and involving both public and private partners.