Framework for City Cluster Economic Development (CCED)

Transcription

1 World Urban Forum Rio de Janeiro Monday 22 March 2010, at Framework for City Cluster Economic Development (CCED) Professor Brian H Roberts International Team Leader CCED Project in South Asia

2 Presentation Overview Competitiveness and economic development Industry clusters enhancing the competitiveness of Cities Explanation of the approach to CCED as applied in three South Asian Countries: Bangladesh, India and Sri Lanka

3 Competitiveness and Economic Development Competiveness, traditionally, has been driven by the need for firms to achieve some form of local or corporate competitive advantage Competitiveness is driven by factors related to the costs of production, distribution, efficiency of supply chains, access to markets and local business environments and dynamics. There is growing awareness that individual firms and corporations can not drive down easily externality costs of commonly used public services, utilities, and human capital development. This requires a more collective effort by government and business working together to identify efficiencies to drive down the costs of the commons. The focus of competitiveness today is on how to create collaborative advantage by focusing on reducing internalised (firms and public organizations) costs, and externalised transaction (supply chain, enabling environments and common-use utility and support services) costs For cities to develop strong sustainable economies, they must focus on how to build the supporting elements strategic architecture, (building blocks) of competitiveness in their internal (firm/organization) and shared (public) realms.

4 Industry Clusters Help to enhance the Competitiveness of Cities There has been growing interest in industry clusters as a means of stimulating local economic development and enhancing competitiveness at an enterprise, local and national level Clusters help to improve the competitiveness of business and cities/regions by: Reducing internal (firm) and external (common utilities) transaction costs to business and encouraging resource sharing and leveraging Stimulating competition, innovation and creativity between rival firms along supply chains Sharing and reducing private and public sector risks Building social and human capital capacity to plug skills, information and knowledge gaps Fostering specialization and value-adding to supply chains Providing an effective collective force for lobbying, and collaborating with government and institutions to build strategic architecture that fosters competitive advantages for business to grow

5 Growing Interest in Cluster Development Michael Porter s research on competiveness fostered a growing interest in the study of clusters and the impact they have on local economic development A study by the US Department of Housing and Urban Development in 1996 found that 54% of all employment in the USA was attached to 18 industry clusters scattered around the country The Australian Wine Industry Cluster has generated a US $2 billion export industry moving the country from almost 0% of global wine exports in 1990 to over 2% in 2009 By the late 1990s governments, international development agencies, OECD and UN began to show strong interest in the way clusters could help support local economic development especially endogenous growth Most developed economies actively support the development of clusters. Industrialized countries like China, India, Brazil are actively promoting cluster development to encourage local innovation, networking and resource leveraging as a way of enhancing the competitiveness and development of city and regional economies

6 Problems with Cluster Development Clusters are created by the natural incremental and sometimes specialised spatial agglomeration of firms and businesses that find advantage in colocation in particular cities/ regions. Clusters cannot be imposed or forced to happen as part of a government policy initiative. Clusters can be fosters when business and governments see mutual advantage in collaborating to develop a local economy and to reduce transaction costs. The process of building trust within the business sectors and between business and government to develop a cluster takes a long time. Without trust building most cluster initiatives fail. Changes of government are a particularly problematic issue for continued support for cluster development There has been extensive research into the phenomenon of clusters, but most local businesses and governments still have a poor understanding about them, and what advantage there is in fostering cluster development. Despite extensive research we still have a poor understanding of factors that can enhance the competiveness of clusters, how to measure these, and what strategic investments are needed to support their development. Improved techniques for cluster analysis are needed especially techniques to measure the competiveness of clusters.

7 Better Framework needed to Analyse and support the development of Clusters Industry clusters are a system of enterprises involved in exchange. They are not just local physical entities but have physical and virtual dimensions which can be global in scale Industry clusters operate within the bounds of hierarchical structures and realms which have an enormous influence on business operations and development opportunities The efficiency and effectiveness of (local, regional, national) enabling environments have an enormous impact on competitiveness and the capacity of businesses in cities and regions to grow. Developing successful local industry clusters requires cities and regions to identify and analyse ways to reduce external transaction costs along the entire supply change systems support a cluster, and progressive building and renewing of the elements of strategic architecture which hold the system together. We have very poor knowledge and understanding of how to analyse the strengths and deficiencies of factors within industry supply chains, common-use facilities etc that enhance the competitiveness and development of industry clusters. The framework developed for the City Cluster Economic Development (CCED) project in South Asia has gone some way to addressing the above.

8 Seven Steps of the CCED Approach Analysis of the National Economic Policy Environment for Cities Analysis of the Drivers of Competitiveness in Cities Sector Competitiveness Profiles of Urban Economies Industry Cluster Analysis Strategic Architecture Framework Action Plans to Support Cluster Development Organizational Arrangements for Operationalizing CCED

9 1 National Economic Policy Environment Matters Should be Analysed? International agreements that impact on trade and development in cities Physical and regional development plans spatial economic plans and economic development zone policies sector industry plans education and human resource development resource development plans corporations laws and policies

10 2 Drivers of Competitiveness in Cities CCED investigates the drivers of competiveness Competitiveness of Cities Analytical Framework has 6 Key Drivers 49 Competitiveness Attributes Competitiveness of Sri Lankan Cities

11 Indicators of Competitiveness for Indian Cities DRIVERS Prosperity Index Urban Governance Business Environment Infrastructure Quality of Life

12 3 Sector Competitiveness Urban Economies City cluster analysis tools: Shift Share Location Quotients Multi sector Analysis Spatial Analysis (GIS)

13 Multi-Sector Competitiveness Analysis Weight C ompetitivenes s Attributes Business Tax Burden Business R egulation P rocedures Informal Fees & Corruption Cost of Utility S ervices Access to capital Business G rowth and P erformance Access to Financing Business Dynamics & L eaders hip E xport Focus Networks & Business Collaboration Workforce Skill base Available Manpower S kills-enhancement programs Transportation & Logistics E fficiency and availability public utilities E nvironmental Facilities Land for Development Hierarchical structure of Decision-making Investment P romotion & Development S upport Transparency of LGUs in its dealings with busines s Legislation & R egulation Reform Institutional Leadership Government policy for particular industry E nvironmental Issues Security of Employment Work Place Health and Safety Conditions Land Required / used Space Location of the industry Source of raw materials Technology using International linkage Multi-Sector Analysis of the Dhaka Economy, Bangladesh

14 4 Cluster Analysis Techniques Cluster Analysis Techniques Geo-spatial cluster analysis (GIS) Supply chain analysis Materials flow analysis Porter diamond model Competitiveness Attribute Analysis Competitiveness Gap Analysis Porter Diamond Model

15 Spatial Typology of Industry Clusters: Garment Industry Cluster in Dhaka Central Business Area New Industrial Areas Industrial Estates EPZ Sub-Regional Concentrations Linear Industrial Dispersed firms Virtual

16 Spatial Change in Textile and Garment Cluster Colombo, Sri Lanka

17 Supply Chain Mapping of the IT Cluster Colombo

18 Cluster Competiveness Attributes Analysis C om petitivenes s Eleme nt s o f C lus ter FIRM STRA TE GY STRU CTU RE AND RIV AL RY C urr ent Co nditions Sco re: 0-5 Future C om petitiveness R equirem ents: 0-5 Defi ciencie s Ga p Stru ctu re N o of fo reig n and jo in t ven tu re firm p resen ce Flexibility o f pro du ction s ystem s Strength of Competitiveness Attributes,Leather Industry 6 Value 5 Internationally Competitive Nationally Competitive Business Tax Burden Business Regulation Procedures 0 Informal Fees & Corruption Cost of Utility Services Access to capital Business Growth and Performance Access to Financing Business Dynamics & Leadership Export Focus Networks & Business Collaboration Workforce Skill base Available Manpower Skills-enhancement programs Transportation & Logistics Efficiency and availability public utilities Environmental Facilities Land for Development Hierarchical structure of Decision-making Investment Promotion & Development Support Transparency of LGUs in its dealings with business Legislation & Regulation Reform Institutional Leadership Government policy for particular industry Environmental Issues Security of Employment Work Place Health and Safety Conditions Land Required / used Space Location of the industry Source of raw materials Technology using International linkage Attributes Leather Industry Cluster Dhaka

19 Competitive Analysis of Ready-made Garment industry Clusters Colombo, Dhaka, Delhi RELATED SUPPORTING INDUSTRIES Value Adding Supply Chains Government Labour Infrastructure Resources FIRM STRATEGY STRUCTURE AND RIVALRY Social Environment Current Competiveness Position Okhla RMG Delhi needs to substantially improve it supporting infrastructure to enhance it competitiveness Technology Orientation Markets DEMAND CONDITIONS FACTOR CONDITIONS Collaboration Government Support for development of RMG cluster in Colombo Structure Business Environment New Products Apparel Cluster Colombo Okhla & Noida Readymade Garments Delhi RMG Industry Dhaka RELATED SUPPORTING Government INDUSTRIES Value Adding Supply Chains Technology Orientation Collaboration Structure Labour Infrastructure Business Environment Resources Social Environment Markets New Products FIRM STRATEGY STRUCTURE AND RIVALRY Apparel Cluster Colombo Okhla & Noida Readymade Garments Delhi RMG Industry Dhaka FACTOR CONDITIONS Competiveness Gap DEMAND CONDITIONS

20 5 Strategic Architecture Elements of Industry Cluster Building Catalysts Strategic Assets and Infrastructure Human Capital Endowed Resources Business Dynamics Enabling Environment Competitiveness is focused on Internalised Transaction costs Firm/Institution - Multi-national Government Competitiveness focused on reducing Externalised Transaction costs Local regional national international Environments

21 6 Action Plans to Support Cluster Development & The following soft activities are part of the action plan: 1. Quality and standards 2. Productivity improvement 3. Improve use of information technology in the cluster 4. Expanded markets and enhancing market penetration 5. Improving supply chain management practices 6. Workers health and safety programmes 7. Improved access to finance 8. Joint purchase of raw material CCED Clusters Colombo Apparel Industry Rubber Industry ICT Industry Delhi Garment Industry Light Engineering Auto Parts Industry Dhaka Ready-Made garment Industry Leather Industry Food Industry The following infrastructure activities are proposed in the cluster: 9. Tool Room Facilities 10. Reverse Engineering and CAD/ CAM Centre 11. Testing Centre (upgrading) of QMC

22 7 Organizational Arrangement for cluster Development Implementation Industry Cluster Partnership Organization (involving Government, Industry, Education Research and Development interests) Network Model (Association) Corporate Model (Company) Rubber Industry Cluster (Colombo) Industry Clusters (Colombo) Garment Industry (Delhi) Roles Preparation of cluster business plans Preparation of pre-feasibility studies (These provide a marketing prospectus for a bankable investment projects) Collaborative marketing and marketing Intelligence systems Education and training Information systems Joint-venture projects Strategic infrastructure investment projects

23 Lessons from CCED approaches Dynamics of cities are changing rapidly so we need to: Develop better tools for competitive analysis of urban economies, especially tools that identify and map deficiencies in common user supply chain utilities and services Enhance the competitiveness of cities by focusing on achieving greater specialization and integration in fostering agglomeration economies through the development of industry clusters, strategic alliances, networks and partnerships Develop economic strategies for cities that are more responsive to changes in the political economy and economic policy Understand the key elements of strategic architecture needed to support Industry clusters and their development Learn what risks to manage and how these can be turned into competitive advantage Promote action learning and knowledge development supporting clusters CCED has enabled us to do many of these things

24 Thank You There will be a book published later this year by the ADB on the experience and application of CCED. Brian Roberts Strategic Planning and Management services SPMS@bigpond.com