Transcript Presentation

Cluster-based City Economic
Development [CCED]:
Analytical Methodology Assessing
Clusters Competitiveness
Application to Colombo Metropolitan Region
Presentation by
Dr. K. CHOE
Co-Chair, Committee of Urban CoP
Asian Development Bank
2 December 2010
TCI International Conference in Delhi, INDIA
1
Contributors to CCED Approach
K. Choe
Project Director
(ADB HQ Manila, Philippines)
R. Brian
International Advisor
(SPMS, Australia)
C. Vaidya
Team Leader for India
(NIUA, Delhi)
R. Singh
APEX Ltd.
(in association with NIUA, Delhi)
R. Jayaratne Team Leader for Sri Lanka
(SEVANATHA, Colombo)
N. Nazem
2
Team Leader for Bangladesh
(CUS, Dhaka)
ADB
STRATEGY 2020
 Inclusive
Economic Growth
 Environmentally Sustainable
Growth
ADB HQ in Manila, PHI
3
 Regional Integration
WHY IS IT IMPORTANT
TO PAY ATTENTION TO
URBANIZATION ?
Why CCED?
Urban Sector Economy:
Higher Productivity
INDIA: Share of GDP Contribution by Urban and Rural
Urban
28%
From Rural
Agricultural Primary
Industries 17%
From Urban
Economic Activities
83%
Rural
72%
Population Share
GDP Share
5
Source: CIA World Data book 2008
Urban as Engines of Economic Growth:
Positive Correlation as a Country Transforms its
Economic Structure from Agriculture to
Manufacturing/Service Sectors
URBANIZATION AND GDP/capita
ASIAN DMCs
South
Korea
GDP/cap (PPP 2005 $constant)
25000
20000
y = 1060.1e0.0304x
R2 = 0.6016
15000
Malaysia
PRC
India
10000
Nepal
5000
0
0
10
20
30
40
50
60
70
% Urbanized
Source: WB 2007. World Development Indicators
80
90
100
A Premise:
If urban economy is considered as
“ENGINES OF ECONOMIC GROWTH,
it’s better to take advantage of the
urbanization process” as a tool for
triggering economic growth, rather
than restricting the opportunities of
economic growth!
URBAN ECONOMIES ARE COMPLEX…..
But, We have poor knowledge of
Understanding
‘What Makes a City Competitive
for Local Economic
Development ?’
A New Way of Pursuing Local Economic Development:
Cluster-based City Economic Development
Evaluating Cities Competitiveness
Government as Facilitator and Partner
Assessing Competitiveness of Industry-Clusters
driven by private sector
Private and public sectors collaboration: triggering
local economic development
9
Increasing Income/Job Opportunities,
thus Reducing Poverty
CCED Analytical Methodology:
Built-in Innovation and Replicability
l
Profiles of National Economic
Strategy
II
Assess Cities Competitiveness
Select cities
III
Multi-sector Industry
Competitiveness Analysis
IV
Industry GIS Mapping &
Industry Cluster Structure Analysis
Competitive
Industry prioritized
Select industryclusters in the
selected cities
V
Gap Analysis in Competitiveness
BP & Action Plans
Project Design and Infrastructure
Feasibility Studies
Executing a Project for
Cluster Development
Industry-Clusters
networking and P/P
Partnership platform
VI
VII
10
Decide the scope of
urban areas
Illustration of CCED Approach
Following the 7 Steps of
Analytical Process
Pilot Case of Rubber/Latex Industry
Cluster
Colombo, Sri Lanka
11
STEP II
STEP II: Analysis of Cities Competitiveness
Key Index: Total 43 attributes under 6 key Drivers
which are critical for enabling the business
environment for economic, urban and social
development of a city:
1.
Cost of doing Business: How expensive is it to operate a
2.
Dynamics of Local Economy: Am I making profit out of my
3.
Human Resource and Training: Are the people well-
4.
business in the city?
business in the city?”
equipped to work?”
Infrastructure: Are the roads, bridges, electricity, telephone
lines etc. in good condition ?”
5. Responsiveness of Local Governments to Business
Needs: Is the city government able to respond to short-term
6.
and long-term business issues?”
Quality of Life: How well-off are urban residents in terms of
quality life and environment?”
STEP II
Assessing Cities Competitiveness
• Not just selecting a city, but
where and what to strengthen ?
the city be more competitive…….
Decision to
Select
Colombo
Colombo:
• relatively
strong human
resources,
• good
infrastructure
• but poor
responsivenes
s of local gov’t
to business
needs
13
STEP III
STEP III. Identification of Key Industries
Which clusters
should be targeted
?
STEP III
Colombo Case (Bubble Analysis)
The “Location Quotient Bubble Graph”--- separates industries in to four
quadrants whether it’s growing or declining over time (x-axis), and whether
it’s presence in the local area is bigger than national average (y-axis). The
size of the ‘bubble’ indicates the size of employment in that industry sector
3.00
IT / IT Enabled Services
2.50
Financial,/ Insurance & Real Estate
2.00
Textiles & Wearing Apparel
Chemicals & Chemical Products
LQ 1997
Transport/ Storage/Communication
Wholesale & Retail Trade
1.50
Rubber & Plastic Products
Hotels & Restaurants
1.00
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
0.50
15
% Change in LQ (1997 to 2006)
20
25
30
35
40
45
50
55
STEP III
WHO ARE THE CANDIDATES
FOR CLUSTER DEVELOPMENT?
Growth Potential Exists?
Commitments to Co-OP &
Government Support
Presence of Absence of
Willingness Willingness
Feasibility &
Competitiveness
Low feasibility &
no market
competitiveness
X
X
X
STEP III
Can Clusters be
Created or Activated ?
When is the time to intervene ?
• Spatially Agglomerated only: spontaneous
• Incubation Stage: spatial agglomeration, some
kind of coordination activities on-going, but not
yet functional as a collective
• Action Stage: created a formalized organization
to represent the interests of the cluster
collective, but still needs external support
• Functional Stage: fully functional representing
the interests of the cluster as a collective, and a
self-sustainable mechanism has established.
STEP IV. a, b, & c
STEP IV. Understanding Value
Chains & Elements Affecting
Clusters Competitiveness
STEP IV.a
STEP IV.b
STEP IV.c
GIS Mapping of Clusters
Structural Mapping of Cluster
Value-Chain
Porter’s Diamond Analysis
STEP IV.a
STEP III.a Cluster (GIS) Mapping: Changes in Rubber &
Plastic Industry-Cluster, Colombo Metropolitan Area
1997
1998
2006
Does a cluster boundary matter
?
19
STEP IV.b
Colombo Case (Structural Mapping)
Rubber Industry Cluster: Forward-Backward Linkage
20
STEP IV.c
STEP III.c Porter’s Diamond Analysis of
Industry-Cluster Selected
And, Assessing
Competitiveness of
Industry Clusters
• Porter’s diamond model :
– Attribute Analysis on 5
Factors of Competitiveness
for Private Sector Business
Environment
– Competitiveness Gap
Analysis
21
Porter’s Diamond Model
STEP IV.c
Colombo Case: Analyzing Competitiveness
of Rubber Industry-Cluster
(5 Factors and 22 Attributes )
 Global recognition for
manufacture of quality
products
 Availability of skilled
workforce
 Good quality infrastructure
services/logistics
 Good quality telecom
services
 Easy and guaranteed supply
of domestically sourced good
quality natural rubber at
competitive prices
 Good working conditions
Θ Lack of education and
training facilities
Θ High cost of services (energy
in particular)
22


Presence of reputed foreign firms
Proactive Business Associations
Θ
Θ
Low level of knowledge sharing
Low level of technology application
Θ Lack of Business development
services
Θ Low response time and quality
of local support services
Θ Firms inability to exploit value
addition potential
Θ Small domestic market
Θ Slow responsiveness and
innovativeness to change
Θ Lack of demand expansion
capacity for new products
Θ Lack of readiness to face
risks.
Θ Less emphasis on product
branding and marketing
Government –
Policy & Support
 High focus to enhance Natural
Rubber production (Land extent)
Θ Lack of government support for
industry development (R&D, Cost
of Utilities, Long-term plans)
STEP V
STEP V. Deficiency Gap Analysis to
Understand the Bottlenecks of
Competitiveness of Industry-Clusters
• Identify deficiencies which hinder
competitiveness of Industry-Clusters in the
city or urban-region (from Porter’s Diamond
Analysis)
• Deficiency gaps are prioritized based on
immediate urgency, medium term, and
longer-term priority so that these priority
actions are reflected in the Cluster Business
Plan.
23
STEP V
Colombo Case
(Deficiency Gaps in
Rubber Industry-Cluster)
The following activities are
part of the action plan to reduce
deficiency:
FACTOR CONDITIONS
1. Rubber compounding center
GOVERNMENT 5.00
Labour
4.50
2. R&D for new products development
4.00
Value Adding
Infrastructure
3. Water supply and effluent treatment
3.50
3.00
4. Expanded markets and enhancing
2.50
Supply Chains
Endowed Resources
market penetration
2.00
1.50
5. Improved supply chain management
1.00
RELATED SUPPORTING
practices
Social Environment
0.50
INDUSTRIES
0.00
6. Vocational training center
7. Improved access to finance and
Technology Orientation
DEMAND CONDITIONS
logistics
8. Joint procurement of raw material
Collaboration
Structure
FIRM STRATEGY,
STRUCTURE AND …
24
Markets
New Products
Business Environment
Current Competitive Position Rubber Cluster
Future Desired Competitive Position Rubber
Cluster
STEP VI
STEP VI. Project Preparation and
Feasibility Studies for Supporting
Infrastructure
How to Enhance Competitiveness
of Industry-Clusters?
Where to Invest ?
&
What to Invest first ?
STEP VI
STEP VI. Concept Proposal for Priority
Action Areas and Project Design
• Industry-cluster’s business plan provides a
long term vision and strategic action plans
• Industry-cluster group consults with its
stakeholders and prioritize project
components
• Project feasibility to design a bankable
project
26
STEP VI
Colombo Case:
Project Concepts for Rubber Industry Cluster
Development
• Proposal: Rubber Industry Park or cluster
support facilities to operate at peak efficiency
levels, offering a unique competitive advantage
to industry clusters. Key components of the
propose project are,
– water supply
– common effluent treatment plants
– cluster supporting services, such as vocational
training center and raw material warehouses, and
– improvement of value chain management, including
logistics
27
Observations & Policy Implications
28
a. Disconnection between national economic policy and urban
development policy  Urgent need for policy reforms to
link economic and urban policies, and support programs to
demand-driven approach
b. Significant structural weaknesses in urban economies 
Need to improve governance, government industry support,
logistics of value-chains & vocational training
c. Tools for competitive analysis techniques (location quotient,
shift-share analysis, bubble analysis) provide detailed
insights to understand the cities economic structure and
dynamics  Need to improve the benchmarking data,
collection, availability.
d. CCED mechanism engages in industry representatives, key
public agencies and knowledge industry  Motivates and
creates action learning as well as collaboration
e. CCED analytical approach proved to be powerful tool to
understand complexity  Enables informed policy decision;
“WHERE TO INVEST” and “WHAT TO INVEST FIRST” for
Maximum economic impact with limited resources.
Thank you
[email protected]
(Kay) KyeongAe CHOE
29