Industry Cluster

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Productivity development

Production technology

Absence oftechnological supports

Global opportunitiesInefective of supplierand vendor network

Application of new techniques and cutting edge technology

Product development

Production scale

Weak human capital

Guidance for govt policies

Strategy of industrialization

Absence of strategicvision


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...a sectoral and geographic concentration of

firms (Schmitz ,1997) A geographically bounded group ofsimilar or

related firms--connected by common markets,technologies or knowledge--their suppliers, their

skilled workers and supporting institutions 12) In Indonesian, sentra, is similar concept, : a

geographical concentration of manufacturers in thesame sector.19)

Industry Cluster :


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advantage from geographic proximity, but far from homogenous

joint activity and inter-firm cooperation

forward and backward linkage : value chain specialization and division of labor 9)

entrepreneurship

information and knowledge spillovers 9)

associated institutions in a particular field, linked by commonalities

and complementaries

5)

competitiveness

cluster Life Cycle (potential emergingmature)

differed from developed economies.In Asia, the Middle East andLatin America clusters are comprised of small and mediumenterprises (SMEs)


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Intra-cluster

Extra-cluster


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Concentrations of firms and workers

Awareness, Conscious Action & Communication

Formal Organization

Concentrated Connected Organized

A Cluster Continuum


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Rival ry &

Cooperat ion

Inputs

Customers

Suppl iers

Source : Michael Porter, Harvard Business School


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Artisinal

infant stage

Active

developed rapidly in

terms of skillimprovement,technologicalupgrading

successfullypenetrated ofdomestic and exportmarkets

Dynamic

decisive role ofleading/pioneeringfirms

usually larger andfaster growing firms

More advancedand complex

Clusteragglomerations; i.e:Jogja, Bali


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Critical for initiating and sustaining clusterdevelopment

establishment of mutual trust1)

collaborative arrangement

About join forces in a shared-power world14)

revitalization and transformation innovative

cluster

Strategic Leadership


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notably : railways, decent road network, electric

power,ports,fibre optic network

pooling of resources

promote cross-linkage among industry participants

access to sources of technology : flow of information,

knowledge

ICT is not a prerequisite for economic growth; i.eAustralia

development of external linkages 1)participation in

global production chains

Strategic Infrastructure


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Adaptive to rapidly changing global markets

and opportunities1)

developing new markets

Introduce quality new products 1)

Identify the competitors and competitiveposition 4)

Effective business strategies

Market Intelligence


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access to and development of skilled labour

restructure organizational production and capabilities

specifically tailored strategy and programs customized business development services (BDS)

intertwinned with economic development goals

access to cutting edge knowledge

exposure to international best practice andbenchmarking 1)

new technology and improve product quality 1)

transmission of tacit knowledge 1)

Capacity Building


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Directly link to performance

Physical resource is only minor part Emphasize on institutional resource

Effective procurement management

Use of Endowed Resource


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Policy tailored to specific problem,

Type of inter-firm linkage

Number and Scope of Industries

Cluster orientation (network or hub-

and spoke)

Relative position of such a cluster in thevalue chain


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absence of collaboration

poor inter-firm linkage

lack sharing infrastructure , housing, or equipment no inter-firm division of labour

Low degree of inter-firm specialization

biased and fragmented its participating actors

underdeveloped technology ; rudimentary equipment

limited potential organizational upgrading

poorly developed commodity chain

Only survival clusters 3)

do not promote performance

Un-supportive regulatory f/w


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using local inputs, run by members of local communities

addressing the needs of local people,

enhancing local incomes, employment and entrepreneurship

Lack of linkage with external stakehoders

Mainly local activity 7)

Under-developed linkage and infrastructure

Lack of information about market

inability to take advantage of market opportunities

Low level marketing capability

relatively low investment attractiveness

The lack of integrated policy, planning, budgeting, financing and monitoring and evaluation at localand metropolitan scale

Lack of political will and institutional support


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it is a long-term phenomenon, lower gains visible in shortto medium term

Common facilities and programmes need states effort It is, however, an institutional , thus political process


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government can help, but cannot replace firms

government as catalyst or long-term actor

o as broker, facilitator, initiator, participant and listener

provision of sound business environment :o adaptive and supportive regulatory f/w 4)

o removed policy which are high cost and neglecting social benefit

o promote cluster-oriented banking8)

o deliver durable, long term policy commitment

o encouraging firms to locate near clusters incentive foster effectiveness of investments

o Directly invest in

o provide investment incentives


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providing access to transportation infrastructure

Institutionalize cluster upgrading

o diffusing new knowledge

o collecting and disseminating data/information

apply industry cluster strategic planning 4)

o Conduct ongoing cluster assessments

coordinate with other public supporting institutions

o creating opportunities for productive dialogue

o Sponsor cluster conferences and forumssocial capital

ensure integration to economic development goals


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Why?

Understanding of the economic and social environment in whicha cluster is located isessential 6)

Background information on the development of the industry orsector

Aggregate production, employment and trade statistics

The regulatory context at a national, regional and local level

The level of state services and infrastructure available

Local statistics on population, health, education, morbidity

Social and demographic profiles relating to gender, ethnicity,religion

Any other relevant socio-economic factors, e.g. migratory trends,recent economic shocks


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Tools Input-Output Models, LQ


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Traders

Producers/traders

Large producers

Small producers

Subcontractors

Homeworkers

UNIDO

Government/municipality

Trade organizations

Business Devt Serv

NGOs


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o Transportation and infrastructure

o Education and workforce development

o strengthening microeconomic foundations -- four determinants of the Diamond

o Supportive regulatory policy and tax

o

cultivate trust and social capital understand the differing cultural values and attitudes

Community revitalization

o Research and technology

extend innovation and upgrading for the entire value chain and not merely the spin-off industries

create value-added products and services;

o Trade promotion and market development14)

o Financing

o Quality of life

o Environmental preservation and restoration


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Special Economic Zone

o a defined territory with special economic conditions (customs, tax,financial and administrative incentives for doing business).

Industrial Estates/Parko are large tracts of land, subdivided and developed based upon a comprehensive

plan with provisions for infrastructure facilities for the use of the industrialcommunity 9).

Export Processing Zone

o a specialized industrial estate primarily oriented to export production and isphysically and administratively outside of the customs territory. Capital

equipment and raw materials can be imported with free of duty

Free Trade Zone/ Free Port Zone

o an area adjacent to a seaport or airport of entry. In this area importedgoods could be free from duties for transshipment or storage or repacking.But goods are subject to duties if moved to a non-free trade area

Industry Cluster

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