“Challenges to Development of Cluster Policies: cross-country perspective”

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Dr. Adnan Seric, UNIDO

Delhi, February 2014

• Overview: setting the stage

• Case Study: Vietnam (Dr. Nicola Coniglio)

• Case Study: Montenegro (Mr. Niksa Bulatovic)

Presentation outline

Changing patterns of investment &trade flows…

• …resulting in new global conditions of competition:- resources, markets, skills (technology)

• Presenting developing countries, in particular, with a policy challenge:- how to access markets, ICT, skills, etc.

• Renewal of interest in industrial policy- not only a developing country phenomenon

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Cluster policy considered integral part of the “IP toolbox”

Why is there a case for cluster policy?• Econ 101: in presence of specific ‘market failures’

corrective measures may be required

• Typically, the case for policy interventions linked to presence of local externalities: - information asymmetries- coordination failure

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What are possible policy answers?

• Policy maker may resort to traditional approaches: vertical and/or horizontal IP

alternatively :

•Target specific public policies at clusters to compensate for underinvestment in a particular type of activity:

- examples include: export & investment promotion, S&T infrastructure, workforce development programmes, setting standards, etc. •Create platforms for joint collaboration (“Cluster Initiatives”) as a means of avoiding externalities in the first place:

- upgrading of companies and cluster relevant business environment - strengthening forward and backward linkages

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Cluster-based approach to policy intervention more efficient way of targeting GOV support

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local

national

global

usually a basket of sector specific measures and targeted interventions at cluster level

Is there an optimal approach to cluster policy?

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agglomeration

com

petiti

vene

ss

Is there an optimal approach to cluster policy?

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agglomeration

com

petiti

vene

ss

“Big Push”

efforts in developing countries often shortsighted primarily focused on increasing agglomeration

Evolution of how we think about policy at large:

from market- to systemic failuresInstitutions do (obviously) matter! In the context of developing countries:• Policy formulation process remains largely uninformed

- leading to wrong set of incentives • Policy makers fail to develop effective policy frameworks

- vision beyond the individual policy plan? • Lack of capabilities and resources to execute

Thus, policy is often confused with paper!

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Zooming in on the opportunities for development of more effective cluster policies

I. Policy analysis- need for neutral and reliable information on clusters (cluster mapping, “observatories”, etc.)II. Policy context- need to better tailor the interventions (incentives) to existing and emerging local circumstances of different clusters (e.g. natural vs. engineered, emerging vs. mature) III. Policy design- need for better stakeholder alignment via improved design of joint collaboration platforms

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…continuedIV. Policy coordination - need to better link cluster policy to other industrial policy tools, e.g. value chain development, export and investment promotion, etc.V. Policy evaluation - need for better M&E frameworks to close the policy loop and enable policy up-scaling

Lastly, as majority of cluster initiatives in DCs are donor-driven many of the challenges relate to ‘us’ (IDC) as much as they relate to ‘them’ (clients)!

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clustersfordevelopment.org

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a.seric@unido.org