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Location factor

Location factor. Institutional factor. What is institutional factor?. External forces to influence the location of industries Government intervention in terms of incentives or penalties Both central and local governments can exert influence Both free and planned economy.

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Location factor

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  1. Location factor Institutional factor

  2. What is institutional factor? • External forces to influence the location of industries • Government intervention in terms of incentives or penalties • Both central and local governments can exert influence • Both free and planned economy

  3. Why does the government intervene?

  4. Strategic reasons • To avoid attack of industries during wartime, e.g USA and China • To encourage the development of military industries, e.g. munitions and aircrafts manufacturing

  5. Political reasons • To maintain economic growth and political stability • To minimize social unrest and riots • To reduce regional economic inequalities or imbalance • To integrate minority races, e.g. China

  6. Economic reasons • To ensure overall economic well-being of the country • To provide job opportunities • To stimulate economic growth • To achieve modernisation (e.g. in many LDCs) • To promote the growth of some particular industries • To diversify economy • To fully utilize resources/factors of production • To raise productivity and increase the wealth of the country

  7. Social reasons • To minimize social unrest • To achieve regional economic balance • To lessen social problems, e.g. massive internal migration, crimes, family problems, suicides, violence brought by unemployment and poverty

  8. Environmental concern • To reduce environment problems/pollution • To disperse industries • To discourage industrial concentration in urban areas

  9. Government measures

  10. Infrastructure, transport & utilities

  11. Providing cheap and extensive land

  12. Jurong Industrial Estate, Singapore

  13. Cambridge Science Park, UK

  14. Silicon Valley, South California, USA

  15. M4 Corridor, UK

  16. Hsinchu Science-based Industrial Park

  17. Slows down redundancy Reduce unemployment rates Encourage employers to take on unemployed workers Example: various employment programmes in HK Employment Services (Elementary Jobs) Employment Services (Skilled Jobs) Employment Programme for the Middle-aged Count On Talent Not Age in Employment Policy making

  18. Establish new industries • To provide regional development funding • To save depressed areas • To develop industries in new areas • To raise production

  19. Example 1: China • Planned economies • The Chinese Government set up a large petroleum refinery and petrochemical works in Urumqi in 1950s – 1970s • To achieve regional economic balance and industrial dispersion

  20. Example 2: UK, France • Mixed economies • To establish nationalized plants in depressed regions and rural areas

  21. To attract foreign investment • To offer favourable terms of trade • To grant tax concessions (tax holidays, low rates on profit taxes) • To grant industrial land at low prices • To provide loans & subsidies • To provide cheap land, factory buildings and workers • To provide freight concessions

  22. To protect home industries • To impose tariffs and quotas on imported finished products • Example: USA imposed tariffs on imported Japanese cars to protect the automobile industry

  23. To adopt zoning policy • Specify the siting of industries • Examples: HK – the setting up of industrial estates

  24. To set up training institutes • To retrain workers • To modernize firms/production • To update technological advances

  25. To impose control • To reduce pollution and other environmental problems • Air, water, noise pollution • Traffic congestion

  26. To adopt town planning measures • To limit the location of repulsive industries, e.g. leather tanning • And environmentally dangerous industries, e.g. chemical works • To encourage the development of cleaner industries • To force the manufacturers to treat their sewage and waste products before disposal

  27. To adopt strong central planning • Common in socialist countries, e.g. China, Russia, Yugoslavia • Direct government intervention • Depends on top-level decisions

  28. Demerits of too much intervention • Excess subsides Low incentives to increase productivity • Which may slow down industrial restructuring • Too much protection reduce imports  higher prices  inflation • Penalties  cost of production ↑ • Sub-optimal location  unprofitable/close down of industries/wastage of resources • Complex bureaucratic barrier  inefficient management/low incentive to produce

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