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Presentation by Dr. K. CHOE Co-Chair, Committee of Urban CoP Asian Development Bank

Presentation by Dr. K. CHOE Co-Chair, Committee of Urban CoP Asian Development Bank 2 December 2010 TCI International Conference in Delhi, INDIA. Cluster-based City Economic Development [CCED]: Analytical Methodology Assessing Clusters Competitiveness.

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Presentation by Dr. K. CHOE Co-Chair, Committee of Urban CoP Asian Development Bank

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  1. Presentation by Dr. K. CHOE Co-Chair, Committee of Urban CoP Asian Development Bank 2 December 2010 TCI International Conference in Delhi, INDIA Cluster-based City Economic Development [CCED]: Analytical Methodology Assessing Clusters Competitiveness Application to Colombo Metropolitan Region

  2. K. ChoeProject Director (ADB HQ Manila, Philippines) R. BrianInternational Advisor (SPMS, Australia) C. VaidyaTeam Leader for India (NIUA, Delhi) R. SinghAPEX Ltd. (in association with NIUA, Delhi) R. JayaratneTeam Leader for Sri Lanka(SEVANATHA, Colombo) N. NazemTeam Leader for Bangladesh(CUS, Dhaka) Contributors to CCED Approach

  3. ADB STRATEGY 2020 • InclusiveEconomicGrowth • Environmentally Sustainable Growth • Regional Integration ADB HQ in Manila, PHI

  4. WHY IS IT IMPORTANT TO PAY ATTENTION TO URBANIZATION ?

  5. INDIA: Share of GDP Contribution by Urban and Rural Why CCED? Urban Sector Economy: Higher Productivity 5 Source: CIA World Data book 2008

  6. Urban as Engines of Economic Growth: Positive Correlation as a Country Transforms its Economic Structure from Agriculture to Manufacturing/Service Sectors South Korea Malaysia PRC India Nepal

  7. 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!

  8. But, We have poor knowledge of Understanding ‘What Makes a City Competitive for Local Economic Development ?’ URBAN ECONOMIES ARE COMPLEX…..

  9. Evaluating CitiesCompetitiveness Government as Facilitator and Partner A New Way of Pursuing Local Economic Development:Cluster-based City Economic Development Assessing Competitiveness of Industry-Clusters driven by private sector Private and public sectors collaboration: triggering local economic development Increasing Income/Job Opportunities, thus Reducing Poverty

  10. Multi-sector Industry Competitiveness Analysis CCED Analytical Methodology: Built-in Innovation and Replicability l Profiles of National Economic Strategy Decide the scope of urban areas Select cities Assess Cities Competitiveness II Competitive Industry prioritized III Select industry-clusters in the selected cities Industry GIS Mapping & Industry Cluster Structure Analysis IV Gap Analysis in Competitiveness V BP & Action Plans Project Design and Infrastructure Feasibility Studies VI Industry-Clusters networking and P/P Partnership platform Executing a Project for Cluster Development VII

  11. Illustration of CCED ApproachFollowing the 7 Steps of Analytical ProcessPilot Case of Rubber/Latex Industry ClusterColombo, Sri Lanka

  12. 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: STEP II STEP II: Analysis of Cities Competitiveness • 1. Cost of doing Business:How expensive is it to operate a business in the city? • 2. Dynamics of Local Economy:Am I making profit out of my business in the city?” • 3. Human Resource and Training:Are the people well-equipped to work?” • 4. Infrastructure:Are the roads, bridges, electricity, telephone lines etc. in good condition ?” • Responsiveness of Local Governments to Business Needs:Is the city government able to respond to short-term and long-term business issues?” • 6. Quality of Life:How well-off are urban residents in terms of quality life and environment?”

  13. Assessing Cities Competitiveness Not just selecting a city, but where and what to strengthen ? the city be more competitive……. STEP II Decision to Select Colombo • Colombo: • relatively strong human resources, • good infrastructure • but poor responsiveness of local gov’t to business needs

  14. Which clusters should be targeted ? STEP III STEP III. Identification of Key Industries

  15. 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

  16. STEP III WHO ARE THE CANDIDATES FOR CLUSTER DEVELOPMENT? Growth Potential Exists? Commitments to Co-OP & Government Support

  17. 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 III Can Clusters be Created or Activated ?When is the time to intervene ?

  18. STEP IV. Understanding Value Chains & Elements Affecting Clusters Competitiveness STEP IV. a, b, & c STEP IV.a GIS Mapping of Clusters STEP IV.b Structural Mapping of Cluster Value-Chain STEP IV.c Porter’s Diamond Analysis

  19. STEP IV.a STEP III.a Cluster (GIS) Mapping: Changes in Rubber & Plastic Industry-Cluster, Colombo Metropolitan Area 2006 1998 1997 Does a cluster boundary matter ?

  20. STEP IV.b Colombo Case (Structural Mapping)Rubber Industry Cluster: Forward-Backward Linkage

  21. 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 STEP IV.c Porter’s Diamond Model

  22. STEP IV.c Colombo Case: Analyzing Competitiveness of Rubber Industry-Cluster (5 Factors and 22 Attributes )

  23. 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. STEP V STEP V. Deficiency Gap Analysis to Understand the Bottlenecks of Competitiveness of Industry-Clusters

  24. STEP V Colombo Case (Deficiency Gaps in Rubber Industry-Cluster) The following activities are part of the action plan to reduce deficiency: 1. Rubber compounding center 2. R&D for new products development 3. Water supply and effluent treatment 4. Expanded markets and enhancing market penetration 5. Improved supply chain management practices 6. Vocational training center 7. Improved access to finance and logistics 8. Joint procurement of raw material

  25. How to Enhance Competitiveness of Industry-Clusters? Where to Invest ? & What to Invest first ? STEP VI STEP VI. Project Preparation and Feasibility Studiesfor Supporting Infrastructure

  26. 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 STEP VI STEP VI. Concept Proposal for Priority Action Areas and Project Design

  27. 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 STEP VI Colombo Case: Project Concepts for Rubber Industry Cluster Development

  28. 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 Significant structural weaknesses in urban economies  Need to improve governance, government industry support, logistics of value-chains & vocational training 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. CCED mechanism engages in industry representatives, key public agencies and knowledge industry  Motivates and creates action learning as well as collaboration 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. Observations & Policy Implications

  29. Thank you kchoe@adb.org (Kay) KyeongAe CHOE

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