Weapons Cluster

According to Stockholm international Peace Research Institute the countries that produce official data on
the financial value of their arms exports account for over 90 per cent of the total volume of deliveries of
major conventional weapons. By adding together these data it should therefore be possible to arrive at a
rough estimate of the financial value of the global arms trade. However, there are significant limitations in
using this data in this way. First, the data sets are based on different definitions and methodologies and
may not be directly comparable. Second, several states-including the United Kingdom-do not release
data on 'arms exports', while others-including China-do not release any data on 'arms exports', 'arms
export licenses' or 'arms export agreements'. By adding together the data that states have made available
on the financial value of their 'arms exports' it is possible to say that that the total value of the global arms
trade in 2011 was at least $43 billion. However, the true figure is likely to be higher.
The major and the largest importer of arms are India, China, and Pakistan, while the major exporters are
United States of America, Russia and even China. (Tables in appendix).
Bangladesh can focus on the import cluster of those countries who are near as well as big spenders
behind arms, such as India, China and even Pakistan.
Bangladesh has such capabilities as can be gleamed from the following facts:
1) This is not the first time we thought about exporting weapons. We did that in 1984 and earned
about $40 million.
2) Bangladesh is now capable of manufacturing automatic rifle BD-08, tracers, blank and API
ammunition for rifles, SMG and LMG, blank and API ammunition for HMG, blank ammunition for
NATO Rifle G-3, hand grenade Arges-84 and its fuze, 105mm artillery HE and blank ammunition,
small arms spares and repair of small arms, ammunition boxes, and wooden parts for rifles.
3) The Bangladesh Ordnance Finance was initially set up with technology, machinery, and
equipment and support facilities from China. Gradually, however, technology transfers from
Austria, Australia, Belgium, Germany and Italy occurred.
4) The Bangladesh ordnance factories can now produce and is soon expected to export
a) Small Arms Factory.
b) Small Arms Ammunition Factory.
c) High Calibre Ammunition & Grenade Factory.
d) Tool Manufacturing Factory


Virtual cluster
The opportunities of the new economic landscape have determined radical changes in the
organizational structures of the firms, till the creation of new virtual clusterization forms,
that is distinct systems of suppliers, distributors, service providers and clients that use the
internetworking technologies as a principal way for co-operating and competing.
These virtual clusterization forms can also be defined as e-business
communities or b-web communities (Tapscott, Lowy & Ticoll 2000).
Common features of a Virtual Cluster:
Internet Infrastructure to lower transaction costs (Tapscott, Ticoll and Lowy 2000):
The Internetworking technologies, and their related virtual business models, have lowered the minimum
threshold value that makes advantageous the outsourcing process, since they allow reducing all the
components of a transaction cost.
Five class of participants (Tapscott, Ticoll. and Lowy 2000):
- Customers, who receive and contribute to the value of the VC;
- Context Providers, that support the interface between customers and suppliers. A
context provider leads the value realisation and rule-making activities of a VC;
- Content provider, who designs, makes and delivers the VC product/services;
- Commerce service providers, that supply transactions and financial management,
security and privacy, information and knowledge management, logistics and
delivery services;
- Infrastructure providers, that allow the necessary Internetworking infrastructure;
Customer centrality (Reicheld and Schefter 2000). In VCs the gap between producers
and consumers is blurring. As highly customized products and services replace mass
production, producers must create specific products that are imbued with the knowledge
requirements, and tastes of individual customers. In VCs, consumers become involved
in the actual design process. This perspective of blending production and consumption
is reminiscent of the notion of prosumption suggested by Alvin Toffler.
Rules and standard (Tapscott, Ticoll. and Lowy 2000): VC participants know and
adhere to the rules of engagement of their community.

(Details in Appendix)






Appendix:
Virtual Cluster
In light of Bangladesh
The benefits of virtual cluster can be enjoyed by almost all of the industries of Bangladesh. However we will
be focusing on one industry in particular. This industry has planted its root many years before, however growth
has been stagnant for a considerable amount of time. But the scenario is changing. This is the Automobile
industry.
Foreign vehicles have been assembling since past 30 years as well. In late 60's they rolled out Vauxhall
Viva cars and Bedford trucks and now several automobile companies are on discussion to build automobile
factories in the country. Pragoti is the state-run automotive industry which assembles Mitsubishi Pajero
Sport, Tata bus and minitruck, and Ashok Leyland minibus. Some privately owned automotive companies
are Aftab Automobiles, Runner Automobiles and Walton.
Thus we can see that the car industry holds huge potential in our country. We will propose a virtual cluster for
the automobile industry in Bangladesh, and also illustrate how it will benefit the industry as well as the
country.
Essential Components of the virtual clusters will include:
Producers :
Currently the major local players in the market are Pragoti which is the state-run automotive industry, Aftab
Automobiles, Runner Automobiles and Walton. Apart from these there are many small scale businesses
located near bangshal and motijheel that provide second hand parts for maintainance of cars. They can be
brought virtually together under a common platform.
Consumers :
The aim of the virtual cluster will be to go global. Pragoti develops high quality cars that they are exported
abroad. In 2009, the Malaysian Agate group proposed to build a car manufacturing plant in Bangladesh in
cooperation with Walton, which itself is preparing to produce motorcycles. In the same year, car
manufacturing company TagAZ announced that they would build their third factory in Bangladesh, aiming for
exporting. In 2010, TagAZ announced the construction of a third automotive manufacturing plant
in Bangladesh, with an initial $2 billion investment. According to TagAZ officials, the decision to build cars
in Bangladesh was made because of its low labour costs and the export advantages it enjoys with neighbouring
countries and Europe. TagAZ had already purchased land in the Kishoreganj District and aimed to sell the first
car assembled there by 2012.
The customers of Bangladeshi assembled cars could be the customers of tagaz, Agate and even the country of
Myanmar. This is because the automotive sector of the country is abuzz with activity, especially on the
retail front. Koreas Hyun- dai opened its first sales showroom in august 2013 with plans to open
another 13 in the next five years, all over Myanmar. Americas Ford Motor Company entered
Yangon with its first dealership in August 2013, and Gen- eral Motors followed an outlet exclusively
for its Chevrolet brand. Japans leading car maker, Toyota opened its first showroom in March 2014
in partnership with a local com- pany, though the first Toyota service center has been operational
since 1996, the second one having opened in 2013. Mazda, again a Japanese car brand, is operating
out of a temporary store for the present trying to capture a slice of the burgeoning auto demand. Mer-
cedes cars zipped on Yangon roads for long, but the first showroom was formally opened in May
2014, after operating out of a small temporary set up since November 2013. The newest to open is
the famous UK brand, Jag- uar Land Rover, now owned by Indias Tata Motors that has tied up with
the local Capital Diamond Star Group.
This shows that the market is extremely suitable for Bangladesh to export their produces.

Sales channel:
The sales channel will include all the stakeholders related to distribution. The companies might directly deal
with the customers or they may involve intermediaries in the form of wholesalers and retailers.
Strategic partners:
Financial institutions such as 56 scheduled banks and also around 30 non-bank financial institutions can be a
part of the cluster. They will play a very important role as both contributor of capital as well as assisting in
other financial sides such as exporting the final output or insuring the factories, etc.
Marketing and branding firms such as Grey Global Group will play a major role in promoting the companies in
the cluster. This is a vital aspect as perception of the value for money of the products of the cluster will
augment future sales and expansion of the market in the foreign countries. This perception will be managed by
the marketing and branding consultants.
Competitors:
The main competitor to the cluster will be the Indian automobile industry as they have a strong footing in the
international market. It will be quite difficult for the firms in the local market to overcome the hurdle posed by
the Indian firms. And by 2020, India is likely to overtake Thailand in global auto-export market share, the
report estimates. Currently, auto exports from Thailand at $24 billion are double that of India's $12 billion.
Setting up of the cluster:
1) Work with various stakeholders in the best interest of the businesses.
2) Survey the needs of the automobile sector and organizing the availability of required technologies and
facilitating specialized training in the application of such technologies.
3) Work with the purchasing arms of the various government departments and Policy Support Unit's to
assess their purchase requirements that have been reserved for purchasing from the industry.
4) Work with the academic institutions such as BUET, Ahsanullah and IUT to review their experiences
and help fine tune the process as needed for improving the industry.
5) Monitor web site usage and suggest any changes that might be necessary to enhance overall user
experience.
6) Organize a package of software applications that will be of benefit to businesses.
7) Train academic institutions and businesses in the use of such software applications.

Benefits of virtual clustering in Bangladesh :
Automobile companies:
a) Awareness of various opportunities such as government tenders and export opportunities.
b) Training in new technologies that will improve their operations and reduce costs.
c) New product development opportunities.
d) Help from students and faculty from academic institutions at low cost. Such help can be in areas such
as quality improvement, cost reduction, new product designs, etc.
e) Targeted help from consultants and experts specific to automobile industry.
Students

A British Council sponsored report on graduate unemployment in South Asia, published earlier this, year,
prepared by the Economist Intelligence Unit (EIU) ranks .As per estimates presented in the report, nearly 5 out
of every 10 graduates in Bangladesh are unemployed (against 3 out of 10 in India and Pakistan).Through the
Virtual Clusters web site and other associated activities we are aiming to address this problem by linking
various academic institutions to businesses.

Consultants and other practicing professionals

Professionals who have expertise in specific automobile sectors will be able to quickly reach businesses in that
sector who are registered through the Virtual Clusters web portal. This will make the process far more efficient
for both the parties.

Banks and other financial institutions

Many banks and other financial institutions offer special funding packages to small businesses. Through the
Virtual Clusters initiative they will be able to offer sector specific funding packages rather than a standard
offering in which the small businesses have to fit in. This will enable banks to specialize in sectoral funding
and simultaneously spread their risks across a larger number of companies in a given sector. Businesses will
benefit by saving time and having ready access to better suited funding options.

Central and State Government organizations

A number of central and state level organizations such as the national board of investment will be able to offer
offer many programs targeted for the development of the comunity. The Virtual Clusters portal will make it
easier for policy makers and other implementing agencies to reach these businesses quickly and more
efficiently.

NGO's and Volunteer advisors

As in case of governmental organizations many NGO's and volunteer advisors can reach businesses that are
registered in the Virtual Clusters web site more effectively.

References :
NDTV Profit. India to Overtake Thailand as Global Auto Hub by 2020. Retrieved October 8,2014.
http://profit.ndtv.com/news/industries/article-india-to-overtake-thailand-as-global-auto-hub-by-2020-
report-652198
Bangladesh trade info. List of automobile companies. Retrieved October 2, 2014.
http://www.bdtradeinfo.com/yellowpages/des_data.php?subcategory_id=154
Wikipedia. TagAZ Bangladesh. Retrieved October 10,2014.
http://en.wikipedia.org/wiki/TagAZ
EconPapers. From geographical innovation clusters towards virtual innovation clusters: The
innovation virtual system. Retreived October 7, 2014.
http://econpapers.repec.org/paper/wiwwiwrsa/ersa02p270.htm
Dhaka Tribune, (2014, April 19). Retreived October 8, 2014 dhakatribune.com :
http://www.dhakatribune.com/op-ed/2014/apr/19/why-export-weapons#sthash.o4NLNCFh.dpuf
Pakistan Defense. Defence Production in Bangladesh. Retreived October 8, 2014.
http://defence.pk/threads/bangladesh-eyes-arms-exports.309531/#ixzz3GtjjA3P0