Competitive Cluster Development in Latin America. ADB Urban Day Kamiya November 5th, 2010
Competitive Cluster Development in Latin America. ADB Urban Day Kamiya November 5th, 2010
Competitive Cluster Development in Latin America. ADB Urban Day Kamiya November 5th, 2010
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IDB Group: Competitiveness, Cluster and SMEs
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What is a Cluster? IDB Working Definition
o At IDB for operational purposes “Cluster” is defined by its
features, as Productive Agglomeration focused on local links to
generate and strengthen competitive advantages.
Elements:
o A Cluster is based on a territory,
o A Cluster is a set of institutions for productive development.
o A Cluster is a coordination entity
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IDB Cluster Projects in LAC
IDB works in cluster development through Loan operations, matching
grants and co-financing (MIF), and credit to private sector (IIC).
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Cities in Asia and Latin America
Cities in Cities* Population Area
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IDB Cluster Development Projects – Loan Operations
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Advantages of Applying Cluster Projects in LAC
Demand for Cluster Development Projects are increasing:
Because:
o At political level, decentralization is making stronger sub-national
states with more control of budget and resources.
o At productive level, larger countries are having a more developed
private sector with global competitive firms. See “Multilatinas”
And are flexible:
o Cluster projects are good vehicle to strengthen dialogues and
develop institutional capacity.
o Easier to combine short term goals with long-term vision.
o Cluster projects can be expanded or reduced based on funding.
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IDB Cluster Project – Example of Financing Scheme
Federal or
IDB Loan Subnational
Stand Alone (50%) State (50%)
cluster project:
IDB Financing: is
around US$10
mill. Joint Public-
Competitiveness
Private Council
Loan: i.e. > $100 (PPC)
mill., the Cluster
component is
around 10%.
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IDB Cluster Project: Institutional Structure of Operation
Defines
Execution and
administration
Executing Public - Private strategy and
Agency Council (PPC) monitors the
of project
program
Resources
Strategy
Services Needs
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Typical Stages of an IDB Cluster Project
Designing a Cluster Development Project
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Examples (Execution): Uruguay – Productive Chains
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Examples (Execution): Uruguay – Productive Chains
MEC - UNAONU
WINE - GOURMET MUSIC / PUBLISHING
BEEKEPING
CRAMBERRY
PROCESSED FOOD
PRECIOUS STONES
SOFTWARE
FOOTWEAR AND LEATHER
AUDIOVISUAL
DESIGN, ARCHITECTURE, ETC.
GARTMENTS
TOURISM - Montevideo
TOURISM - Colonia
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Examples (Execution): Uruguay – Productive Chains
Integrating Public Intervention with Private Sector Needs
Productive Chains
Access to finance
Labor training
Cluster promotion
Business Climate
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Cluster Hybrid Projects
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IDB Cluster Project: Tools
Impact evaluation and measurement are key:
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IDB Cluster Project: Examples of Outcomes
o Final Outcome: Increase in competitiveness of territory/country
• Increase in at least 5% in sales per worker
• Increase in at least 10% of sales outside territory/ or exports
o Outputs at cluster level
Compared to initial baseline, the average outputs must be:
• 10% Increase of companies introducing new products and
processes.
• 100% increase in productive linkages, joint marketing
campaigns, joint productive operations
• 20% increase in R&D activities
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Cluster and SMEs Projects: Impact
o Increase in sales, employment and competitiveness
• IDB Cluster projects (see logical framework and Dev. Matrix)
• Job creation then poverty reduction (IDB MIF 2007)
• UNIDO Cluster studies (thematic evaluations of intervetions)
• Cluster projects in East Asia (Sonobe and Otsuka 2008)
o SMEs and Policies at firm level results
• Gains in productivity through microdata analysis in LAC,
programs in 5 countries
(World Bank, Hong Tan and Acevedo 2010, and previous studies).
• SMEs policies Increase productivity. 16 countries focusing
on training, quality control, export promotion, credit.
(IDB, Ibarraran, Maffioli, Stuchi, 2010)
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Cluster Projects: Keys to Success
Political support from the top (President, Minister of Finance);
Involvement of the private sector since the initial stages;
A well defined cluster vision for the short, medium and long
term, often carried out by an international expert;
Institutional capacity of the counterpart with skills and
resources is needed with long-term view;
Keep public managers to secure the implementation and “the
memory” of the project;
Disseminate results and increase support and awareness.
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Cluster Projects: FAQ and IDB Approach
• Goal of a competitiveness project: act on poverty and jobs?
- Productivity is the main goal, acting on poverty and jobs.
• Working with large firms or smaller ones?
- Large firms are key for SMEs for productive linkages.
• Microenterprises or just SMEs?
- Raise productivity above program costs may be difficult.
• SMEs programs are always efficient?
- Intervention should be horizontal and serving formal firms.
• Urban clusters, and what about rural clusters?
- Intervene in rural zones when is key for a value chain.
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IDB Approach to Private Sector Development
1. Macro Level: Business Environment
o Regulatory framework, institutional and political reform;
o Financial markets strengthening / Long-term financing;
o Doing Business Reform
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The Logic of Interventions
Horizontal Vertical
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Productive Development Policies (PDP):
New Framework for Cluster Development
o Promotion of conditions for enterprises performance within a
territory;
o Cluster development programs comprise a broad set of
elements such as productive agglomerations, value chain, and
production network initiatives;
o Institutional dimension integrating public and private sector
related with productive capacity in the region;
o Emphasis in generation of “Marshallian externalities” and public
goods;
o Intensification of Horizontal PDPs in place such as investment
and export promotion, innovation, training, financial and non
financial support to SMEs.
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Examples (Execution) : Brazil – Bahia
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Examples (Starting) : Brazil – Minas Gerais
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Cluster Projects: Challenges Ahead
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