The CLUSTERING ALLIANCE We connect the dots! Number 47 – November 2003

Mission: To improve the competitiveness of industries and localities in the Asia Pacific region – by enhancing cluster-based development initiatives. We connect the dots!

Clusters Asia Pacific Inc. is a network of development practitioners – we are the regional chapter of The Competitiveness Institute (Barcelona), member of the LEED Group (OECD, Paris). Newsletter primary circulation of 725, and then onto thousands.

In this edition

Canadian rebuts cluster critics

‘Good guy’ companies targeted in UK

Gove – pathways for Alcan and indigenous population

Government is important, says US experts

Can Keniry deliver for the Nationals and regional Australia?

The Budget process is underway in Australia – critical for Deputy PM Anderson (leader of Nationals) who needs significant funding for Auslink (national integrated transport strategy) despite Treasury-inspired talk re need for budget-neutral initiatives. His armoury includes the Keniry Report recommendations on regional investment (www.rbda.gov.au). Main recommendations:

Investment and capital
– small business finance program; revolving loan fund program; specialist support services to regional SMEs; promotion of regional Australia; pilot business angel investment program.
High level taskforce
– each region to have a body responsible for regional planning & delivery of government services; mechanism by which federal funding can leverage strategic coordination.
Competitive advantage
– information briefs on regional benchmarking; tightening of the Zonal Tax Rebate Scheme; regional marketing strategies focusing on skilled people etc.; better use of business migration initiatives.
Prioritisation of major infrastructure projects unlikely to attract private sector investment
– independent advisory group to advise on priorities, based on connectivity between regions and national and global markets; develop a regional infrastructure bond market.

Significant submissions include:

Mike Turner, Tasmania (director of 16 companies) – encourage establishment of new enterprises biased towards manufacturing, with potential to export markets. They ‘pull’ innovation, skills and support enterprises into a region – company tax breaks for 5-10 years in the establishment years’.

Spiller, Gibbins & Swan – understand supplier-buyer linkages (value chains) within a region, from major regional exporters and then work backwards…Europe tends to focus on the relationship between cities & hinterlands, with city regions playing knowledge-intense, brokerage roles while hinterland regions play more production and logistical roles.

Canadian rebuts cluster critics

Topical paper on TCI website soon – by Indira Singh, Office of the Ministry of Northern Development & Mines, Ontario [email protected]). Addresses common concerns about clusters:

1. Cluster definitions are broad and ambiguous – clusters vary due to size, structure of industries, origins, performance, etc. Boundaries of clusters evolve. As new firms and industries emerge and pursue a global strategy, the stage of the cluster evolves. Part of the reason why different types of governments can adopt cluster strategies is precisely because the approach is so flexible.

2. May not be applicable to rural areas (lack the necessary scale) – there are successful small clusters in regions e.g. Renfrew, Ont. (pop. 10,000); Montebelluna, Italy (pop. 25,000); Timmins, Ont. (pop. 75,000) and Dalton, Georgia (pop. 25,000). Cluster theory and principles are not exclusive to urban areas. Empirical evidence from developing countries shows that clusters exist in rural areas.

3. Communication technology is replacing the need for spatial or geographic clustering – while ITC has made e-education, e-business and telecommuting possible and profitable, but face-to-face interactions that support an information rich environment are still needed. Both research and empirical evidence support the view that tacit knowledge is critical to innovation. Tacit knowledge is not easily transferable through technology. Clusters gain power through personal collaboration.

4. Scarcity of research on effectiveness of the cluster approach – clusters require a decade or more to develop depth and gain competitive advantage. There is a lack of available information. Intangible assets (trust, social capital and inter-firm linkages) are difficult to measure.

The cluster model is effective for several reasons.
– sector or industry-specific strategies usually compartmentalized – but clusters are integrative.
– clusters drive innovation, and innovation drives productivity.
– Clusters break down silos, promote social capital, facilitate tacit knowledge.

From a public official’s point of view, clusters promote horizontal collaboration and strategic partnerships…focus on strengthening economic foundations (infrastructure, workforce development) and brings coherence and coordination to programs and funding at various levels of government that usually exist in isolation and lack cumulative impact.

Staccato News

*Incoming TCI Board – Alec Hansen, USA (President); Lars Eklund, Sweden (VP – Europe); Alan Koziarski, NZ (VP – Asia Pacific); Nana Adeishvili, Georgia; Mateja Demastia, Slovenia; Alberto Pezzi, Spain…*PM’s Science, Engineering & Innovation Council (Australia) recently considered a report on a major science mapping project. Aim is to assist governments to make more informed decisions re allocation of resources for R&D – plugging identified gaps, minimising duplication, identifying infrastructure projects…*UNIDO Cluster program in India – details at http://www.unido.org/clusters…*Spatial Location of Firms and Industries: An Overview of Theory (by Miroslav N. Jovanovic, UN Economic Commission for Europe) is now available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=451800

Electronics association sparks federal grant

Minister for Industry, Tourism & Resources, Mr. Ian Macfarlane announced in September a $140,000 grant under the Innovation Access Program to the Australian Electrical and Electronic Manufacturers’ Association (CAP member) to further develop its pioneering cluster initiatives in Australia.

AAEMA says the grant signals to industry the Federal Government’s support for the concept of industry clusters, and its confidence in AEEMA’s leadership and ability to garner local industry interest in, and support for, the notion of clustering and collaboration.

The aim of the project, entitled ‘Enhancing national economic benefits through a new cluster paradigm’, is to investigate how cluster projects could be used to advance Australian industry. The project will examine the commercial issues surrounding collaboration, and develop protocols to facilitate industry-led large-scale collaborative initiatives. The project has a strong ‘knowledge diffusion’ imperative.

Grant funds will be used to research and analyse cluster activities; define how industry clusters can be best used to aid the competitiveness of Australian industry; and inform industry of project outcomes. John Humphreys, MD of Brisbane-based Global Innovation Centre and Convenor, AEEMA Queensland Industry Cluster, will manage the one-year project. (Details re AEEMA’s cluster mapping next month).

Information: [email protected] or [email protected]

Maritime clusters

Richard Walker of Sydney has kindly furnished his insights on The Competitiveness Institute’s Annual Conference in Gothenburg in September.

300 delegates – 40 countries. Australian delegates were Tracy Scott-Rimington (Cairns), Amanda Brumpton (Rockhampton), Steve Arnott (Perth), Margaret Ryan & Richard Walker (Sydney).

Main conference, plus 2 day academic conference, visits to telematics and audio/visual clusters etc.

Major benefit was being able to discuss with the leading practitioners/policymakers the issues involved with clusters as an economic development tool, particularly at the local level.

Cluster Initiative Greenbook based on survey of 250 clusters. Downloaded from TCI website. Conference outcomes in a White Book in December.

Steve and Tracy presented lessons from established maritime clusters in WA and Cairns, and Richard spoke on issues involved in establishing a new marine cluster in southern Sydney. In brief:

In WA, the combination of discovery of extensive petroleum resources, development of vessels for the major crayfish export industry, the influx of technological know-how/capability for the America’s Cup competition and Australia’s two Ocean Defence Policy through the 1990’s led to the formation of the Australian Maritime Complex at Cockburn Sound. The convergence of defence, marine and offshore oil and gas industry has seen a major cluster develop – has built 40% of the world’s patrol boats in the last 2 years and 25% of the world’s high speed ferries over the last decade.

The Cairns REDC has encouraged the development twelve industry clusters in the region. The presentation described the Tourism, SuperYachts and Seafood/Marine clusters.

In Sydney, the alienation of harbourside land by housing and recreation reserves has led to a scarcity of land for boat building, service and storage. Sutherland Shire Council is encouraging the development of a Marine Cluster based on the Marine Repair Facility at Taren Point.

Contact: [email protected]

‘Good guy’ companies targeted in UK

Peter Morris of Telesis Consulting, Perth WA (CAP member) recently received an item dealing with bridging the financial-social divide:

The East of England Development Agency is backing an innovative scheme where companies and individuals can support their local communities. It is the brainchild of East of England Community Capital (EECC) that looks for individuals/corporations to help with neighbourhood regeneration. It is a regionally-defined fund and aims to be self-sustaining rather than profit-making. It is part of ICOF Community Capital (industrial and provident society) EECC attracts investments from people and organisations with a social conscience – in the £250 – £20,000 range.

Spokesman Andrew Hibbert says “Any investments should be seen as sponsoring an ethical cause, with a priority for people…money raised is lent to obtain social and environmental benefit as well as a modest return for the investor. A recent similar share issue involving EECC exceeded expectations and was supported by Secretary of State for Trade and Industry, Patricia Hewitt. Backers will see, in the companies in which they invest, real gratitude and appreciation…by participating in a share issue, investors see first hand how their contribution can benefit their neighbourhood.”

“Businesses considered to be fundamental to combating social exclusion, with EECC investment, can thrive…one local company that has already benefited is Daily Bread Cooperative, in Cambridge and Northampton. Director Mark Osbourn says “The ICOF loan we received provided much-needed working capital to enable us to get off the ground. We were then able to utilise disadvantaged people in a range of roles – office administration, selling in the shops, packing food, operating forklift trucks. Their efforts have helped us to pay off the loan some years ago. We have some private investors in Daily Bread Cooperative and we want to encourage more to invest in us…we now have plans potentially to buy a freehold property as we expand and as our lease runs out.”

See [email protected] or http://www.businessweekly.co.uk/directory/profile.asp?company_id=386

Wine supply chains: Australia-South Africa-Canada?

Philippe Roy (Ottawa) writes
‘We continue to enjoy Australian wines in Canada, both reds and whites, all of a uniformly high quality, full bodied and lots of diversity in characteristics and flavours. Can you do an article on Australian wine clusters, and invite other countries and regions to respond with wine cluster study reports? I can see Australia, NZ, France, Italy, Spain, Portugal, USA, South Africa, Chile, Argentina, all over a longer period of time. Winemaking is a multi-billion dollar industry globally.’ Cheers! Philippe Roy, Cluster Pathfinders, Ottawa, Canada.

Professor Ian Marsh (Australian National University) replies

Australian wine industry has achieved spectacular success internationally – in just over a decade. While a number of environmental and external factors helped, the progressive development of a cluster structure introduced the critical element. This is the central finding of a study Brendan Shaw and I conducted for the Australian Business Foundation. (See http://www.abfoundation.com.au).

The process began with the formation of a strategic plan for the industry (Strategy 2020). It demonstrated the scale of the business development opportunities, particularly growth from exporting, the requirements for realising these opportunities, and why collaboration held the key. The opportunities exceeded what any producer could achieve by solo action. This report provided the grounds for ‘buy-in’ and collective ownership by producers.

The areas where collaboration and commitments were required from producers, researchers and marketeers were clearly specified. Industry leaders championed these proposals at industry conferences and forums. Research and marketing agendas were established – and crucially, the agencies needed to drive collaboration were established. Where they already existed, the institutions adapted their programs to the new strategies. Over the course of a few years, 8 agencies were established or reformed to manage implementation. The most critical were the Australian Winemakers Federation (overall strategy), the Wine & Brandy Marketing Corporation (international market development) and the Grape & Wine Research Board (R&D).

In its appraisal of the industry, the respected Dutch assessor, Rabobank, scored the Australian effort against a variety of indicators e.g. natural advantages, economic context and the industry’s self-made capabilities. The Australian industry scored best in this latter category, clearly affirming the contribution of clustering to its ongoing success.

Nigel Gwynne-Evans reports from South Africa

The Wine Industry Plan is hot off the press. It is a commitment by the South African wine industry to deal with the legacy of a highly regulated economic environment and the challenges of increasing global competitiveness and discrimination along racial and gender lines. Aims to establish a “vibrant, united, non-racial and prosperous SA wine industry”.

The South African Wine & Brandy Company is the key body, with 5 offices involved – Social & Economic Development; Human Resources Development & Training; Technology Innovation & Transfer (Winetech network); Generic Market Development & Promotion via Wines of South Africa (WOSA) and SA Brandy Foundation; Knowledge & Information Systems through SAWIS.

An interesting notion is a Wine Industry Scorecard (WIS) – to manage the process and create synergies. Each signatory will implement transformation strategies to be monitored by the SAWB. Black economic empowerment will be attended to within all of these indicators. A proposed checklist of indicators and benchmarks will be developed in the 10 categories: Human resources development; Social upliftment & rural development; Business development, service providers & input suppliers; Ownership & equity schemes; Governance systems & participation; Quality & integrity; Technology, innovation & transfer; Market development & promotion; Environmentally sustainable production practices; Economic performance, efficiency & competitiveness.

The plan is available from South African Wine & Brandy Company – [email protected] (Is there a window for technology transfer and supply chain initiatives between South Africa and Western Australia? Any interest, readers? – Editor).

Gove – pathways for Alcan and indigenous population

A very interesting discussion paper ‘Going for Gove: investment, interdependence and integration’ has recently been released. A joint project between Invest Australia and Alcan (the Canadian aluminium giant), it distils the short and long term issues and investment considerations for the Gove region in the Northern Territory. The backdrop is a $1.9 billion expansion of Alcan’s alumina refinery at Nhulunbuy and the desire of Alcan to understand the perspectives of the traditional owners and Yolnu elders.

The author, Rebecca Gordon, lived in the Gove region for a month in mid 2003 soaking up the views of stakeholders. The main findings of her report are:

Significant investment opportunities exist, particularly in horticulture, aquaculture, tourism, art & culture and minerals (Note: estimated $30 billion worth of base metals and bauxite in the region).

However a clearly recognised, understood and accepted pathway is needed for the development of investment projects.

For investment to occur, both Yolnu and non-indigenous people need long-term partnerships.

The township of Nhulunbuy should become an important regional centre to service east Arnhem Land and to attract investment.

Anyone with an interest in sharing ideas about remote area development, indigenous business development or the interaction between multinationals and indigenous groups should read this report. Contact: [email protected]

Seminars & conferences

Canberra – FEAST Networking for Excellence Conference, 13-14 November – over 20 European speakers including EU officials – See http://www.feast.org
Brisbane – Brisbane City Council and University of Canberra’s Centre for Developing Cities offers an advanced short course on STRATEGIC PLANNING IN URBAN MANAGEMENT (Prof. Brian Roberts UC, guest lectures by Jude Munro, Michael Kerry & Peter Cumming 24-28 November at UC’s Brisbane Campus. See http://cities.canberra.edu.au

Adelaide – Manufacturing Prosperity Conference, Friday 5 December (8-11am). Key speakers: Francis Grey (SAM Index), Brian Moulds (Property Council of Aust), Dennis O’Neill (AusCID). Followed by CAP Board meeting and CAP Forum. Contact [email protected]
Pundits Corner

Panel of experts at recent food industry convention in London (via just-food.com):

"You cannot save your way to prosperity" – David Reid, Tesco.

“We can all cut costs, but it’s boring” – Alistair Sykes, Nestle UK Chairman.

Important Notice: About this newsletter

Distribution is to CAP members, plus special contacts, particularly overseas.

We are continually streamlining the distribution. If you’ve not been in contact in the last 6 months, new readers will be replacing you. Our version of natural selection theory.

If clusters and collaboration are not your scene, please tell us – you will not offend.

Contact us for advice, to make connections, to let off steam, push a point of view etc. Note – views are not incorporated in this newsletter unless authorised by the author.

Government is important, says US experts

Phil Davies’ piece (fedgazette – September 2003 – Courting clusters) has some real gems. Extracts:

Government can’t fathom how to help clusters without engaging in ongoing conversations with the cluster businesses themselves… Cluster-savvy policies emphasize “a set of issues that are more fundamental in terms of improving the competitiveness of the state’s economy,” Cortright said. Like access to a well-trained workforce. Without it, cluster growth can’t be sustained.

Through clusters, government officials learn what makes a particular cluster tick and where its greatest needs lie. Still, implementation is where cluster strategy gets sticky – state and local governments are struggling to get academics, bureaucrats and business people on the same page.

Research at major universities tends to ignore the priorities of industries in their own backyards. “Right now the universities and centers do invest in R&D, but often it’s based on the interests of the faculty, and what they produce may have no relevance to the local economy,” Rosenfeld said.

Minnesota’s Department of Employment and Economic Development assigns specialists to industries (computers, health care, printing & publishing), helping businesses market themselves, apply for loans and grants, find strategic partners and sign up for customized training.

It’s not really about public policy,” said Mary Jo Waits, at Arizona State University “By collaborating, business, academia and government learn from each other what it takes for clusters to flourish, sustaining a feedback loop of continuous improvement.”

“One of the things we can do in state government is start focusing all of our grant, loan and business support programs to encourage, if not require, businesses to collaborate with each other before they apply for grants,” says Dave Gibson in Montana.

Membership matters

Visit our website at http://www.capinc.com.au It provides an overview of industry clusters, recent publications, CAP newsletters since January 2002, key events etc.

CAP members share substantial information and ideas. We tender for projects, give each other leads, assist with tour itineraries, make submissions to Government, liaise with other associations, speak at conferences, help people find jobs – and generally try to make the world a better place. We look for collaborative partners. We are apolitical, and have a ‘no dud’ rule to help us.

There is no copyright on this newsletter – so if you know others with an interest, please email it to them or copy it into your Board papers! Ideas or suggestions for our newsletter are welcomed.

Go safely,

Rod Brown, Executive Director

This newsletter is a product of Clusters Asia Pacific Inc.
Australian Project Developments Pty. Ltd. (Canberra) provides the editorial/distribution service.
Phone/fax 02 – 6231 7261 [email protected]