Industrial Clusters in India: Evidence from Automobile Clusters in Chennai and the National Capital Region

This study analyzes the patterns of agglomeration of some modern manufacturing sectors in India, and in particular the Indian automobile sector. It also examines and contrasts the factors that have led to different patterns of cluster development in two leading auto clusters in India-Chennai and the National Capital Region (NCR). Moreover, the study analyzes whether firms in clusters perform better than those that are excluded and whether the relative importance of variables that determine the behavior of firms differs among clusters. Our analyses, which employ a combination of quantitative and qualitative methods, show that Indian industrial clusters are largely concentrated in the three clustered regions: NCR, Mumbai-Pune, and Chennai-Bangalore, across different manufacturing sectors. Our study of the auto clusters in Chennai and the NCR find considerable differences in the patterns of cluster formation, due partly to the historical and policy conditions under which firms, particularly, the lead firms must operate. Moreover, our econometric analyses confirmed that being part of a cluster positively influences the performance of the auto component firms and those belonging to a cluster perform better.

開発戦略としてのPro-Poor Growth －貧困層への雇用創出－

本稿は、後発開発途上国においてpro-poor growthを達成する開発戦略を、産業政策との関連から研究したものである。アジアとアフリカの経済発展プロセスにおいて、貧困層にどの産業が雇用機会を提供するか、を研究した。その結果明らかになったのは、1970-90年代の典型的な東アジア高成長経済であるタイと台湾において、貧困層に最も大きな雇用機会を与えたのが農業部門であったのに対して、貧困層の雇用機会増に最も貢献したのが製造業部門であったということである。同様の傾向は、アフリカの輸出指向成長国であるモーリシャスについても観察された。一方、グローバリゼーションの活力が十分に生かされなかったマラウィ、南アフリカ、インドにおいては、製造業が同様の雇用機会を貧困層に提供できなかった。結論として導かれるのは、典型的な後発発展途上国においては、雇用に関して農業のシェアが製造業のシェアを上回るのが一般的であるものの、もし比較優位がグローバリゼーションの中で顕在化できるのであれば、貧困層の雇用機会増に関して、農業よりも製造業の貢献度が大きくなりうる、ということである。一国全体の経済発展という観点のみならず、貧困層に利益をもたらすpro-poor growthという文脈においても、製造業の果たす役割が無視し得ないことが明らかになった。

Industrial Policy in Asia

This paper examines three types of industrialization that have occurred in East Asia: the Japanese, Chinese and generic Asian models. Industrial policies in Japan and the Republic of Korea (ROK) initially protected local companies from foreign investors by imposing high tariffs on foreign investors. But Japan began introducing liberalization policies to attract foreign direct investment (FDI) in the 1960s, and the ROK began to welcome foreign technology in the 1970s. Meanwhile, the governments of the ASEAN countries and Taiwan established export-processing zones (EPZ) to invite FDI by offering preferential treatment, such as tax deductions and exemptions. China adopted similar industrial policies and also established EPZs, attracting the capital and know-how of multinationals and thereby strengthening the international competitiveness of local enterprises. This paper reaches the following three conclusions. First, it would have been difficult for East Asian countries to grow without FDI. Second, central governments were a crucial factor in these countries' growth strategies. Third, EPZs offering preferential treatment can effectively enhance aggregate growth in developing countries, and the Asian experience shows that this strategy can be applied to other countries that satisfy certain preconditions.

Competitiveness of the knitwear industry in Bangladesh : a study of industrial development amid global competition

This paper assesses the technical efficiency and profitability of the knitwear industry in Bangladesh taking into account the sector’s role in poverty reduction. While stochastic frontier analysis was invoked to assess technical efficiency, three alternative measures, namely the rate of return, total factor productivity and the Solow residual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation results indicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiency in comparison with the garment industries of other developing countries. While there is a significant scale effect in profitability and productivity, no supporting evidence was found for the positive impact on competitiveness of industrial upgrading in terms of usage of expensive machinery and vertical integration and industrial agglomeration.

Asian Industrial Development from the Perspective of the Motorcycle Industry

This paper discusses the diversity of industrial development among Asian countries that emerges through an investigation of the motorcycle industry despite its uniform industrial attributes. The paper then explores factors that generate diversity, focusing attention on the differences in knowledge-based assets accumulated in each country. It finds that diversity is brought about through the differences in domestic industrial resources and the capabilities of local firms. The analysis underscores each country’s intrinsic logic in industrial development, contrary to the current trend of stressing assimilation through the global production networks of multinational corporations.

Industrialization in Indonesia since the 1970s

Introduction: During the period from the latter half of the 1980s until just before the Asian currency crisis in 1997, Indonesia’s economic development had drawn expectations and attention from various quarters, along with Malaysia and Thailand within the same Association of Southeast Asian Nations (ASEAN). In fact, the 1993 report by the World Bank, entitled “East Asian Miracle: Economic Growth and Public Policy,” recognized Indonesia as one of the East Asian economies with the strong economic performance, i.e. sustained economic growth (World Bank [1993]). And it was the manufacturing industry that had been the driving force behind Indonesia’s economic growth during that period. Since the 1997 outbreak of the Asian currency crisis, however, the manufacturing sector in Indonesia has been mired in a situation that rules out the kind of bright prospects it had emanated previously. The Indonesian economy is still in the developing stage, and in accordance with the history of industrial structural changes in other countries, Indonesia’s manufacturing industry can still be expected to serve as the engine of the country’s economic development. But is it really possible in an environment where economic liberalization and globalization are forging ahead? And, what sort of problems have to be dealt with to make it possible? To answer these questions, it is necessary to know the current conditions of Indonesia’s manufacturing sector, and to do that, it becomes important to think back on the history of the country’s industrialization. Thus, this paper is intended to retrace and unlock the track of Indonesia’s industrialization up until the establishment of the manufacturing sector in its present form, with the ultimate goal being to give answers to the above-mentioned questions. Subject to an analysis in this paper is the period from the installment of President Soeharto’s administration onward when industrialization of the modern industrial sector2 moved into high gear. 　　　The composition of this paper is outlined below. Section 1 first shows why it is important to examine import substitution and export orientation, both of which are used as the measures of the analysis in this paper, in tracking the history of the industrialization, and then discuss indicators of import substitution and export orientation as well as statistical data and resources needed to develop those indicators. Section 2 clarifies the status of the manufacturing industry among all industries by looking at the composition ratio of the manufacturing industry in terms of value added, imports and exports. Section 3 to 5 cover three periods between 1971 and 1995 and make an analysis of import substitution, export orientation and changes in the industrial structure for each period. Section 3 analyzes the period from 1971 through 1985, when Indonesia pursued the import substitution policy amid the oil boom. Section 4 covers the period from 1985 through 1990, when the packages of deregulatory measures were announced successively under structural adjustment policies made necessary by the fall in oil prices. Section 5 examines the period from 1990 through 1995, which saw the alternate shifts between the overheating of the economy by sharply rising investment by both domestic and foreign investors in the wake of the liberalization of investment, trade and financial services, and polices to cool down the economy. Section 6, which covers the 1995-1999 period straddling the economic crisis, is designed for an analysis of the changes in production trends before and after the economic crisis as well as the changes in the industrial structure. Section 7, after summing up the history of Indonesia’s industrialization examined in the previous sections, discusses problems found in respective sectors and attempts to present future prospects for the country’s manufacturing industry.

Perfecting the Catching-up: The Case of Taiwan's Motorcycle Industry

The final stage of the catching-up process has formidable hurdles. This paper examines the case of Taiwan’s motorcycle industry and shows how latecomers overcame the hurdles. In the early 1990s, the two largest motorcycle makers in Taiwan, Sanyang and Kwang Yang, had completed the catching-up process and became independent from Honda, on which they had technologically depended since the early 1960s. The requisite for independence was acquiring the capacity for product innovation. The two assemblers could cultivate technological capacity by investing abundant resources, which they accumulated in the protected market. It should be noted that although the market was protected and highly concentrated, it was also very competitive. Another condition was the solid local suppliers of parts and components. The local suppliers had also grown under the government’s industrial policies. However, their development beyond imitators can be attributed to their own initiatives.

The Iron and Steel Industry in Asia: Development and Restructuring

The paper examines the development and restructuring of the iron and steel industry in Asian countries. Studying countries that have integrated steelworks with large blast furnaces (South Korea, Taiwan, China and India) and countries without (Thailand, Indonesia and Malaysia), the paper shows the difference in the development processes across the countries and across time, and points to the diversity of the development experience of these countries. The paper argues that significant differences in steel production technologies in terms of initial investment and minimum-efficient scale, the changing role of the state, and shifting demand structures in the domestic steel markets of each country have been the important factors that led to the differences in the development path of the steel industry in each country.

FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.

Chapter 5 Product Differentiation versus Geographical Differentiation: Evidence from the Pork Processing Industry in China

This chapter attempts to identify whether product differentiation or geographical differentiation is the main source of profit for firms in developing economies by employing a simple idea from the recently developed method of empirical industrial organization. Theoretically, location choice and product choice have been considered as analogues in differentiation, but in the real world, which of these strategies is chosen will result in an immense difference in firm behavior and in the development process of the industry. Development of the technique of empirical industrial organization enabled us to identify market outcomes with endogeneity. A typical case is the market outcome with differentiation, where price or product choice is endogenously determined. Our original survey contains data on market location, differences in product types, and price. The results show that product differentiation rather than geographical differentiation mitigates pressure on price competition, but 70 per cent secures geographical monopoly.

Platforms, network effects and small business dynamics in China : case study of the Shanzhai cell phone industry

This paper seeks to argue the significance of platforms on emerging markets through a case study of the Shanzhai cell phone industry in Shenzhen, China. In this industry, value chains are being driven by both the technology platforms and the market platforms. The former include MTK baseband chipset, and so-called Shared PCBA and Shared Mould. The latter include the North Huaqiang Market and the Purchasing and Money Platform. Technology platforms greatly reduced the technological barriers to entry for independent design houses and system integrators, while market platforms markedly improved their poor marketing and purchasing abilities. Due to factors such as social networks, supporting industries, informality and platform governance, strong network effects have been exhibited in the two types of platforms, which have not only fostered numerous start-ups, but have also led to effective exploitation of emerging markets.

Growth strategies in a greener world

Two new developments in the global landscape - growing concerns towards global warming and the rising prices of commodities – require countries to craft new growth strategies. These recent developments in the global market offer fresh industrial opportunities as well as difficulties for developing countries embarking on industrialization. In this paper, we examine current developments in global market that would affect industrialization prospects in East Asia and explores development strategies that are suitable for development based on export oriented manufacturing industries in a green world.

Technology network for machine tools in Vietnam

When Vietnam joined the WTO, it accepted foreign direct investment and started to grow. Technically, it was then greatly influenced by the enterprises that entered the country through direct investment. This report shows that the technology network for machine tools is formed via direct investment and subcontracting.

Diversified boundaries of the firm

We analyze diversification of boundaries of local firms in developing countries under the economic globalization. The globalization has an aspect of homogenization of the world economy, but also has another aspect of diversification through international economic activities. Focusing on boundary-level of the firm, this article shows that the diversification from a comparison with boundaries of foreign firms in developed countries is brought by a disadvantage of technology deficit and a home advantage as local firms.