“Challenges to Development of Cluster Policies: cross-country perspective”

1. “Challenges to Development of Cluster Policies: cross-country perspective” Dr. Adnan Seric, UNIDO Delhi, February 2014

2. Presentation outline • Overview: setting the stage • Case Study: Vietnam (Dr. Nicola Coniglio) • Case Study: Montenegro (Mr. Niksa Bulatovic)

3. Changing patterns of investment &trade flows… • …resulting in new global conditions of competition: - resources, markets, skills (technology) • Presenting developing countries, in particular, with a policy challenge: - how to access markets, ICT, skills, etc. • Renewal of interest in industrial policy - not only a developing country phenomenon Cluster policy considered integral part of the “IP toolbox”

4. Why is there a case for cluster policy? • Econ 101: in presence of specific ‘market failures’ corrective measures may be required • Typically, the case for policy interventions linked to presence of local externalities: - information asymmetries - coordination failure

5. What are possible policy answers? • Policy maker may resort to traditional approaches: vertical and/or horizontal IP alternatively : • Target specific public policies at clusters to compensate for underinvestment in a particular type of activity: - examples include: export & investment promotion, S&T infrastructure, workforce development programmes, setting standards, etc. • Create platforms for joint collaboration (“Cluster Initiatives”) as a means of avoiding externalities in the first place: - upgrading of companies and cluster relevant business environment - strengthening forward and backward linkages

6. global national local Cluster-based approach to policy intervention more efficient way of targeting GOV support usually a basket of sector specific measures and targeted interventions at cluster level

7. Is there an optimal approach to cluster policy? competitiveness agglomeration

8. Is there an optimal approach to cluster policy? competitiveness “Big Push” agglomeration efforts in developing countries often shortsighted primarily focused on increasing agglomeration

9. Evolution of how we think about policy at large: from market- to systemic failures Institutions do (obviously) matter! In the context of developing countries: • Policy formulation process remains largely uninformed - leading to wrong set of incentives • Policy makers fail to develop effective policy frameworks - vision beyond the individual policy plan? • Lack of capabilities and resources to execute Thus, policy is often confused with paper!

10. Zooming in on the opportunities for development of more effective cluster policies I. Policy analysis - need for neutral and reliable information on clusters (cluster mapping, “observatories”, etc.) II. Policy context - need to better tailor the interventions (incentives) to existing and emerging local circumstances of different clusters (e.g. natural vs. engineered, emerging vs. mature) III. Policy design - need for better stakeholder alignment via improved design of joint collaboration platforms

11. …continued IV. Policy coordination - need to better link cluster policy to other industrial policy tools, e.g. value chain development, export and investment promotion, etc. V. Policy evaluation - need for better M&E frameworks to close the policy loop and enable policy up-scaling Lastly, as majority of cluster initiatives in DCs are donor-driven many of the challenges relate to ‘us’ (IDC) as much as they relate to ‘them’ (clients)!

12. clustersfordevelopment.org a.seric@unido.org