The Clustering Alliance - Number 17

Rod Brown

May 2001

This newsletter is for members/friends of Clusters Asia Pacific Inc.
– the largest cluster network in the southern hemisphere.

Our Mission - To improve the competitiveness of industries and localities in Australia, New Zealand and elsewhere - by enhancing cluster-based development initiatives.

CAP Inc. update

On 14 March 2001, Clusters Asia Pacific (CAP) Inc. was legally ‘incorporated’ under the South Australia Associations Incorporation Act 1985. The Board membership is – Mr. Rodin Genoff, Playford City Council, South Australia (Co-Chair); Professor Julian Lowe, Ballarat University, Victoria (Co-Chair); Mr. Ifor Ffowcs Williams, Cluster Navigators Ltd (Wellington, New Zealand); Ms. Paquita Lamacraft, Hepburn Shire Council, Victoria; Mr. Lou de Leeuw, Ecobusiness Consultants Pty Ltd., Adelaide, SA (Treasurer); Ms. Tracy Scott-Rimington, Cairns Region Economic Development Corporation, Queensland; Mr. Rod Brown, Australian Project Developments Pty Ltd, Canberra ACT (Exec. Director).

Key Roles of CAP Inc.

1. Facilitate increased awareness and uptake of industry clustering techniques, as means of building economic capacity and winning outcomes at the industry and/or local level. (AWARENESS)

2. Provide a reference point for parties with a commitment to competitive advantage, sustainable development and collaboration. (REFERENCE POINT)

3. Facilitate training and accreditation of practitioners (TRAINING)

4. Influence policymaking at all levels of industry and government regarding 1-3 above (INFLUENCE)

5. Prepare submissions, provide consultancy expertise, and lobby for funding to build economic capacity at the industry and/or local level. (FUNDING)

Membership

Application forms are being prepared for prospective members. Please contact us if you would like to join. The annual fees are:

• $A500 + 10% GST organisations/companies ($A100 + 10% GST for individuals)
• New Zealand - $NZ500 for organisations/companies ($NZ100 for individuals)
• Other countries - $US300 for organisations/companies ($US60 for individuals)

European Union – action on regional innovation systems

The Commission of the EC is proposing to fund pilots aimed at strengthening regional innovation systems – funding of around 400 million € (about $A730 million). The communique provides a fascinating insight into EC thinking - summary below.

“There is a wide gap between regions in the fields of innovation and R&D......to prevent this gap from widening and to take advantage of the opportunities offered by the new economy, the less-favoured regions must be in a position to introduce innovative practices which effectively explore these opportunities.”

”Globalisation is resulting in stiffer competition on account of the greater integration of markets......the transition to a knowledge-based economy and the promotion of the use of new technologies in regional economies are, therefore, becoming priorities.....businesses and in particular SMEs, which form the basis of the regions' productive fabric, must anticipate and adapt to the technological changes....in this new economy, knowledge and knowhow are becoming the raw materials. Consequently, the possibility of gaining swift, easy access to them will be one of the principal strategic competitive weapons. Human capital is proving to be more and more of a determining factor; continuing training and lifelong learning are becoming the keys to innovation and regional competitiveness.”

“Innovative actions in this area could cover:

• cooperation networks between firms or groups of firms, research centres and universities, financial institutions and specialist consultants etc.
• staff exchanges between research centres, universities and firms, particularly SMEs.
• dissemination of research results and technological adaptation within SMEs.
• establishment of technological strategies for the regions, including pilot projects.
• support for incubators for new enterprises with links to universities and research centres.
• encouragement for spin-offs from university centres or large companies.
• schemes to assist S&T projects - jointly by SMEs, universities and research centres.
• contribution to new financial instruments (venture capital) for business start-ups. “

Regional Universities

Regional universities are mostly disconnected from the economic development priorities of their regions, according to a new study, ‘Engaging Universities: Knowledge contribution to regional economic development in Australia’ (Steve Garlick, Southern Cross University) - commissioned by the Australian Government (DETYA).

The study examines regional engagement relationships at the campus level, analysing 16 campuses and their 15 regions. Three specific engagement outcomes were considered: regional students flows or human capital, agreed regional economic development priorities and regional social capital. Steve Garlick said the findings were disappointing in that there is only ad-hoc or an indirect connection between campuses’ knowledge-based programs, their infrastructure and leadership, and the articulated priorities of the region.

• Only Newcastle University achieved a 'high-level of engagement' – where it connects in a strategic, whole-of-institution way by providing an on-the-ground package of leadership, infrastructure, collaboration and multidisciplinary research and teaching - targeted at areas or regionally identified economic development.
• The largest number of universities fell into the middle level of engagement – this is usually ad hoc, and driven by specific projects, staff or targeted at a particular enterprise: Canberra, Ballarat, Sunshine Coast, South Australia (Whyalla), Curtin (Muresk), Southern Queensland (Darling Downs), Monash (Gippsland) and Southern Cross (Northern Rivers).
• Those falling into the low level of engagement – ANU, Uni of Western Sydney (Hawkesbury), Uni of Tasmania (Launceston), Edith Cowan (Bunbury), La Trobe (Bendigo) and Charles Sturt (Central Western NSW).

Steve concluded that high growth regions, and campuses with strong structural relationships, appear to influence strong human resource engagement – and vice versa. Steve’s views should not be taken lightly. He has long-standing expertise in assessing the role of universities in regional development, and was an Assistant Secretary in the Commonwealth regional development/local government area. http://www.detya.gov.au/highered/eippubs.htm

Thanks to Peter Quiddington (pq@asto.com.au) and his newsletter, Incites (Innovative Citations).

Ongoing dilemma for clusters identified

The need for policy to support clustering is as important as policy on developing clusters. This is a finding of research, across seven European regions, undertaken by Philip Raines (Univ. of Strathclyde, Scotland - published Dec. 2000). The same issue has cropped up in South Australia where SABV indicates that ‘policy supporting clusters’ is being discussed at meetings with Chairs and executives of the Spatial, Water and Defence clusters. These clusters are at a stage of development when continued funding support and cross-cluster collaboration are becoming critical to their sustainability.

The Raines research found that for a cluster approach to take root requires the support of the main policy actors. One of these is government - a vital contributor in seed funding, removing bureaucratic/legislative barriers, purchaser of services/products emerging from the cluster. Clusters are also more likely to be successful where they are a natural outgrowth of previously successful programs of collaboration.

A key question posed by SABV is how long should government assistance continue? It argues that it depends on how successful a cluster becomes. ‘The problem is not just how success is to be defined, but indeed whether it can be defined, (and) once defined how to measure success’. Some measures can be classified. These include the extent to which:

• the cluster gets its members to think and act as an entity that promotes their industry;
• networking/alliancing occurs between members around specific projects; and
• there is access to external resources to make the cluster effective e.g. access to information on market trends, export opportunities, technology.

SABV believes all the above applies to the three clusters in question, but no extensive research is yet available to validate their sustainability without the need for further assistance.

$1400 million for Salinity + Water Quality initiatives

We have received a progress report on the PM’s October 2000 announcement of the 7-year Salinity Program - Commonwealth funding of $700 million – to be matched by the States. Intergovernmental Agreements have to be signed with each State. Queensland has its act together, as has SA and the NT – Victoria and Tasmania are expected to sign soon. There are some delivery problems requiring resolution in respect of NSW and WA.

The Program, established via Coalition of Australian Governments (COAG), identifies 21 priority regions/catchments - $1,100m is set aside for on-ground works - regions need a comprehensive Action Plan before the Commonwealth and State/Territory signs off. Unlikely that the Action Plans will be prepared inside 6 months, due to concept development, thinking and liaison required. National targets will be set. Integrated approaches – employment, SME development, private investment etc. - are particularly sought. (Further details available for CAP Inc. members).

‘Examples and Reflections on Brazil’s clusters’

Mr. Alfredo Lopes Neto (Coordenador do Suporte Estratégico, Fortaleza, Brazil - vicegov.supest@secrel.com.br) has kindly forwarded a copy of the paper delivered at the World Congress on Clusters (Paris, January 2001). The document is in French – a rough translation of a key section is as follows.

The processes vary greatly according to their nature but they generally imply the following elements (many of which are simultaneous):

• Identification of actors and champions in the cluster
• Use of consultants to scope the possibilities before the parties commit to constructive dialogue.
• Development of a group vision.
• Research and analysis, in order to arrive at a common level of understanding.
• Prioritisation of the key factors to secure the competitiveness of the cluster.
• Formation of working groups and teams to work on specific projects for the cluster.
• A continuing focus on medium and long-term steps that must be followed to deliver the competitiveness of the cluster.

The appropriate functions for government include:

• To create a context that motivates innovation and progress.
• To reinforce the formation of the cluster and its constant adjustment.

Food Action Agenda

The Prime Minister’s Supermarket to Asia Council has agreed that globalisation is the major issue currently facing the Australian food industry. There is a strong need for industry and government to develop a strategy that will respond to the opportunities and challenges globalisation presents, particularly given the importance of the food industry to regional Australia. The Council is thus developing a National Food Industry Strategy to position Australia to meet the challenges and grasp the opportunities arising from this global trend.

The Strategy will assess Australia’s standing in the global market and contain recommendations for actions on how the industry can improve its competitive position. It will focus on processed foods, and horticultural and meat produce sold in its fresh state (excludes bulk commodities). A senior AFFA official explained that the outwards investment is a particular focus, and that clustering-type concepts and the role of SMEs would be considered. The deadline is September. The explanatory material refers to the formation of networks, improvement in the efficiency and integrity of the supply chain, and the provision of a regulatory structure that is consistent across the industry and the global market.

Members of the Steering Group include Mr Reg Clairs (Supermarket to Asia), Mr Ian Donges (National Farmers Federation), Dr Michael Eyles (Chief Executive -Food Science Australia), Mr Paul Little (MD - Toll Holdings Ltd), Mr Ray O’Dell (Chairman - Consolidated Meat Group), Mr Andrew Reeves (MD - Coca-Cola Amatil Ltd and Dr Mike Ginnivan (MD - Tassal Ltd).

Mauritius

Mr. Nikhil Treebhoohun, Executive Director of the National Productivity Council reports that he and Mr. José Poncini (Chairman of NPCC) have been pushing the concept of clusters in Mauritius for some years now. Since arriving back from the Glasgow conference, a report has been circulated to all major policy makers in Mauritius and a conference on incubators, science park and clusters has been organised.

The Government of Mauritius has set up a Task Force to work on a National Integrated Strategy and one of the components is to build up linkages between small, medium and big enterprises - in a word to promote clustering. A sub-committee on clusters and training has been formed. natpro@intnet.mu

New Horizons – south coast NSW & east Gippsland

The New Horizons’ Strategic Plan covering the south-east corner of Australia (Bega Valley, Bombala, East Gippsland and Eurobodalla shires) is in preparation. Funded mainly by the Commonwealth Government, it involves the development of Action Agendas across the key sectors - dairy, forestry/farm forestry, beef, fishing/aquaculture, horticulture, wool, farm tourism, exotic animals and water.

The first stage is the preparation of industry audits, based on interviews with 100+ organisations across the region. The audits cover business capacity and capability, competitive strengths and weaknesses, impediments to investment, and opportunities for collaboration, networking and industrial diversification.

One of the many ideas being developed is interlinking of facilities for research/education, processing, sales/warehousing/freight consolidation of local goods. Precedents are being studied e.g. certain business incubators, artisan networks in timber, facilities such as the Port Lincoln Marine Centre etc. The development of industry and investor links with other regions in Australia and overseas is also being investigated. Do you wish to share ideas? See the website www.newhorizons.org.au

Enterprise zones for Australia?

‘Australia is in need of a new vision for the regions.......the cost of unemployment relief in some areas has reached the point where governments must choose between intervention and national disintegration’’ according to a study by the National Institute of Economic & Industry Research (reported in most daily newspapers on 10 April).

The NIEIR study, commissioned by the Local Government & Shires Association of NSW and the Institute of Chartered Accountants, urges the introduction of enterprise zones – ‘a concept used effectively overseas’.

Spokesman Bill Sheehan said ‘jobs have to be moved to the people.....the lack of Commonwealth support for regional economic initiatives is particularly serious given the Commonwealth’s dominance of taxation, and the consequent limited capacity of state and local government to finance investment and grant tax incentives......investment in enterprise zones would require an investment of $2-3 billion a year, but with the potential that resulting higher levels of economic activity and taxation revenues would eventually fund the project’.

(The prospects of tax breaks for enterprise zones are very slight - Commonwealth concerns re Budget blow-out, no signs of the necessary Commonwealth-State rapprochement, and nothing on the Canberra radar suggesting a move away from market-induced adjustment i.e. subsidies to ‘move jobs to the people’ would reverse adjustment processes underway – Ed.)

Tucson – NZ connection

The role of clusters in NZ’s economic development agenda received a strong boost with the visit prior to Easter of two cluster leaders from Tucson - Brian Catts (Office of Economic Development, Univ. of Arizona) and Robert Gonzales (former CEO, Greater Tucson Economic Council). They have made a huge contribution to the development of the high technology economy in Southern Arizona, built around business cluster and strategic partnership processes.

Their visit was coordinated by Innovation & Systems, and sponsored by the Wellington and Dunedin city councils, CDC (Christchurch) and Industry NZ. The 2 week program benchmarked economic development strategies and cluster processes with those of Tucson – one of the top 5 US cities for economic growth over the last 5 years. Industry NZ also ran workshops in Auckland and Wellington – this offered a wide audience of Government officials and practitioners from other regions access to Brian and Robert's expertise and knowledge. Clusters are a part of Industry NZ's strategy for industry and regional economic development.

During the visit, the story of Tucson, and the potential role of clusters in economic development in New Zealand achieved a high profile, with interviews on national TV and radio networks, articles in newspapers. Also examined was the possibility of NZ cluster practitioners forming a professional association to continue benchmarking among the NZ centres, and to provide a vehicle for professional development and international relationships.

Contacts: paul.frater@innovation.net.nz or bcatts@u.arizona.edu

More cluster action in South Australia

Adelaide’s Festival Theatre (morning of 1 June 2001) promises three outstanding speakers at a conference being organised by SABV 2010 and the University of South Australia.

• Dr. Robyn Batterham, Australia’s Chief Scientist, will be the keynote speaker. He will speak on Innovation and Clustering.
• The Federal Minister for Science, Industry and Resources, Hon. Nick Minchin, will launch the Environment Industry Cluster and an accompanying report.
• Professor Richard Blandy will launch the report that the SABV2010 Board commissioned on South Australia’s cluster project in a global context.

The conference will launch another major cluster. hugh.forde@sabv2010.com.au

University of Sussex

At the last TCI conference in Glasgow, Professor Hubert Schmitz, Institute of Development Studies, Univ. of Sussex, gave a perceptive address in which he explained that their work is part of a broader exercise on who are the winners and losers out of globalisation.

'We think the losers are the entrepreneurs who are isolated, and the winners are those who are part of clusters…..this view is criticised, but at least we have a significant body of experts who think it is important......Competitive advantage can be derived in a number of ways - there can be 'incidental' competitive advantage that occurs in local economies. It can also be consciously pursued through joint action. Then there is a third category that derives from a mix of the two – cooperation and performance, as in the case of Brazil.

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We want to network to as many interested people as possible.

Regards
Rod Brown
Executive Director

This newsletter is a product of Clusters Asia Pacific Inc.
Australian Project Developments Pty. Ltd. continues to provide the editorial/distribution service.
Phone/fax 02 - 6231 7261 apd@orac.net.au