IPMI MOC Conference 5

Comparative Cluster Initiatives in Asia

HIGHLIGHT on Microreconomics: The Microeconomics of Competitiveness (MOC) Conference – Asian Chapter hosted by IPMI International Business School on Monday, 9th July 2018 to explore the determinants of competitiveness and successful economic development from bottom-up, microeconomic perspective. In today’s economic map of the world is characterized by “clusters”.

The conference was opened by H.E Eko Putro Sandjojo; Minister of Indonesian Villages, Disadvantaged Regions and Transmigration of Republic of Indonesia. During his opening speech, H.E Eko Putro Sandjojo highlighted the Indonesian economy which is dominated by agriculture sector, with the recent statistic shows 82,77% lives in rural areas.

IPMI MOC Conference 2018 2bIn today’s economic map of the world is characterized by “clusters.” A cluster is a geographic concentration of related companies, organizations, and institutions in a particular field that can be present in a region, state, or nation. Clusters arise because they raise a company’s productivity, which is influenced by local assets and the presence of like firms, institutions, and infrastructure that surround it. With their limited access in the rural area of Indonesia to reach the market, lack of capital and low quality product; the government of Indonesia welcome the private sector involvement to support to these critical issues. Clustering of rural area products (in other words, Prukades) that brings together stakeholders, such as related Ministries/Institutions, Local Government, Banking, Business World, both State-Owned and Private to discuss product development needs.

So far, through Prukades Forum have facilitated the signing of the memorandum of understanding as an intent of cooperation of 102 Regions, 68 businesses, and binding more than 200 Prukades development activities with an estimated total investment value of Rp 47 Trillion.

So, what are the criteria on choosing the location?
• Disadvantaged Villages in 7 large islands which has 100 villages with Stunting problem;
• It has village flagship products which can be developed;
• Possible to create entrepreneur groups, which has female and diffable participation;
• It has active village owned enterprises, with suitable business activities;
• It has business actors who can develop the business products.

Other support by the government of Indonesia is to provide funding partnership to selected villages to enable the economic development capacity. With this support, by year 2030 Indonesia is predicted to be the country with the 9th strongest economy in the world with GDP reaching USD 2,449 Billion.

During the MOC conferences, there are selective papers presentation covering comparative cluster initiatives in Asia such as:
* Determinants and Decision Making of Youth Tourists in Taiwan: From the Perspective of Western Tourists,
* Exploring Kazakhstan Residents’ Attitudes Towards the Future Impacts of China’s Belt and Road Initiative on Tourism Development,
* Indonesia Renewable Energy Infrastructure Strategic Decision in the Scarcity of Resources,
* One Developing Country, Two Different Stories: Comparison Study between Inner Mongolia and Shandong,
* Pundok: The Cebu Furniture Cluster in Philippines.

The Philippines
The economy is dominated by the services sector, accounting for more than 57 percent of gross domestic product (GDP) in 2016. With the imminent threat of artificial intelligence (AI) replacing most jobs in this sector, it is imperative for the Philippines to gear itself towards improving its industries in order to maintain its path towards robust economic growth.

However, in developing the manufacturing sector, investments in infrastructure, human capital, and technology are vital to build complementing clusters that will further stimulate economic growth through spillover effects from synergies and economies of scale.

Pundok: The Cebu Furniture Cluster
The added value of the Philippines’ furniture and fixtures industry to the manufacturing sector posted a compounded annual growth rate (CAGR) of 25.02 percent from 2008 to 2015. Moreover, its share to (GDP) rose from 0.36 percent in 2008 to 1.19 percent in 2015. Cebu’s continuous innovation and streamlined production in the furniture and fixtures cluster have greatly contributed to the recent increase of the industry’s contribution to GDP. Using Michael Porter’s Microeconomics of Competitiveness (MOC) framework, this paper aims on elucidating the current conditions of Cebu’s furniture and fixtures cluster. Through the development of industry clusters similar to that of Cebu’s, the Philippines will be able to future-proof its sustainable long run growth.

Majority of furniture companies in the country still produce furniture in relatively small volumes through manual labor. Use of equipment are limited to the employment of basic or semi-mechanized tools, giving Filipino furniture a distinctive craftsmanship that is otherwise absent in mass-produced furniture. Nevertheless, local companies are aware that productivity needs to be increased through the use of modern equipment given the increasing market demand and scarcity of resources.

In its long history, the Cebu furniture cluster has witnessed many ups and downs. It still faces marked pressure from international competition. Nevertheless, the cluster has world-class winners, decades of accumulated industrial knowledge, and enjoys institutional linkages but to secure its competitiveness and its future, it needs to fortify its assets, capitalize on its size and approaches, and upgrade its processes and products to be appropriate for this century. This Pundok: Cebu Furniture Cluster presented by Mr. Justin Jerome G. Valle from Ateneo de Manila, Phillipine – as one of the best paper presented during the microeconomics of competitiveness conferences on Monday, 9th July 2018 in Jakarta.

(Written by Ms. Betty Siahaan ~ Alumni of IPMI International Business School, a leading business school in preparing senior executives for global readiness as well as a pioneer in executive and MBA education in Indonesia).