Promoting Competitiveness in Practice - Economic Growth - usaid

• Former East Germany, Slovenia, Slovakia and Hungary launched cluster-based initiatives in
the early 1990s as part of their strategy for making the transition from a centrally-planned
economy to a market-based economy.
• Malaysia took on an intensive cluster-based program to set the stage for its plan to become a
developed nation by the year 2015.
While a number of initiatives were launched in the early 1990s, much of the significant growth
in the use of cluster-based approaches has emerged over the past five years – and, as mentioned
in the introduction to this chapter, we now see literally hundreds of cluster initiatives taking
place around the world. Concomitant with this growth, donors have also started to explore the
use of cluster-based initiatives in developing countries. One of the World Bank’s earliest efforts
was in Morocco in 1995. Carried out in close cooperation with the World Bank and with
financing from the European Union, Le Maroc Competitif facilitated cluster development in four
areas: textiles and apparel, sea products, tourism, and electronic and information technology.
USAID launched its first major cluster-based competitiveness initiative in Lebanon in early
1998; as discussed in further detail below, USAID is now becoming an increasingly important
player in promoting cluster-based approaches to economic growth. The Inter-American
Development Bank featured competitiveness as the theme of its 2001 Economic and Social
Progress Report and approved one of its first major projects for a cluster-based program in
Panama in mid-2002.
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In summary, competitiveness practice and theory emerged, initially, as two separate and distinct
developments. During the mid-1980’s, the practice of cluster development was becoming
increasingly central to SRI’s work. The SRI team was aware of Porter’s evolving thinking and
research on competitiveness theory and clusters; nonetheless, its focus on cluster development
was driven largely by the needs of its clients. Similarly, Porter’s theory of competitiveness was
not linked to SRI’s efforts to promote cluster development; the theory explained the success of
clusters that had emerged organically as opposed to those that had been facilitated. Despite its
different origins in practice and in theory, cluster development has now became an increasingly
important dimension of promoting economic development, fueled, in part, by the recognition of
the importance of market-driven approaches to economic development.
AN OVERVIEW OF COMPETITIVENESS INITIATIVES
In order to provide perspective on the breadth of competitiveness initiatives, this next section of
the assessment provides an overview of practice of cluster-based initiatives. We begin by
looking at the USAID’s portfolio of cluster-based initiatives and, in particular, the seven major
initiatives it has launched since 1998. We then explore how cluster-based initiatives have
emerged in the context of multilateral and regional organizations, including the World Bank, the
Inter-American Development Bank, and UNIDO. Lastly, we take a brief look at industrialized
countries. We do not examine in depth the approach, the results, or the lessons learned from
these initiatives in this chapter. Rather, our intent is to provide a context for understanding how
USAID initiatives are similar and different from other cluster-based approaches to
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