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I. BACKGROUND Cluster is a local agglomeration of firms or enterprises producing related, complementary, or similar products or services. City cluster economic development (CCED) is a local economic development approach that seeks to enhance the ability of cities to promote economic growth in an extended urban-region. The framework of analysis of the CCED approach helps to answer the questions, Where to invest first and What to invest, thereby helping policymakers, investors, and donors to make informed decisions on strategic investments that produce the greatest intended impact. In 2009 ADB initiated a study under RETA 6337: Subproject 7: City Cluster Economic Development in South Asia. The result of the study provides a background for the <strong>conference</strong>, which is the first <strong>international</strong> gathering organized by the Asian Development Bank (ADB) to discuss CCED, particularly the clustering of small and medium enterprises (SMEs). The <strong>conference</strong> aims to (i) provide an overview of cluster economic development (CED) as a new paradigm for local economic development, (ii) show some examples of good practices of small and medium enterprise (SME) clusters, and (iii) contribute to the ongoing discussion on using the cluster approach as an example of CED application (see Annex A: Conference Agenda). The <strong>conference</strong> gathered over 70 representatives from the governments of Bangladesh, Cambodia, India, Indonesia, Lao PDR, Nepal, Pakistan, Philippines, Sri Lanka, and Viet Nam; <strong>international</strong> development agencies and organizations; academe; non-government organization (NGO); the private sector; and ADB (see Annex B: List of Participants). The profile of speakers and panel members is in Annex C. II. OPENING Ms. (Kay) KyeongAe Choe, Lead Professional (Water and Urban Development), ADB, opened the <strong>conference</strong>. Mr. Sultan Hafeez Rahman, Director General of ADB's South Asia Department, welcomed the participants. Mr. Rahman said that the cluster approach could be used to trigger the growth and development of SMEs. Further, increasing the competitiveness of SMEs could fuel private sector development, which is a key to reducing poverty in the Asia and Pacific region. The approach is particularly relevant to Asia, which experiences rapid urbanization. Some critical issues for consideration involve identifying growth areas in urban-rural areas, accelerating SME and private sector development, and sustaining large-scale infrastructure development amidst availability of limited resources. Mr. Rahman noted that the cluster approach offers an alternative framework for addressing these issues and expressed hope that the <strong>conference</strong> would provide a venue for finding solutions to these challenges. (Annex D). Mr. Rajat M. Nag, Managing Director General of ADB, delivered the opening address. He said that Asia was in a period of rapid urbanization, which brings benefits and also presents complex challenges. Resources for development have been stretched tightly, thus the need to target development assistance and to look for areas where development impacts can have immediate effects. SMEs are increasingly recognized as major drivers of economic growth, employment and income generation, and poverty reduction. Therefore, it is critical 6
for governments to devise effective strategies for CCED. The CCED is a local economic development strategy that promotes the use of limited resources for maximum development impact. It is a new paradigm for promoting industry development and fostering competitiveness of cities. CCED provides a useful analytical framework for the development of SMEs and for making investment decisions-- where to invest first and what to invest to maximize resources. Mr. Nag challenged the participants to consider how Asian countries could accelerate progress in economic growth and poverty reduction. In conclusion, Mr. Nag expressed his wish that the <strong>conference</strong> would promote further initiatives to create a competitive environment for SME clusters in Asia. (Annex E). III. KEYNOTE SPEECH: SMEs AND INDUSTRIAL CLUSTERS FOR ACHIEVING MDGs Mr. Jebamalai Vinanchiarachi, former Principal Adviser to the Director General of UNIDO, delivered the keynote speech. He said that by creating jobs, SMEs and industrial clusters could play a big role in fostering inclusive growth espoused by the Millennium Development Goals (MDGs). Breaking the poverty trap needs foreign direct investment and technology diffusion. ADB’s Strategy 2020 is relevant to MDGs because it focuses on private sector development, good governance, regional integration, etc. Mr. Vinanchiarachi cited some country experience showing that targeting communities and commodities can lead to poverty alleviation. A humanitarian program in Sudan focusing on isolated villages used grassroots innovations and provided vocational training and livelihood programs. Good practices of the program were replicated in Timor Leste. Targeting commodities, as in the case of the button city in the People’s Republic of China and the milk production and processing in Nicaragua, can also create positive impacts on poverty alleviation. Growth follows networking with development partners and boosting competitiveness. Mr. Vinanchiarachi emphasized that urbanization is good for industry development because agglomeration of firms promotes economies of scale, creates competitive pressures and fosters information sharing for efficiency gains, and better influences the policy dialogue. As a way forward, he suggested establishing cluster parks and common facilities through public-private partnerships, enhancing the role of regional development agencies, and strengthening the regional industrial innovation system. (Annex F.a). IV. SPECIAL LECTURE ON CLUSTERS AND CLUSTER POLICY On video, Professor Christian H.M. Ketels of the Harvard Business School talked about the conceptual framework of clusters and cluster policy. He explained three dimensions of clusters--geography or spatial proximity, industrial linkages (group of economic activities), and interaction between actors (public and private institutions)--whose dynamics are driven by local externalities. Clusters, along with urbanization and quality business environment, contribute to prosperity. Regions which have specialization tend to do better in terms of creating better jobs, higher wages, and higher standards of living. Location and natural resources trigger the development of clusters, so do a more friendly business environment. Growth of clusters is influenced by competition across regions, business environment, entrepreneurial decisions, and cooperation and competition within the cluster. Because of globalization, some regional clusters grow, shrink, or emerge. Clusters change their profile 7
Page 2 and 3: TABLE OF CONTENTS Page Acronyms 3 E
Page 4 and 5: EXECUTIVE SUMMARY The International
Page 8 and 9: though functional specialization an
Page 10 and 11: VI. SESSION 2: EXAMPLES OF ECO-CLUS
Page 12 and 13: VII. SESSION 3: PROMOTING LOCAL ECO
Page 14 and 15: development, because the capacities
Page 16 and 17: Annex A: Conference Agenda INTERNAT
Page 18 and 19: Annex B: List of Participants INTER
Page 20 and 21: Annex B: List of Participants Count
Page 22 and 23: Annex B: List of Participants Count
Page 24 and 25: Country DMC Government Official Vie
Page 26 and 27: Department Staff Internal Evaluatio
Page 28 and 29: Annex C: Profile of Speakers and Pa
Page 30 and 31: Annex C: Profile of Speakers and Pa
Page 32 and 33: Annex D: Welcome Remarks by Directo
Page 34: Annex E: Opening Address by Managin

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