>> MIM Speaks
CLUSTERS GIVE EDGE IN GLOBAL DEALINGS
AUGUST 13, 2003 -
THE STAR
By KAREN P S YUE
IN the Global Competitiveness Report 2002-2003 of the World
Economic Forum (www.isc.hbs.edu), Malaysia was ranked 27th out
of 80 countries in terms of growth competitiveness.
The ranking suggests the relative strength of Malaysia's ability
to return to a sustained growth path upon a global recovery.
It was lagging far behind the United States and Finland, the top
two countries, and its Asian neighbours, Taiwan and Singapore,
which came in third and fourth respectively.
How is a nation's competitiveness measured? What makes a country
more or less competitive than another?
Michael E. Porter, a key figure in the Global Competitiveness
Report, said competitiveness is determined by productivity - how
a nation uses its human, capital and natural resources. It is
"not what industries a nation competes in" but rather how firms
compete in those industries, he said. Productivity in a nation
is a reflection of what both domestic and foreign firms choose
to do in that location.
Malaysia has fared well, considering that it has weathered the
Asian economic crisis of 1997-98 better than most of its Asian
neighbours. It also has in place a sound macroeconomic,
political, legal and social structure, all of which are the
foundations for productivity and growth.
Yet Malaysia is not quite there in terms of global
competitiveness.
Porter's focus on Malaysia's competitive agenda for 2003 at a
recent conference in Kuala Lumpur elicited an important area for
attention: cluster development.
Engaging in cluster development is probably the next big step
Malaysia could take to raise its productivity, and hence its
global competitiveness. This, Porter argued, was because
"competitiveness ultimately depends on improving the
microeconomic capability of the economy and the sophistication
of local companies and local competition."
It is noted that many competitive businesses are not national -
they tend to be local. Therefore, there is a great need to
develop sophisticated and demanding local customers as a prelude
to successful exporting to external markets.
One would think that globalisation and advances in technology
and rapid transportation would have made location less important
as a source of competitive advantage. Yet, Porter argued that
location remains central to competition.
By locating critical masses of linked industries and
institutions in one place - in other words, "clustering" -
companies in the cluster are able to enjoy competitive success.
Examples of clusters that have yielded the type of enviable
competitiveness abound. World-class wine clusters, for example,
are found in specific geographic areas: in California, Italy,
Germany, Chile, and Australia. It is a high-cost place to grow
grapes for wine in California. Clusters are very efficient
because of the concentration of suppliers and firms in related
fields, bringing about a host of benefits.
They include efficient access for the companies within the
cluster, closer relationships and ease of coordination, and
better information and rapid diffusion of knowledge on best
practices. These incentives and advantages are difficult to tap
from a distance. Besides, clusters stimulate innovation and the
creation of new businesses within the cluster.
Clusters create a lot of productivity. A good example is the
case of Australia's highly successful wine cluster. As recently
as the 1950s, Australia hardly figured as an exporter of wine.
In fact, it had to import foreign technology for its
wine-making.
Yet in 1965, the Australian Wine Bureau was established. A
winemaking school at Charles Sturt University was founded in
1970.
By 1990, the Winemaker's Federation of Australia was set up
following the creation of a large number of new wineries. In the
1990s there had been a surge in its exports and international
acquisitions, with new organisations being created for
education, research, market information, and export promotions.
Today, in just 20 years, the Australian wine cluster is in a
class of its own, its exports totalling more than US$1bil,
making up more than seven per cent of the world market share.
Other geographic clusters are seen for footwear, with Italy
leading clusters for the design, marketing and production of
premium shoes. Portugal, China and Romania, for example, are
famous footwear clusters for the production of lower to medium
price-range shoes.
In Malaysia, the Multimedia Super Corridor (MSC) promises to be
the start of the creation of cluster development.
Running 50km north to south from the Kuala Lumpur City Centre to
the Kuala Lumpur International Airport and Putrajaya, and 15km
from east to west, it was envisioned to bring together
world-class multimedia corporations that would locate their
business units and R&D facilities there.
It was meant to be the catalytic cluster that would propel
Malaysia into a vibrant and strategic regional hub for IT trade
and services, education, medical services and telecommunication.
Malaysia can take heart that the development of such strategic
clusters, like everything else, takes time to shape up.
It took the Australian wine industry 20 years. It is not
unimaginable in another 17 years to see the MSC cluster come
into a class all its own, and contributing to Malaysia's
possession of an economy that is competitive, dynamic, robust
and resilient.
|
