CLUSTER GOVERNANCE

Originators: Foundation for MSME Clusters (FMC), UNIDO

Reducing poverty through sustainable industrial growth

Government and Governance

Governance is management of relations among entities

Government is one well known form of governance

It manages through rules and norms and via institutions

It manages at macro and micro level

Here rules predominate norms

Reducing poverty through sustainable industrial growth

Cluster Governance

A cluster does not generally have such formal governance mechanism

Here needs of diverse interest groups need to be managed

Typical cluster issues are of prime importance

Various agreements evolve through processes for different issues

Government is not enough to handle these

Hence cluster level intermediaries play a major role

Reducing poverty through sustainable industrial growth

Components of Cluster Governance

Local government

Associations

Networks

Institutions

Large firms

NGOs

Across the relevant value chain

Generally within the cluster

Reducing poverty through sustainable industrial growth

Intervention in Governance Structure

Case study: Leather Cluster of Ambur / India

Reducing poverty through sustainable industrial growth

Cluster Map of Ambur (2000)

KAR

KARAMBURTEC

Export Market

International Fair

Indian Market

ChennaiMarket

Export Agent of buying houses

Merchant Tanners in Chennai

Local Agent

Integrated Export Oriented Leather (22)

& Shoe Units (21)

Shoe Upper Units (40)

ATA

Tanneries (80)

Hides & skins’ Commission

Agent

Machinery Supplier

Chemicals Supplier

Shoe material Supplier

 ASSMA

Tiny Shoe units (120)

Specialised Job-Working

Technocrats (30)

Local Market

Irregular Buyers

Women workforce form villages (unskilled)

Reducing poverty through sustainable industrial growth

Ambur Governance Capacity (2000)

Analysis of cluster map:

Types of units: semi-finished leather, shoe upper units, tiny shoe making units, integrated export oriented firms

Associations: ATA of tanning units, tiny shoe units have a dead association ASSMA, no other associations

Two technical institutions KAR polytechnic and AMBURTEC, operating from outside are CLRI, CLE, and NSIC

Raw material procurement and selling of products by tiny shoe making units are sub-optimal market conditions

Large units dominate shoe upper and tanners

More issues may be revealed during implementation

Reducing poverty through sustainable industrial growth

Status Prior to Intervention

Absence of appropriate intermediaries – large units

Dormant association – tiny shoe units, tanners

Dormant support institution - KAR

Low linkage among intermediaries

Conflict among intermediaries – shoe upper and large units

Sub-optimal market phenomenon for tiny shoe units

Reducing poverty through sustainable industrial growth

Governance Capacity (2002)

One association of tiny shoe manufacturers (TASSSMA), one umbrella organisation (AEDOL), two export consortia (ALTECO and CSM), an NGO (ACCESS) involved in empowerment of women (fresh issue)

AEDOL has emerged as the lead organisation for growth and development of the cluster

KAR polytechnic has become proactive in running training programmes

Creation of step-c and common sales outlet of TASSMA

There are deficiencies in intermediaries

Further scope exists

Reducing poverty through sustainable industrial growth

Ambur Cluster Map (2002)

KAR

KARAMBURTEC

Export Market

International Fair

Indian Market

ChennaiMarket

Export Agent of buying houses

Merchant Tanners in Chennai

Local Agent

Integrated Export Oriented Leather (22)

& Shoe Units (21)

Shoe Upper Units (40)

ATA

Tanneries (80)

Hides & skins’ Commission

Agent

Machinery Supplier

Chemicals Supplier

Shoe material Supplier

 

Tiny Shoe units (120)

Specialized Job-Working

Technocrats (30)

Local Market

Irregular Buyers

Women workforce form villages (unskilled)

Reducing poverty through sustainable industrial growth

Need for Better Governance

Existing deficiencies in infrastructure to be pursued vigorously

Implementation capacity of ATA needs to be enhanced

Problems of shoe uppers job-working segment needs to be perused

There is a greater scope for the empowerment of women. Specialised institution need to be called in

New issues do emerge

Reducing poverty through sustainable industrial growth

Features of Good Institutional Gov.

Full financial sustainability

Established working relationship (norms) with other institutions - public or private

Active participation in coordinating cluster-wide activities

Professional functioning

Reducing poverty through sustainable industrial growth

Various Governance Structures

Purely market driven – no intermediary

Representative intermediary of all stakeholders

Several intermediaries

A mix of the above

One or two intermediaries take lead

None an imposed entity - they evolve

Reducing poverty through sustainable industrial growth

Governance Structures - Examples

FEKTAA and various associations in Ludhiana

Association(s) – IMTMA and ABMTC in Bangalore

NGO – Bunkar Vikas Sansthan in Chanderi or KDHF in Kota - information

LIRD: NGO from outside the cluster

Institution – CHI in Ahmedabad

Reducing poverty through sustainable industrial growth

Steps towards Governance Structure

Understand the institutional gaps (through cluster map)

Promote a vision

Promote business through ideal business intervention for targeted intermediaries

Initiate, demonstrate and pass natural responsibilities

Create linkages through interaction and develop norms for interaction

Link vision to intermediaries as capacity develops