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| Sunday, 27 February 2005 |
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Business |  |
| News Business Features Editorial
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Urban planning and competitiveness by Lloyd F Yapa Last year's devastating tsunami disaster, having plunged a great swathe of the country into deeper poverty, offers at the same time many opportunities for its alleviation. One of them is the opportunity to realign the lay of the land with regard to the physical infrastructure and assets, especially the towns in order to heighten the economic competitiveness of the nation. Competitiveness Competitiveness or competitive advantage is derived from being cost effective to beat competitors on price. In addition, it involves the ability to offer products and services, which customers regard as superior to those offered by rival suppliers, thereby building a capability of obtaining premium prices. This ability to become rich by earning high returns, especially from trading is by concentrating on industries producing similar products and service. Tsunami reconstruction offers a rare opportunity to undertake the task. How Geographic clusters work The competitiveness of the economic activities in the affected areas can be increased several- fold by designing the infrastructure in such a manner as to concentrate on the supplier, producer or manufacturer and buyer enterprises in one well located spot. These concentrations, referred to as 'geographic clusters', should also provide all the relevant urban services. These include administrative, health, educational and banking services that cater to great throngs of people, especially professionals who are normally attracted to live and work near a city offering the required facilities for them and their families to lead a comfortable life. Geographic clusters are different from ordinary urban centres. If a certain critical mass is reached in terms of size i.e enterprises related to all the activities in the value chain from supply, through production/ manufacturing, distribution/ marketing are present the cluster concerned will enjoy economies of scale leading to low unit costs of production. In addition, the proximity of enterprises enables a constant flow of information pertaining to best practices back and forth among the enterprises. This tendency is supported by the opportunities that employees and employers of various enterprises have of meeting each other. There may be many chances of social meetings or gatherings for official purposes such as for discussing common problems, making representations to the government or for co-operation for training, bulk purchases or common marketing efforts. This tendency may be further supported by ownership of several enterprises by the same individuals, families or companies, as in the case of the 'kairetsu' of Japan namely Sumitomo and Mitsubishi. At the same time, proximity may promote intense rivalry among the firms to outdo each other by innovating their processes to earn higher returns. For this purpose they may try to attract the best talent available for example from the universities or build alliances with the leading companies in the world. These tendencies could enable the enterprises in the cluster to earn higher returns through value addition and differentiation of products. This may attract the setting up of other enterprises directly or indirectly connected with the activities present in the cluster. This is why such concentrations of enterprises have been described as growth centres. Well known world clusters include the Silicon Valley in California (ICT products and services), Wichita, Kansas (aviation / aircraft and connected products) and Basel in Switzerland (pharmaceutical products). These clusters have grown to be huge value adding 'machines' due to the natural tendency on the part of like enterprises to congregate (like Sea Street for jewellery and Ratmalana for textiles and apparel), supported by the setting up of a stream of new businesses, directly and indirectly connected to the main product/service, and attracted by the facilities available in the same location. The high performing nations in Asia, such as Taiwan and Singapore have adapted this natural mechanism for spurting towards competitiveness and ultimately to prosperity. For instance, right now Singapore is investing nearly $ 2 billion to set up 'Biopolis', a cluster to manufacture biomedicine, with a target of pushing up the exports from the sector to $ 12 billion by 2010. Other countries such as Malaysia and India have been following suit with spectacular results. Sri Lanka can do the same, especially now, when the nation is gearing to build from scratch after the tsunami devastation. Candidate sectors Obviously the fisheries and tourism sectors, qualify immediately for setting up clusters, mainly because of their size and enormous potential for growth. In the tourism area, a start in this direction has already been made in places such as Bentota and Unawatuna. No such effort has been made or being planned in the area of fisheries, despite the enormous resources in the surrounding Indian Ocean, especially Point Pedro and Wadge fishing grounds in the North, which are now exploited with impunity by foreign fishing vessels. This particular venture can be linked to a shipping hub either around the ports to be built in Hambantota or Trincomalee. Imagine the vast range of products and services, which it can accommodate and attract- from fishing and shipping to boat building and insurance. In the agriculture sector, there is definitely room for several clusters to be built linking a crop such as rice or crops with potential for further processing such as citrus, grapes, papaw and mango. This potential has to be examined along with the technical and commercial feasibility of the clusters. The authorities concerned could make a start by assembling a team of experts in the relevant fields. These teams should invariably include sociologists, as the beneficiaries have to be consulted and urban planners, as much spatial planning is involved. Corporate bodies of beneficiaries have invariably to be organised, so that the planners could consult them for organising the new activities on the basis of their needs and aspirations. Later these bodies, which have a better chance of attracting capital and expertise than individuals, can be entrusted with the running of these businesses. The unstated ingredient in all these dreams of prosperity of course is stability, which unfortunately is in the hands of our wayward politicians. So it is up to the people, civic and other organisations to make things happen. |
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