Assignment no.

1
Title: industrial cluster and regional development

1. Introduction
Industrial clusters definition by Porter (1998) and Sonobe and Otsuka (2014) have emerged from the
concept of a comparatively static notion of Industrial districts driven by Marshall‘s theory, (1980).
Therefore, they both Share a strong resemblance with each other indicating common roots of
Geographical proximity of related and complementary firms and social Emboldeners. However, industrial
clusters which are an agglomeration of Industries that produce either similar (in case of similar products)
or Complementary (suppliers or support firms) products meanwhile localized in A particular area, draws
heavily from the research on regional and global Value chains, and competitive advantage and
externalities (Becattini, Bellandi, & Propris, 2009). Industrial clusters have been under study by
Policymakers and researchers because their role is accepted as the source of Poverty eradication
(Hayami, 1998; Sonobe & Otsuka, 2006; Nadvi & Barrientos, 2004) especially in the context of
developing countries.

Competitive advantage emerges from the proximate firms that form the Cluster and become the engine
of economic prosperity by enhancing the Local employment, production, innovation, and export for the
country or Region (Bekele & Jackson, 2006). The phenomenon of clustering emerged from developed
nations like the United Kingdom and the United State of America. For instance, Manchester In the United
Kingdom is known for its textile industry cluster, the United States has a shipbuilding industrial cluster in
Glasgow, and Information Technology firms are successfully clustered in Detroit and more importantly In
Silicon Valley. Such successful agglomerations are emulated by the Developing world like Bangladesh,
China, and Pakistan in the case of the Textile industry cluster. In fact, in China, approximately 19
industrial Clusters are identified which are related to the textile industry absorbing 1.81 Million people.
(Long & Zhang, 2011). Similarly, India has successfully Followed the IT cluster example from Silicon Valley
and has IT clusters in Bangalore, Pune, and Hyderabad among other cities. This has resulted in its
Significant contribution (55%) to global IT services (Rao, 2016).

2. Main body:
2.1. Industrial Cluster Status in Pakistan
At the time of independence, the country was feeble in terms of Infrastructure and industrial
base. The manpower lacked technical expertise, he machinery was either absent or faulty and
old. There was a lack of Regulatory and support institutions. However, Pakistan was blessed with
Natural resources and an agrarian economy and had few cotton textile, sugar, And jute mills and
tea processing facilities, and cotton and jute were even Exported in raw form to be processed
abroad (Wizarat, 2002). Therefore, the Policymakers in the government felt the need to promote
 industries and Suggest policies suited for infant industries along with implementing Favorable
trade policies ushering the developmental decade in the 1950s Which resulted in improvement
in GDP and export. This trend is still Prevalent in the country despite its slow pace (Mahmood,
Ahmed, & Jaffri,2016). It has some labor-intensive yet low technology industries including
Textile, knitwear, plastic items and toys, surgical equipment, and sports Goods which promote
employment in the country and help in the lowering of Poverty (Sonobe & Otsuka, 2006).
Among all these industries and clusters, Garments and textile is the biggest sector generating
low-cost employment (Memon, 2010).

2.2. Regional and urban development

“Clustering is a term describing a phenomenon in which events or artefacts are not randomly
Distributed over space, but tend to be organized into proximate groups. Industrial clustering Is a
process that has been observed from the beginning of industrialization. From the cotton Mills of
Lancashire and automobile manufacturing in Detroit, to the textile mills of Ahmadabad and
Bombay and the tanneries of Calcutta and Arcot, even the casual observer Can visually discern
the evidence on industrial clustering by industry type” (Cbakravorty, Koo & Lall, 2003).
Many industries are tied to their location by the need to be close to their local markets. These
Industries are clustering in a more narrow geographic sense like a part of a city – mainly due to
Complementarities in attracting customers – but these effects are not strong enough to
influence The locational patterns across regions (Ketels, 2003). Productivity is likely to be higher
in areas Where an industry is more spatially concentrated due to the buyer-supplier networks,
access to Specialized labor pool and to efficient subcontracting relations4.
The natural resource-dependent industries are concentrated across space according to the
Presence of natural resource. Also, there are many industries that concentrate across
geographies And tend to cluster in attractive specific location (Porter, 2003).

The theoretical literature suggests that clusters are a factor at every stage of economic
Development but that in weaker environments clusters will tend to be weaker and more narrow
as Well (Rosenfeld, 1997).
According to other authors, while internal and external economies of scale are responsible for
Agglomerations, external economies are more important to economic development, through:
Localization economies, which explain that lower production costs and higher output in a Given
industry at a specific location lead to job growth in that industry (Mills & MacDonald, 1992). The
gains from localization economies are expected to lead to the creation of local Industrial clusters.
Urbanization economies, which states that an increase in a given urban area’s economic size
(e.g. its population, incomes) leads to an increase in the number of establishments across all
Industries in that urban area. These urbanization economies include access to specialized
financial And professional services, availability of a large labor pool with multiple
specializations, interindustry information transfers and the availability of less costly general
infrastructure (Cbakravorty, Koo & Lall, 2003). The gains from the urbanization economies are
expected to Lead to the industry concentrations in metropolitan and other leading urban regions.

One of the most prominent industrial clusters in Pakistan is the Sialkot cluster, which is known for its
sports goods manufacturing industry.
 2.3.Formation and Growth:

The cluster initially started as a small cottage industry producing footballs. However, with time, the
cluster’s focus diversified to other sports equipment such as cricket bats, hockey sticks, and gloves. The
Government of Pakistan played a crucial role in promoting the cluster’s growth by providing necessary
infrastructure, technical support, and financial incentives. As of today, the cluster has over 2,000 small
and medium-sized enterprises (SMEs) employing a workforce of approximately 0.5 million people.

2.4.Impact on the Local Economy:

The formation of this industrial cluster has had a massive impact on the local economy. The cluster
contributes approximately 10% to Pakistan’s total exports, generating foreign exchange for the country.
Through the cluster, Pakistan has become the world’s leading producer of sports goods, with a market
share of over 70% in some products such as hand-stitched footballs.

The cluster has also played a vital role in poverty alleviation by creating significant job opportunities for
locals. It has also indirectly contributed to local businesses and services, such as transport, energy, and
banking.

3. Conclusion

In conclusion, industrial clusters in Pakistan have played a crucial role in the country’s economic
development. Clusters such as Faisalabad, Sialkot, and Gujranwala have emerged as prominent centers
of excellence in specific industries, driving innovation, competitiveness, and productivity. These clusters
have offered numerous benefits to the economy, including job creation, increased exports, and poverty
alleviation.

The concentration of interconnected firms within a specific geographic region has facilitated knowledge
sharing, collaboration, and the development of new products and technologies. This has contributed to
the growth and competitiveness of industries within the clusters.

Moreover, the proximity of businesses in the same industry has allowed for the sharing of common
infrastructure, suppliers, and skills, leading to economies of scale and reduced production costs. This has
enabled firms to offer competitive prices in both domestic and international markets.

Industrial clusters have also attracted domestic and foreign investments, creating a favorable business
environment. The investments made in these clusters have not only fueled economic growth but have
also resulted in job creation, improving the livelihoods of the local population. Additionally, the success
of these clusters has contributed to the overall socio-economic development of their respective regions.

To further capitalize on the potential of industrial clusters in Pakistan, it is crucial for the government to
continue providing supportive policies, infrastructure development, and skills enhancement programs.
By nurturing and expanding industrial clusters, Pakistan can enhance its competitiveness, attract more
investments, and accelerate its economic growth.
4. Reference
 Becattini, G; Bellandi, M; Propris, L. (2009). Handbook of Industrial Districts. Edward Elgar
Publisher.
 Bekele, G; Jackson, R. (2006) Theoretical Perspectives on Industry Clusters. West Virginia:
Regional Research Institute West Virginia University.
 Cbakravorty S., Koo J. and Lall S. (2003): Metropolitan Industrial Clusters: Patterns and Processes,
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 Wizarat, S. (2002). The Rise and Fall of Industrial Productivity in Pakistan. Karachi: Oxford
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