Page 62 - Plastics News June 2023

ARTICLE

Cluster-based economic development
Government officials, corporate executives, academics, and practitioners all recognise that cluster-based economic
development promotes innovation, productivity growth, and wealth. Intangible assets like social capital drive cluster
success, regardless of their origins. Clusters foster knowledge and collaboration. Cluster development provides a new
way for governments to arrange their industrial projects and services. Actions include embracing cluster-based eco-
nomic development as a national strategy, sponsoring cluster evaluation and plans, expanding R&D investment, infusing
technology, and demanding clusters. Isolated cluster approach fails. Instead, the question is whether industries succeed
owing to solid business strategies, locational advantages, or leveraging on a nation's competitive advantages and strategic
planning by governments/states throughout the world.
Understanding of Chemicals Clusters in different regions
Europe: Europe is a major chemical market. European clusters servicing consumers in this region continue to benefit
from the scale of the European market, even as other markets, notably in Asia, rise. Europe's key asset is its highly de-
veloped business environment, which allows chemical businesses to attain productivity levels that compensate for high
factor prices. Second, access to a highly skilled labour population, especially in places where a long history of chemical in-
dustry employment has produced specialised educational institutions. Third, the chemical industry has access to produc-
tive general inputs and services from numerous linked and supporting sectors, notably in Europe's industrial heartlands.
Chemical product manufacture and usage in Europe must fulfil rigorous environmental and safety regulations. European
chemical clusters may be threatened by some of these requirements, which are costly. However, as these standards
foresee worldwide trends and empower enterprises to find new solutions, they may also position European clusters as
global industry leaders in innovation. Based on these economic environment characteristics, Europe has built a cadre of
powerful chemical enterprises, many with rich historical origins. Many of these firms have global reach and contribute to
other clusters. This worldwide reach gives European clusters significant links to foreign markets. European enterprises
must continually examine which of their various locales is ideal for a specific activity, which puts European clusters in
constant rivalry.
Asia: Asia's chemical industry is younger than Europe's. It is still defined by fragmented markets, whereas competitors in
North America and China are rising in bigger, more integrated markets. European clusters have issues due to their long
history. Europe's capital stock is older, so industrial facilities don't attain the same economies of scale as new investments
in Asia.
Jurong Island: Petrochemicals Cluster Case Study
The diamond model is used to analyse the petrochemical cluster. The diamond model suggests four linked facets i.e.
factor inputs, demand conditions, connected and supporting industries, and firm strategy and rivalry. Jurong Island's
cluster-based growth is crucial to Singapore's petrochemical industry. Feedstock and many upstream and downstream
enterprises combined with linkages at one designated location makes this very beneficial for individual companies. Due
to rising regional demand for petrochemical and specialised chemicals, multinational corporations from around the
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cutting-edge utility infrastructure. Supporting businesses like logistics, common docks and jetties, waste treatment facili-
ties, and chemical warehouses attract investors.
1. Factor Input
Political stability, sound macro & fiscal policies, financial incentives, good transportation network, sound legal frame-
work, good telecommunication infrastructure, and pro-business atmosphere are widely understood. Cluster-specific
factor inputs are the emphasis here.
Refineries: Singapore's third-largest oil refinery is in Singapore. The four major refineries are Shell, Exxon Mobil, SPC,
and SRC (SRC). Oil refineries produce naphtha, NGL, and LPG, which are used as feedstock in the petrochemical
process. Their presence in Singapore may encourage other firms to build petrochemical plants nearby to decrease
transportation costs. Cost is the reason petrochemical factories are located near or integrated into feedstock producing
sites. Integrated petrochemical refineries are anticipated to add US$2-$5 per tonne of petroleum to refinery margins.
Shared Facilities: Jurong Island was established to provide a cost-effective environment for corporations, notably in
capital-intensive industries like petrochemical. Jurong Island was developed by linking seven small islands (Pulau Mer-

62 PLASTICS NEWS June 2023