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Economic clusters - geographic concentrations of inter-connected companies and institutions in a particular field- have driven the development of regional industries and economies throughout modern history, from the trading houses of Venice and the shipbuilding industry in England to modern salmon farming in Chile, coffee and flower production in Kenya, and the Good Agricultural Practices (GAP) clusters of Thailand.
Successful economic clusters exhibit a number of common characteristics: strong brand identities; robust export strategies; extensive opportunities for inter-firm interactions and partnerships; and the presence of a diverse range of institutions from the public, private and academic sectors. As a result, clusters are also attractive 'one stop shops' for visiting investors and trade missions, important conduits for tapping into new international markets.
In addition, through their economies of scale; clusters can also anchor other economic sectors. The Napa Valley wine cluster, with $USD13billion in direct economic benefits in 2012, generated nearly $USD50B in additional benefits in such related sectors as bottling, corking, testing and wine tourism. In Indonesia's case, innovations in the fisheries and seaweed sectors have similar potential to serve as catalysts for the birth or expansion of a range of industries, from transport to processing to eco-tourism.
A regional development model that leverages the benefits of economic clusters will typically drive inwards investment and attract skilled workers that ensure an ongoing cycle of growth and innovation.
With these intentions and historical precedents in mind, Indonesia adopted its Master Plan for Acceleration and Expansion of Indonesia Economic Development (2011-2025) . A key element of this plan was the identification of industrial clusters and special economic zones which would extend beyond defined administrative boundaries at the provincial and district levels. This was included as an explicit effort to promote regional economic development, increase the economic competitiveness of rural areas, and encourage rural-urban and inter-regional linkages. Focusing on products and services which reflected the comparative advantage of each region, businesses and institutions engaged in the same sectors would then be encouraged to connect to join forces in addressing common challenges and opportunities. The public sector would then focus on initiatives to promote regional development and reduce existing barriers to trade within the regions. Putting these theories into practice in a highly decentralized political economy such as Indonesia represents a significant challenge. In support of this effort, the governments of Canada and Indonesia developed the National Support for Local Investment Climates Project (NSLIC). Focused primarily on the two provinces of Southeast Sulawesi and Gorontalo, NSLIC will promote over its seven-year lifespan inclusive growth through the expansion of 'economic growth centres' in the agriculture, forestry and tourism sectors.
Specifically, this innovative 7 year program will focus on:
This white paper provides a brief overview of the 4 key program considerations that, when taken together, provide a comprehensive and balanced approach to designing a successful regional economic development program of this nature: