Foreword

Dear Readers,

Cluster e-News is the electronic version of the previous Cluster News, that many of you have read. This bimonthly newsletter is aimed at providing all those who are associated with cluster development not only with a review of news and announcement of events but also with food for thought. To this end, every number will present a case study.

The case study selected for this first issue relates to the Ludhiana knitwear cluster, where UNIDO completed its four years of intervention. The end of a project is always a moment of balance between achievements and failures. In this issue we share with you the challenges present at the onset of the project, the strategy adopted to face them, the milestones of the intervention and its main results.

Of course this newsletter is a two-way channel of information dissemination and we at the UNIDO Focal Point invite your valuable inputs in the form of articles, feedback and suggestions through email to the Editor.

So write to The Editor, Cluster e-News, unido@del3.vsnl.net.in

Looking forward to your response,

Anita Das
Editor

Special Message

It is heartening to know that the UNIDO Cluster Development Programme Focal Point is introducing the first copy of Clusters e-News.

As you are aware, there is a great deal of interest generated in development of SSI and artisan clusters in the country. Starting from 1996, when only a couple of institutions were engaged with cluster development initiatives we have come a long way, with several institutions and States launching their own initiatives for development of SSI clusters. In fact, "Cluster Development" as an approach for the growth of the SSI sector is one of the most important initiatives launched by the Ministry of SSI to meet the challenges of globalisation.

This boom in interest for cluster development, and the necessity to be constantly updated about the latest development in this field renders this newsletter all the more useful and timely.

I therefore, welcome this initiative and wish it every success.

S.K.Tuteja
Secretary
Ministry of Small Scale Industries
Government of India

Inaugural Address

I am delighted to inaugurate the first electronic issue of 'Clusters e-News'. Here is a fast and effective communication media for sharing information and experiences within the vast network of the UNIDO Cluster Development Programme (CDP). Let us hope all partners will derive the optimum benefit from this highly useful inter-active media.

This is an admirable platform to emphasise that the many network partners have been the key to the success of the programme. UNIDO’s CDP role has merely been to foster cooperation, develop methodologies and disseminate the best practices. It is you - our partners in the field, business associations and development institutions - that have taken the lead and put in all the hard work.

This is the crux of the cluster programme. Our efforts can only bear fruit when local partners assume its ownership and lead in identifying problems and solutions. Only local partners know fully the local conditions and have to live with the solutions in the long run.

India has a pioneering leadership Cluster Development Programme. UNIDO’s CDP launched in 1997 with the Ministry of Small Scale Industries, Government of India, has shown remarkable results in specific industrial and artisan clusters. After enabling them to become self-reliant in a number of ways, four major clusters have been handed back to their owners. The CDP in India is financed by the Italian Ministry of Foreign Affairs and the Swiss Agency for Development and Cooperation.

Today, the programme has gradually shifted its emphasis to assisting State Governments, Indian SME support institutions and development banks willing to undertake cluster development initiatives. A training course for practitioners of cluster development and customised methodologies for cluster development are key inputs of the assistance to State Governments and local institutions. The training course, developed with the Indian Entrepreneurship Development Institute of Ahmedabad, is offered to NGOs, banks, state governments and SME support agencies. By strengthening the capacity of local development agents to promote cluster development, rather than working directly with clusters, far more clusters are reached, directly and indirectly, by the programme.

The Programme has also compiled a repository of information on national and international best practices on cluster development, which is made available to other countries in the Asia-Pacific Region that are inspired by the Indian experience when seeking specific solutions to the challenges faced by their clusters.

India hosts a large number of clusters. Over 350 industrial clusters contribute almost 60 per cent of its manufactured exports; and around 2,000 artisan clusters offer millions of jobs. Some perform very well, like the hosiery cluster in Tirupur or the software cluster in Bangalore. However, most Indian clusters face severe problems related to their technological obsolescence, stiff competition in globalized markets and inability to meet quality, environment and social standards. Through its CDP, UNIDO assists them in these areas.

Worldwide, UNIDO’s CDP assists ‘under-achieving’ clusters by enhancing cooperation among SMEs and their support institutions. The programme assists the cluster actors (i.e. firms, institutions, local authorities) to develop a consensus-based vision for the cluster as a whole and by strengthening their capacity to realize their vision.

Dr. George B. Assaf
UNIDO Representative & Regional Director for South Asia

Coming up...

UNIDO CDP Learnshop on Monitoring and Evaluation

In May 2002, UNIDO Cluster Development Programme organised a learnshop aimed at getting a comprehensive view of emerging trends in clusters development projects brought forward by different institutions in India. Following the interest shown by participants, a second learnshop will be organised at the end of May 2003. This time the focus will be on a specific topic: "Monitoring and Evaluation of Cluster Development Programmes".

For more information, contact Ms Elisabeth Beer (UNIDO) at lisabeer@libero.it

National Programme for Training of Textile and Clothing Industry Personnel

The Textiles Committee of India is organising training courses on more than 22 topics ranging from orientation on ISO 9001 to apparel manufacturing in order to equip the personnel working in the industry with updated skills and knowledge. These workshops are being hosted in different locations in the country.

For further information, please see www.textilescommittee.nic.in

Launch of the SME network

An Internet network specifically dedicated to SMEs has been recently launched. The network has four-pillars: information, web enabling, networking and interaction. It is promoted by the Federation of Indian Micro and Small & Medium Enterprises together with three Industry Associations of Uttar Pradesh.

For further information visit the site www.smenetwork.net or contact coordinator@smenetwork.net

News in Brief

The Expert Group Meeting on Impact Assessement of CDP

An Expert Group Meeting (EGM), held in Delhi from the 9th until the 14th of December 2002 focused on impact assessment of Cluster and Network Development projects promoted by UNIDO. The objectives of the meeting were to draft a common impact framework in order to compare systematically UNIDO cluster and network projects around the world and to share knowledge and promote mutual learning about projects implementers.

Cluster and network projects currently being implemented in Nicaragua, Zimbabwe, Senegal, Nigeria and India were presented. A common impact assessment framework was proposed. Additional presentations described tools and methodologies for clusters and network development programmes. Their impact on poverty alleviation was also discussed. Finally, in order to present a concrete case study, a field visit to the Ludhiana knitwear cluster was organised.

For more information, contact Ms Elisabeth Beer (UNIDO) at lisabeer@libero.it

The Development Commissioner (SSI) visits Machine Tool cluster at Bangalore

Mr. Suresh Chandra, Additional Secretary & Development Commissioner (SSI), Ministry of Small Scale Industry, visited the machine tool cluster of Bangalore on 8-9th January 2003. He visited production units and interacted with nine consortia, representating the cluster actors, besides SIDBI and NSIC, in order to better understand cluster work and to guide further progress.

Ministry of SSI website www.dcmsme.gov.in For more information on Bangalore cluster, contact Mr. Jitendra Kalra (UNIDO) at jitendrakalra@hotmail.com

Workshop on "Emerging shift in micro-enterprise development"

A national level workshop on “Prototype for micro enterprise development” was organised by PRAGYA on the 29th and 30th of February, in Delhi. It was sponsored by the Japan Bank for International Cooperation and SIDBI. Micro Enterprise Development (MED) is fast emerging as an important tool to address poverty alleviation in India. Over the past few years diverse models have evolved to address the issue of livelihood creation through MED. The workshop sought to glean the different learnings of these interventions and to encapsulate them in prototypes.

For further information, please contact info@pragya.org or www.pragya.org

Collaboration between TVS Lucas, SISI Chennai and UNIDO CDP

On 19^th of February, the company TVS Lucas, Small Industries Service Institute (Chennai) and UNIDO CDP launched a 6 months long collaboration initiative in the field of international best practices in the autopart manufactures.

For more information, visit www.sisi-chennai.com

40 new Coir Consortia in SBI CDP in Alleppey

In Alleppey (Kerala), where SBI UPTECH has taken up a cluster development initiative in the coir sector, the Cluster Development Agent has mobilized small producers at the grass root level, entrepreneurs and exporters into creating 40 different consortia. These consortia have adopted group initiatives in order to face common challenges such as sourcing raw material, accessing markets and export services.

For more details, please contact Abraham Joseph (SBI) at abrhilda1954@yahoo.co.uk

NSIC new cluster initiative

The National Small Industries Corporation (NSIC) has recently taken up cluster development initiative in 20 clusters and their Cluster development Agents (CDAs) have been trained by Entrepreneurship Development Institute of India (EDII), Ahmedabad where UNIDO CDP were also provided. The focus of NSIC is mainly to utilise the services of their CDAs to develop the cluster and increase business of NSIC services.

For further information, please contact Mr. RK Celly at dpm@nsicindia.com or visit www.nsicindia.com

DC (Handlooms) and EDII Ahmedabad training program on cluster development

The Development Commissioner (Handlooms), Governement of India, in conjunction with the Entreprenuership Development Institute of India (EDII), has recently conducted a residential training program on cluster development for its field officers.

For further information, visit www.edii.org or contact Mr Kunal Sood at kunal@ediindia.ortg

A delegation from the Jamnagar brass parts cluster visits China

As part of the ongoing Cluster development project, a delegation of 15 entrepreneurs from the brass parts cluster of Jamnagar (Gujarat) visited Hong Kong, Shanghai and Yuhuan in China, last March. The delegates could see the brass manufacturing cluster in China, the plants machines, the quality of the products, their finish and polish. Trade terms were negotiated for the interested exporters/importers and the possibility of appointing sales agents there was explored. The delegation also had an overview of the Chinese marketing practice and the tools used to attract foreign direct investment.

For more details, please contact Mr Sanjay Pal at banhi@rediffmail.com

A Case Study

Ludhiana: A New Paradigm?

In 1997, UNIDO Cluster Development Programme started its intervention in the 100 years old knitwear cluster of Ludhiana. Ludhiana’s products represent 95% of the domestic woollen market and the cluster holds a major share in the cotton segment. The main problems diagnosed in the cluster included: lack of sufficiently skilled work force, poor product range (need for yarn diversification), lack of market information, poor finishing and poor infrastructure.

In order to address these issues and to enhance the capability of the cluster to rapidly respond to the changing demand pattern of consumers, the project focused on building a stronger private sector set-up. It started off by assisting a group of exporters into creating a small network since this segment had no worldwide representative body. The network, initially composed of 6 members, has grown to become an association of 54 exporters - the Apparel Exporters’ Association of Ludhiana (APPEAL) - covering almost 80% of Ludhiana exports. Nevertheless, since domestic market continued to be the main strength of the cluster, a local association of knitwear manufacturers - Knitwear Club- was guided towards developmental activities, going far beyond the lobbying work it used to do. These two private associations have become the main pillars for Ludhiana’s future strategy of growth. Yet, efforts to bring both the bodies and other suppliers associations under an umbrella association called Federation of Knitwear and Allied Industries Associations (FEKTAA) have still not fructified in their entirety. This remains a challenge to be addressed in the future.

Between 1997 and the end of UNIDO project in 2001, the activities set in motion through APPEAL and Knitwear benefited approximately 150 firms directly and indirectly. Cost cutting and productivity improvement measures led to savings amounting to USD 1.2 million in around 55 units and new techniques to raise competitiveness like energy saving and store management were introduced in the cluster. New market ventures at international level brought an increased sale of 10 million USD from 1998 to 2002 whereas new marketing tools like exclusive Buyer Seller Meet were introduced. Joint participation in trade fairs was launched and consortia created. The estimated additional investments in new equipment made by 22 units amounted to 8 million USD. Forty-five new yarns were introduced in the cluster. Five innovative training programs were designed, training around 400 people. Of these, 300 were women and 70% gained new employment while others were in-house trainees. The creation of a resource centre was also enabled.

After the completion of the project, in December 2001, several successors took up the lead in the on-going initiatives. The State Bank had launched its project in March 2001, while the Textiles Committee of India officially partnered with the UNIDO Cluster Development Programme in 2002 to carry on the activities. Its Cluster Development Agent was posted in the cluster in June 2002. The Knitwear Club and APPEAL (Apparel Exporters Association of Ludhiana) as well as the apex body FEKTAA had already forged strong linkages with central and local policy makers and with various support institutions.

The Associations have in fact undertaken various activities. The International Yarn Fair, organised by Knitwear Club in joint collaboration with the China Chamber for Promotion of Import and Export of Textiles, received a lot of appreciation. It gave the required confidence to the industry that it could manage events of this magnitude on its own. After this event, APPEAL recently conducted a second mega scale Buyer Seller Meet for promoting exports. Knitwear Club has conducted a workshop on the opportunities provided by Technical Textiles setting the road towards collaboration in this emerging area. Knitwear Club also organised a major exhibition on Yarns, Accessories and Machinery. All the exhibitions have been fully sustainable and have earned profits for both the associations. On the marketing front, a brand “Made in Ludhiana” will be promoted by FEKTAA to build consumers' confidence in the products from Ludhiana. The major achievement however remains the Industrial Associations bidding for the Apparel Park, an infrastructure proposal. The state government has appreciated their capability to undertake a project worth Rs. 50- 60 crores.

Thus, Ludhiana provides an example of a positive transition towards a stronger, capable, workable and, more importantly, a sustainable local governance framework that UNIDO aspired to build on.

For more information, contact Deepak Arora (UNIDO) at unido@del3.vsnl.net.in

APPEAL appeal@sify.com or go to www.ludhianaknits.com

Knitwear Club info@knitwearclub.com or go to www.knitwearclub.com

For Your Information

Compendium of various SME clusters related schemes

A "Compendium of various SME clusters related schemes" has been prepared by the Focal Point Please contact UNIDO CDP Focal Point at unido@del3.vsnl.net.in

Interesting Web sites

UNIDO CDP Learnshop on Monitoring and Evaluation

Interesting information on cluster initiatives can be found at:

• www.unido.org/clusters
• www.competitiveness.org which publishes a newsletter that can be found at www.competitiveness.org/newsletter
• www.oecd.org publishes Leed news, a bimonthly newsletter. To subscribe to Leed Flash, send a mail to lucy.clarke@oecd.org

Also mentioned in this number:

SIDBI www.sidbi.com

Japan Bank for international cooperation www.jbic.go.jp/english/

Entrepreneurship Development Institute of India (EDII), Ahmedabad www.ediindia.org