The experiences of many countries all over the world are broadly consistent with the hypothesis underlying the so-called Williamson Curve, formulated in economic literature in 1960s. Williamson (1965) stated that when a country enters a fast growth path, regional disparities increase in the early stages of development, but later on, convergence processes take place. In the last decade, we observe spectacular economic growth in some emerging market economies in Asia, with the most notable example of China. At the same time, this growth is not evenly spread across national economies, as it is concentrated mostly in some regions, leading to increasing spatial disparities. Another economic theory that may be applied to describe this process is the theory of growth poles, which assumes that “growth does not appear everywhere at the same time; it manifests itself in points or poles of growth, with variable intensities” (Perroux 1955, p. 56). Growth poles are understood as concentrations of industries around a central core that are able to impact growth for them, as well as that of the surrounding area. In more recent times, the growth poles may be analyzed through the prism of the concept of clusters, defined by Porter (2000, p. 254) as “a geographically proximate groups of inter-connected companies and associated institutions in a particular field, linked by commonalities and complementarities”. The most famous example of cluster is Silicon Valley in California, however, in the last year this concept has been gaining in importance all over the world, both as a business model for companies’ activities, and as an economic policy instrument (Kowalski, 2016). We also observe dynamic emergence of clusters in Asian economies, in particular in China, especially FDI (foreign direct investment)-driven clusters centered in special economic zones (SEZs) in the most prosperous coastal regions in the east of the country.
The economic successes of many regional economies, which have developed prosperous cluster structures, encourage the governments all over the world to prepare and implement different types of programs supporting clustering processes. This is why cluster policy is emerging as an important element of broader economic policy, and the concept of the cluster-based economic development policy was formulated at the OECD forum. This concept inspired also Thailand’s government, which in September 2015 initiated active cluster policy. Thai strategy involves the creation and development of 2 types of clusters:
- Super Clusters, which are clusters of businesses using advanced technology and future industries, of particular importance for international competitiveness of the economy,
- Other Targeted Clusters with competences in low-tech industries.
The Super Clusters, with their locations and industries were designated by Thailand’s Board of Investment (2015a; 2016) and BOI (2015b), that is:
- Automotive and Parts Cluster (7 Provinces: Ayutthaya, Pathum Thani, Chonburi, Rayong, Chachoengsao, Prachinburi, Nakhon Ratchasima),
- Electrical Appliances, Electronics and Telecommunication Equipment Cluster (the same 7 Provinces as for the previous cluster),
- Eco-friendly Petrochemicals and Chemicals (2 Provinces: Chonburi and Rayong),
- Digital-based Cluster (2 Provinces: Chiang Mai and Phuket),
- Aerospace Industrial Cluster (Bangkok, Samut Prakan, Nakhon Pathom, Pathum Thani, Chacheongsao, Chonburi, Rayong, Chiang Rai, Phitsanulok, Nakhon Sawan, Lopburi, Nakhon Ratchasima, Surat Thani and Songkhla),
- Food Innopolis, Medical Hub, and Automation and Robotics Industrial Cluster (with details to be announced later).
The second category of clusters supported in the framework of the cluster policy in Thailand, so called Other Targeted Clusters, include: Agro-processing Cluster, and Textile and Garment Cluster. They are focused on low-tech sectors and are located in different regions, where raw materials are available, as indicated below (BOI 2015a, 2015b):
- Agro-processing Cluster: Northern Region (vegetables and fruits, herbal products), Northeastern Region (livestock, tapioca, sugar cane, maize), Lower-Central Region (sugar cane, pineapple, rubber), Eastern Region (fruits, rubber), Southern Region (palm, seafood, rubber),
- Textile and Garment Cluster: West Corridor connected to manufacturing source in Myanmar, East Corridor connected to manufacturing source in Cambodia, and Bangkok connected to the Design, Sourcing, and Trading Hub.
In the same way as for the Super Clusters, the details on the eligibility criteria for Other Targeted Clusters are presented in the Announcement of Thailand’s Board of Investment (2015a). The incentives offered for these two categories of clusters are indicated in Table 1.
The analysis of the incentives offered in the framework of cluster policy initiated in Thailand in 2015 shows that they are in fact very similar to policy instruments that are usually applied in special economic zones (SEZs). This finding illustrates the nature of the cluster policy in Thailand, which is directed mostly at attraction of foreign direct investments (FDI) rather than at enhancing cooperation between local firms, as it has place in developed market economies, like the European Union. Another specific feature of cluster policy in Thailand is its top-down approach, meaning that it is the government, which designates specific territory and initiates clusters in the selected regions. In comparison, it was not the government that designated Silicon Valley in California, as this cluster developed mostly as a result of spontaneous process based on the market forces, and different kinds of agglomeration economies. Even if the governments support clusters in developed countries, usually they adopt bottom-up approach to cluster policy. It means that the key role in clustering process is played by local enterprises, whereas public authorities undertake only some supportive actions (Kowalski, 2013). This bottom-up approach to cluster policy can be observed for example in Poland, where the Ministry of Development appoints so called Key National Clusters on the basis of open competition with a set of pre-defined criteria, which applying clusters must fulfill, like: the critical mass, development and innovation potential, cooperation status, plans, experience etc.
In conclusion, the observation of clusters developing all over the world shows that this is a very flexible concept, which can encompass the experiences of different countries characterized with distinct economic, political and social systems. However, comparison of Thai and European or American approaches to clustering demonstrates that there are different variations and trajectories how clusters develop and how they are supported by the governments. In particular, this analysis contributes to the more in-depth formulation of Asian model of clusters and cluster policy. The key distinguishing element of this model is that Asian clusters are driven mostly by FDI, which take the central place in the cluster structure. At the same time, domestic companies and the system of local connections are much less important elements of the cluster. An important role in the process of cluster initiation and development in Asia is played by the government, which introduces different types of tax or non-tax incentives, but they are usually very similar to the instruments used in SEZs, which again highlight strong position of FDI in Asian clusters. At the same time, there is top-down approach to cluster policy, especially in the initial phase of cluster formation, with specific locations for clusters specializing in different types of industry designated by public authorities.
BOI (2015a), Announcement of the Board of Investment No. 10/2558. Cluster investment promotion incentives and privileges in the Special Economic Development Zones, Announced on the 27th of October 2015.
BOI (2015b), Thailand Moving Ahead with Cluster Development, Board of Investment Brochure, Bangkok.
BOI (2016), Announcement of the Board of Investment No. 7/2559. Additional Amendments of Eligible Activities for Investment Promotion in accordance with Cluster Investment Promotion Incentives and Privileges in the Special Economic Development Zones, Announced on the 11th of April 2016.
Kowalski A.M. (2013), Znaczenie klastrów dla innowacyjności gospodarki w Polsce, Warszawa: Szkoła Główna Handlowa w Warszawie – Oficyna Wydawnicza.
Kowalski A.M. (2016), Territorial location of ICT cluster initiatives and ICT-related sectors in Poland, in: H. Drewello, M. Bouzar, M. Helfer (eds): Clusters as a Driving Power of the European Economy, Baden-Baden: Nomos, pp. 49-66.
Perroux F. (1955) Note sur la notion de pole de croissance, Economie Appliquee, Vol. 8, pp. 307–320.
Porter M.E. (2000), Locations, clusters, and company strategy, in: G.L. Clark, M.P. Feldman, M.S. Gertler (eds), The Oxford Handbook of Economic Geography, Oxford: Oxford University Press, pp. 253-274.
Williamson J.G. (1965), Regional Inequality and the Process of National Development: A Description of the Patterns, Economic Development and Cultural Change, Vol. 13, pp. 3-45.
Arkadiusz Michał Kowalski is an Associate Professor in the World Economy Research Institute at the Warsaw School of Economics. Since September 2016 until February 2017, he is a Visiting Researcher at the Chulalongkorn University in Bangkok.