1. Location factor
Institutional factor

2. What is institutional factor?
External forces to influence the location of industries
Government intervention in terms of incentives or penalties
Both central and local governments can exert influence
Both free and planned economy

3. Why does the government intervene?

4. Strategic reasons
To avoid attack of industries during wartime, e.g USA and China
To encourage the development of military industries, e.g. munitions and aircrafts manufacturing

5. Political reasons To maintain economic growth and political stability
To minimize social unrest and riots
To reduce regional economic inequalities or imbalance
To integrate minority races, e.g. China

6. Economic reasons To ensure overall economic well-being of the country
To provide job opportunities
To stimulate economic growth
To achieve modernisation (e.g. in many LDCs)
To promote the growth of some particular industries
To diversify economy
To fully utilize resources/factors of production
To raise productivity and increase the wealth of the country

7. Social reasons To minimize social unrest
To achieve regional economic balance
To lessen social problems, e.g. massive internal migration, crimes, family problems, suicides, violence brought by unemployment and poverty

8. Environmental concern
To reduce environment problems/pollution
To disperse industries
To discourage industrial concentration in urban areas

9. Government measures

10. Infrastructure, transport & utilities

11. Providing cheap and extensive land

12. Jurong Industrial Estate, Singapore

13. Cambridge Science Park, UK

14. Silicon Valley, South California, USA

15. M4 Corridor, UK

16. Hsinchu Science-based Industrial Park

17. Policy making Slows down redundancy Reduce unemployment rates
Encourage employers to take on unemployed workers
Example: various employment programmes in HK
Employment Services (Elementary Jobs)
Employment Services (Skilled Jobs)
Employment Programme for the Middle-aged
Count On Talent Not Age in Employment

18. Establish new industries
To provide regional development funding
To save depressed areas
To develop industries in new areas
To raise production

19. Example 1: China Planned economies
The Chinese Government set up a large petroleum refinery and petrochemical works in Urumqi in 1950s – 1970s
To achieve regional economic balance and industrial dispersion

20. Example 2: UK, France Mixed economies
To establish nationalized plants in depressed regions and rural areas

21. To attract foreign investment
To offer favourable terms of trade
To grant tax concessions (tax holidays, low rates on profit taxes)
To grant industrial land at low prices
To provide loans & subsidies
To provide cheap land, factory buildings and workers
To provide freight concessions

22. To protect home industries
To impose tariffs and quotas on imported finished products
Example: USA imposed tariffs on imported Japanese cars to protect the automobile industry

23. To adopt zoning policy Specify the siting of industries
Examples: HK – the setting up of industrial estates

24. To set up training institutes
To retrain workers
To modernize firms/production
To update technological advances

25. To impose control To reduce pollution and other environmental problems
Air, water, noise pollution
Traffic congestion

26. To adopt town planning measures
To limit the location of repulsive industries, e.g. leather tanning
And environmentally dangerous industries, e.g. chemical works
To encourage the development of cleaner industries
To force the manufacturers to treat their sewage and waste products before disposal

27. To adopt strong central planning
Common in socialist countries, e.g. China, Russia, Yugoslavia
Direct government intervention
Depends on top-level decisions

28. Demerits of too much intervention
Excess subsides  Low incentives to increase productivity
Which may slow down industrial restructuring
Too much protection  reduce imports  higher prices  inflation
Penalties  cost of production ↑
Sub-optimal location  unprofitable/close down of industries/wastage of resources
Complex bureaucratic barrier  inefficient management/low incentive to produce