1. CLUSTER GOVERNANCE Originators: Foundation for MSME Clusters (FMC), UNIDO

2. Reducing poverty through sustainable industrial growth Government and Governance  Governance is management of relations among entities  Government is one well known form of governance  It manages through rules and norms and via institutions  It manages at macro and micro level  Here rules predominate norms

3. Reducing poverty through sustainable industrial growth Cluster Governance  A cluster does not generally have such formal governance mechanism  Here needs of diverse interest groups need to be managed  Typical cluster issues are of prime importance  Various agreements evolve through processes for different issues  Government is not enough to handle these  Hence cluster level intermediaries play a major role

4. Reducing poverty through sustainable industrial growth Components of Cluster Governance  Local government  Associations  Networks  Institutions  Large firms  NGOs Across the relevant value chain Generally within the cluster

5. Reducing poverty through sustainable industrial growth Intervention in Governance Structure Case study: Leather Cluster of Ambur / India

6. Reducing poverty through sustainable industrial growth Cluster Map of Ambur (2000) KAR AMBURTEC Export Market International Fair Indian Market Chennai Market Export Agent of buying houses Merchant Tanners in Chennai Local Agent Integrated Export Oriented Leather (22) & Shoe Units (21) Shoe Upper Units (40) ATA Tanneries (80) Hides & skins’ Commission Agent Machinery Supplier Chemicals Supplier Shoe material Supplier ASSMA Tiny Shoe units (120) Specialised Job- Working Technocrats (30) Local Market Irregular Buyers Women workforce form villages (unskilled)

7. Reducing poverty through sustainable industrial growth Ambur Governance Capacity (2000) Analysis of cluster map:  Types of units: semi-finished leather, shoe upper units, tiny shoe making units, integrated export oriented firms  Associations: ATA of tanning units, tiny shoe units have a dead association ASSMA, no other associations  Two technical institutions KAR polytechnic and AMBURTEC, operating from outside are CLRI, CLE, and NSIC  Raw material procurement and selling of products by tiny shoe making units are sub-optimal market conditions  Large units dominate shoe upper and tanners  More issues may be revealed during implementation

8. Reducing poverty through sustainable industrial growth Status Prior to Intervention  Absence of appropriate intermediaries – large units  Dormant association – tiny shoe units, tanners  Dormant support institution - KAR  Low linkage among intermediaries  Conflict among intermediaries – shoe upper and large units  Sub-optimal market phenomenon for tiny shoe units

9. Reducing poverty through sustainable industrial growth Governance Capacity (2002)  One association of tiny shoe manufacturers (TASSSMA), one umbrella organisation (AEDOL), two export consortia (ALTECO and CSM), an NGO (ACCESS) involved in empowerment of women (fresh issue)  AEDOL has emerged as the lead organisation for growth and development of the cluster  KAR polytechnic has become proactive in running training programmes  Creation of step-c and common sales outlet of TASSMA  There are deficiencies in intermediaries  Further scope exists

10. Reducing poverty through sustainable industrial growth Ambur Cluster Map (2002) KAR AMBURTEC Export Market International Fair Indian Market Chennai Market Export Agent of buying houses Merchant Tanners in Chennai Local Agent Integrated Export Oriented Leather (22) & Shoe Units (21) Shoe Upper Units (40) ATA Tanneries (80) Hides & skins’ Commission Agent Machinery Supplier Chemicals Supplier Shoe material Supplier Tiny Shoe units (120) Specialized Job- Working Technocrats (30) Local Market Irregular Buyers Women workforce form villages (unskilled)

11. Reducing poverty through sustainable industrial growth Need for Better Governance  Existing deficiencies in infrastructure to be pursued vigorously  Implementation capacity of ATA needs to be enhanced  Problems of shoe uppers job-working segment needs to be perused  There is a greater scope for the empowerment of women. Specialised institution need to be called in  New issues do emerge

12. Reducing poverty through sustainable industrial growth Features of Good Institutional Gov.  Full financial sustainability  Established working relationship (norms) with other institutions - public or private  Active participation in coordinating cluster-wide activities  Professional functioning

13. Reducing poverty through sustainable industrial growth Various Governance Structures  Purely market driven – no intermediary  Representative intermediary of all stakeholders  Several intermediaries A mix of the above One or two intermediaries take lead None an imposed entity - they evolve

14. Reducing poverty through sustainable industrial growth Governance Structures - Examples  FEKTAA and various associations in Ludhiana  Association(s) – IMTMA and ABMTC in Bangalore  NGO – Bunkar Vikas Sansthan in Chanderi or KDHF in Kota - information  LIRD: NGO from outside the cluster  Institution – CHI in Ahmedabad

15. Reducing poverty through sustainable industrial growth Steps towards Governance Structure  Understand the institutional gaps (through cluster map)  Promote a vision  Promote business through ideal business intervention for targeted intermediaries  Initiate, demonstrate and pass natural responsibilities  Create linkages through interaction and develop norms for interaction  Link vision to intermediaries as capacity develops