1. Competitiveness of Small Enterprises: Clusters, Business Environment and Local Development ‘Clusters, Territorial Competitiveness, Poverty and Social Sector Integration’ Dr Khalid Nadvi Institute for Development Policy and Management School of Environment and Development University of Manchester, UK UNIDO/ MIF-FOMIN Joint Workshop Inter American Development Bank Washington DC 29-30 October 2007

2. Structure and aims Clusters, poverty and social sector integration– is there a relationship? What evidence is there of pro-poor cluster/network development initiatives? What do we learn from this evidence? What implications for territoriality? What are the policy challenges?

3. Clusters and Poverty: The Conceptual Challenge CLUSTERS Growth & Competitiveness Collective Efficiency Local Institutions Social Capital Global Buyers Local Clusters in Global Value Chains POVERTY Incomes Employment Vulnerability Risk Participation Empowerment Social Protection Social Provisioning

4. Cluster-Poverty Nexus: The Key Questions Does clustering raise employment for the poor? Does clustering reduce vulnerability and risk for firms and labour? Does cluster based upgrading have positive outcomes for the poor? Does clustering enhance skills? Is this pro-poor? Can social capital strengthen pro-poor initiatives? What is the relationship between local cluster governance and global value chain governance? Can clusters promote compliance with labour, social, environmental standards and CSR norms? How can poor clusters build territorial advantages?

5. Clusters and Poverty (Nadvi & Barrientos, 2004, UNIDO) Cluster Features – Location, Sectors, Firms, Workers Cluster Processes – Agglomeration Economies, Joint Action, Local Institutions, Social Capital Cluster Dynamics – Growth Trajectories, Upgrading and Differentiation Cluster to Poverty Mapping – Identifying poverty nodes Poverty and Social Impact Assessment – Improving impact

6. The Evidence: Latin America and sub-Saharan Africa Chontales milk processing cluster, Nicaragu Built supply networks with global buyers Brought about improvements on infrastructure Atuntaqui garment cluster, Ecuador Addressed child labour Improved health and safety Productivity based wage incentives Gullele Handloom Cluster- Addis Abbaba, Ethiopia Co-operatives of weavers with shared equipment and facilities (Selam Teramaj) Strengthened marketing initiatives Raised Incomes Suame (Ghana), Ziwani (Kenya) and Nnewi (Nigeria) vehicle repair clusters Nairobi (Kenya) garment clusters

7. The Evidence II: UNIDO initiatives in India Sindhudurg Cashew cluster, Maharashtra Chanderi Handloom cluster, Madhya Pradesh – Focusing on particular poor & vulnerable groups – women, minorities – Promoting social development (health/education) and entrepreneurship – Self Help Groups as the basis for local joint action Orissa Cluster Development Programme – Pre-dominance of poor off-farm clusters in handlooms, handicrafts and metal working – Working with ‘non-formal forms’ of joint action Self Help Groups – Focusing on the very poor – Building geographical indication around region/territory based artisanal crafts Ludhiana Garment cluster, Punjab – APPEAL (Apparel Exporters Association of Ludhiana) training programmes for poor unskilled women

8. India – the Outcome Chanderi – 600 weavers organised into 150 SHGs – 2005, total turnover US$ 200,000 – Average wage rises by 10-15% 2004-06 – Improved access to formal sector credit – Women’s literacy programme – 61 female weavers – Women’s SHGs catering to 186 women weavers MSME Foundation and Govt. of India’s commitment to a (pro- poor?) cluster development strategy

9. The Evidence III – Sialkot, Pakistan and the ILO-IPEC programme The Challenge - Child labour in the sports good cluster The Response- 1997 Atlanta Agreement – ILO-IPEC: factory monitoring – UNICEF: universal primary education – Save the Children Fund (SCF-UK): school development and income generation – Active collaboration with local Chambers and local and central government The Outcome – Cluster-based ‘developmental’ agenda – Questions about sustainability 2006 Nike ‘Pull Out’ and questions about the longer term impacts

10. Broad conclusions Clusters can matter to the poverty agenda – But how, and in what ways? – Drawing boundaries Key Policy Issues – Focus on targeting & beneficiaries – Improve work organisation – raise productivity and empower labour – Promote collective capabilities – Carve out artisanal craft niches – build geographical indication as territorial advantage – Promote labour standards – ethical sourcing as a territorial advantage – Strengthen local collectivities – small networks, co-operatives, SHGs – Strengthen local governance – Build social sector provisioning into cluster development strategies – Adopt an Improving Impact approach Territorial competitive advantage can be based on a ‘high road’ labour and poverty strategy

11. Policy Challenges Tensions between enterprise/cluster development and pro-poor concerns Develop a better understanding of local conflicts and diverse interests within clusters and GVCs ‘Local values’ and ‘Global norms’ Exit and scaling up - how are sustainability concerns best addressed? A changing role for UNIDO - ‘pure’ cluster development actor to a pro-poor cluster development actor