Post on 15-Jan-2016
University of Macedonia Regional Development & Policy Research Unit
Transborder clusters as a means to enhance competitiveness:
the transformation of a quasi cluster in N. Greece to a quasi cluster that embraces
Southern Balkans
Lois LabrianidisEconomic Geographer, Professor Dept of Economics,
University of Macedonia
DIME-LIFE Conference 30/11- 1/12/06 Athens
University of Macedonia Regional Development & Policy Research Unit
Changes of Global Inward FDI, imports and GDP 1970-2003 (1970=100), current prices
0
2000
4000
6000
8000
10000
12000
Εισερχόμενες ΞΑΕ ΑΕΠ ΕισαγωγέςΠηγή: UNCTAD FDI database online
University of Macedonia Regional Development & Policy Research Unit
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Απόθεμα εισερχομένων ΞΑΕ ($ΗΠΑ εκ.) ως % του συνόλου Απόθεμα εξερχομένων ΞΑΕ ($ΗΠΑ εκ.) ως % του συνόλου
Participation of under-developed countries in the global stocks of FDI inflows and outflows,
1980-2004
Πηγή: UNCTAD FDI database online
University of Macedonia Regional Development & Policy Research Unit
Stocks of inward FDI, 1980, 1990 and 2003 ($USA millions)
University of Macedonia Regional Development & Policy Research Unit
Πηγή : Για τα έτη 1953-1980 Dicken P. (1998) ‘Global Shift: Transforming the World Economy’, London: Paul Chapman, σελ. 93. Για τα έτη 1990-2001 World Bank, WDI online
0%
20%
40%
60%
80%
100%
1953 1963 1970 1980 1990 1995 2001
Αναπτυγμένες Υπανάπτυκτες
Distribution of global value-added in manufacturing between the developed and the under-developed
countries, 1953-2001
University of Macedonia Regional Development & Policy Research Unit
Stocks of FDI/capita, 1993, 1998, 2004
University of Macedonia Regional Development & Policy Research Unit
Development of the per capita outward FDI stocks of Greece, the developed and the under-developed countries, 1980-2004
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1980
1981
1982
1983
1984
1985
1986
1987
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1989
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1997
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2001
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2003
2004
Αναπτυγμένες χώρες Υπανάπτυκτες χώρες ΕλλάδαΠηγή: UNCTAD FDI Database
University of Macedonia Regional Development & Policy Research Unit
Periodisation of Greek companies entering CEECs
1st period: 1989-1996 Exclusively in the CEECs, primarily in the Balkans, small size mainly in trade and light industry, looking for low labour cost and esay entry to the market 1989-1993 – “the El Dorado”: could enjoy high and easy profits/ supposedly effortless opportunities. micro SMEs or individual “entrepreneurs” 1994-97 – “The Mafia Period”: situation in the country of destination was characterised by the proliferation of illegal practices in the economic sphere, the lack of market institutions, lack of intra state agreements for the protection of investments, etc.
2ndt period: 1997- today “Normalisation”: “rationalisation” of the internationalisation process on the Greek side. large investments with long term prospects, mainly by established companies in Greece, NOT only in CEECS. Since 1999 boost to the engagement of big Greek companies due to stockmarket (Labrianidis, 2001)
University of Macedonia Regional Development & Policy Research Unit
University of Macedonia Regional Development & Policy Research Unit
Number of Greek affiliates and of their employees per geographical region of activity, 2006 (% and n.n.)
Geographical region
Number of affiliates
Employees
Balkans 48,8 67,8 Rest of Europe 35,7 21,0 USA 5,7 0,1 Africa 3,8 6,4 Asia 5,6 4,8 Australia 0,4 0,1 Total % 100 100 Total n.n. 1.116 116.081 Source: Field work (interviews with entrepreneurs, newspapers, commercial attaché, web sites, etc)
University of Macedonia Regional Development & Policy Research Unit
TotalL.L. BNSI
Sofia 52,7 56,8 48,5Northern Bulgaria 34,8 8,6 2,3Southern Bulgaria 10,2 31,7 44,6Rest of country 2,3 2,9 4,6Total 100 100 100
Spatial distribution of FDIs in Bulgaria, 1992-97
Greek
University of Macedonia Regional Development & Policy Research Unit
Geography matters!
Percentage of total trade and FDI outflows in neighbouring countries, for selected
countries
Country Total trade (1989-98) FDI (1980-97) Germany 40.6 37.3 France 50.2 38.5 Austria 54.9 46.4 Denmark 50.1 39.5 Belgium-Luxemburg 62.0 66.3 Greece 19.0 90.0?
Source: IMF (1999), OECD (2000).
University of Macedonia Regional Development & Policy Research Unit
Why this acceleration in the global integration in the clothing industry
1st General changes, not industry specific: - globalisation (Held 1995)
- that has been enhanced by advances in technology (Castells 1996)
- especially telecommunications, transportation, IT (Lash and Urry 1994), - made the world smaller (Harvey 1982) - extending the reach of people+businesses over space (Giddens
1990). • - predominance of neo-liberal ideology prioritising free market
over state regulation,interests of global over national capital, of capital over labour (Hirst and Thompson 1996, Jessop 2002)
2nd relative ease of global integration of clothing industry due to low entry barriers, low capital and skills requirements, labour intensive (60% of total costs - Scheffer 1994; OECD 2004) easy delocalisation to countries with cheap, flexible labour (Phizacklea 1990, Hanzl-Weiss 2004)
3rd rise of global buyers: such as retailers, branders, marketers (Gererffi 1994; Smith et al. 2002)
University of Macedonia Regional Development & Policy Research Unit
Clothing is the paramount global commodity has some of the highest levels of: - import penetration - volume of trade - degree of supply chain internationalisation Trade in clothing is among the oldest in the world, since 1960s there has been a
dramatic increase of interdependence in production +consumption
Geographic shifts in clothing production - In 1960s from W. Europe + US Japan- In 1970s-1980s: from W. Europe Southern Europe (Greece etc),
from Japan Hong Kong, South Korea, Singapore, Taiwan - In late 1980s from W. Europe further east in Europe,
–from US L. America, Caribbean, mainland China, Sri Lanka other Southeast Asian countries (Gerefffi and Memedovic, 2003)
- In 1990s South Asian and N. African suppliers were added (Gibbon, 2001), while the
significance of L. America, E. Europe, Turkey and recently the Middle East increased (Scheffer 1994, Kessler 1999, Begg, Smith& Pickles 2003, Gereffi and Memedovic 2003).
University of Macedonia Regional Development & Policy Research Unit
«Washington’s consensus»: FreeTrade yes! only when we are competitive!
(e.g. garment manufacturing) Since the 1970s world clothing industry has been undergoing major structural reorganisation UDCs, taking advantage of their “favourable” competitive position, began to pose a serious threat to levels of employment in core economies (focused on: mass produced items and relatively limited degree of product differentiation) Faced with the choice of - undertaking costly adjustment measures and the spectre of bankruptcy (employers) + - unemployment (workers) - co-operated to convince governments of the need to postpone choice. Thus a “temporary” framework for regulating the world clothing trade has been in place > 30 years
“Short term Arrangement” “Long term Arrangement” Multi Fibre Arrangement (1974) all abolished in 2005
University of Macedonia Regional Development & Policy Research Unit
Total wage cost/hour in textiles and garment industry 2005
Direct Wages in US$
0,00
5,00
10,00
15,00
20,00
25,00
30,00
Switz
erlan
dBe
lgium
Ger
man
yAu
stria
Fran
ce UK Italy
Japa
nCa
nada
Irelan
dAu
stra
lia USA
Spain
Gre
ece
Malt
aIs
rael
Taiw
anS,
Kor
eaPo
rtuga
lHo
ng K
ong
Czec
h Re
p,Po
land
S.Af
rica
Slov
akia
Esto
niaTu
rkey
Arge
ntina
Vene
zuela Br
azil
Mor
occo
Mex
icoO
man
Tunis
iaCo
lombia Pe
ruM
aurit
iusBu
lgaria
Thail
and
Mala
ysia
Egyp
tCh
ina C
oast
alKe
nya
India
Indo
nesia
China
Main
land
Sri L
anka
Pakis
tan
Bang
lades
hVi
etna
m
University of Macedonia Regional Development & Policy Research Unit
Employment of Greek garment manufacturing firms in South Eastern
Europe
Country Employees % Albania 1.075 7,4 Bulgaria 11.833 80,9 Romania 855 5,8
FYR Macedonia 842 5,8 Turkey 15 0,1
ΣΥΝΟΛΟ 14.620 100,0 Source Federation of Knitting Companies of Northern Greece (2001)
University of Macedonia Regional Development & Policy Research Unit
• There is a quasi cluster of garment textile manufacturing in N. Greece since the ‘60s (Greece low levels of trust. Levels of trust differ across countries as well as regions and sectors – Welter +Smallbone, 2006)
• This quasi cluster since the early ’90s transcends national boundaries (other e.g. Medicon Valley –Copenhagen/Skane Sweden)
• The identity of the entrepreneur is shaped by his role in cross-border transaction:
- international commuting
- Entrepreneur that leaves in his ivory tower (draw parallel with “cathedrals in the desert” parachute
industries”)
University of Macedonia Regional Development & Policy Research Unit
Cross-border entrepreneurial activities in Eastern Europe
•Entrepreneurs involved in cross-border activities face continuous challenges and transformation regarding their identities and their behavior - To understand these transformations we need to overcome popular beliefs claiming the revival of past identities (“deep freeze theory”)
•Entrepreneurial cross-border activities are to a great extent based on informal networks and do not exclusively aim on long-term capital accumulation. Such activities may also cover symbolic and material consumption needs
- were initially based on petty trade and household enterprises
- presently involve a special kind of postsocialist elites called “the cell and Mercedes people”
University of Macedonia Regional Development & Policy Research Unit
University of Macedonia Regional Development & Policy Research Unit
Textile and clothing companies that have relocated in part to the Balkans are doing much
better in every respect compared to those that have not
relocated
University of Macedonia Regional Development & Policy Research Unit
Investments on mechanical equipment
Μηχανήματα
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Όχι Βαλκάνια Βαλκάνια
University of Macedonia Regional Development & Policy Research Unit
Turnover
Τζίρος
0
2.000.000
4.000.000
6.000.000
8.000.000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Όχι Βαλκάνια Βαλκάνια
University of Macedonia Regional Development & Policy Research Unit
Gross profit
Μικτό κέρδος
0200.000400.000600.000800.000
1.000.0001.200.0001.400.0001.600.0001.800.000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Όχι Βαλκάνια Βαλκάνια
University of Macedonia Regional Development & Policy Research Unit
Investment on buildings
Κτίρια
0
500.000
1.000.000
1.500.000
2.000.000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Όχι Βαλκάνια Βαλκάνια
University of Macedonia Regional Development & Policy Research Unit
Profits before interests and taxes
Κέρδη προ τόκων και φόρων
-100.000-50.000
050.000
100.000150.000200.000250.000300.000350.000400.000450.000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Όχι Βαλκάνια Βαλκάνια
University of Macedonia Regional Development & Policy Research Unit
Development of the company’s sales, production and employment (F Company)
YEARS 1986 1993 1994 1995 1996 1997 1998 1999 Production volume (in thousands of pieces) 502 3.046 3.919 3.942 4.498 4.778 5.242 7.245 % of production in the Balkans 0 16 22 43 58 63 71 86
Employees in Greece 226 413 440 454 466 461 439 421
Employees in the Balkans 0 50 80 150 250 310 400 500 Employees in Greece/the Balkans 226 8,3 5,5 3,0 1,9 1,5 1,1 0,8 % of cost for cutting, sewing, packaging in price 27,4 26,6 28,7 28,6 27,3 27,2 24,7 19,7 % of employees in Greece 21,6 22,0 22,7 24,4 26,0 30,6 32,3 37,8
Albania and Bulgaria since 1994, FYROM since 1996 and Romania since 1997
University of Macedonia Regional Development & Policy Research Unit
Employment in the F company in Greece and the Balkans
Greece
Year Blue collars
% White collars
% Total a.n.. Total % Greece/ Balkans
1986 226 226
1993 78,0 22,0 413 100,0 8,3
1994 77,3 22,7 440 100,0 5,5
1995 75,6 24,4 454 100,0 3,0
1996 74,0 26,0 466 100,0 1,9
1997 69,4 30,6 461 100,0 1,5
1998 67,7 32,3 439 100,0 1,1
1999 62,2 37,8 421 100,0 0,8
Source: Data from company F
University of Macedonia Regional Development & Policy Research Unit
Theories , typologies of delocalisation:
some preliminary thoughts• A firm (e.g. a Greek firm) can either undertake and/ or give
subcontracting, while at the same time being a parent of a firm in the Balkans (the typical case of Greek MNEs), or an affiliate of a developed country firm . – What is then, the defining feature of the internationalisation
process?
• Different theories would have different predictions about what actually determines why, when and where (to mention only some of the questions) firms internationalise
• Extant theories– Supply chain theory (Gereffi)– Internalization theory (Buckley) – Ownership advantages (Hymer)– Resource based theory (Penrose)– Divide and rule theory (Peoples)
University of Macedonia Regional Development & Policy Research Unit
• Supply chain theory The testable hypothesis here could be whether firms organising the supply chain (their ‘own’ network of subcontractors or affiliates) would behave in different ways and be able to better defend their positions in the market than firms that are parts of a supply chain organised by another (e.g. a W. European firm).
• Internalisation theoryAre firms which are part of a MNE (either as parents
or affiliates) better endowed with the knowledge and information freely flowing within the MNE network, to mention only one of the benefits stemming from being part of a multinational firm.
• Ownership advantagesIt is not clear whether labour intensive firms must have
specific ownership advantages, which they must exploit themselves in order to become multinational.
University of Macedonia Regional Development & Policy Research Unit
• Resource based theoryFor many firms, delocalisation (especially FDI) was
easy, since it was possible through the utilisation of the firms’ existing resources. In a sense, therefore, FDI does not represent an expansion of the firm, but rather a reconfiguration. For many firms FDI was not the daunting challenge we often think it is but the best solution in the choice between perishing, upgrading or delocalising.
• Did firms acquire more resources prior to internationalising?• Is internationalisation one of the stages of the growth of a firm, or simply
a survival strategy?
• Divide and ruleLabour considerations are of primary importance to
labour-intensive firms. Do the firms use delocalisation as a possible threat in order to squeeze labour costs in their home markets?
University of Macedonia Regional Development & Policy Research Unit
In favour of a “Balkan economic area”:
In favour of supporting the transnational cluster to be
The argument is within the context of an existing polycentric Europe, consisting of groups of neighbouring countries (Benelux, Visegrad states, Baltic region CADSES, Black sea zone, Adriatic zone etc): construction of a unified geographical space.
It is not a defensive option (based on isolationist/ self centred ideas).
It will offer the opportunity to the Balkans to face the adverse consequences of European unification and a better integration to the world. Upward shift in the value chain
Greece will play a leading role in the “Balkan economic area” . Greece can play: the role of the “North” in the Balkans
while continuing to play the role of “South” towards the ded world (EU, USA etc)
This new reality demands long term goals on behalf of the Greek government that will advance co-operation as well as stability in the Balkans and direct actions in crucial issues. So far, the Greek State has not been particularly forthcoming in providing tangible support for the development of economic linkages with the Balkans.
University of Macedonia Regional Development & Policy Research Unit
Greek interests in the Balkans can be very important for both parties
For the Balkans Positive “new” TNCs and SMEs of Greek interests are very important for the Balkans at least in the
short and medium run: provide employment and technology that is more adequate the existence of significant Intra Industry Trade between Greece and the other Balkan
countries will prevent socks to their economies. Greek FDIs: do not enhance regional imbalances. No political or economic threat
Negative Labour exploitation Little transfer of knowledge
For Greece Positive increase their foreign trade and Greek FDIs in the Balkans give Greek firms necessary time to restructure
negative (especially the relocation of production) short-term (lost jobs mainly in certain sectors - garments - and areas - Northern Greece) long term. postpone the necessary restructuring of firms. Greece is loosing its
competitiveness in the advanced international markets (e.g. decrease of exports to EU increase to Balkans). Due to low-value added of manufacturing activities in Greece not many stages can be relocated abroad
University of Macedonia Regional Development & Policy Research Unit
Greek exports, 1950-2003
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10
20
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80
EU 25 United States and Canada South-East Europe and CIS Developing economies
Source: UNCTAD Handbook of Statistics on-line
University of Macedonia Regional Development & Policy Research Unit
Triangular manufacturing
G r e e c e B a l k a n s
D C g e r m a n y )
O r d e r P r o d u c t