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Finally, infrastructure development and infrastructure facilities have been central to CDPs focusing on the tannery clusters in Tamil Nadu through the development of common effluent treatment plants , the Pune food cluster through the building of research and development facilities and the Bangalore machine tools cluster through the common design facility FMC Finally, a few initiatives have sought to focus on the promotion of corporate social responsibility concerns, especially with respect to labour and environmental considerations.
One of the most significant of these has been the interventions undertaken in the Jalandhar football cluster see Lund-Thomsen and Nadvi b ; Khara and Lund-Thomsen Our aim in this paper is not to assess the effectiveness of the policy interventions on cluster development initiated by UNIDO and then subsequently by various Indian public agencies. This is clearly a key area for future research and policy given the emphasis, and the budgets, being placed on cluster development initiatives in India.
Instead, what we have sought to do here is to provide a sense of the wider institutional policy framework that has been constructed to promote growth and competitiveness of Indian MSME clusters. While many of these clusters have been long-standing and successful exporters, by far most of them focus on relatively low quality markets, and specialize in relatively smaller and flexible orders for more labour-intensive varieties of traditional products.
This attitude among entrepreneurs can at least partly be traced back to the traditional caste-based division of tasks in many of these sectors, with a chasm between traders as entrepreneurs and artisans as workers. Production in many Indian clusters often takes place either in home-based units run by artisans with mainly family labour, or in workshops run by white-collar trader-entrepreneurs who usually pay piece rates and often sub-contract labour recruitment to some master-artisans Mezzadri a , b.
In such working environments labour conditions cannot be gauged through an assessment of formal labour contracts.
The absence of formal contracts does not imply that workers are an anonymous mass. Instead, intricate relations of obligation, debt and patronage exist, but within a broader context of highly exploitative labour relations. Volatility is a key characteristic in the seasonal production patterns of most clusters, and the dominant piece-rate system effectively passes on this instability to workers Mezzadri a. While workers may have the upper hand in a few peak-season weeks every year, a labour surplus characterizes most clusters for the main part of the year.
Most trader-entrepreneurs simply see labour as a cost, not a potential asset, and investing in the quality of the labour force is virtually unheard of in these more traditional sectors. Only a very limited number of relatively larger export-oriented firms in high-profile consumer-facing sectors like garments and footwear actually offer labour contracts to workers. As informality is the norm, an overwhelming majority of workers in Indian clusters are unprotected by public labour legislation and unions seldom achieve effective countervailing power.
Moreover, Indian entrepreneurs are experts in manoeuvring around attempts by public private and civic actors to regulate their behaviour.
For example, Mezzadri a , b reports how entrepreneurs in the export-oriented garment industry subcontract the more labour-intensive activities through layers of invisible contractors, thus aiming to thwart effective compliance with standards used by foreign brands. As most Indian clusters tend to focus on producing for lead firms who are less focused on compliance with labour and environmental standards, both domestic and internationally, they do not even need to try to thwart compliance. In effect, most entrepreneurs in Indian clusters face few pressures to comply with social responsibility concerns, neither from their private value chain relationships nor from Indian public agencies.
Das Nevertheless, this rather gloomy picture from a social responsibility perspective needs to be qualified on at least three accounts. First, in a large country like India you are likely to find exceptions. One instructive exception is the case of environmental compliance in the leather sector Kennedy ; Tewari and Pillai Tewari and Pillai show how the Indian leather goods sector adjusted to a German ban on importing leather goods that used PCP and Azo dyes.
Because exports to Germany were critically important to the Indian leather goods industry and vice versa! Moreover, German importers, industry associations, and governmental agencies were keen to assist Indian actors to effectively respond. Instead of following the dead-end standard approach of trying to force a sprawling network of small-scale tanneries to stop using dyes with these ingredients, the Indian government passed a law to ban the import and production of dyes that contain PCPs or Azo.
Even though the chemical companies who produced these dyes initially vigorously contested this ban, it turned the input industry into a de facto diffuser of environmental compliance among small-scale tanneries Tewari and Pillai This would not have been possible without synergetic interaction between public and private compliance mechanisms. In effect, this compelling case study Tewari and Pillai shows how far fetched such a successful compliance scenario is for most artisanal clusters in India.
Initial findings suggest that in regions where these programs have been implemented, the daily wage rate for unskilled labour tends to rise, which makes it a potentially important instrument to raise the effective—be it informal—minimum wage level in India Basu It is too early to assess whether this will become a significant driver of more socially responsible investments in India Gulati Notwithstanding these qualifications, we conclude that by and large the rather implicit Indian social contract does not provide clustered entrepreneurs with any incentives to engage with responsibility concerns.
Finally, for clustered entrepreneurs with personal moral incentives to engage with responsibility concerns it is difficult to put this into practice. Most of them compete in cut-throat price-driven market segments without a premium for a higher responsibility profile see e. Khara and Lund-Thomsen One recent study suggests over 2, potential cluster regions within the country Pires et al. Examples of Brazilian clusters extend from agro-processing activities to labour-intensive manufacture, capital-intensive and knowledge-intensive industries as well as in the services sector.
Moreover, clustered firms are engaged in developing products and services for export and domestic markets. As the strategy unfolded, enhancing competitiveness of clustered firms also led to a growing emphasis on firm and cluster upgrading. Thus, in more recent years cluster promotion policies have in large measure addressed firm-level technological upgrading, cluster-level research and development activities including building linkages with universities and research centres, and improving the capabilities of clustered firms and workers through training programmes.
SEBRAE employs more than 4, employees and over 9, consultants distributed between the headquarters and 27 state-level centres who deliver services to SMEs through points of service delivery. SENAI runs a large network of vocational training, technical education, and innovation of industrial technologies initiatives. These institutional interventions have a long history. SENAI, for example, was founded in It has over operations unit, including mobile units, with many located in and undertaking specific training functions for designated clusters.
Brazil is known for its relatively strong labour and environmental regulations Posthuma and Bignami Yet, the Brazilian experience on the engagement of local clusters with national social and environmental considerations is mixed. Brazilian clusters have faced pressures on labour and environmental norms. What distinguishes the Brazilian experience is that while such pressures may emanate from global buyers down the value chains to local clustered suppliers, 4 equally and in some cases more significant has been the driver of domestic regulations and their enforcement.
As Puppim de Oliviera notes the literature on clusters in developing countries rarely takes note of the significance of national regulations on labour and the environment, and its consequences for promoting social upgrading. According to Almeida , p. The washing and chemical processing of jeans required high levels of water consumption in excess of 21 million gallons a month and resulted in substantial levels of polluted effluent discharge twelve times the level permitted under Brazilian environmental regulations. Firms realised the economic benefits to be had in developing low cost technologies that not only reduced pollution but also reduced water consumption costs for firms by relying on recycled water.
The recent study by Posthuma and Bignami underlines the ways in public and private actors are able to come together to address regulatory gaps and thus improve working conditions. Labour regulation and enforcement in Brazil is notably strong Locke As Pires , p. According to Coslovsky , p. Alongside the labour inspectors are up to 10, labour prosecutors, an array of specialist labour lawyers and a separate arm of the judicial system purely focused on enforcing the various aspects of the labour legislation.
Drawing on evidence from four different sector case studies, namely sugarcane harvesting in Sao Paulo state, temporary agricultural workers in Parana state, and the clusters of firework manufacturers in Minas Gerais and charcoal producers used for pig iron smelting from Eastern Amazonia, Coslovsky shows how the public labour regulatory regime effectively led to improved outcomes for workers, such as through reduced incidences of accidents and better occupational health and safety standards particularly noticeable in firework production , improved working conditions, higher levels of formalisation of the labour force especially pronounced in sugarcane harvesting , and substantial reduction in the extent of servitude for workers in some of the sectors such as in charcoal production.
These closer relationships have resulted in wider changes in commercial practices, including increasing mechanisation in some sectors such as sugarcane harvesting , improved quality outcomes through preferred user-producer ties as in the case of the charcoal cluster and enhanced national quality and safety standards as in the case of the fireworks sector which also helped the sector to compete against lower quality Chinese imports.
Threats of judicial sanction have combined with various forms of public assistance to bring about outcomes for labour and the environment across a number of sectors where clusters dominate, as well as enhance the capacity of clustered firms to upgrade and compete in national and domestic markets.
The engagement between the private sector and the state around issues of corporate social responsibility is pronounced in Brazil. Brazilian private capital has worked closely with state institutions and labour bodies in taking on board a number of international initiatives on CSR. However, the evidence from Brazil on CSR engagement, suggests that despite the anxiety expressed on high regulatory costs, there is it appears a wider consensus between the state, civil society actors and key elements of private capital within Brazil that such labour and environmental norms, and their enforcement, are in the long term for the good Posthuma and Bignami In terms of trade and industrial growth, China represents a different scale and order of magnitude.
Moreover, this has been achieved over a much shorter period. It is hard to gauge the exact numbers of clusters in China.
These include: the electronics and information and communication technology cluster of Shenzhen and the electronics and biotech cluster of Pudong, Shanghai ibid. Some clusters are heavily dominated by foreign direct investment—the most notable being the electronics and computing cluster of Kunshan on the outskirts of Shanghai which is in large measure a cluster of Taiwanese firms that migrated from Taiwan to obtain lower wage cost advantages.
Similar patterns of foreign direct investment driven clusters can be seen in other parts of Guangdong province most notably in the city of Dongguan and the wider Pearl River delta region Enright et al. Most Chinese clusters, however, have strong local roots. Such clusters tend to be dominated by SMEs and usually draw on a long standing tradition of local manufacturing skills, specialised capabilities and tacit artisanal knowledge, a history that often predates the Communist era.
Many of the small and medium sized private firms that dominate these clusters have emerged out of town and village enterprises TVE. The main concentrations of clusters are nevertheless along the coastal belt, and in regions that are well connected in terms of logistics, and domestic and export markets. These include the provinces of Zhejiang, Fujian, Jiangsu and Guangdong. A number of towns have emerged as leading centres of sector specialised production. Haining, Zhejiang province has warp knit factories with over US 1. Dieshiqiao, Haimen, Jiangsu province is the leading centre for home textiles manufacture in China—for both domestic and export markets ibid.
There is no explicit policy framework for cluster development in China. City and municipal level governments also link closely to provincial government institutions in supporting local industrial strategies. It is also clear that environmental considerations are increasingly becoming part of the Chinese industrial regulatory framework Brandi There is a growing emphasis placed by national, provincial, and local governments to reduce environmental impacts, improve water and air qualities as well as promote green economy initiatives.
Moreover, the labour regulations framework, including the labour contracts law of and the minimum wage legislation is being more actively used by the state, at various levels, to address issues in the labour market Chan and drive geographical shifts in some labour industries away from relatively higher waged and better regulated regions along the southern coast to regions with lower wages and relatively more lax regulatory enforcement Zhu and Pickles These developments help to shape our understanding of the institutional landscape within which Chinese clusters operate and the nature of the consequent social contract that applies.
Chinese manufacturing firms have been challenged over a number of years for their poor working conditions, their excessive reliance on long working hours and the nature of control exercised over dormitory based migrant workers Chan Migrant workers, with limited citizenship hukou rights at their places of work, provide a labour regime in China that is associated with high levels of labour exploitation.
In many sectors pay is predominantly based on piece-rated production. Consequently, many leading Western global brands have required their Chinese suppliers to conform to their specific codes of conduct. While independent collective bargaining rights remain restricted in China, workers do exercise agency. The most obvious is through high levels of labour turnover, especially at the time of the annual Chinese new year holidays.
In recent years, the Chinese state has sought to respond to growing labour, and environmental, concerns through a variety of public regulatory initiatives. These have included the Labour Contract Law of , the minimum wage legislation, social insurance legislation and a range of environmental measures Brandi ; Chan ; Chan and Zhai There are also debates, and in some cases shifts in local policy, around extending some hukou local citizenship rights to migrant workers.
There has also been a greater public investment with enhancing the standards regime in China, improving particularly standards related to quality assurance, food safety, and environmental impacts as well as a greater emphasis on investing in product standards. These moves within the regulatory environment are given shape by national government, and implemented by provincial and local governments. Some of the most significant interventions are observed in the more developed coastal provinces.
A key aspect of this is that in some regions, and clusters, local minimum wage legislations, enforcement of the contract labour laws and social insurance provisioning, as well as pressures around enforcement of environmental regulations, is resulting in both industrial upgrading as well as shifts in the geographies of production Zhu and Pickles China, therefore, presents a much more complex landscape in some ways then that seen in Brazil or India.
This is not as clearly marked as we observe in Brazil, yet in terms of public policy it appears far more substantial in terms of its overall impact as compared with India. The importance of both the global value chain and local cluster dynamics in explaining the attention given to labour and environmental standards has already been highlighted in the literature on this topic. In this paper we aim to add another dimension: an understanding of the ways in which the national policy framework shapes the public rules as well as the private norms among local clustered entrepreneurs that apply to compliance with labour and environmental standards.
Moreover, these processes interact.
Protein Families. Amengual, M. Handy , C. Coslovsky, S. This has implications not only for policy actors seeking to define future cluster development strategies, but also for academics working on the relationships between local clusters and global value chains and how these ties are impacted upon by pressures on labour, social and environmental concerns.