There are many definitions of the term “cluster”. The most famous definition is given by Professor Michael Porter who is considered to be one of the most respected experts in the field of strategic planning in the XX century.

According to Porter, clusters are... geographical concentration of interconnected enterprises, companies specializing in supply of a certain type of product, service organizations, companies operating in related industries and associated institutions (for example, universities, standards setting agencies and trade associations) in specific competing, but also cooperating industries.

A cluster is not lobbyists or a group of companies that merge with each other to achieve common goals. It’s usually just reality, an unplanned event. Clusters exist, developed under the influence of the state and actions of individuals, but they are difficult to create. This section tells briefly what “clusterization” is connected with (in many cases, this is a natural process), how the government can help create the conditions for prosperity and competitiveness for these structures in the global market. Finnish Institute of Economic Research identifies the following types of clusters.

Table 1. Types of clusters

Type Short description of the cluster
High-efficient Effective cluster formation reflecting the main stages of the production cycle, intense competition and cooperation between the members of the cluster
Stable Cooperation between the members of the cluster, the cluster and its structure develop steadily, but critical mass of industrial potential, which enables to get a significant profit, has not been obtained at the moment.
Potential When creating a favorable business environment, the cluster begins to develop rapidly
Implicit Under existence of independent cluster structures, there are no stable relations between the members of the cluster.

How clusters function

Clusters develop gradually. It is not a phenomenon that appears or disappears suddenly. While complete understanding of clusters development is still lacking, a number of observations were made based on the studies of certain cases and conceptual thinking.

Development of many clusters began many years ago. Objective factors such as availability of natural resources or location on the main trade route can facilitate the formation of certain clusters, whose presence has been felt for many years after the loss of their immediate influence. Another factor contributing to the development of the clusters can be existence of institutions such as companies or universities which will eventually contribute to the emergence of new types of economic activities within the cluster and will help attract investment of the companies located outside the region.

Appearance and development of clusters includes 6 stages:

1. Appearance of a cluster is often connected with historical circumstances such as availability of natural resources, research institutes or traditional knowledge, special needs of the groups located in close geographic proximity to each other and presence of companies or private entrepreneurs introducing important technological innovations that stimulate development of many other enterprises. The first step in the development of the cluster often involves foundation of new joint enterprises which results in concentration of enterprises that are substantially at the same production stage in one region.

2. After the formation of enterprises conglomerate, the economy becomes more open, there are integration processes. At the initial stage, the economic structure of enterprises often involves a number of companies specializing in supply of a particular type of product and companies rendering services. Meanwhile, the economy is often focused on vertical disintegration of companies and creation of a specialized labor market.

3. Formation of new organizations that serve several companies in a growing cluster, for example, academic institutions, specialized educational institutions and business communities.

4. Development of externally oriented economy and emergence of new local organizations contribute to the growth of prestige and attractiveness of the cluster. This can lead to the fact that more companies will join the cluster and a larger number of qualified specialists will come to work at the enterprises of the cluster making it more appealing. It will also contribute to emergence of new local companies.

5. Creating a non-market, relative assets that facilitate information and knowledge exchange, for example, through informal cooperation, and help to coordinate economic activity. Thus, developed regional clusters may have special, differentiated and localized relationships between people and organizations regulated by the rules of behaviour which are often applicable only in case of participants’ geographical proximity.

6. Despite the fact that the cluster can function successfully for decades or become a part of a new cluster, sooner or later, a period of decline will begin for many regional clusters. The decline of clusters is often believed to reflect technological, institutional, social and / or cultural ‘stagnation’ in business.

This study shows that development of clusters can last for several years and often decades. Many clusters have been developing without much effort of their participants to develop them.

Characteristic of enterprises located in close proximity to each other, in due course, the economy enabled to attract a number of companies and other institutions that led to emergence of a self-reinforced cycle, and the reason for this emergence was often a random event. But other clusters developed much faster thanks to purposeful actions of regional leaders who noticed the potential of the region in the development of the cluster. A tendency to clustering is a characteristic feature for sectorial industries. This may seem paradoxical, but local competitive advantages can contribute to successful international competition. Without going into detail, the geographical proximity of enterprises provides the following benefits:

  • Facilitates access to supplies of certain commodities, services and human resources
  • Facilitates information exchange
  • Flexibility and speed of response to changes due to specialization
  • Experience exchange contributes to more rapid innovation

Participants of clusters can improve productivity, speed of innovation introduction and competitiveness of companies. Clusters enable small businesses to combine their advantages with advantages of large enterprises.

In general, a cluster enables small and medium-sized enterprises to compete successfully in the world market due to greater access to information and specialized resources, flexibility and rapid introduction of innovations.

authorities and the general public.

Cluster development in practice

All definitions given by scientists are as broad as the definition proposed by Porter. As you have to make practical decisions to move forward, in fact, you can find almost any business association referred to as ‘a cluster‘.

Such vague and diverse definitions may be associated with characteristics of the definition itself. Thus, there are two variants. Firstly, you can develop a precise definition and then apply it only in relation to business associations corresponding to this association. Secondly, the emphasis may be placed not on the concept, but on a cluster approach which could become a kind of business philosophy. The first approach means commitment to the cluster concept, the second is commitment to clusterization. Talking about industrial policy, we mean a choice between education and development of clusters. Preference is given to the latter.

To sum up, we can say that the aim of the process of the cluster determination should be to identify business associations in accordance with certain minimum criteria which may have a greater impact on the philosophy of clusterization.

What are the minimum criteria a cluster should satisfy?

“... There have always been types of clusters different in size and shape... It would be wrong to give a rigorous definition of a cluster which could be attributed only to a certain type ... We must consider all possible components and focus on the cluster as a phenomenon based on the externalities of enterprises rather than any particular association ... ”

Michael E. Porter. TCI Conference. 2002.

Although it is not an axiom, a cluster should satisfy the following criteria:

  • Critical mass of enterprises. It is necessary that they could benefit from the dynamics of competition and cooperation which involves clusterization. Depending on the sector of industry and products, a different number of companies is required (from five to twenty).

In general, if the cluster includes, at least, 15 — 20 enterprises, it is not a significant cluster.

  • Critical mass of activity. This criterion supplements the previous one. A minimum number of enterprises is not enough. On the other hand, can’t an association of 5 companies, where there are 3,000 employees and which produces 70 % of GDP, be called a cluster?
  • Concentration of enterprises in close geographic proximity to each other. Clusters are often defined at the regional level (for example, companies that produce shoes in Aragon), without taking into account the fact that they should be located in close proximity to each other. Enterprises must be located close enough to each other to achieve all positive externalities to enable information exchange and social relations arising from the phenomenon of clusterization.
  • Companies must compete in the same industry. An industrial park cannot be called a cluster. Most of the advantages we have described (exchange of technologies , information, specialists) are possible only if the cluster members are engaged in one and the same industry or they have a lot in common.
  • Since the cluster is also a social phenomenon, a certain degree of specialization of the local economy in the core business of the cluster is expected.
  • The cluster must also be considered, at least, in the long term, with a variety of actors. An important factor that can help you evaluate it is a sectorial industry in which the cluster members specialize.

Cluster policy today

European cluster policy is at the state level. Clusters are often found in the economic structure of various countries and industries. Despite the lack of accurate data, it is evident that a large number of the clusters is situated in Europe. In several European countries, a cluster approach is a part of the government’s economic policy. Examples of such countries are the Netherlands and Denmark. The United Kingdom has been pursuing cluster policy very actively in recent years. Large amounts of money are allocated for cluster development there. Ireland has been carried out conscious competitive policy for many years and uses the cluster concept in this context. Finland and since recently Sweden also use clusters very actively to identify the priorities of the economic policy. Several countries, where attempts to develop cluster are taken actively, have achieved greater success than they would have expected taking into consideration the overall level of cluster development in these countries. We are talking about Ireland, Portugal, Sweden and Finland. Ireland uses the cluster approach to structure initiatives in the field of cluster policy, for example, in the area of foreign direct investment attraction. The clusters of Portugal became an object of intense study about 10 years ago. Currently, important clusters specializing in the production of shoes and wine affect the development of clusters. In Sweden, special institutions such as Vinnova, whose task is to use a cluster approach in the regional development policy, have been created. Finland has developed a detailed strategy and institutional structure to direct resources for the development of several national clusters. The countries such as France, Germany, Italy and Spain have no equivalent national policy, but there is also the trend of using the cluster concept in certain regions or industries. For example, a very interesting experiment was made in Germany in the early 1990s. The federal government offered financial support to three regional biotech clusters that could prove more convincingly that they had funds and a critical cluster development plan. In addition to a financial impetus, the process of combining participants of clusters both private and state-owned enterprises contributed to the fact that Germany became the European leader in the field of biotechnology. In many countries, which joined the EU, cluster initiatives have been launched with the support of the EU and other international organizations in recent years. The most striking example is Slovenia, the country where the cluster program and the role played in the development of clusters attracted worldwide attention to Slovenian economy.

Cluster policy in regions.

One of the first regions in the world that have applied a cluster perspective in its economic policy was the Basque Country (Basque) in Spain. During the period of severe economic crisis of its traditional industries — steel and shipbuilding — executives of the state and private industries used the cluster approach to change its economic trajectory. A decade later, the region became one of the richest in Spain, and GDP per capita reached the average European level. Meanwhile, in many parts of Europe, various types of regional cluster initiatives were being developed, from ceramic tile in Catalonia to pharmaceutical products in the Strait Öresund, the car industry in Styria, video games in Scotland, textile industry in Emilia-Romagna and many others all over Europe. Most of these initiatives belong to local leaders who try to draw industry associations and individual companies in them. Systematic data on the results of these initiatives are not enough yet. Many of them have been started recently, and it is difficult to evaluate their results, however, the need for reliable data increases to know what structures and economic policies are the most effective. Managers of private sectors show initiative rarely. For example, in one of the regions in Eastern Germany, the company management made an attempt to improve the image and living standards in the region. They focused their efforts on the development of certain clusters such as car and chemical industries and on some issues which required complex solutions. They began to act since the work of the state sector had been paralyzed by poor action coordination among the three German federal states and three major cities interested in the region. When a leading role in the economy was taken by the private sector, it became far easier for representatives of the state sector to follow this initiative. There are some examples of existing clusters:

  • Castel Goffredo, Italy (population is 7000) has about 200 companies which together produce sixty percent of hosiery and sell them in Europe
  • Dalton, Georgia, USA (population 25,000) has 174 factories producing carpets. They produce 85% of the total production of carpets in the USA and almost half of the world production of carpets.
  • Montebelluna, Italy (population 25,000) produces 75% of world production of skiing and other special shoes

The following pictures show examples of clusters in Italy and in the USA.

Cluster policy has become widespread since early 1990s. Taking into account the number of taken measures and difficulty for determining the extent of their importance, we do not try to determine how many possible areas of the cluster policy can exist or investigate their nature in detail. However, except for examples of measures taken in different countries, in this section, we describe some general models of the cluster policy, enumerate their pros and cons. With regard to more specific observations, the Government of the Netherlands, Denmark and Finland were the first to introduce brokerage programmes, where developed medium and small enterprises took part in. The Governments of Australia, Austria, Canada, Finland, France, Germany, New Zealand, Norway, Spain, Portugal, the United Kingdom and the USA have programmes that involve available human resources and have introduced innovations associated with clusterization. China and Taiwan primarily perform the brokerage policy related to industrial parks and incubators. Thailand supports the cooperation of small and medium enterprises, while the Philippines have a more traditional institutional infrastructure to support small and medium enterprises. Japan has replaced the measures on scientific research support of small and medium enterprises to support innovation within clusters on a larger scale.

Many countries use the cluster concept as a tool to attract foreign investments to specific regions. Australia, Finland, Ireland, the Netherlands and Chile belong to the countries that have developed an ambitious strategy to support local contractors and other local firms cooperating with small and medium enterprises. The list can be continued. In several other countries including the developed, developing and transition economies reforms related to cluster processes have been undertaken. Traditional government programmes on payment of export subsidies and rendering services were refocused everywhere to provide information for small and medium-sized enterprises and cluster structures. The cluster concept is being studied in detail in a number of countries in Central and Eastern Europe, Middle East and South Asia so as to improve competitiveness of industrial production. Cluster support is also a way to increase competitiveness in situations where the market and relevant institutions have not been formed yet. In some countries, the clusters are of great importance as a tool that emphasizes the importance of organizational changes and intensive joint efforts to build a more dynamic and innovative society. In this context, within the cluster development, the most attention is primarily paid to innovations. On the other hand, there is also a negative experience in some countries. Some specific measures or programmes may fail, as they have been just superficial measures. They could also be unrealistic or meet resistance. In some countries, the cluster concept has become less topical, being replaced by supplementing concepts such as introduction of innovations, while other countries continue to intensify their positions. Another aspect of the problem is in the fact that in many countries, the laws of the labor market are still in force, investment and tax policies are held and incentives are suggested that violate competitive conditions between foreign and domestic investors (sometimes even between domestic investors) and prevent the natural processes of clusterization. In some cases, the issue on the cluster reform has been expanded and has been included its discussion.

Cluster theory
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Project «Kazakhstan Cluster Initiative»

The ultimate goal of this project is to improve living standards of Kazakhstan citizens. Realizing that the price of oil and mineral resources may not always be high and that many countries rich in natural resources have failed to achieve sustainable long-term improvement of living standards, the government of Kazakhstan has adopted a wise decision to develop and implement the plan for economic diversification in non-oil industries. The main goal is to promote rapid growth and diversification of non-extractive sectors in Kazakhstan economy. This can be judged by the growth of value added in the non-oil sectors of the economy, the share of exports and the number of people employed in the non-oil sectors of the economy.

Currently, the cluster initiatives are an important part of industrial, regional and innovation policy worldwide. Now it is a common phenomenon not only in countries with highly developed economy, but also in countries with transition and developing economy. The cluster initiatives are organized efforts to strengthen growth and improve competitiveness of the clusters within the region. The companies which belonging to clusters, the government and / or academia take part in them. Experiments are made all over the world. In some countries and regions, they were already started in the 1980s and 1990s, in the others they are being started only at present.

Cluster development in Kazakhstan

The purpose of this project is to develop an action plan to improve competitiveness of the key clusters. Working on a project, the team uses some of the most accurate analytical techniques applied in the world in order to assess competitiveness. Local partners are also trained to use these techniques. The plan is being developed in close cooperation with representatives of business and the government. The action plan includes strategic actions related directly to the clusters, as well as actions aimed at improving the overall business environment. The team launches a sustained process providing a roadmap and giving Kazakhstan specialists a possibility having changed the position of Kazakhstan industry sectors in the global market strategically. The project focuses on the non-extractive industries. However, they also study the possibility of industries that can help increase the value added to the products of oil and mineral extracting industries in the domestic market. The project deals with the definition of existing, emerging and potential clusters in agriculture, industry and service field. The team evaluates their potential and collaborates with their leaders to help them develop and implement strategic initiatives that will enhance their competitiveness. The team develops diagnostics for 14-20 industrial clusters and cooperates with 5-7 clusters to develop a deeper strategy and its original implementation. The team working on the project is searching for public understanding and support of the government’s program to improve competitiveness of clusters adopted in accordance with the economic development plan “Kazakhstan 2030”. The team involves many of the key persons concerned. It cooperates with the mass media and hopes to make rapid progress. When implementing the project, it is emphasized that, undoubtedly, there are many clusters in Kazakhstan that could potentially achieve prosperity. Election of 23 clusters for the analytical study and 7 clusters for development and implementation of the project is based on the criterion of likelihood that they have good potential to achieve success and benefit from the project. This does not mean that “favourites are elected”. There is no guarantee that selected clusters will succeed eventually, as there is no reason to doubt that other clusters can be very successful. In this sense, elected clusters should be considered as pilot ones for this type of activity to increase competitiveness, that is, as the first cohort of the cluster members. According to 7 pilot clusters, plans for the development of clusters were developed, adopted and approved by the Government Resolution № 633 of 25.06.05. Successful implementation of the project “KKI” requires five basic components:

1. Studying industries, business environment and related issues
2. Collaboration with members of clusters and their development
3. Measures to improve a constructive dialogue between the government and business
4. Public awareness and change of its attitude to this issue
5. Capacity building

All of these components together will help improve competitiveness of Kazakhstan in three key areas: economic activity, the composition of the economy and competitive environment for business and investment. Component 1 carries out the bulk analysis of the components in industrial sectors, selection of clusters and initial assessment of the business environment. Component 2 works with a selected group of clusters to expand their cluster connections and competitive activity: actions carried out to improve strategy and business environment specific clusters. Component 3 helps business and government representatives to identify and implement competitive priorities, particularly, in relation to national and business environment inherent in clusters. Component 4 supports this process by providing accurate information and, if necessary, changing setting and expectations. Component 5 focuses on the transfer of skills to Kazakhstan businessmen, professionals and institutions ensuring improving competitiveness after the project completion. Initially, the activity of participants in the project is to prepare for the analytical work after which the most essential elements of the project are cooperation with cluster members and their development.

Diagram 2

Conceptual diagram which shows the relationship between the main components

Logistics activity in Dubai.

Let’s consider the foundation for the development of logistics in Dubai. In 1959, Dubai International Airport and the corresponding cargo terminal (Dubai Cargo Village, DCV) were built by decree of Sheikh Rashid Bin Saeed Al Maktoum. Currently, this airport is located in the city center due to the rapid development of the latter. The capacity of Dubai airport is 25 million passengers per annum is small compared to airports such as Frankfurt or London with their capacity of 60 million passengers or more a year. However, there are opportunities and plans to increase the capacity of Dubai airport to 75 million passengers. Another feature of this airport is that there are peak increases of the passenger flow (from midnight to 1:00 a.m. and 7:00 a.m. to 8:00 a.m.) twice a day. They are explained by the existing schedule of flights at the airports in Europe and Asia. This phenomenon is amplified by the fact that Dubai airport is used as a transit point for long flights. At this time, no logistical problems associated with the activity of the airport on passenger transportation are observed.

Quite a different situation occurred at the cargo terminal, the emergence of which was associated with the dynamic growth of freight traffic. Thus, in 2004, freight volumes increased more than twice — from 480 tonnes to 1.2 million tonnes, respectively, compared with 1999.

Existing cargo terminal equipment is considered to be the best in the region and, therefore, provides the most expeditious cargo handling. Nevertheless, this does not relieve the terminal from the logistical problems, which are numbered, at least, two.

Firstly, companies — logistics operators feel operational difficulties in cargo handling. Secondly, there is no possibility to increase the capacity of the terminal in the future, despite the growing demand for logistics. First and foremost, these problems are explained by today’s location of the airport within the city and corresponding shortage of space. That is why significant amounts of cargo stored on pallets in the open air that is possible owing to the arid climate in Dubai. Alongside with it, it sometimes rains and then the cargo may suffer, especially, if it is a computer or other sophisticated equipment. This situation does not affect timeliness of cargo air transportation, but at the same time it creates more and more problems in their storage conditions. Dubai Cargo Village is located between the throughway, that is why there are no free space to build new storage capacity. Even today, the demand for logistics areas increases the available more than twice. In addition, the volume increase in logistics services and assortment expansion of provided logistics services are expected in Dubai airport in the near future.

Perspectives in the volume of cargo transportation development in DIA and its logistics and land provision

To solve the problem of lack of space for further development in Dubai International Airport (DIA) and establishment of Dubai Logistics Area (DLA), at first, it was decided to search for necessary area in the vicinity of the airport. Eventually, such a proposal was rejected since it was not optimal. To make such a decision would lead to a shortage of land in the near future. The local government of Dubai decided to build Dubai Logistics Area (DLA) near the existing seaport Jebel Ali, create another free economic zone and include DLA in the structure of Dubai World Trade Centre, which is located near the new international airport Jebel Ali (JXB). Such a radical decision regarding a new placement of DLA was explained by the following arguments.

Demand in areas for logistic companies in DIA

Firstly, the political system in Dubai allows making decisions regarding long-term investment projects (as opposed to Europe where the situations connected with the election should be taken into consideration). Therefore, in addition to such significant projects that have already been implemented (among them — the hotel “Burj Al Arab”, the tower “Burj Dubai” and “Palm Islands”), Dubai’s sheikhs have decided to build a new logistics facility to continue implementation of grandiose building projects in Dubai that will be able to improve the city’s image in the future. Secondly, the placement of the new International Airport Jebel Ali and Dubai logistics area in a deserted part of the country provides significant advantages in terms of their territorial expansion in the future. Thirdly, the proximity of Dubai logistics area and Dubai Jebel Ali Airport enables companies to take advantage of the free economic zone. Thus, it becomes possible to change the type of transport (air, sea, land) during cargo transportation without any problems.

A new variant of location of Dubai logistics city

It should also be noted that the cargo transportation can be carried out both by sea from the port of Jebel Ali and by trucks or airplanes. In the case, the cargo delivery to a neighboring country is often carried out not by big container ships, but much smaller barges.

An important advantage for Dubai is its favorable geographic location in comparison with neighboring countries Oman and Yemen, as there are no mountains in the vicinity of the city that would hinder land transportation. Another advantage, in particular for the air transportation, is that Dubai Airport is connected with major European airports. In addition, the presence of free trade zone at the airport Jebel Ali eliminates any difficulties and obstacles for companies — international logistics operators.

Location of the International Airport Jebel Ali and Dubai logistics city

Pursuant to the instructions from the country’s government, the plan for further development of Dubai logistics area (until 2050) was developed taking into account possible changes in external and development of the logistics sector. An example of the introduction of new technologies is an improved security system. However, the critical issue is still limited area of the International Airport Jebel Ali. Hence, an effective territorial organization that facilitates effective cargo transportation and handling becomes important. Therefore, the development of the free economic zone will be implemented in the form of separate modules. Besides, construction of office, research and other structures, as well as housing estates is provided for in Dubai logistics area.

Structure of Dubai logistics campus

Main consumers of Dubai logistics area are logistics providers and manufacturers with significant volumes of cargo transportation. At the same time, these companies may only rent (rather than buy) the relevant land areas and facilities in the logistics sector for a long term. Dubai logistics area is especially important for providers of three-modal logistics services, which are used for cargo transportation by air, sea and land transport.

Potential sectors — customers of Dubai logistics area may be production of electronics, pharmaceuticals, high-tech production, spare parts and other goods that logistics services use in the supply chain.

The value of DLA increases more and more, takes into account the scale of the new airport in Dubai — Jebel Ali (JXB), which after its completion will be the largest one in the world in terms of both power (120 million passengers and 12 million tons per year) and area (140 km², larger than London Heathrow Airport and Chicago O’Hare Airport together). It will push the current leader — London airport “Heathrow” with its capacity of 83.5 million passengers per annum to the second place. Jebel Ali Airport will have, at least, six parallel runways and several departure lounges. The new airport is assumed to be able to provide the growing needs of the Emirates in passenger and freight traffic until 2050.

Foundation of Dubai logistics area on the bases of Jebel Ali airport and an eponymous seaport, except for sea and air cargo transportation, suggests development of land transport infrastructure. In particular, it is decided to add railway roads (with the length of more than 700 km) to a well-developed road network. These railways will connect the main cities of the Emirates and will be a part of a large-scale railway network covering all the countries of the Persian Gulf. At the same time, the project “Emirates Railways” should become the main commercial artery of the region. Implementation of the whole project is planned for 5-7 years, and it will require at least $ 30 billion. It is also planned to build the underground in Dubai (before 2012). The local underground will have two lines (red and green) with total length of 72 km comprising 55 stations. This will be the longest fully automated metro system in the world. The purpose of this integrated solution in Dubai is to increase the share of public transport sector from 4.7% to more than 17% for the next 15 years.

Singapore maritime innovative and industrial cluster

Theoretically, Singapore marine innovation and industrial cluster (MC) can be divided into two sectors: main, which combines traditional areas of maritime transportation, and subsidiary, which includes the provision with marine transport and manufacturing equipment for the offshore oil and gas production.

For the last 12 years, the average growth rate of Singapore MC has been about 12% (at annual 7% employment growth), and its share in GDP is 7.4 %. Soaring growth of Singapore MC provided in a tough regional and global competition was achieved for the account of productivity increase and accelerated innovation development of key industrial sectors.

Thus, at the beginning of 2000s, Singapore port confronted tough competition on the part of Malaysian port of Tanjung Pelapas and some new Chinese seaports, the advantage of which are cheap workforce and considerable land resources.

Owing to significant investment in port infrastructure automation and productivity, Singapore port managed to protect its market share of maritime transportation. Today, Singapore seaport is the world leader in container transportation and the second in the world in total cargo turnover.

Another segment of the MC, which has made in its development technological and innovative breakthrough, is the shipbuilding industry. Within relatively short time, it has become one of the world leaders in the production of offshore oil drilling equipment.

The strategy to diversify the traditional shipbuilding and the repair industry through the development of offshore oil and gas production equipment gave an extremely positive result.

In the period from 2001 to 2006, annual growth of Singapore marine engineering industry was 20.2% (during the previous five years, the average annual growth of the industry was negative and amounted to 1.8%).

Nowadays, Singapore companies such as Keppel FELS, SembCorp Marine and Labroy Marine control 70% of the world market in conversion of floating oil production systems, storage and unloading, as well as the construction of oil and gas offshore platforms. Moreover, Singapore also controls 20% of the world market of ship repair services.

Role of the state in MC development

In 2003, the government ordered Singapore department of maritime transport and port facilities (Maritime & Port Authority, MPA) to ensure the country’s transformation from an average regional maritime transport hub into a leading Asian comprehensive and integrated international maritime center (IMC).

Within the scope of fulfilling this task, MPA introduced several initiatives that formed the basis of an overall strategy to establish the IMC.

Traditional service range of Singaporean maritime transport industry was expanded due to additional services of refueling, chartering, logistics support, insurance, legal and financial support. With this purpose, MPA involved companies — the world leaders in these fields, as well as it created conditions for the active development of the local business structures.

At the same time, in collaboration with EDD (Economic Development Department of Singapore) and IE Singapore (government agency focused on the development of Singapore’ foreign opportunities), MRA created necessary conditions to expand the traditional shipbuilding and repair industry by means of establishing offshore oil and gas production platforms and marine engineering.

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