Industrial Hubs as Development Incubators

Contemporary industrial hubs evolved in East Asia after the 1950s and have been associated with the industrial catch-up of the East Asian economies and their industrial policies. This chapter has three main objectives: to depict the path of hubs development in these pioneering economies and provide a synthesis of the East Asian experience; to extract relevant lessons for policymakers and practitioners; and to provide a perspective on how industrial hubs can synergize industrialization and technological catch-up. Although there are commonalities, experiences have been uneven across these economies with different stages of development. The experiences of the first-generation industrial hubs, namely, Taiwan (China), South Korea, and Singapore are reviewed, followed by China as the second generation. A synthesis, key observations, and conclusions are reviewed. The chapter will complement the other chapters under Part IV through synthesis and lessons, while it complements the analytical perspectives under Parts I and II of the Handbook, by building on arguments and conceptual perspectives.

Global Value Chains, Industrial Hubs, and Economic Development in the Twenty-first Century

This chapter uses the global value chain (GVC) framework to analyse the shifting strategies of key lead firms and first-tier suppliers in the athletic footwear and electronics industries. Growing cost pressures for labour and raw materials, as well as the potential political disruption from the escalating ‘trade war’ between the United States and China and the accelerating technological disruption sparked by the digital economy on both the demand side (e.g. e-commerce) and the supply side (e.g. automation) of GVCs, are encouraging brand leaders and major suppliers in both GVCs (such as Adidas and Nike in footwear, and Apple and Foxconn in electronics) to pursue automation in select factories in their supply chains. However, the industrial hubs where athletic footwear and electronics production is concentrated remain overwhelmingly labour-intensive, both in China and elsewhere in Asia (such as Vietnam and Indonesia) where big suppliers are moving to diversify their options.

A Strategic Approach to Industrial Hubs

The experience of industrial hubs in Africa is characterized by unevenness and mixed outcomes. Most African countries did not start developing hubs until the late 1990s and 2000s, and most have been unsuccessful in driving sustained industrialization and structural transformation. Although relatively new to industrial hubs policies, Ethiopia has embraced active industrial policies in pursuit of its developmental goals, and this chapter examines its nascent experience and experiments on industrial hubs, linking with experiences elsewhere, and extracting lessons for policymakers and practitioners from both successes and failures. This chapter complements the other chapters on empirical evidence from Africa and illustrates the complex process faced by late latecomers of the twenty-first century. It underlines the centrality of the strategic approach to industrial hubs and its connection with the industrial policy framework. The focus is on policy learning as a process rather than on success as an outcome of what remains a work in progress.

Towards a New Generation of Special Economic Zones

Special economic zones (SEZs) are widely used across most developing and many developed economies. According to UNCTAD’s new SEZ database, there are nearly 5,400 zones across 147 economies as of 2019, up from about 4,000 five years ago. Although the performance of many zones remains below expectations, the rate of establishment of new zones is accelerating, and more than 500 new SEZs are already in the pipeline. In building new zones and revitalizing existing ones, policymakers and zone developers face new challenges in the context of a rapidly evolving global competitive landscape and the sustainable development imperative. This chapter provides an overview of the universe of SEZs and discusses their economic, social, and environmental impact—proposing an SEZ Sustainable Development Profit and Loss Statement. It highlights three key emerging challenges, points to five routes to modernizing SEZs, and outlines a pioneering idea of SDG model zones.

Industrialization, Hubs, and Catch-up

This chapter analyses the striking changes in the geographical distribution of manufacturing production amongst countries and across continents since 1750, a period that spans more than two-and-a-half centuries, which could be described as the movement of industrial hubs in the world economy over time. Until around 1820, world manufacturing production was concentrated in China and India. The Industrial Revolution, followed by the advent of colonialism, led to deindustrialization in Asia and, by 1880, Britain became the world industrial hub that extended to northwestern Europe. The United States surpassed Britain in 1900, and was the dominant industrial hub in the world until 2000. During 1950 to 2000, the relative, though not absolute, importance of Western Europe diminished, and Japan emerged as a significant industrial hub, while the other new industrial hub, the USSR and Eastern Europe, was short lived. The early twenty-first century, 2000–2017, witnessed a rapid decline of the United States, Western Europe, and Japan as industrial hubs, to be replaced largely by Asia, particularly China. This process of shifting hubs, associated with industrialization in some countries and deindustrialization in other countries in the past, might be associated with premature deindustrialization in yet other countries in the future.

Industrial Hubs and the Industrial Labour Force in Africa and Asia

Industrial hubs can take a number of institutional forms and vary greatly in size, sectoral composition, and degree of internal coordination. What all such hubs have in common, though, is that they concentrate industrial workers in great numbers and therefore play a key role in opening up new possibilities for organizing and negotiating industrial relations. In this chapter we examine the role of industrial hubs for light manufacturing in creating and maintaining an industrial labour force in Africa and Asia. We critically review theories for understanding industrial hubs as spaces of both job creation and labour control, and show how outcomes are in part determined by incorporation into global production networks. Drawing on a wide range of empirical evidence, we provide an overview of wages and working conditions in industrial hubs in Africa and Asia, and examine the causes and consequences of gendered labour dynamics in these spaces.

An Evidence-based Analysis of Industrial Hubs

The Singapore narrative of resilient industrial hubs accords high importance to the pragmatic approach and facilitative role of the government in first getting the fundamentals right, which can be at variance with textbook cases. Their determination to achieve their desired industrial hub development outcomes and their experimentation with new models is not restricted by any fixed ideology or mindset. The chapter illustrates phases of industrial development in Singapore over fifty years from the 1960s to the 2010s and beyond. Industrial development in each decade will be discussed under five themes: objective and mission; challenges encountered; strategies chartered; implementation process with institution building; and industries established. For Singapore to remain relevant, a national effort to seek synergies and complementarity with regional industrial hubs through a real-time monitoring online digitalized platform will be paramount. Given rising trade protectionism, potential disruption caused by rapid technological advancement, and rapid shifts in production networks and value chains, industrial hubs need to be recalibrated.

Special Economic Zones in Sub-Saharan Africa

SEZs can be an effective catalyst for industrialization and structural transformation for developing countries if implemented properly in the right context. However, the performance of SEZs is mixed globally, with East Asia outperforming other regions in general. In sub-Saharan Africa, with the rapid industrial transfer wave of recent years and inspiration from the East Asian success, countries have shown renewed interest in this policy instrument. This chapter provides an overview and an in-depth analysis of Africa’s SEZ experiences through thirteen case examples, identifies the key drivers of SEZs’ success, and draws useful lessons which can be applicable to other developing countries.

Gender, Industrialization, and Industrial Hubs

Industrial hubs are a key component of open-economy industrialization and have the potential to influence gendered patterns in industrial development as well as contributing to structural transformation. In most countries, the majority of the workforce in hubs is female—employment is highly feminized. An extensive literature documents the experiences of women workers in hubs, drawing attention to low wages and poor working conditions in export processing zones (EPZs) in particular. This chapter considers the effects of hubs on women and on gender equality. We propose a conceptual framework for analysing these effects, both direct/static and indirect/dynamic, through the channels of employment, wages, working conditions, rights and benefits, empowerment, and social effects. The negative experiences of women workers in many hubs derive in part from the typical concentration of women’s employment in low-wage, low-skill, low value-added hubs, rather than in forward-looking hubs that build on dynamic comparative advantage with decent labour standards.

The Servitization of Industrial Hubs in the Digital Era

The increasing share of services in GDP, the servitization of manufacturing, and the productivity gains conferred by agglomeration economies, is to the advantage of large well-connected cities. Research to date suggests that to sustain rapid growth, urban hubs need a mix of activities that may include some manufacturing complemented by a clustered array of tradable and non-tradable services. Rather than attempting to create hubs focused on manufacturing activities, with some anchored to special economic zones in small cities or remote areas, developmental policies could derive more economic mileage from incentivizing the interlaced emergence of manufacturing and services in major urban centres. Digital technologies are not only tightening the linkages between manufacturing and services, they also have the potential of enhancing the gains from agglomeration thereby reinforcing the lead enjoyed by mega cities.