Role of government in Cluster based development for

leather industry
Though the government plays a major role in promoting cluster-based SME development, various
other institutions have roles to play. Non-market institutions such as international organizations,
donor agencies, non-government organizations are important players of industrial development.
Collaborative actions among these institutions nonetheless are the key to successful cluster-based
SME like leather industries development.
Theories of industrialization and the experiences of other countries, however, suggest that low-
income countries never succeed when they develop or start with these types of industries in which
they lack comparative advantages. One reason is that these industries barely survive or do not
thrive at all in labour-abundant, low wage countries. Simple and light industries are far better
industries to begin with in poor economies. Industries that require labour intensive activities such as
leather industry are among those that can certainly survive in developing economies. Thus, low-
income countries aiming to industrialize successfully should focus their development efforts
towards appropriate industries.

Need of industrial cluster

Clusters promote enterprise to enterprise and enterprise to merchant relations by reducing
transaction costs (e.g., cheating, stealing, lying, shirking), thus, giving rise to well-functioning of inter
related markets. They stimulate multifaceted innovations by attracting a variety of useful human
resources, such as engineers, designers, merchants and lower staff. The disadvantage however of
clusters is that they discourage investment in innovation as benefits for innovators are reduced by
imitation and this could lead to declination in long term growth.

Strategies to promote industrial clusters

Initiate new industry – this can be done in different ways such as:
(i) Establishing standard operating environment (SOEs) from which private firms can learn.
This would also help in standardizing the structure of the leather industry as well as process
units.
(ii) Attracting FDIs in the sector and learning from the skills and knowledge they bring in. This
could be a better way to communicating and sharing the information in leather industry.
(iii) Building model plants from which employees can be trained to initiate new businesses and
to explore and exhibit appropriate systems of technologies and management.
(iv) Construction of market-places that will facilitate the transactions of intermediate inputs
between manufacturers and the final goods between manufacturers and trader.
(v) Industrial zones and parks that will attract enterprises producing similar and related
products to enhance agglomeration economies; as well as roads connecting cluster and
markets.
(vi) Providing low-interest loans to successful enterprises and high-performing entrepreneurs in
training programs can also further innovations.

In order to sustain and promote the efforts of entrepreneurs in small scale ventures in various
aspects of cluster development such as innovation, training programs are a requisite. Educating the
people about the industry, process and overall structure would somehow contribute to the
escalation in the development of cluster. The government spending in such cluster will also push
the enterprise to grow, learn and enhance their productivity.