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Thursday, August 17, 2017

Role of industrial parks

Industrial parks, which are specific areas with many factories, are today considered the pathway to fast job creation and economic growth. Parks have successfully been used in both the advanced countries and the newly industrialised countries. For countries working towards industrialisation, parks form a basic tool in any major industrialisation programme. That means any rapid results programme will prove insufficient if the tool of industrial parks is left untouched and undeveloped.

To support the factories, the parks are located in select areas that have land and related support services. This includes services such as electricity, water, telephone, roads, railway, waste disposal, and internet. The success of industrial parks rests on two major advantages- economics of scale and economies of clustering. When industries are located in one area, it is cheaper and faster to provide support services than when they are located apart from each other. The cost of services declines per unit of each factory, with the increasing size of the park. For instance, a park that is 100 acres of land will be almost half the unit cost per factory of one that is 50 acres in size.

The other factor is clustering, so that small and medium factories with similar needs are located together and so take the character of one large firm. The park then becomes a complex of interdependent and interrelated industries. Such a setting creates a community of interests that is necessary for the growth of each factory. Housing, transport, schools and social amenities are shared.

Many developing countries have used the parks to encourage small scale industries while developed countries have used it to reduce and shift urban population. The parks can also be used to reduce regional imbalances. The difference between industrial parks and industrial area is that the former does not offer any focused incentives to the factories. Nonetheless, one way of setting up parks is by upgrading the existing industrial areas by offering the required infrastructure services and other required incentives. For instance, making sewerage systems, water and electricity connection a priority in industrial areas in various major towns because this is a big deal for many factories.

Industrial parks are a tried and tested concept. Trafford Park, set up in 1896 in Manchester, England, is recognised as the world’s first fully fledged industrial estate and is known as the “Mother of Industrial Estates”. Post first and second World Wars, England started industrial parks to deal with severe lack of jobs and revive the economy. Other countries used the same and were moved towards the path of prosperity.

More significantly, systematic use of parks provides job-creation focused economic growth. They also meet the goal of growth of exports, attracting foreign firms and modernisation of artisan/jua kali sector. Asia has successfully used parks a tool of job creation and economic growth in Singapore, Malaysia and India with very good results.

Kandie is IDB Capital MD

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