Kuchiki, Aki umi
A icle
B ake segmen o agglome a ion policy: Enginee s as
human capi al
Economies
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Sugges ed Ci a ion: Kuchiki, Aki umi (2024) : B ake segmen o agglome a ion policy: Enginee s as
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Ci a ion: Kuchiki, Aki umi. 2024.
B ake Segmen o Agglome a ion
Policy: Enginee s as Human Capi al.
Economies 12: 163. h ps://doi.o g/
10.3390/economies12070163
Academic Edi o : An ónio
Ca doso Ma ques
Recei ed: 30 Ma ch 2024
Re ised: 15 May 2024
Accep ed: 21 May 2024
Published: 27 June 2024
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economies
A icle
B ake Segmen o Agglome a ion Policy: Enginee s as
Human Capi al
Aki umi Kuchiki
Ins i u e o In e na ional T ade and In es men , Tokyo 104-0045, Japan; [email p o ec ed]
Abs ac : A “segmen ” is a componen o he o ganiza ion o an agglome a ion. The o ganiza ion
o agglome a ion is o med by he cons uc ion o segmen s. Manu ac u ing agglome a ion seg-
men s can be di ided in o ou main ca ego ies: human esou ces including enginee s, physical
in as uc u e, ins i u ions, and li ing en i onmen . Each segmen hen has a speci ic unc ion in
he p ocess o building indus ial agglome a ion. We ocus on he p ocess o building segmen s
in agglome a ion o ma ion. We de ine a “b ake segmen ” as a segmen ha has a “ unc ion” o
decele a e he speed o he p ocess. The pu pose o his pape is o iden i y he exis ence o his
b ake segmen in he p ocess o cons uc ing he segmen s o he manu ac u ing agglome a ion.
We ob ained he ollowing h ee esul s. Fi s , a modi ied e sion o he spa ial economic model
yields ha he numbe o agglome a ed i ms is in e sely ela ed o he wages o skilled wo ke s.
Second, a ac o analysis o he da a on in es men en i onmen cos s indica es ha in he case o
he manu ac u ing indus y, he numbe o agglome a ed i ms a e in e sely ela ed o he wages o
enginee s. Thi d, he ac o analysis o he six coun ies in he JBIC su ey e eals ha he segmen
ha poses he in es men issue in o eign di ec in es men in India is enginee s as human capi al. We
conclude ha enginee s as human capi al a e a b ake segmen . The implica ion is ha he sus ained
de elopmen o “enginee s” as human capi al is essen ial o he success o manu ac u ing indus y
agglome a ion.
Keywo ds: b ake segmen ; unc ion; enginee s; human capi al; spa ial economics
1. In oduc ion
Special economic zones (SEZs) a e s ongly posi i e in a ac ing o eign di ec in-
es men (FDI) in China, acco ding o UNCTAD (2019). The no ion o indus ial hubs by
Oqubay and Lin (2020) is a gene ic e m o agglome a ions o economic ac i i y ha ha e
de eloped since he Indus ial Re olu ion. Special economic zones (SEZs), indus ial pa ks,
and expo p ocessing zones (EPZs) ha e been widely used o ca ch up and ans o m he
economies o newly indus ializing economies in Eas Asia. Howe e , Zheng and Agga wal
(2020) ound ha India could no ma ch he scale and success o China’s SEZs.
The li e a u e on indus ial hubs has ocused on di e en ypes o indus ial hubs:
indus ial dis ic s, EPZs and SEZs, and small indus ial clus e s, acco ding o Oqubay
(2020) as ollows. Fi s , FIAS Wo ld Bank’s occasional pape by FIAS (2008) iews SEZs as
‘a ool o enhance indus y compe i i eness’ and de ines ‘a geog aphically delimi ed a ea,
o e ing ce ain incen i es o businesses which physically loca e in he zones’ (Fa ole and
Akinci (2011); Zeng (2010)). Second, New S uc u al Economics by Lin (2012), ocuses on a
de eloping coun y s a egy o ien ed o a la en compa a i e ad an age.
The cons uc ion o an agglome a ion is no ins an ly comple ed, bu a sequen ial
p ocess o building he segmen s. I ook mo e han en yea s o cons uc he manu ac-
u ing agglome a ions. Thi d, Kanai and Ishida (2000) called esea ch on he dynamic
p ocess o agglome a ion building as ‘p ocess analysis’. Kuchiki and Tsuji (2011) and Fuji a
and Kuchiki (2006) use a lowcha app oach o indus ial agglome a ion. The lowcha
Economies 2024,12, 163. h ps://doi.o g/10.3390/economies12070163 h ps://www.mdpi.com/jou nal/economies
Economies 2024,12, 163 2 o 28
app oach analyzes he p ocess o cons uc ing agglome a ion segmen s. The lowcha ap-
p oach was applied o many cases all o e he wo ld, as ollows: he Malaysian elec onics
indus y by Meyana han (2011), he Wuhan Op ical Valley indus y in China by Hu and
Liu (2011), he au omobile indus y in China by He (2011), he Rio de Janei o So wa e
indus y by Bo elho e al. (2010), he Aus in Technopolis in he US (2008), he Indus ial
Clus e Plan p omo ed by he Minis y o Economy, T ade and Indus y Japan. Macasaqui
(2008) applied i o indus ial agglome a ion in he Philippines, and Mi a and Meh a (2011)
applied his app oach o indus ial agglome a ion in India. They analyze he p ocess o
cons uc ing agglome a ion segmen s.
In economic heo y, K ugman (1991) buil he p o o ype model o examine whe e
economic ac i i y occu s and why. Fuji a e al. (1999) ex ended he p o o ype model o
es ablish spa ial economics. Using a Ho elling- ype amewo k in cen al place heo y,
Henkel e al. (2000) ob ained he b eaking condi ions o agglome a ion equilib ia on
spa ial alloca ion decisions in which consume s a e ac i e in a ma ke place. Helpman and
K ugman (1985) p o ided a new ade heo y in spa ial economics, in which he equilib ium
numbe o i ms is de i ed based on a gene al equilib ium model.
By analyzing da a on indus ial hubs based on a model o spa ial economics, he
ollowing h ee conclusions we e d awn. Fi s , Kuchiki (2021) used he model o Henkel
e al. (2000) o de i e he segmen ha is he mas e swi ch in he cons uc ion o ou ism
indus ial agglome a ion. I is he in oduc ion o bo h in as uc u e ha educes anspo
cos s and he e ogeneous goods wi h low elas ici y o subs i u ion.
Second, Kuchiki and Sakai (2023) used he hyb id model o K ugman (1991) and
Alonso (1964) o de i e he segmen ha is he mas e swi ch o u ban agglome a ion. I
is he in oduc ion o bo h in as uc u e ha educes commu e cos s and he e ogeneous
goods wi h low elas ici y o subs i u ion. Thi d, Kuchiki (2023) used Helpman and K ug-
man’s (1985) model o de i e he segmen ha is he “accele a o ” in he cons uc ion o
manu ac u ing agglome a ions. I is he “leased” indus ial pa k.
The “segmen s” cons i u e he o ganiza ion o indus ial agglome a ion. The o ganiza-
ion o agglome a ions is o med by building segmen s. The segmen s comp ise ou majo
ca ego ies: human esou ces, physical in as uc u e, ins i u ions, and li ing condi ions,
acco ding o Kuchiki (2023). Table 1illus a es some o he in es men su ey i ems o
he manu ac u ing indus y. The majo ca ego y o human esou ces consis s o segmen s:
gene al wo ke s, gene al o ice s a , enginee s, and sec ion chie s a , o manage s.
Each segmen has a “ unc ion”. I s unc ion includes he ole o a mas e swi ch o
accele a o . Po s and oads ha e he unc ion o mas e swi ches o indus ial agglome a-
ion policy. Indus ial pa ks ha e he unc ion o accele a o s. We ocus on he p ocess o
building segmen s in agglome a ion o ma ion.
This pape unde s ands he ansi ion p ocess as a p ocess o cons uc ing segmen s o
an agglome a ion and cla i ies he impo ance o he “p ocess o policy implemen a ion”.
The “sequencing economics” o he cons uc ion o segmen s is hen add essed. This pape
discusses segmen s ha unc ion o decele a e he p ocess o building segmen s owa d
indus ial agglome a ion. This pape de ines he segmen as he “b ake segmen ”. India
has no succeeded in es ablishing expo -o ien ed SEZs h ough he in oduc ion o o eign
di ec in es men . The e o e, i is conjec u ed ha some segmen s unc ion o bake he
p ocess o es ablishing indus ial agglome a ion. No s udy has aken up a case s udy o
examine whe he b ake segmen s exis and wha hey a e om he iewpoin o heo e ical
and quan i a i e analysis when cons uc ing segmen s o manu ac u ing agglome a ions.
The pu pose o his pape is o iden i y he exis ence o his b ake segmen . We
will compa e India wi h coun ies in Eas Asia, including Vie nam and Thailand, o he
pu pose o examining in his hypo hesis. India did no succeed in in oducing expo -
o ien ed o eign capi al and swi ched o o eign capi al o he domes ic ma ke , while
Vie nam and Thailand succeeded in in oducing o eign capi al.
Economies 2024,12, 163 3 o 28
Table 1. Segmen s and in es men - ela ed cos s.
Ca ego y Segmen Segmen s Func ion
Human eso uce wo ke (gene al labo e ) W1
enginee B ake W2
middle managemen (sec ion chie ) W3
s a (gene al o ice wo k) W4
manage (sec ion chie ) W5
Physical in as uc u e Indus ial zone Accel Z1
Indus ial zone Accel Z2
O ices Z3
Elec ici y P1
Wa e P2
Gas P3
Po s Mas e swi ch C1
Mas e swi ch C2
Road Mas e swi ch
Ai po Mas e swi ch
Ins i u ions De egula ion Mas e swi ch
P e e en ial ea men s Mas e swi ch
One-s op se ices Mas e swi ch
Laws and egula ions
Li ing condi ions Housing
In e na ional schools
Hospi als
En e ainmen & shopping
Sou ce: Au ho ’s based on Japan Ex e nal T ade O ganiza ion (JETRO 2022).
The esul s o his pape we e de i ed in he ollowing h ee s eps. Fi s , a modi ied
e sion o he spa ial economic model yields ha he numbe o agglome a ed i ms is
in e sely ela ed o he wages o skilled wo ke s. Second, a ac o analysis o he da a
on in es men en i onmen cos s indica es ha in he case o he manu ac u ing indus y,
skilled wo ke s a e enginee s. In o he wo ds, he numbe o agglome a ed i ms a e
in e sely ela ed o he wages o enginee s. Thi d, he ac o analysis o he six coun ies in
he JBIC su ey e eals ha he segmen ha poses he in es men issue in o eign di ec
in es men in India is enginee s as human capi al. A eg ession analysis o he ac o sco e
da a con i ms his ac .
This pape concludes ha enginee s as human capi al is a b ake segmen . The impli-
ca ion is ha sus ained de elopmen o “enginee s” as human capi al is essen ial o he
success o manu ac u ing indus ial agglome a ion. To a oid pedaling he b akes in he
ansi ion p ocess o an agglome a ion equilib ium, i is necessa y o sus ainably de elop
enginee s as human capi al.
Sequencing economics in a chi ec u e heo y ela ed o agglome a ion is applied o
sequencing he segmen s o an agglome a ion in e ms o ‘economies o sequence’. The
concep o ‘economies o sequence’ is de ined as he selec ion and sequencing o any wo
segmen s om among he en i e g oup o segmen s o an indus ial agglome a ion owa d
he e icien building o he agglome a ion, acco ding o Kuchiki (2021).
This pape is o link he heo y o spa ial economics wi h he p ac ice o sequencing
economics. Indus ial agglome a ion consis s o o ganiza ions, and o ganiza ions consis
o segmen s. Sequencing economics is used o embody he heo e ical model o spa ial
economics in o agglome a ion policy. The “ unc ion” o he segmen s, which a e he
building blocks o agglome a ion, is cla i ied. The “design” o agglome a ion policy is
essen ial o policy make s o design i s cons uc ion p ocess.
The lowcha app oach has so a a ayed segmen s in he p ocess o building in-
dus ial agglome a ion. In his app oach, he concep o “economies o sequence” was
in oduced o in oduce he pe spec i e o “e iciency” o segmen cons uc ion. In o de o
conside e iciency, he “ unc ion” o he segmen was iden i ied.
P e iously, mas e swi ches and accele a o s we e iden i ied as examples o “ unc-
ions”. In addi ion o hese, his pape iden i ies he enginee s as human capi al segmen
Economies 2024,12, 163 4 o 28
as a segmen o he “b ake” unc ion. In sequencing economics, iden i ying he unc ion
o a segmen leads o e icien implemen a ion o he agglome a ion policy. The e o e,
sequencing economics is use ul o policy make s o implemen agglome a ion policies.
Sec ion 2p esen s p eceding s udies on he unc ion o segmen s such as mas e swi ch.
Sec ion 3p o ides an o e iew o indus ial zones in Vie nam and Thailand and special
economic zones in India. In Sec ion 4, we explain he ma e ials and me hods. In Sec ion 5,
we ob ain he b ake segmen using ac o analysis and eg ession analysis. Sec ion 6
concludes his pape .
2. Li e a u e Re iew on Sequencing Economics
On one hand, Fuji a e al. (1999) es ablished in spa ial economics ‘ he s udy o whe e
and why economic ac i i y akes place’. The esul s can be used in sequencing economics
as loca ion condi ions in economic decision-making. On he o he hand, Kuchiki (2023)
p oposed sequencing economics as an a chi ec u al heo y o agglome a ion. Kuchiki (2023)
analyzed special economic zones (SEZs) as agglome a ions om he pe spec i e o bo h
spa ial economics and sequence economics.
The p ocess o cons uc ing an agglome a ion iden i ied by Kuchiki (2023) is as ollows.
The i s s ep in building agglome a ions is o de e mine whe e o loca e hem. Spa ial eco-
nomics de e mines he condi ions o his loca ion. Nex , he segmen s o a eas de e mined
a e cons uc ed o sa is y hose condi ions.
The analysis o he cons uc ion p ocess add essed by Kuchiki (2023) is in he ollowing
way. The o ganiza ion o indus ial agglome a ion consis s o segmen s. Each o hese
segmen s has a unc ion. Kuchiki and Sakai (2023) iden i ied (1) mas e swi ches and
(2) accele a o s as examples o sequencing economics, espec i ely. Kuchiki and Sakai
(2023) ound ha he segmen ha educes anspo cos s is he mas e swi ch and ha he
segmen ha educes ixed cos s is he accele a o . This pape inds ou which a e (3) he
“b ake” segmen s ha decele a e he cons uc ion p ocess o he agglome a ion segmen .
Figu e 1illus a es he ela ionship ha he mas e swi ch, o e icien ly cons uc he
segmen s ha make up he agglome a ion in sequencing, is he segmen ha sa is ies he
symme y b eaking condi ion.
Economies 2024, 12, x FOR PEER REVIEW 4 o 30
The lowcha app oach has so a a ayed segmen s in he p ocess o building indus-
ial agglome a ion. In his app oach, he concep o “economies o sequence” was in o-
duced o in oduce he pe spec i e o “efficiency” o segmen cons uc ion. In o de o
conside efficiency, he “ unc ion” o he segmen was iden i ied.
P e iously, mas e swi ches and accele a o s we e iden i ied as examples o “ unc-
ions”. In addi ion o hese, his pape iden i ies he enginee s as human capi al segmen
as a segmen o he “b ake” unc ion. In sequencing economics, iden i ying he unc ion
o a segmen leads o efficien implemen a ion o he agglome a ion policy. The e o e, se-
quencing economics is use ul o policy make s o implemen agglome a ion policies.
Sec ion 2 p esen s p eceding s udies on he unc ion o segmen s such as mas e
swi ch. Sec ion 3 p o ides an o e iew o indus ial zones in Vie nam and Thailand and
special economic zones in India. In Sec ion 4, we explain he ma e ials and me hods. In
Sec ion 5, we ob ain he b ake segmen using ac o analysis and eg ession analysis. Sec-
ion 6 concludes his pape .
2. Li e a u e Re iew on Sequencing Economics
On one hand, Fuji a e al. (1999) es ablished in spa ial economics ‘ he s udy o whe e
and why economic ac i i y akes place’. The esul s can be used in sequencing economics
as loca ion condi ions in economic decision-making. On he o he hand, Kuchiki (2023)
p oposed sequencing economics as an a chi ec u al heo y o agglome a ion. Kuchiki
(2023) analyzed special economic zones (SEZs) as agglome a ions om he pe spec i e o
bo h spa ial economics and sequence economics.
The p ocess o cons uc ing an agglome a ion iden i ied by Kuchiki (2023) is as ol-
lows. The i s s ep in building agglome a ions is o de e mine whe e o loca e hem. Spa-
ial economics de e mines he condi ions o his loca ion. Nex , he segmen s o a eas de-
e mined a e cons uc ed o sa is y hose condi ions.
The analysis o he cons uc ion p ocess add essed by Kuchiki (2023) is in he ollow-
ing way. The o ganiza ion o indus ial agglome a ion consis s o segmen s. Each o hese
segmen s has a unc ion. Kuchiki and Sakai (2023) iden i ied (1) mas e swi ches and (2)
accele a o s as examples o sequencing economics, espec i ely. Kuchiki and Sakai (2023)
ound ha he segmen ha educes anspo cos s is he mas e swi ch and ha he seg-
men ha educes ixed cos s is he accele a o . This pape inds ou which a e (3) he
“b ake” segmen s ha decele a e he cons uc ion p ocess o he agglome a ion segmen .
Figu e 1 illus a es he ela ionship ha he mas e swi ch, o efficien ly cons uc he
segmen s ha make up he agglome a ion in sequencing, is he segmen ha sa is ies he
symme y b eaking condi ion.
Figu e 1. “Mas e Swi ch” o agglome a ion policy. Sou ce: Au ho ’s Illus a ion.
Figu e 1. “Mas e Swi ch” o agglome a ion policy. Sou ce: Au ho ’s Illus a ion.
2.1. The Segmen s o Mas e Swi ch
Kuchiki (2021) used a symme y b eaking condi ion de i ed om he Henkel e al.
(2000) model in cen al place heo y. This model is a “pa ial equilib ium” analysis o
ou ism indus ial agglome a ion in spa ial economics.
Kuchiki (2021) ound ha in sequencing he ou ism agglome a ion segmen s, he
mas e swi ch was o gi e i s p io i y o he opening o Uni e sal S udios Japan, which
educes he elas ici y o subs i u ion among di e en ia ed goods, and second p io i y o
he cons uc ion o Kansai In e na ional Ai po , which educes anspo a ion cos s. The
opening o Uni e sal S udios Japan inc eased he numbe o o eign passenge s a Kansai
In e na ional Ai po wi h a wo-yea lag. Subsequen ly, he inc ease in he numbe o
Economies 2024,12, 163 5 o 28
o eign passenge s was lagged by some yea s, leading o an inc ease in he numbe o
a i als and depa u es a Kansai In e na ional Ai po , as well as an inc ease in he numbe
o o eign ou is s in Osaka P e ec u e.
The economy is a symme ic equilib ium in which manu ac u ing is equally di ided
be ween he wo egions as Fuji a e al. (1999) de ined in Sec ion 5. I ound he condi ions
o he symme y b eaking. Kuchiki and Sakai (2023) used symme y b eaking condi ions
de i ed om a “gene al equilib ium” model in a monocen ic ci y se ing as a mas e
swi ch. K ugman (1991) was used o de i e he condi ion o mas e swi ch.
As shown in Figu e 2, when a s able symme ic equilib ium is b oken, hen he
cons uc ion o segmen s o an agglome a ion equilib ium begins. Kuchiki and Sakai
(2023) p esen he condi ions o he mas e swi ch o be u ned on and iden i y wha
segmen s sa is y hose condi ions. The condi ion is ha he e is a c i ical alue ( h eshold)
o anspo cos s, and i is necessa y o cons uc segmen s ha educe anspo cos s
below he c i ical alue. The segmen s a e illus a ed as oads, po s, simpli ica ion o
in es men p ocedu es, e c.
Economies 2024, 12, x FOR PEER REVIEW 5 o 30
2.1. The Segmen s o Mas e Swi ch
Kuchiki (2021) used a symme y b eaking condi ion de i ed om he Henkel e al.
(2000) model in cen al place heo y. This model is a “pa ial equilib ium” analysis o
ou ism indus ial agglome a ion in spa ial economics.
Kuchiki (2021) ound ha in sequencing he ou ism agglome a ion segmen s, he
mas e swi ch was o gi e i s p io i y o he opening o Uni e sal S udios Japan, which
educes he elas ici y o subs i u ion among diffe en ia ed goods, and second p io i y o
he cons uc ion o Kansai In e na ional Ai po , which educes anspo a ion cos s. The
opening o Uni e sal S udios Japan inc eased he numbe o o eign passenge s a Kansai
In e na ional Ai po wi h a wo-yea lag. Subsequen ly, he inc ease in he numbe o
o eign passenge s was lagged by some yea s, leading o an inc ease in he numbe o
a i als and depa u es a Kansai In e na ional Ai po , as well as an inc ease in he num-
be o o eign ou is s in Osaka P e ec u e.
The economy is a symme ic equilib ium in which manu ac u ing is equally di ided
be ween he wo egions as Fuji a e al. (1999) de ined in Sec ion 5. I ound he condi ions
o he symme y b eaking. Kuchiki and Sakai (2023) used symme y b eaking condi ions
de i ed om a “gene al equilib ium” model in a monocen ic ci y se ing as a mas e
swi ch. K ugman (1991) was used o de i e he condi ion o mas e swi ch.
As shown in Figu e 2, when a s able symme ic equilib ium is b oken, hen he con-
s uc ion o segmen s o an agglome a ion equilib ium begins. Kuchiki and Sakai (2023)
p esen he condi ions o he mas e swi ch o be u ned on and iden i y wha segmen s
sa is y hose condi ions. The condi ion is ha he e is a c i ical alue ( h eshold) o
anspo cos s, and i is necessa y o cons uc segmen s ha educe anspo cos s below
he c i ical alue. The segmen s a e illus a ed as oads, po s, simpli ica ion o in es men
p ocedu es, e c.
Figu e 2. Manu ac u ing agglome a ion policy. Sou ce: Au ho ’s illus a ion.
2.2. The Segmen s o Accele a o
Figu e 2 shows he low om he mas e swi ch h ough he accele a o o he ancho
i m. The condi ions o he accele a o segmen we e de i ed om Helpman and
K ugman’s (1985) model o spa ial economics. Acco ding o he new ade heo y o spa-
ial economics, he numbe o i ms in an agglome a ion is in e sely ela ed o i s ixed
cos s. The main accele a o segmen o agglome a ion a e he mas e swi ch is u ned on
is he o ma ion o segmen s ha educe i ms’ ixed cos s.
"Mas e swi ch": The i s o de segmen s
Reduc ion in anspo a ion cos s : Down
"Accele a o ": Indus ial Zones
In oduc ion o di e en ia ed goods: Down
Ancho i m (An assemble i m)
"B ake segmen ": Enginee s
Manu ac u ing agglome a ion
Figu e 2. Manu ac u ing agglome a ion policy. Sou ce: Au ho ’s illus a ion.
2.2. The Segmen s o Accele a o
Figu e 2shows he low om he mas e swi ch h ough he accele a o o he ancho
i m. The condi ions o he accele a o segmen we e de i ed om Helpman and K ug-
man’s (1985) model o spa ial economics. Acco ding o he new ade heo y o spa ial
economics, he numbe o i ms in an agglome a ion is in e sely ela ed o i s ixed cos s.
The main accele a o segmen o agglome a ion a e he mas e swi ch is u ned on is he
o ma ion o segmen s ha educe i ms’ ixed cos s.
Kuchiki (2023) iden i ies he accele a o equi ed o he p ocess o agglome a ion
o ma ion. In he case o manu ac u ing agglome a ion o ma ion, he accele a o segmen
is speci ically indus ial pa ks. The unc ion o his segmen is o speed up he p ocess o
building he segmen s o he manu ac u ing indus y agglome a ion.
2.3. B ake Segmen
Segmen s ha unc ion o decele a e he p ocess o building segmen s o indus ial
agglome a ion a e de ined as “b ake segmen s”. In he ollowing, we iden i y he segmen s
ha se e as b akes in he segmen building p ocess. We hen empi ically con i m ha
enginee s as human capi al is a b ake segmen .
Economies 2024,12, 163 6 o 28
3. Indus ial Agglome a ions in Vie nam, Thailand, and India
India has no succeeded in manu ac u ing agglome a ion and is implemen ing agglom-
e a ion policies h ough he Make in India policy. Many eas -Asian coun ies, including
China, ha e succeeded in es ablishing manu ac u ing agglome a ions.
In 1981, China and India had app oxima ely he same GDP pe capi a: USD 275 o
India and USD 288 o India; in 2023, India’s GDP pe capi a is USD 2612 and China’s
is USD 12,541
1
. One can p esumably a ibu e his di e ence in pa o he success o
he Special Economic Zone (SEZ) policy ha was launched in China in 1979, based on a
ch onological and s a is ical analysis by Kuchiki (2023).
Zheng and Agga wal (2020) conclude ha India has ailed o ma ch he size and
success o China’s SEZs in a ac ing FDI. Ahluwalia e al. (2018) ound ha India los i s
compa a i e ad an age in labo -in ensi e p oduc ion in he ea ly s ages o de elopmen
despi e i s ela i e abundance o unskilled labo . Wi h ega d o he use o SEZs o es ablish
indus ial agglome a ion, he e a e di e ences in he e ec i eness o SEZs in India and
China.
Two Asian coun ies ha ha e ypically succeeded in using he sequencing economics
o agglome a ion a e Vie nam and Thailand. These coun ies ha e been success ul in
manu ac u ing agglome a ion h ough he use o ODA as well as he in oduc ion o
o eign capi al. Sequencing has been op imal in he cons uc ion o mas e swi ches and
accele a ion segmen s.
In he case o hese coun ies, he sequence o ODA implemen a ion along wi h
FDI was op imal. NESDB (2016) o he Thai go e nmen iden i ied he esul s o he
Eas e n Seaboa d De elopmen P og am agglome a ion wi h Japanese ODA. Lecle (2002)
desc ibed he au omobile indus ial agglome a ion in he Eas e n Seaboa d De elopmen
P og am, while Shimomu a (2000) p esen ed he Japanese con ibu ion o he p og am
and a hi d-pa y e alua ion. Wa anabe (2004) concluded ha he combina ion o FDI and
ODA was e ec i e in p omo ing au omobile accumula ion in Thailand. The au omobile
agglome a ion is called “De oi in Eas Asia”.
Simila ly, T an e al. (2003) posi i ely e alua ed he impac o Japanese ODA and FDI
on indus ial agglome a ion in no he n Vie nam. FDI was in he indus ial agglome a ion
in he no h o he coun y. Mi sui (2004) e alua ed ha he cons uc ion o Na ional
Highway 5 wi h ODA was e ec i e o he agglome a ion o FDI. ODA p o ided he
mas e swi ch and accele a o h ough op imal sequencing.
This sec ion p esen s he segmen sequencing. The sec ion highligh s success ul cases
o he in oduc ion o expo -o ien ed o eign di ec in es men in Vie nam and Thailand,
in con as o unsuccess ul cases in India. The p ocess o building mas e swi ches and
accele a o segmen s in he p ocess o building indus ial agglome a ion in Vie nam and
Thailand will be illus a ed. In his con ex , he p ocess o de eloping enginee s as human
capi al wi h a con ol unc ion in he Vie namese p ocess will be highligh ed. Fo he
SEZs in India, we will ocus on he p ocess o shi ing om expo -o ien ed o domes ic
ma ke -o ien ed o eign in es men wi hou much success in in oducing o eign capi al.
The cases o Vie nam and Thailand in Kuchiki (2007) a e e iewed in hese subsec ions
(1) and (2), as shown in Figu es 3and 4. The segmen s o indus ial agglome a ion ha e
a mas e swi ch and an accele a o pedal as unc ions. These cases a e ein e p e ed wi h
espec o he unc ion o he segmen s.
In his sec ion, on he one hand, Vie nam and Thailand implemen ed he policy
o os e ing enginee s as human capi al. On he o he hand, India has implemen ed
agglome a ion policies using Special Economic Zones, bu has no su icien ly ained
enginee s as human capi al as a segmen ha cons i u es he in es men en i onmen in i s
agglome a ion policies.
In he nex sec ion, we will heo e ically demons a e ha agglome a ion does no
p og ess when he e is a lack o enginee s as human capi al based on a model o spa-
ial economics. Thus, we heo e ically con i m ha he ailu e o India’s manu ac u ing
agglome a ion was due o he lack o enginee s as human capi al.
Economies 2024,12, 163 7 o 28
Economies 2024, 12, x FOR PEER REVIEW 7 o 30
The cases o Vie nam and Thailand in Kuchiki (2007) a e e iewed in hese subsec-
ions (1) and (2), as shown in Figu es 3 and 4. The segmen s o indus ial agglome a ion
ha e a mas e swi ch and an accele a o pedal as unc ions. These cases a e ein e p e ed
wi h espec o he unc ion o he segmen s.
In his sec ion, on he one hand, Vie nam and Thailand implemen ed he policy o
os e ing enginee s as human capi al. On he o he hand, India has implemen ed agglom-
e a ion policies using Special Economic Zones, bu has no sufficien ly ained enginee s
as human capi al as a segmen ha cons i u es he in es men en i onmen in i s agglom-
e a ion policies.
In he nex sec ion, we will heo e ically demons a e ha agglome a ion does no
p og ess when he e is a lack o enginee s as human capi al based on a model o spa ial
economics. Thus, we heo e ically con i m ha he ailu e o India’s manu ac u ing ag-
glome a ion was due o he lack o enginee s as human capi al.
Figu e 3. The elec onics indus y agglome a ion in no he n Vie nam. Sou ce: T an e al. (2003)
based on JBIC-IDCJ (2003). No e: ODA is official de elopmen assis ance.
Yea ODA
(1) Highway Rou e 5 1993, 1995 210
(1) Haiphong Po 1995, 1999 173
(2) Thanglong Indus ial Pa k 1997
(2)
Nomu a Haiphong Indus ial Zone 1997
(1) Ins i u ional Re o m 1999 200
(3) Canon 2001 To al amoun
583
100 supplie s 2008
30 housand employees
(Uni : million $)
Figu e 3. The elec onics indus y agglome a ion in no he n Vie nam. Sou ce: T an e al. (2003)
based on JBIC-IDCJ (2003). No e: ODA is o icial de elopmen assis ance.
Economies 2024, 12, x FOR PEER REVIEW 8 o 30
Figu e 4. Eas e n Seaboa d. Sou ce: Kuchiki and Tsuji (2011) based on Shimomu a (2000).
3.1. Agglome a ions in No he n Vie nam
This subsec ion iden i ies he ole o he “mas e swi ch” and accele a o in he es ab-
lishmen o indus ial agglome a ion h ough Japanese official de elopmen assis ance in
he case o indus ial agglome a ion in no he n Vie nam2.
3.1.1. Roads and Po s: Reduc ion o T anspo Cos s as Mas e Swi ch
The cons uc ion and eno a ion o Na ional Highway No. 5 and Haiphong Po we e
effec i e as mas e swi ches o he building o indus ial agglome a ion. Figu e 3 shows
ha JPY (Japanese Yen) 21 billion was p o ided o he cons uc ion o Na ional Highway
5 and JPY 17.3 billion o he eno a ion o Haiphong po in 1993 and 1995.
Loan con ac ag eemen Loan comple ion Loan
execu ed execu ed
Wa e /Aqueduc P ojec 7/1982 4/1987 36.06 36.06
(1) Leamchabang Po 9/1984 6/1993 31.78
11/1986 11/1993 48.42
2/1990 9/1995 58.68
10/1985 10/1992 25.76
9/1987 9/1992 19.89 184.53
(2) Leamchabang Indus ial Es a e 10/1985 10/1992 25.76
9/1987 9/1992 19.89 45.65
Railway P ojec s
Si acha/Leamchabang 9/1988 7/1996 9.2
Sa ahip/Map aphu 9/1988 1/1997 28.26
Khlong19/Kengkoi 2/1990 12/1999 72.98 110.44
Road P ojec s
Chonbu i/Pa aya 11/1988 3/1994 40.74
Bangkok/Chonbu i 12/1990 4/1993 134.35
Ou e Bangkok Ring 12/1990 4/1993 128.28 303.37
680.05
(3) Mi subishi Mo o s Es ablished in 1990
Figu e 4. Eas e n Seaboa d. Sou ce: Kuchiki and Tsuji (2011) based on Shimomu a (2000).
Economies 2024,12, 163 8 o 28
3.1. Agglome a ions in No he n Vie nam
This subsec ion iden i ies he ole o he “mas e swi ch” and accele a o in he es ab-
lishmen o indus ial agglome a ion h ough Japanese o icial de elopmen assis ance in
he case o indus ial agglome a ion in no he n Vie nam2.
3.1.1. Roads and Po s: Reduc ion o T anspo Cos s as Mas e Swi ch
The cons uc ion and eno a ion o Na ional Highway No. 5 and Haiphong Po we e
e ec i e as mas e swi ches o he building o indus ial agglome a ion. Figu e 3shows
ha JPY (Japanese Yen) 21 billion was p o ided o he cons uc ion o Na ional Highway 5
and JPY 17.3 billion o he eno a ion o Haiphong po in 1993 and 1995.
3.1.2. Ins i u ions: Reduc ion o T anspo Cos s as Mas e Swi ch
In Ap il 1999, Japanese Minis e o Finance Miyazawa pledged JPY 20 billion o sup-
po a p i a e sec o de elopmen p og am. The loan was ag eed upon and implemen ed
in Sep embe 1999.
Acco ding o he JBIC-IDCJ su ey (2003), as shown in Table 2and Figu e 5, p i a e
companies e alua e he e ec o ins i u ional change on anspo a ion cos educ ion
om ou main pe spec i es
3
. Fi s , he app o al sys em o new business was abolished
and changed o a egis a ion sys em. Second, sub-licences a e abolished. Changes in
company o ma ion s eamlined adminis a i e p ocedu es. Thi d, he colla e al and access
o banks a e imp o ed. Las ly, ade was libe alized. The numbe o es ic ed o p ohibi ed
indus ies dec eased om 400 o 250.
Table 2. Bene i o Well-de eloped In as uc u e.
Type
P oduc ion Ma ke -Local Ma ke -Expo Impo Hai Phong Po
Highway No. 5
Example
1
Hanoi Haiphong Haiphong B B Canon
2
Hanoi Local Haiphong Haiphong B B TOTO
3
Hanoi Local Haiphong B C Vie nam Floa Glass
4
Hanoi Via in e ne CAD
echnology Yabashi
5
Hanoi Noi Bai Haiphong C C Sumi omo Bakeli e
6
Haiphong Haiphong Haiphong B As’ y
7
Haiphong Local Haiphong B C San Miguel
Yamamu a
8
Haiphong Local Haiphong Haiphong
A (inc.local dis ibu ion
by ship) B
Han-Vie Hea y
Indus y &
Cons uc ion
9
Haiphong Noibai Noibai B ESTELL
10
Vinh Phuc Local Haiphong C C Honda
No e: A, B and C show equency o use. A: ex emely equen , B: e y equen , C: equen . Sou ce: Kuchiki
(2007) based on JBIC-IDCJ (2003).
3.1.3. Thang Long Indus ial Pa k and Nomu a Haiphong Indus ial Zone as Accele a o
Bo h Thang Long Indus ial Pa k (TLIP) and Nomu a Haiphong Indus ial Zone
(NHIZ) se ed as accele a o s o help in es o s educe hei ini ial ixed cos s. The de elop-
men a ea is 121 hec a es o TLIP and 180 hec a es o NHIZ.
Economies 2024,12, 163 15 o 28
JBIC (2007–2022) Su ey Repo on O e seas Business Ope a ions by Japanese Manu-
ac u ing Companies om 2007 o 2022 aimed o esea ch and analyze he cu en s a us
and u u e p ospec s o o e seas business de elopmen o Japanese manu ac u ing com-
panies. The companies a ge ed in his su ey a e Japanese manu ac u ing companies
which ha e h ee o mo e o e seas a ilia es. This pape uses he da a o he de ails o bo h
issues and p omising easons, and, in pa icula , ocuses on he de ails o issues. Fac o
analysis is applied o he op en coun ies om 2007 o 2022. The six coun ies a e India,
Vie nam, Indonesia, Thailand, he US, and China. Fo example, ega ding (Japan Bank o
In e na ional Coope a ion) (JBIC 2007–2022), he numbe o su eyed companies is 946,
and he numbe o esponden s is 531. This pape p o ides a ac o analysis ega ding he
easons o he high po en ial and he easons o he issues in in es ing in he p omising
in es men coun ies.
China was he i s p omising coun y in 2018. Appendix Aillus a es he s a is ics
o p omising and issue i ems in Tables A1 and A2, espec i ely. Among he issue i ems in
Table A2, which a e China’s challenges, he issue i em wi h he highes numbe o i ms
is (o) In ense compe i ion wi h o he companies wi h 132 i ms, and he i em wi h he
second-highes numbe o i ms is (m) Rise in labo cos s wi h 129 i ms. Howe e , i is
no ewo hy ha he issue i ems wi h consis en ly high loading sco es in he ac o analysis
a e ins i u ional easons such as (h) Insu icien p o ec ion o in ellec ual p ope y igh s
and (i) Fo eign exchange and emi ance es ic ions.
We use high po en ial, o p omising easons, which a e condi ions ha p omo e
indus ial agglome a ion in each coun y. Appendix Bshows he ac o loadings as ollows:
The i s ac o , ML1, ep esen s ‘FDI-led agglome a ion’: (o) Local logis ics se ices (1.1); (n)
Local physical in as uc u e (1); ( ) S able poli ical and social condi ions (1); (l) P o i abili y
o local ma ke (0.9); and (m) A base o p oduc de elopmen (0.7).
The second ac o , ML2, ep esen s ‘Human esou ces o low-wage labo ’: (b) Low-
wage labo (0.7); (a) Excellen human esou ces (0.5); and ( ) Risk di e si ica ion ecep acle
o o he coun ies (0.6).
The hi d ac o , ML3, ep esen s ‘Expo p ocessing zone’: (p) P e e en ial ax in-
cen i es o in es men (0.9); (q) S able policies o a ac o eign in es men (0.9); (h) An
expo base o Japan (0.8); (g) An expo base o hi d coun ies (0.6); and (d) A supple base
o assemble make s (0.4).
The ou h ac o , ML4: ‘Raw ma e ial p ocu emen ’: (i) Ad an age in p ocu emen
o aw ma e ials (0.6); and (c) Cheap pa s and aw ma e ials (0.5). He e, he alues o
pa en heses a e ac o loadings (Kuchiki (2023), pp. 10–11).
This pape ocuses on he issues ha hinde indus ial agglome a ion. Rega ding
he ac o loadings o he issues o in es men , ML1 o Ins i u ional Issues consis s o (h)
Insu icien p o ec ion o in ellec ual p ope y igh s (1), (i) Fo eign exchange and emi ance
es ic ion (1), (b) Unclea ope a ion o legal sys em (0.9), and (p) Di icul y in collec ing
paymen s (0.9).
In e ms o he ope a ion o he legal sys em, hey a e ( ) S eng hening o axa ion
(0.9), (j) Impo egula ions and cus oms p ocedu es (0.8), (e) S eng hening axa ion (0.8),
(g) In es men licensing p ocedu es a e complica ed and unclea (0.8), (m) Rise in labo
cos s (0.8), (d) Ope a ion o he ax sys em is unclea (0.7), (q) Di icul y in aising unds
(0.5), and (n) Labou issues’ (0.5).
ML 2 o Indus ial Agglome a ion consis o ( ) Unde de elopmen o local suppo ing
indus ies (1.1), (a) Unde de eloped legisla ion (1), ( ) Unde de eloped in as uc u e (0.9),
(o) In ense compe i ion wi h o he companies (
−
0.9), ( ) Lack o in o ma ion on in es ing
coun ies (0.9), and (s) Lack o cu ency and p ice s abili y (0.7).
ML 3 o Human Capi al o Enginee s and Manage s consis s o (k) Di icul y in
secu ing local enginee s (0.8) and (l) Di icul y in secu ing managemen -le el pe sonnel
(0.8).
ML 4 o Insecu i y and Social Ins abili y consis s o (u) Insecu i y and social ins abili y
(0.8) and (c) Complexi y o he ax collec ion sys em (0.5).
Economies 2024,12, 163 16 o 28
The ac o s ha his pape will pay pa icula a en ion o in he nex sec ion a e ML
3, Enginee s and Manage s. In pa icula , enginee s as capi al s ock as a ixed ac o o
p oduc ion in he manu ac u ing indus y.
5. Empi ical Analysis o B ake Segmen s
In his sec ion, a ac o analysis using JETRO da a di ided he in es men en i onmen
segmen s in o h ee ac o s: The i s ac o is wo ke s (gene al labo ) and s a (gene al
o ice wo k). The second ac o is middle managemen (sec ion chie ) and manage s (sec ion
chie ). The hi d ac o is enginee s (in e media e echnician) o W2.
Fu he mo e, a ac o analysis was conduc ed on he in es men issues o FDI in
he six mos p omising in es men des ina ions o Japanese i ms using JBIC da a: he
six coun ies a e India, Vie nam, Thailand, Indonesia, China, and he Uni ed S a es. As
discussed in Sec ions 3.3.3 and 3.3.4, among hese coun ies, India has been b aking because
i is no as agglome a ed as o he coun ies in e ms o expo s. The esul s o he ac o
analysis and eg ession analysis p o ed he hypo hesis ha he issue in India’s in es men
en i onmen om 2007 o 2021, o a b ake segmen , is he “enginee s” segmen . Hence, we
can conclude ha he b ake segmen is enginee s as human capi al.
A summa y o he esul s ob ained by ac o analysis e eals ha only India has a
ac o sco e o mo e han 1 o ha ing issues wi h enginee s om 2007 o 2021 (no including
2022. Fo he o he coun ies, he ac o sco e exceeds 1 o Vie nam only o 2007 and 2008,
and o Thailand only o 2020. In o he wo ds, we can conclude ha enginee s a e he
ac o ha poses a challenge o he es ablishmen o indus ial agglome a ion in India.
5.1. Fac o Analysis o Wo ke s, Enginee s, and Manage s
Indus ial agglome a ion is basically o med a he ci y le el. In mos coun ies, he
leading ci ies d i e he economic g ow h o he coun y a he na ional le el. Kuchiki (2020)
in he Ox o d Handbook o Indus ial Hubs and Economic Kuchiki (2023) showed his
ac o China and ASEAN, espec i ely. The e o e, we will conduc a ac o analysis on a
ci y-by-ci y basis.
As shown in Appendix C, he conclusion ob ained in his sec ion is ha in es men -
ela ed cos s can be ca ego ized in o h ee ac o s. The i s ac o o ML 1 is wo ke s
(gene al labo ) in W1 and s a (gene al o ice wo k) in W4. The second ac o o ML 2 is
middle managemen (sec ion chie ) o W3 manage s and manage s (sec ion chie ) o W5.
The hi d ac o o ML 3 is enginee s (in e media e echnician) o (W2). The de ini ion o
enginee s (in e media e echnician) (W2) does no include so-called skilled wo ke s.
The e o e, he pape supposes ha ML 3 o “enginee s” belongs o skilled labo as he
human capi al o ixed cos s in he manu ac u ing indus y. In eg a ing his esul wi h
Resul 1 yields he ollowing esul :
Resul 2. The numbe o manu ac u ing agglome a ions is in e sely ela ed o he sho age o
enginee s as “human capi al”.
5.2. P omising Fac o s o In es men
As shown in Table 5a, we conclude he cha ac e is ics o he ac o sco es o each
coun y in he ollowing. Vie nam has high sco es o Fac o 2, anging om 1.13 o 3.09
be ween 2007 and 2022, and is p omising wi h espec o inexpensi e labo . Thailand has
high sco es o Fac o 3, anging om 0.5 o 2.44 be ween 2007 and 2022, and is p omising in
e ms o o eign in es men in EPZs, e c. The US has high sco es o Fac o 1, anging om
0.97 o 3.18 be ween 2007 and 2022, and is p omising in e ms o indus ial agglome a ion.
China has high sco es o Fac o 4, anging om 0.77 o 2.15 be ween 2007 and 2015, and is
p omising o in es men in cheap aw ma e ials and cheap pa s.
Economies 2024,12, 163 17 o 28
Table 5. (a) Fac o sco es o in es men p omising easons by yea by cou y by ac o analysis. (b) Fac o sco es o in es men issues by yea by cou y by ac o
analysis.
(a)
India
Vie nam Thailand
Indonesia
China
U.S.
Agglo
FDI
Wo ke Ma e i Agglo
FDI
Wo ke Ma e i Agglo
FDI
Wo ke Ma e i Agglo
FDI
Wo ke Ma e i Agglo
FDI
Wo ke Ma e i Agglo
FDI Wo ke
Ma e i
2007
−0.77 −0.52 0.96 0.37 -0.32 1.28 3.09 −1.85 0.17 2.08 0.43 0.37 −0.90 −0.57 0.57 2.67 −0.88 0.59 −0.07 2.16 2.76 −1.06 −0.17 −0.61
2008
−0.74 −0.70 0.60 −0.12 −0.58 1.00 2.24 −1.53 0.11 1.63 0.08 −0.13 −0.93 0.66 0.43 1.76 −0.71 0.16 −0.20 2.10 2.05 −1.48 −0.24 −0.99
2009
−0.85 −0.83 0.43 0.27 −0.68 0.67 1.72 −0.69 0.21 2.26 −0.07 0.39 −0.84 0.21 0.22 1.09 −0.75 0.26 −0.25 2.00 1.42 −1.54 −0.44 −1.21
2010
−0.85 −0.68 0.56 0.76 −0.60 0.51 1.89 −0.23 0.02 2.06 −0.34 1.46 −0.82 −0.24 0.70 1.26 −0.43 0.10 −0.68 2.03 1.75 −1.33 −0.47 −0.91
2011
−0.79 −0.60 0.35 0.48 −0.84 0.29 1.64 0.64 0.17 2.45 −0.49 1.09 −0.71 −0.08 0.52 0.78 −0.55 0.19 −0.84 1.66 1.95 −0.86 −0.63 −0.65
2012
−0.89 −0.71 0.13 0.67 −0.88 0.35 1.52 0.03 0.36 2.42 −0.37 0.15 −0.79 −0.35 0.39 0.23 −0.53 −0.13 −1.01 1.28 2.04 −1.15 −0.43 −0.83
2013
−0.80 −0.59 −0.02 0.25 −0.62 −0.03 1.92 −0.55 0.70 2.30 −0.30 −0.24 −0.62 −0.26 0.26 0.20 −0.38 −0.26 −1.48 0.93 2.40 −1.09 −0.25 −0.52
2014
−0.80 −0.80 0.00 0.34 −0.62 0.08 1.49 −0.36 0.36 2.34 −1.21 0.70 −0.64 −0.52 −0.14 −0.27 −0.21 −0.37 −1.23 0.77 3.19 −1.16 0.15 −0.68
2015
−0.79 −0.45 −0.17 0.32 −0.12 −0.16 1.85 −1.07 −0.13 1.52 −0.61 1.02 −0.60 −0.60 0.15 0.29 −0.17 −0.58 −1.58 1.03 2.23 −0.97 −0.48 −0.68
2016
−0.74 −0.63 −0.29 0.14 −0.34 −0.40 1.27 −0.96 −0.17 1.48 −0.95 −0.10 −0.74 −0.46 −0.21 −0.02 −0.25 −0.58 −1.38 0.36 2.41 −1.06 −0.37 −0.58
2017
−0.73 −0.62 −0.05 0.04 −0.28 0.00 1.72 −0.87 0.19 1.57 −0.70 −0.79 −0.65 −0.40 −0.12 0.33 −0.20 −0.45 −1.40 0.63 1.63 −1.11 −0.87 −0.29
2018
−0.68 −0.59 −0.29 0.08 −0.33 0.24 1.60 −0.59 0.33 1.16 −0.42 −0.92 −0.61 −0.51 −0.42 −0.26 0.02 −0.44 −1.33 0.49 1.60 −0.80 −0.77 −0.84
2019
−0.70 −0.55 −0.17 0.21 −0.12 0.12 1.36 −1.18 0.42 0.99 −0.79 −0.70 −0.60 −0.37 −0.14 −0.84 0.10 −0.41 −1.54 0.08 0.97 −0.87 −1.07 −0.79
2020
−0.85 −0.53 0.00 0.31 −0.38 −0.01 1.14 −0.93 0.24 0.51 −0.42 −0.92 −0.77 −0.31 −0.16 −0.27 −0.03 −0.50 −1.66 0.61 1.80 −0.80 −0.79 −0.67
2021
−0.87 −0.55 −0.15 0.24 −0.27 0.48 1.60 −1.79 0.32 1.90 −0.57 −1.51 −0.75 0.11 0.03 −0.18 0.23 −0.31 −1.50 0.00 1.50 −1.00 −0.66 −1.05
2022
−0.73 −0.46 0.01 −0.43 0.09 0.76 2.24 −1.50 0.47 1.95 0.07 −1.02 −0.49 −0.13 0.15 −0.28 0.24 −0.33 −1.46 0.04 1.91 −0.80 −0.66 −0.73
(b)
India
Vie nam Thailand
Indonesia
China
U.S.
Engi
Agglo
Ins i Secu Engi
Agglo
Ins i Secu Engi
Agglo
Ins i Secu Engi
Agglo
Ins i Secu Engi
Agglo
Ins i Secu Engi
Agglo
Ins i Secu
2007
1.20 −0.77 −0.44 −0.09 0.73 0.36 0.15 −0.08 0.65 0.11 0.31 0.53 −0.81 0.90 0.41 1.59 0.12 −1.11 1.27 −0.08 0.89 −1.26 −1.16 −1.01
2008
0.80 −0.70 −0.43 0.27 1.75 2.23 −0.41 −1.65 0.03 0.50 −0.49 0.78 −1.01 1.67 −0.17 1.10 −0.44 0.37 2.43 0.21 −0.52 −1.43 −1.13 −1.15
2009
0.86 −0.68 −0.84 −0.31 1.01 1.40 −0.49 −0.59 0.34 0.83 −0.15 0.30 −1.24 1.40 −0.33 0.96 −0.40 0.13 2.21 0.36 −0.52 −1.22 −1.31 −1.48
2010
1.20 −0.78 −0.70 −0.16 0.94 1.16 −0.21 −0.70 0.67 0.67 −0.36 0.87 −1.47 1.28 −0.05 1.08 −0.91 −0.35 1.97 −0.17 −0.76 −1.36 −1.35 −1.57
2011
0.98 −0.59 −0.96 0.25 0.59 0.86 −0.55 −0.84 0.27 0.03 −0.66 −0.29 −1.52 1.23 1.08 1.37 −0.33 −0.38 2.11 −0.10 −1.26 −1.26 −1.37 −1.48
2012
1.23 −0.72 −0.78 0.12 −0.38 1.47 0.05 −0.41 −0.18 0.62 −0.24 0.16 −1.52 1.23 1.08 1.37 −0.91 −0.31 2.29 0.45 −1.56 −1.40 −1.25 −1.62
2013
0.82 −0.75 −0.84 −0.32 0.26 1.48 −0.45 −0.94 0.06 0.62 −0.32 0.09 −1.58 1.39 0.07 1.01 −0.53 −0.41 2.21 0.18 −1.06 −1.21 −1.23 −1.35
2014
1.40 −0.87 −0.82 −0.46 0.45 1.12 −0.36 −0.67 0.47 0.56 −0.22 0.40 −1.78 1.29 1.01 1.89 −0.46 −0.60 1.94 0.32 −1.51 −1.43 −1.20 −1.42
2015
1.02 −0.69 −0.70 0.14 0.94 1.36 −0.02 −0.47 0.47 0.73 0.27 0.48 −1.67 1.37 0.28 1.67 −0.24 −0.75 2.10 0.60 −1.20 −1.33 −1.07 −1.35
2016
1.46 −0.68 −0.66 −0.33 0.68 0.62 −0.13 −0.90 0.24 0.65 0.58 0.94 −1.71 1.30 0.55 2.12 −0.18 −0.78 1.84 0.00 −0.60 −1.28 −1.25 −1.48
2017
1.54 −0.70 −0.68 0.18 0.53 0.76 −0.16 −0.37 −0.05 0.38 0.42 0.53 −1.83 1.25 0.35 2.01 −0.19 −0.85 1.62 0.03 −0.64 −1.29 −1.30 −1.29
2018
1.73 −0.77 −0.52 −0.03 0.84 0.70 −0.05 −0.51 0.86 0.31 0.51 1.06 −1.33 1.31 0.81 2.32 −0.46 −0.73 1.96 0.47 −0.29 −1.28 −1.09 −1.10
2019
1.41 −0.86 −0.73 −0.17 0.94 0.74 −0.05 −0.84 0.03 0.26 0.19 0.41 −1.27 1.04 0.41 1.05 −0.07 −0.85 1.42 −0.26 −0.14 −1.31 −
1.08658875
−1.02
2020
0.96 −0.96 −0.75 −0.48 0.69 0.47 −0.23 −1.27 0.54 0.34 −0.13 0.12 −1.07 1.11 0.29 1.17 0.32 −0.99 1.29 0.03 0.06 −1.24 −1.01 −0.90
2021
1.24 −0.84 −0.67 −0.66 0.50 0.26 −0.24 −0.92 1.11 0.50 0.05 0.20 −1.10 0.70 0.08 1.39 −0.26 −1.03 1.40 −0.07 0.30 −1.23 −1.17 −1.03
2022
0.91 −1.02 −0.64 −0.19 0.17 0.46 0.39 −0.41 0.39 0.60 0.57 0.89 −1.27 1.14 0.45 1.95 −0.13 −1.06 1.53 0.31 0.78 −1.17 −1.18 −0.69
No e: Agglo = Agglome a ion, FDI = Fo eign Di ec In es men -led, Wo ke = Wo ke s, Ma e i = Rww ma e ials. No e: a(p33,n ac o s = X, m = “ml”, o a e = “p omax”) $sco es
by P og am R. X = Numbe o eigne alues g ea e han 1. Engi = Enginee s, Ins = Ins i u ions, Secu = Secu i y. a(p33,n ac o s = X, m = “ml”, o a e = “p omax”) by P og am R.
X = Numbe o eigne alues g ea e han 1. Sou ce: Au ho ’s calcula ion.
Economies 2024,12, 163 18 o 28
When a ac o sco e is 0.7, he a iable has a s ong ela ionship wi h he ac o . When
a ac o sco e is 1.0, he a iable is comple ely ela ed o he ac o .
Finally, India, howe e , is p omising o in es men in e ms o enginee s as human
capi al only in 2007 and 2008, bu no in o he a eas.
5.3. Issues o In es men as “B ake Segmen ”
In his subsec ion, we each he main conclusion o his pape ha “enginee s” a e a
b ake segmen as human capi al o indus ial agglome a ion policies in he manu ac u ing
indus y. Fac o sco es o India a e high a he ac o consis ing o bo h he i ems o di icul
o secu e echnical/enginee ing s a and di icul o secu e managemen -le el s a .
5.3.1. Fac o 1: Ins i u ions
As shown in Figu e 6, ins i u ional issues we e iden i ied as he numbe one ac o
o in es men issues in p omising coun ies. These include ‘Insu icien p o ec ion o
in ellec ual p ope y igh s’ (1), ‘Fo eign exchange and emi ance es ic ion’ (1), ‘Unclea
ope a ion o legal sys em’ (0.9), and ‘Di icul y in collec ing paymen s’ (0.9). In e ms o
he ope a ion o he legal sys em, ‘In es men licensing p ocedu es a e complica ed and
unclea ’ (0.8) and ‘Ope a ion o he ax sys em is unclea ’ (0.7) we e ci ed. ‘Di icul y in
aising unds’ and ‘Labou issues’ (0.5) we e also ci ed.
Economies 2024, 12, x FOR PEER REVIEW 20 o 30
5.3. Issues o In es men as “B ake Segmen ”
In his subsec ion, we each he main conclusion o his pape ha “enginee s” a e a
b ake segmen as human capi al o indus ial agglome a ion policies in he manu ac u -
ing indus y. Fac o sco es o India a e high a he ac o consis ing o bo h he i ems o
difficul o secu e echnical/enginee ing s aff and difficul o secu e managemen -le el
s aff.
5.3.1. Fac o 1: Ins i u ions
As shown in Figu e 6, ins i u ional issues we e iden i ied as he numbe one ac o
o in es men issues in p omising coun ies. These include ‘Insufficien p o ec ion o in-
ellec ual p ope y igh s’ (1), ‘Fo eign exchange and emi ance es ic ion’ (1), ‘Unclea
ope a ion o legal sys em’ (0.9), and ‘Difficul y in collec ing paymen s’ (0.9). In e ms o
he ope a ion o he legal sys em, ‘In es men licensing p ocedu es a e complica ed and
unclea ’ (0.8) and ‘Ope a ion o he ax sys em is unclea ’ (0.7) we e ci ed. ‘Difficul y in
aising unds’ and ‘Labou issues’ (0.5) we e also ci ed.
Figu e 6. Fac o loadings o in es men issues. No e: The numbe s abo e he a ows a e ac o load-
ings. Sou ce: Au ho ’s calcula ion.
5.3.2. Fac o 2: Indus ial Agglome a ion
The ollowing indus ial agglome a ion ac o s we e iden i ied: ‘Unde de elopmen
o local suppo ing indus ies’ (1.1); ‘Unde de eloped legisla ion’ (1); ‘Unde de eloped
in as uc u e’ (0.9); ‘Lack o in o ma ion on in es ing coun ies’ (0.9) and ‘Lack o cu -
ency and p ice s abili y’ (0.7).
Figu e 6. Fac o loadings o in es men issues. No e: The numbe s abo e he a ows a e ac o
loadings. Sou ce: Au ho ’s calcula ion.
Economies 2024,12, 163 19 o 28
5.3.2. Fac o 2: Indus ial Agglome a ion
The ollowing indus ial agglome a ion ac o s we e iden i ied: ‘Unde de elopmen
o local suppo ing indus ies’ (1.1); ‘Unde de eloped legisla ion’ (1); ‘Unde de eloped
in as uc u e’ (0.9); ‘Lack o in o ma ion on in es ing coun ies’ (0.9) and ‘Lack o cu ency
and p ice s abili y’ (0.7).
5.3.3. Fac o 3: Human Capi al o Enginee s
‘Di icul y in secu ing local enginee s’ (0.8), and ‘Di icul y in secu ing managemen -
le el pe sonnel’ (0.8).
5.3.4. Fac o 4: Insecu i y and Social Ins abili y
The issue o ‘insecu i y and social ins abili y’ (0.8) is signi ican . No e ha ‘complexi y
o he ax collec ion sys em’ (0.5) is included in Fac o 4.
Nex , his sec ion examines he cha ac e is ics o each coun y’s ac o sco e ega ding
issues in in es men . As shown in Table 5b, India alone has high sco es o Fac o 3, anging
om 0.80 o 1.73 be ween 1.2 in 2007 and 0.91 in 2022, indica ing issues o enginee s and
manage s. Vie nam has high sco es o Fac o 2, anging om 0.86 o 2.23 be ween 2.23 in
2007 and 1.36 in 2018, indica ing ha indus ial agglome a ion was he issue. Thailand has
no high sco es o all ac o s.
Indonesia has high sco es o bo h Fac o 1 and Fac o 4. Fac o 1 anged om 0.96 o
2.32 be ween 1.1 in 2007 and 1.59 in 2022, and Indonesia aced issues ela ed o ins i u ions
and ins abili y, such as social un es and he ax collec ion sys em. Fac o 4 anged om 0.7
o 1.67 be ween 1.67 in 2007 and 0.9 in 2022, and Indonesia aced he p oblem o secu i y.
China has high sco es o Fac o 1, anging om 1.27 o 2.43, indica ing issues wi h he
legal sys em. The US has no high sco es o all ac o s be ween 2007 and 2018.
Table 6is summa y by combining he esul s o a and Table 5a,b India shows no
p omising i em o in es men and has issues wi h enginee s and manage s. Vie nam has
issues wi h enginee s only in 2007 and 2008 bu has an abundance o low-wage labo and
has been a good ecipien o China’s eloca ion. Thailand has no in es men issues and
is p omising o he in oduc ion o o eign di ec in es men . China has no p omising
poin s and has issues wi h i s legal sys em. Indonesia has he issues o bo h ins i u ions and
secu i y. The US has no in es men issues and is p omising o indus ial agglome a ion.
Thus, he issues ela ed o in es men in India a e enginee s and manage s. The issues
o enginee s a e he ac o s ha hinde he indus ial agglome a ion o SEZs in India and
a e he “b ake segmen ” o building indus ial agglome a ion.
The summa y o issues and p omising easons by ac o analysis in Table 6gi es policy
ecommenda ions as o 2022 o p omo e manu ac u ing agglome a ion o he i e a ge
coun ies o he han India. China has an issue on ins i u ions bu does no ha e an issue on
enginee s as human capi al. The e o e, ins i u ional e o m is needed. Indonesia has bo h
issues o ins i u ions and secu i y, so ins i u ional e o m and imp o emen o secu i y a e
needed.
The US and Thailand will ha e no issues in 2022. In he US, he agglome a ion i em
is p omo ing, and in Thailand, he FDI-led i em is p omo ing. Bo h coun ies should
con inue de eloping enginee s as human capi al in o de o p omo e he agglome a ion
o manu ac u ing indus ies. In Vie nam, he wo ke s i em is p omo ing, and he issue o
enginee s as human capi al was esol ed in 2022. The e o e, i is necessa y o con inue
he cu en de elopmen o enginee s as human capi al. As a whole, he esul s in Table 6
indica e ha he condi ion o he con inua ion o he p ocess o indus ial agglome a ion
in any coun y is he de elopmen o enginee s as human capi al.
Economies 2024,12, 163 20 o 28
Table 6. Summa y o issues and p omising easons by ac o analysis.
Economies 2024, 12, x FOR PEER REVIEW 22 o 30
Table 6. Summa y o issues and p omising easons by ac o analysis.
Issues P omising I ems
Yea Enginee s Agglome a ion Ins i u ions Secu i y Agglome a ion FDI-led Wo ke s Raw Ma e ials
India
2007 1.2
2021 1.24
2022 0.91
Vie nam
2007 1.74 2.23
3.09
2008 1.01 1.4 2.24
2011 1.47 1.63
2014 1.36
2022 2.24
Thailand
2007
2.07
2018 1.15
2020 1.11 0.99
2021 1.9
2022 1.94
Indonesia
2007
1.67 1.09
2.
7
2010 1.23 1.07 1.26
2022 0.9 1.59
China
2007
2.42
2.15
2015 1.02
2016
2022 1.26
U.S.
2007
2.75
2022 1.9
Sou ce: Au ho ’s.
Nex , he ela ionship be ween he “indus ial agglome a ion” ac o o he p omis-
ing easons in Table 5a and he “ ou ac o s” o he issues in Table 5b will be eg essed.
The indus ial agglome a ion ac o o he p omising easons o he in es men en i on-
men in Table 5a is he objec i e a iable, and he ac o sco es o he issues o “enginee s”,
“agglome a ion”, “sa e y”, and “ins i u ions” in Table 5b a e he independen a iables.
The esul s a e as ollows:
Agglome a ion = 0.01007 − 0.49339 Enginee s − 0.34550 Agglome a ion issue
(0.158) (−6.744) *** (−4.479) ***
−0.28121 Ins i u ions − 0.41943 Secu i y
(−3.781) *** (−4.404) ***
(Adjus ed R-squa ed is 0.6059, F-s a is ic is 37.52 on 4 and 91 DF, and p- alue is 2.2 ×
10^16 and *** is signi ican a he 0 pe cen le el. The numbe s in pa en heses a e - alues).
The ac o sco es o he in es men en i onmen issues o enginee s, agglome a ion,
sa e y, and ins i u ions a e nega i ely ela ed o he ac o sco es o he p omising easons
o indus ial agglome a ion. The coefficien s o all independen a iables a e nega i e,
indica ing ha hese issues ha e a nega i e impac on agglome a ion building. The
Sou ce: Au ho ’s.
Nex , he ela ionship be ween he “indus ial agglome a ion” ac o o he p omising
easons in Table 5a and he “ ou ac o s” o he issues in Table 5b will be eg essed. The
indus ial agglome a ion ac o o he p omising easons o he in es men en i onmen
in Table 5a is he objec i e a iable, and he ac o sco es o he issues o “enginee s”,
“agglome a ion”, “sa e y”, and “ins i u ions” in Table 5b a e he independen a iables.
The esul s a e as ollows:
Agglome a ion = 0.01007 −0.49339 Enginee s −0.34550 Agglome a ion issue
(0.158) (−6.744) *** (−4.479) ***
−0.28121 Ins i u ions −0.41943 Secu i y
(−3.781) *** (−4.404) ***
(Adjus ed R-squa ed is 0.6059, F-s a is ic is 37.52 on 4 and 91 DF, and p- alue is
2.2 ×1016
and *** is signi ican a he 0 pe cen le el. The numbe s in pa en heses a e
- alues).
Economies 2024,12, 163 21 o 28
The ac o sco es o he in es men en i onmen issues o enginee s, agglome a ion,
sa e y, and ins i u ions a e nega i ely ela ed o he ac o sco es o he p omising easons
o indus ial agglome a ion. The coe icien s o all independen a iables a e nega i e,
indica ing ha hese issues ha e a nega i e impac on agglome a ion building. The coe i-
cien o enginee s was 0.493, he highes o he ou ac o s. In o he wo ds, he issue o
enginee s was con i med o ha e a nega i e impac on he p omising easons o indus ial
agglome a ion.
In summa y, i s , his pape applied a spa ial economic model o ob ain Resul 1. In
he “manu ac u ing” sec o , enginee s and so-called skilled wo ke s a e included in he
ca ego y o skilled labo . Enginee s can be assumed o be human capi al as a ixed ac o o
p oduc ion a he han a a iable ac o o p oduc ion. The e o e, he sho age o enginee s
in he manu ac u ing sec o can be a b ake on agglome a ion.
Second, ac o analysis using JETRO da a ound ha in es men - ela ed cos s can be
ca ego ized in o h ee ac o s. The i s ac o o ML 1 is wo ke s (gene al labo ) in W1 and
s a (gene al o ice wo k) in W4. The second ac o o ML 2 is middle managemen (sec ion
chie ) o W3 manage s and manage s (sec ion chie ) o W5. The hi d ac o o ML 3 is
enginee s (in e media e echnician) o (W2). The de ini ion o enginee s (in e media e
echnician) (W2) does no include so-called skilled wo ke s. The pape supposes ha
ML 3 o “enginee s” belongs o skilled labo as he human capi al o ixed cos s in he
manu ac u ing indus y. In eg a ing his esul wi h Resul 1 yields he ollowing Resul
2: he numbe o manu ac u ing agglome a ions is in e sely ela ed o he sho age o
enginee s as “human capi al”.
Thi d, he ac o analysis based on he manu ac u ing su ey e eals ha he ac o s
ha make up ML 3, whe e he ac o sco es o in es men challenges in India a e highe ,
a e (k) Di icul y in secu ing local enginee s (0.8) and (l) Di icul y in secu ing managemen -
le el pe sonnel (0.8). In o he wo ds, India’s in es men challenge is he sho age o
manage s and enginee s.
Taking he abo e h ee poin s oge he , we can judge ha enginee s as human capi al
belong o a b ake segmen . I is no ed ha we do no ule ou he possibili y ha o he
segmen s, including manage s, belong o a b ake segmen . In conclusion, he segmen o
“enginee s” as human capi al is one o he “b ake segmen s”.
6. Conclusions and Summa y
India has no ma ched he size and success o Eas Asian indus ial hubs, including
China. The e o e, i is necessa y o iden i y he missing segmen s o he in es men
en i onmen o he in oduc ion o o eign di ec in es men . The “segmen s” cons i u e
he o ganiza ion o agglome a ions. Each segmen hen has a speci ic unc ion in he p ocess
o building indus ial agglome a ion. We ocus on he p ocess o building segmen s in
agglome a ion o ma ion. We de ine a “b ake segmen ” as a segmen ha has he “ unc ion”
o decele a ing he speed o he p ocess o building segmen s.
This pape iden i ies b ake segmen s in he p ocess o cons uc ing segmen s o indus-
ial agglome a ion. A a ian model o spa ial economics and ac o analysis o in es men
en i onmen cos da a yielded he esul ha he numbe o agglome a ed i ms is in e sely
ela ed o he wages o enginee s. Fac o analysis and eg ession analysis o he six mos
p omising in es men des ina ions o Japanese i ms using JBIC da a we e conduc ed on
he in es men challenges o o eign di ec in es men . The six coun ies a e India, Vie nam,
Thailand, Indonesia, China, and he US. Only India has a b aking segmen , due o he ac
ha i is he only one o hese coun ies ha has no inc eased i s agglome a ion as much as
he o he s. As a esul o he analyses, India’s issue o he in es men en i onmen om
2007 o 2021 was he “enginee ” segmen . Hence, he conclusion o his pape is ha he
“b ake segmen ” is “enginee s as human capi al”.
As a policy ecommenda ion, his pape p o ides s eps ha can be used o indus ial
agglome a ion policies, as shown in Figu e 2. Fi s , he cons uc ion o agglome a ion
begins wi h an onse o he mas e swi ch. The mas e swi ch o manu ac u ing agglome -
Economies 2024,12, 163 22 o 28
a ion is o de elop anspo a ion in as uc u e ha educes anspo cos s and a ac s
i ms ha p oduce he e ogeneous goods wi h low elas ici y o subs i u ion. Second, he
accele a o segmen o agglome a ion is he cons uc ion o indus ial pa ks.
Thi d, iden i ying he b aking segmen is an essen ial p oposi ion o policy make s in
egions whe e he p ocess o segmen building is no ye in p og ess. Since he segmen
ha ac s as a b ake in he agglome a ion building p ocess is enginee s as human capi al,
he implica ion o his pape is o implemen human esou ce de elopmen o enginee s
om “ he ini ial s age”. The p ocess o building indus ial agglome a ion equi es “ he
con inuous de elopmen ” o enginee s as human capi al. I he de elopmen o human
capi al becomes a bo leneck, he p ocess o building indus ial agglome a ion will likely
come o a s ands ill.
This app oach can be used o de e mine he sequencing o o icial de elopmen as-
sis ance (ODA) in de eloping coun ies. Fi s , ODA can be e ec i e in building segmen s
ha will be u ned on by a mas e swi ch o ini ia e an agglome a ion policy. Second,
human esou ce de elopmen o enginee s needs o be implemen ed and con inued om
he beginning. Policy make s need o keep hese wo poin s in mind o ini ia e and con inue
he p ocess o building he manu ac u ing agglome a ion.
Table 7summa izes he con ibu ions o his pape . We linked spa ial and sequence
economics o ou ism, u ban agglome a ion, and manu ac u ing. We ocused on he seg-
men s ha cons i u e he o ganiza ion o agglome a ions. We hen iden i ied he unc ions
o he segmen s and speci ied mas e swi ch and accele a o segmen s. This pape iden i ied
he b ake unc ion.
Table 7. Linking spa ial economics and sequencing economics.
Agglome a ion Loca ion Func ion Segmen Spa ial Economics Sequencing
Economics
Tou ism indus y Osaka, Japan (1) Mas e swi ch commu e cos s
Henkel e al. (2000)
Kuchiki (2021)
U ban
agglome a ion Sappo o, Japan (1) Mas e swi ch commu e cos s K ugman (1991),
Alonso (1964)
Kuchiki and Sakai
(2023)
Manu ac u ing Indus ial hubs,
China (2) Accel indus ial zones Helpman and
K ugman (1985)Kuchiki (2023)
Manu ac u ing Indus ial hubs,
India “(3) B ake” “enginee s” Helpman and
K ugman (1985)“This pape ”
Sou ce: Au ho ’s.
The con ibu ion o iden i ying segmen unc ions can be explained below. Desc ip i e
case s udies on indus ial agglome a ion a e nume ous. The Ox o d Handbook o Indus ial
Hubs and Economic De elopmen by Oqubay (2020) p o ides a comp ehensi e analysis o
he ac o s behind he success and ailu e o indus ial agglome a ion in Asia, La in Ame ica,
and A ica. The Ox o d Handbook o Indus ial Hubs and Economic De elopmen by Lin
and Oqubay p o ides a comp ehensi e analysis o he ac o s behind he success and ailu e
o indus ial agglome a ion in Asia, La in Ame ica, and A ica. Oqubay (2020) poin ed
ou ha Taiwan success ully pionee ed an expo p ocessing zone a Kaohsiung Ha bou ,
which aimed o a ac in es men and de elop he manu ac u ing sec o , especially o
expo s. Pie obelli (2020) ound ha mos examples in La in Ame ica managed o c ea e
he condi ions a he local le el o p i a e–p i a e, public–p i a e, and public–public
collabo a ion. Oqubay and Ke ale (2020) conclude ha in A ica, e ec i e mechanisms o
de elop p oduc ion linkages emain weak in E hiopia. Ahluwalia e al. (2018) a gue ha
India los i s compa a i e ad an age in labo -in ensi e p oduc ion in he ea ly s ages o
de elopmen due o e y es ic i e labo egula ions in he o mal sec o and s ong ade
unions. Desc ip i e case s udies on indus ial agglome a ion a e nume ous in his way.
Howe e , his pape iden i ied he ac o s ha pose issues o indus ial agglome a ion
om he ollowing di e en pe spec i es. This pape con ibu es o he analysis o he
Economies 2024,12, 163 23 o 28
p ocess o indus ial agglome a ion o ma ion posed by Kanai and Ishida (2000). The
p ocess o agglome a ion o ma ion p oceeds h ough he cons uc ion o he segmen s ha
s uc u e he agglome a ion. This pape iden i ies he ole, o unc ion, o hese segmen s,
and, in pa icula , iden i ied segmen s ha unc ion o decele a e he speed o he p ocess.
In pa icula , he pape con ibu es o p o iding a means by which he heo y o
“spa ial economics” can be used in indus ial agglome a ion policy. The loca ion heo y o
spa ial economics p esen s he b eaking condi ions om symme ic equilib ium o agglom-
e a ion equilib ium. Howe e , he p ocess o ansi ion o an agglome a ion equilib ium
does no ini ia e unless hose condi ions a e sa is ied. This allows policy make s in in-
dus ial agglome a ion o speci ically de e mine he sequence o policy implemen a ion.
This pape p esen ed success ul examples o segmen sequencing in he case o o icial
de elopmen assis ance (ODA) in Vie nam and Thailand.
The e a e ou issues o be add essed in he u u e o his pape . Fi s , he mos
impo an ask is o iden i y he segmen wi h he unc ion o inno a ion ac i i y. This
pape ocuses on he p ocess o agglome a ion. Fuji a and Kuchiki (2006) de ined indus ial
clus e s as consis ing o wo componen s: agglome a ion and inno a ion ac i a ion. The
s udy o he unc ion o segmen s o inno a ion ac i a ion is essen ial unde he ou h
indus ial e olu ion.
Second, he numbe o case s udies needs o be inc eased and induc i e conclusions
s eng hened. The e a e simila esea ch issues o o he indus y agglome a ions. Knowl-
edge indus y, ou ism indus y, and u ban agglome a ion a e some possible examples. We
need o inc ease he numbe o case s udies in o de o a ain conclusions, especially wi h
ega d o he empi ical s udy.
Thi d, al hough ac o analysis was used as he s a is ical me hod, i would be wo h
explo ing o he s a is ical me hods o iden i y he unc ions o segmen s.
Fou h, he alidi y o he spa ial economic model on which he conclusions o his
pape a e based also needs o be eexamined. Wi h ega d o he heo e ical model, we
need o conside cases in which he assumed assump ions change.
Funding: This esea ch ecei ed no ex e nal unding.
Ins i u ional Re iew Boa d S a emen : No applicable.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : Publicly a ailable da ase s we e analyzed in his s udy. This da a can be
ound he e: h ps://www.jbic.go.jp/ja/in o ma ion/p ess/p ess-2022/1216-017128.h ml (accessed
on 25 Sep embe 2023). h ps://www.je o.go.jp/wo ld/ epo s/2010/07000312.h ml (accessed on
25 Sep embe 2023).
Acknowledgmen s: We would like o hank Hideyoshi Sakai, Ka sumi Nakayama, and e e ees o
hei commen s on he d a o his pape .
Con lic s o In e es : The au ho decla es no con lic o in e es .
Appendix A
Table A1. P omising i ems o in es men .
China 2018
Su ey I em # o Companies Uni : %
a Excellen human esou ces 25 11.3
b Cheap labo 29 13.1
c Inexpensi e pa s and aw ma e ials 16 7.2
d A supply base o assembly manu ac u e s 53 24.0
e Indus ial agglome a ion 49 22.2
Hubs o isk di e si ica ion in o he coun ies 5 2.3
Economies 2024,12, 163 24 o 28
Table A1. Con .
China 2018
Su ey I em # o Companies Uni : %
g An expo base o Japan 10 4.5
h An expo base o hi d coun ies 23 10.4
i Ad an ages o aw ma e ial p ocu emen 9 4.1
j Cu en size o local ma ke 141 63.8
k Fu u e g ow h po en ial o local ma ke s 161 72.9
l P o i abili y o local ma ke 18 8.1
m
P oduc de elopmen hubs 16 7.2
n Well de eloped local in as uc u e 30 13.6
o Well de eloped local logis ics se ices 18 8.1
p P e e en ial ax ea men o in es men 9 4.1
q S able policies o a ac o eign in es men 1 0.5
S able poli ical and social condi ions 6 2.7
To al 221 100.0
No e: 1. # oc companies = numbe o companies. 2. China is he i s p omising coun y in 2018 o in es . 3.
Fo he ac o analysis in his pape , 16 da a se s om 2007 o 2022 we e used o each o he ables o p omising
in es men i ems and in es men issues o China. Fo India, 16 da a se s om 2007 o 2022 we e also used.
Simila ly, 16 da ase s we e used o each o he o he coun ies in Thailand, Vie nam, Indonesia, and he Uni ed
S a es. Thus, he o al numbe o da a obse ed in each able used in he ac o analysis is 96. Sou ce: JBIC (2018).
Table A2. Issues o in es men .
China 2018
Su ey I em # o Companies Uni : %
a Unde de eloped legisla ion 18 8.1
b Unclea ope a ion o legal sys em 99 44.8
c Insecu i y and social ins abili y 18 8.1
d Ope a ion o he ax sys em is unclea 39 17.6
e S eng hening axa ion 53 24.0
Con ol o o eign cu ency 45 20.4
gComplica ed and unclea in es men licensing
p ocedu es 33 14.9
h Insu icien p o ec ion o in ellec ual p ope y igh s 79 35.7
i Fo eign exchange and emi ance es ic ion 62 28.1
j Impo egula ions and cus oms p ocedu es 53 24.0
k Di icul y in secu ing local enginee s 39 17.6
l Di icul y in secu ing managemen -le el pe sonnel 43 19.5
m
Rise in labo cos s 129 58.4
n Labou issues 41 18.6
o In ense compe i ion wi h o he companies 132 59.7
p Di icul y in collec ing paymen s 52 23.5
q Di icul y in aising unds 11 5.0
Unde de elopmen o local suppo ing indus ies 9 4.1
s Lack o cu ency and p ice s abili y 14 6.3
Unde de eloped in as uc u e 11 5.0
u Complexi y o he ax collec ion sys em 33 14.9
Lack o in o ma ion on in es ing coun ies 6 2.7
To al 221 100.0
No e: 1. # o companies = numbe o companies. 2. China is he i s p omising coun y in 2018 o in es . 3. Fo
he ac o analysis in his pape , 16 da a se s om 2007 o 2022 we e used o each o he ables o p omising
in es men i ems and in es men issues o China. Fo India, 16 da a se s om 2007 o 2022 we e also used.
Simila ly, 16 da ase s we e used o each o he o he coun ies in Thailand, Vie nam, Indonesia, and he Uni ed
S a es. Thus, he o al numbe o da a obse ed in each able used in he ac o analysis is 96. Sou ce: JBIC (2018).
