An Industrial Cluster Study: As A Basis For The Aegean Region's Development Policy

Ege University Working Papers in Economics 2006 http://www.iibf.ege.edu.tr/economics/tartisma

Neşe Kumral

Çağaçan Değer

Working Paper No: 06 / 01

March 2006

Department of Economics

Ege University

AN INDUSTRIAL CLUSTER STUDY: AS A BASIS FOR

THE AEGEAN REGION’S DEVELOPMENT POLICY

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An Industrial Cluster Study: As a Basis for the Aegean Region’s Development Policy‡

NESE KUMRAL* and CAGACAN DEGER+

* Department of Economics, Faculty of Economics and Administrative Sciences,

Ege University, Izmir, 35040, TURKEY. Email: [email protected]

+ Department of Economics, Faculty of Economics and Administrative Sciences,

Middle East Technical University, Ankara, 06531, TURKEY. Email: [email protected]

Abstract:

The Aegean Region, which is the focus of this study, is the second most developed region of Turkey. Its share in the GDP has remained relatively stable around 17 percent during 1990-2000 periods according to data provided by State Planning Organization of Turkey. The region enjoys a number of advantages like; high quality human resources, rich experience in manufacturing industry going back to the 19th century, small and medium sized industries comprising the majority of enterprises, a promising potential for inter-firm network development particularly in industries like food, wearing apparels, leather, metal wares and automotive, relatively more foreign direct investment in various branches, an international port, universities, geographic location. However, despite these advantages, the region also has some disadvantages which can be summarized as follows: the lack of implementation of an effective regional development policy, limited number of regional institutions, inadequate institutional coordination between these institutions, poor vocational training, high level of brain drain, foreign trade of the traditional commodities of the region, inefficient R&D, low technology level, etc. In order to overcome these disadvantages, regional resources need to be reallocated according to the requirements of a global competitive environment in the framework of new regional policy. The study aims to identify manufacturing-based clusters across the Aegean Region and these clusters’ provincial locations, so that a base can be formed for potential regional policies. Department of Trade and Industry’s analysis of UK clusters is taken as the basis of methodology to be applied in this paper.

JEL Codes: O18, L60, R12

‡ Earlier version of this paper was also presented in conference on “Reinventing Regions in the Global

Economy”, which was organized by Regional Studies Association in Pisa, Italy between 12th

-15th

April 2003.

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INTRODUCTION Turkey is a country that has a wide variety of topographical and climatic conditions, which form the basis of seven different regions, namely, Marmara, Aegean, Mediterranean, Central Anatolian, Black Sea, Eastern Anatolian and Southern Anatolian. There have been considerable social, economic and cultural divergences between these regions in terms of development indicators. It is generally agreed upon that Marmara Region is the most advanced region of Turkey. According to State Planning Organisation (SPO) data for the year 2000, Marmara Region has the highest value of GDP with a value of $74 billion. In terms of per capita GDP, Marmara Region takes the lead with a value of $3060. Aegean Region on the other hand has the third value, of GDP, $30,5 billion. The region stands for about %15 of national GDP. It has the second highest per capita GDP value of $2610. The Aegean Region ranks fourth as recipient of public investment expenditures; a value of $550 million out of a national total of $10,5 billion. The region has eight provinces. With more than 9 million inhabitants, it comprises around 14 percent of total population of Turkey. The region has some opportunities like; favorable geographic location and climate, availability of natural resources, high quality human resources, rich experience in manufacturing industry and trade going back to the 19th century, small and medium sized industries comprising the majority of enterprises, a promising potential for inter-firm network development particularly in industries like food, wearing apparels, leather, metal wares and automotive, relatively more foreign direct investment in various branches, an international port, universities, geographic location (proper climatic and soil conditions, closeness to Europe, etc.). However, despite these opportunities, the region also has some threats which can be summarized as follows: the lack of implementation of an effective regional development policy, limited number of regional institutions, inadequate institutional coordination between these institutions, centralized regional policies preventing active participation of regional institutions and stakeholders in developing regional policies, foreign trade of the traditional commodities of the region, narrowing of demand particularly after the February 2001 crisis leading to declining levels of investment in the region, loss of attraction with respect to abundant, cheap and high quality labor due to open economy policies in the Eastern European countries, burdens on infrastructure caused especially by rural migration, etc. In addition to these threats and opportunities, the region also has strengths and weaknesses, which are summarized in Table 1.

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Table 1: Strengths and Weaknesses of Aegean Region

In order to overcome these disadvantages and threats, regional resources need to be reallocated according to the requirements of a global competitive environment in the

Location Factor Strength Weakness

Labor Market Cheap and abundant supply of labor

Availability of quality labor in food and

textile industry

Migration to Marmara Region due to low

wages

February 2001 crisis and layouts

Financial Capital One of the most advanced regions in the country with respect to financial resources

Unavailability of credits due to financial crisis

Lack of institutional infrastructure to provide

seed venture capital for new establishments

Transportation Izmir Harbor: 91% of total exports are

realized through the harbor

Highway constructions are tying the region’s cities to the harbor

Insufficient capacity of Izmir harbor

Insufficient transport capacity to transfer

export goods to Izmir Harbor

Sites and Facilities Free trade zones in Izmir

Availability of organizes industrial districts

Insufficient funding to improve the

infrastructure of the organized districts

Lack of scientific and objective criteria in

choosing industrial district sites

Education & Training One of the most advanced regions in the

nation with respect to educational infrastructure

University in every city

University-industry cooperation is limited

Vocational training programs are limited

There is need to implement a concept of

“lifelong” education

Unawareness of the presence of common

benefits across stakeholders

Lack of synergy and cooperation among institutions

Lack of an institutional capacity that focuses on implementing policy measures to attract

quality FDIs to the region

Absence of an institutional capacity that

would help SMEs to integrate them in global

value chain

Absence of common R&D branches in

Organized Industrial Districts

Lack of funding for R&D –leading the actors

to copy technology rather than to improve creativity

Absence of incubation centers for high value

added products

Business Climate Tax money does not return back to region

(Izmir’s contribution to Nation’s general budget is 4% and share in total government

investment is 1%

Bureaucratic obstacles; lack of coordination

Lowest value in investments since gulf war

crisis

Insufficient foreign capital

Insufficiencies in energy investment

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framework of new regional policy. It is the aim of this paper to provide a basis for such a regional policy by identifying potential clusters of Aegean Region.

PURPOSE The study aims to identify manufacturing high point industries of the Aegean Region’s provinces, so that a base can be formed for future studies about Aegean Region’s clusters which may provide a foundation for Aegean Region’s development policy. In order to identify such a foundation, Department of Trade and Industry ’s analysis of UK clusters is taken as the basis of methodology to be applied. The steps through which the study progresses are as follows: Step 1) Identification of provincial manufacturing high points, Step 2) Mapping of provincial locations of manufacturing high points. METHODOLOGY The methodology used to identifiy high points can be characterised as follows: • Boundaries of Aegean Region have been identified in accordance with the definition of the region by the State Planning Organisation (SPO), which is basically geographical in nature. According to this definition, the region consists of 8 provinces, namely Izmir, Manisa, Denizli, Aydın, Mugla, Manisa, Afyon and Kutahya. • Firm level four-digit ISIC Rev 3 data of Aegean Region manufacturing industries have been obtained from State Institute of Statistics (SIS). The analysis encompasses all manufacturing industries of economic activity and is Aegean Region-wide. • The analysis is firm-based, using data for years 1995 and 2000 on more than 21309 firms relating to their type of activity, employment and provincial location. • Employment data has been used to identify “high points” and two groups of provinces. The groups of provinces have been identified on the basis of employment figures. The three provinces in which Aegean Region manufacturing employment has concentrated have been taken as the first group. For the first group of provinces, the industries that account for at least 0.2 per cent of the regional workforce and with an LQ value over 1.25 are listed in the tables as provincial high points. For the second group, the industries that account for at least 0.2 per cent of the regional workforce and with an LQ value over 5 are listed in the tables. The five provinces of the second group account for about 15% of the employment Aegean Region’s total manufacturing sector employment. Since this group has such a low share of employment, the provinces in this group are identified as local authority districts (LADs) as defined by DTI. For this step, location Quatient (LQ) values have been calculated as follows: LQ = {(Eij / Σi Eij) / (ΣT EiT / Σi ΣT EiT )}

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where E stands for employment and subindex i stands for 4 digit SIC Rev 3 industry, subindex j stands for the studied unit of analysis (Aegean Region or provinces in this case) and subindex T stands for all the provinces of Turkey. Thus; Eij stands for employment of a given industry (i) in a given region (j), Σi Eij stands for total manufacturing sector employment in a given region (j), ΣT EiT stands for total national employment of a given industry (i) and Σi ΣT EiT stands for total national employment of all manufacturing sector. EMPIRICAL RESULTS As can be seen in Table 2, manufacturing industries of Aegean Region concentrate mostly in the provinces of Izmir, Manisa and Denizli. In the Aegean Region, 82,83% of the firms, 84,18% of employment and 91,83% of created value added in manufacturing are accounted for by these three provinces. Among these three provinces, Izmir accounts for more than half of the region’s firms, employment and created value added in manufacturing.

Table 2: Provincial Profile of the Aegean Region Manufacturing Industry

Provincial High Points As stated, we have divided the 8 provinces of the Aegean Region into two groups. The first group of provinces may be named as Large Provinces while the second group of provinces may be named as Local Authority Districts. Large Provinces: The first group contains three provinces; Izmir, Denizli and Manisa. As stated above, these three provinces form an industrial concentration within the Aegean Region. An LQ value of 1,25 and a %0,2 share of regional workforce have been the criteria by which the high point industries in these provinces are identified.

Number of Firms

Number of firms As Percentage of Aegean Total

Employment

Employment Percentage of Aegean Total

Value Added (US$)

Value Added As Percentage of Aegean Total

Afyon 104 5,28 6161 3,29 182695589 2,83 Aydin 89 4,52 7706 4,11 158653160 2,46 Denizli 416 21,13 40756 21,76 722598307 11,21 Izmir 1021 51,85 94353 50,38 4428508034 68,67 Kutahya 50 2,54 8096 4,32 117933368 1,83 Manisa 194 9,85 22552 12,04 770307391 11,95 Mugla 28 1,42 1984 1,06 17847283 0,28 Usak 67 3,40 5684 3,03 50057328 0,78

Regional Overall Totals

1969 100 187292 100 6448600462

100

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Izmir In Izmir are a total of 33 high point industries. When considered by ISIC codes, two groups of industries appear relatively more concentrated. Table 3 High Point Industries of Izmir

SIC Rev 3 Number of firms Employment

Share of regional employment

LQ 1995 LQ 2000

Percentage Change in LQ

1513 43 5770 6.12 2.33 2.59 11.38 1514 11 1643 1.74 1.95 2.23 14.36 1520 10 1418 1.50 1.81 1.99 9.84 1551 1 388 0.41 1.18 1.41 19.70 1553 2 508 0.54 4.62 3.29 -28.67 1600 13 9306 9.86 4.27 5.87 37.34 2023 7 218 0.23 3.18 3.00 -5.53 2101 8 1498 1.59 1.09 1.84 68.17 2102 13 837 0.89 0.96 1.30 35.93 2320 7 1555 1.65 2.36 2.86 21.27 2413 3 5438 5.76 7.82 9.32 19.25 2422 12 1578 1.67 2.80 2.65 -5.44 2424 9 802 0.85 0.31 1.29 311.84 2520 48 3518 3.73 1.30 1.49 15.12 2692 1 1074 1.14 NA 5.11 NA 2694 5 1226 1.30 0.99 1.42 42.77 2731 14 788 0.84 0.50 1.27 152.82 2732 2 454 0.48 5.56 4.12 -26.02 2812 10 759 0.80 1.81 1.41 -22.31 2912 14 792 0.84 1.31 1.41 7.63 2915 16 551 0.58 0.75 1.35 81.61 2919 22 905 0.96 1.67 1.71 2.68 2922 12 513 0.54 1.21 1.35 11.33 2926 11 451 0.48 2.89 2.65 -8.36 3000 1 653 0.69 0.33 6.58 1892.05 3110 9 921 0.98 0.80 1.44 80.18 3150 7 421 0.45 0.37 1.50 304.04 3311 9 409 0.43 1.82 2.08 14.59 3320 3 213 0.23 4.16 4.18 0.35 3410 4 2567 2.72 1.00 1.09 9.71 3420 5 332 0.35 4.21 1.43 -66.14 3430 28 2416 2.56 1.37 1.60 16.85 3592 6 744 0.79 4.62 7.58 64.17

High point totals 366 50666

High points as percentage of provincial total 35.85 53.70

Provincial Totals 1021 94353

The first of these groups is the industry of manufacture of food products and beverages (ISIC 15). Within the ISIC 15 group, all industries display positive changes

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of LQ values between 1995 to 2000 except for the industry of malt liquors and malt (ISIC 1553). This group employs 9727 workers in the year 2000, more than half of which is accounted for by the industry of processing and preserving of fruit and vegetables (ISIC 1513). The second group in which the industries concentrate is the manufacture of machinery and equipment n. e. c. (ISIC 29). The only negative change in LQ value in this group is by the manufacture of machinery for textile, apparel and leather (ISIC 2926). In addition to these two groups, there are also two relatively smaller groups of relative concentration in this province. Each of these groups contains 3 high point industries. One of these groups is manufacture of chemicals and chemical products (ISIC 24). A total of 7818 workers are employed in this industry whereas nearly 70% percent of these workers are employed by manufacture of plastics in primary forms and of synthetic rubber (ISIC 2413). Within the considered time period, the local concentration of industry of manufacturing of paints, varnishes and similar coatings, printing ink and mastics (ISIC 2422) displays a severe decrease while the local concentration ratio for manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations (ISIC 2424) has increased extremely by a rate of more than 300%. The next group that contains three industries is the industry of manufacture of motor vehicles, trailers and semi-trailers (ISIC 34). Within this group, manufacture of bodies (coachwork) for motor vehicles, manufacture of trailers and semi-trailers (ISIC 3420) has the lowest employment and displays a fall in LQ ratio, pointing to the possibility of a shrinking industry. When examined individually, the industries with the highest employment level are the industries of manufacture of tobacco products (ISIC 1600), processing and preserving of fruit and vegetables (ISIC 1513), manufacture of plastics in primary form and synthetic rubber (ISIC 2413). The industries with the most number of firms in year 2000 are manufacture of plastics products (ISIC 2520), processing and preserving of fruit and vegetables (ISIC 1513), and manufacture of parts and accessories for motor vehicles and their engines (ISIC 3430). The industries with the highest LQ value in year 2000 are manufacture of plastics in primary forms and of synthetic rubber (ISIC 2413), the second is the manufacture of bicycles and invalid carriages (ISIC 3592) and the last is the manufacture of office, accounting and computing machinery (ISIC 3000). Denizli The next province considered in this group is Denizli, in which are 10 high point industries. Four of these industries are in the manufacture of textiles (ISIC 17) group. Within this group, a total of 20222 workers are employed and nearly 70% of the employment in this group is accounted for by preparation and spinning of textile fibers; weaving of textiles (ISIC 1711). While two of the industries in this group display moderate to significant increases in local concentration ratios, the other two industries display decreases in LQ ratios within the considered time period.

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Table 4:High Point Industries of Denizli



LQ 1995 LQ 2000

Percentage Change in

LQ 1711 138 14006 34.37 1.98 2.71 36.82 1712 18 1714 4.21 6.05 2.26 -62.61 1721 20 3834 9.41 2.59 5.69 119.73 1729 18 668 1.64 2.78 2.40 -13.72 1810 78 11412 28.00 3.05 2.14 -29.70 2109 1 266 0.65 NA 1.44 NA 2411 5 535 1.31 1.19 2.71 127.00 2610 2 896 2.20 2.94 1.83 -37.92 2696 13 821 2.01 0.30 3.13 941.49 3130 8 573 1.41 2.47 2.10 -14.95




The next group of industries to be considered is the industry of manufacture of other non-metallic products (ISIC 26), which includes two of the high point industries in Denizli. The industries have nearly the same level of employment in the year 2000. However, cutting, shaping and finishing of stone industry (ISIC 2696) displays a significant increase in LQ ratio while manufacture of glass and glass products (ISIC 2610) displays a decrease in local concentration. Considered individually, preparation and spinning of textile fibers; weaving of textiles (ISIC 1711) industry has the largest number of firms whereas manufacture of wearing apparel, except fu apparel industry (ISIC 1810) is the second and the industry of made-up textile articles except apparel (ISIC 1721) is the third. The same order is observed in terms of employment as well. The highest LQ value is displayed by the industry of made-up textile articles except apparel (ISIC 1721), the second highest value is observed in the industry of cutting, shaping and finishing of stone (ISIC 2696) and the third is by manufacture of basic chemicals except fertilizers and nitrogen compounds (ISIC 2411). These industries also display significant increases in LQ values in the considered time period. Manisa In the next province, Manisa, manufacture of food products and beverages (ISIC 15) displays a relatively stronger concentration of industries, as was the case in Izmir. Out of 21 high point industries, four are accounted for by this group. A total of 4663

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workers is employed by this group and half of this employment figure is accounted for by the industry of processing and preserving of fruit and vegetables (ISIC 1513). This situation is also similar to the case in Izmir. All the industries in this group display increases in local concentration. Table 5: High Point Industries of Manisa



LQ 1995 LQ 2000

Percentage Change in LQ

1513 10 2654 11.77 4.61 4.99 8.34 1514 3 326 1.45 1.49 1.85 24.02 1533 3 263 1.17 1.22 2.15 76.37 1554 3 1420 6.30 4.58 13.63 197.49 1911 4 176 0.78 0.84 1.52 80.22 1920 6 375 1.66 1.44 1.96 36.85 2021 2 223 0.99 1.49 1.79 20.45 2520 3 759 3.37 3.63 1.35 -62.89 2691 1 586 2.60 2.54 2.95 16.05 2693 66 3478 15.42 11.58 10.01 -13.56 2732 1 275 1.22 NA 10.43 NA 2812 4 794 3.52 3.78 6.17 63.13 2892 1 419 1.86 0.69 9.83 1329.10 2899 4 737 3.27 1.71 2.05 20.23 2912 1 443 1.96 1.15 3.30 187.62 2929 1 62 0.27 11.52 1.35 -88.27 2930 4 1233 5.47 3.83 3.01 -21.42 3130 1 242 1.07 NA 1.60 NA 3140 1 376 1.67 5.05 13.18 160.83 3230 2 3054 13.54 11.57 20.68 78.84 3430 3 924 4.10 0.11 2.56 2278.49




The next group of industries is manufacture of fabricated metal products except machinery and equipment (ISIC 28), made up of 3 high point industries. However this group does not stand for a significant amount of employment when considered in comparison to manufacture of food products and beverages (ISIC 15), for it employs only about 2000 workers. The industries in this group display increases in LQ values, especially the industry of treatment and coating of metals, general mechanical engineering on a fee or contract basis (ISIC 2892) shoes more than 1000% increase in local concentration within the considered time period, reaching a value of 9.83 in year 2000. The last group to be considered is the manufacture of machinery and equipment n. e. c. (ISIC 29). This group also contains three high point industries. Standing for a bit more than 1700 jobs, this group generally displays decreases in local concentration

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ratios. The only exception is manufacture of pumps, compressors, taps and valves (ISIC 2912) with an LQ increase of 187.62%. Considered separately, manufacture of structural non-refractory clay and ceramic products (ISIC 2693) has the largest number of firms in year 2000, whereas the industry of processing and preserving of fruit and vegetables (ISIC 1513) is the second and manufacture of footwear (ISIC 1920) is the third in terms of number of firms. The industry of manufacture of structural non-refractory clay and ceramic products (ISIC 2693) again has the lead in employment level in year 2000 whereas processing and preserving of fruit and vegetables (ISIC 1513) is the third now with the manufacture of TV and radio receivers, sound or video recording and reproducing apparatus and associated goods (ISIC 3230) as the second in terms of employment. The manufacture of TV and radio receivers, sound or video recording and reproducing apparatus and associated goods (ISIC 3230) takes the lead in terms of regional concentration with an LQ value of 20.68 in year 2000. The industry of Manufacture of soft drinks and production of mineral waters (ISIC 1554) and the industry of manufacture of accumulators, primary cells and primary batteries (ISIC 3140) take the second and third ranks with very close LQ values a bit higher than 13. Local Authority Districts The second group contains 5 provinces, namely Kutahya, Aydin, Afyon, Usak and Mugla. Each of these provinces are identified as local authority districts (LADs) and the high points in these provinces are identified as the industries with an LQ value of more than 5 and 0.2% share of regional workforce, as done by DTI. Kutahya As seen in Table 6, the only ISIC-based group that can be formed in Kutahya is the industry of manufacture of other non-metallic products (ISIC 26), which consists of two industries and stands for nearly %65 of provincial total manufacturing employment. Table 6: High Point Industries of Kutahya



LQ 1995 LQ 2000

Percentage Change

2010 5 146 1.80 4.59 7.47 62.65 2412 2 895 11.05 34.13 26.37 -22.74 2691 6 4145 51.20 26.92 58.10 115.80 2693 8 1026 12.67 8.80 8.22 -6.55

High point totals 21 6212 High points as percentage of provincial total 42 76.73


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Within this group, manufacture of non-structural non-refractory ceramic ware industry (ISIC 2691) alone stands for nearly half of provincial total employment and displaying an increase in local concentration by a rate of more than 100% to reach 58.1 in year 2000. Considered individually, manufacture of non-structural non-refractory ceramic ware industry (ISIC 2691) has the lead in both local concentration rate and employment, however in terms of number of firms, the industry of manufacture of structural non-refractory clay and ceramic products (ISIC 2693) takes the lead. Manufacture of non-structural non-refractory ceramic ware industry (ISIC 2691) is the second and saw milling and planning of wood (ISIC 2010) is the third in terms of number of firms. It has been noted that manufacture of non-structural non-refractory ceramic ware industry (ISIC 2691) has a very high LQ value and employment rate. Manufacture of fertilizers and nitrogen compounds (ISIC 2412) has the second highest LQ value and the industry of manufacture of structural non-refractory clay and ceramic products (ISIC 2693) has the third value. In terms of employment figures, the industry of manufacture of structural non-refractory clay and ceramic products (ISIC 2693) has the second place while the industry of manufacture of fertilizers and nitrogen compounds (ISIC 2412) ranks the third. Aydin In the case of Aydin, there is also only one group of industries, namely that of manufacture of machinery and equipment n. e. c. (ISIC 29). The two industries in this group account for 375 jobs; a very low number compared to the previous provinces studied so far. Table 7: High Point Industries of Aydin



LQ 1995 LQ 2000

Percentage Change

1512 2 143 1.86 NA 9.49 NA 2023 2 76 0.99 5.86 12.82 118.84 2693 7 778 10.10 6.09 6.55 7.55 2921 4 245 3.18 5.15 5.07 -1.60 2925 2 130 1.69 1.09 5.19 376.10

2 tane 29 High point totals 17 1372



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Manufacture of agricultural and forestry machinery (ISIC 2921) displays a slight decrease in local concentration whereas manufacture of machinery for food, beverage and tobacco processing (ISIC 2925) displays a sharp increase of 376.1%. Considered individually, 2693 has the highest level of employment. Second in terms of jobs is 2921 and the third is 1512. In terms of number of firms in year 2000, manufacture of structural non-refractory clay and ceramic products (ISIC 2693) again takes the lead and manufacture of agricultural and forestry machinery (ISIC 2921) is the second. The remaining three industries each have 2 firms in year 2000. Afyon There are two groups of industries in Afyon. The first is the industry of manufacture of food products and beverages (ISIC 15), accounting for a bit more than 1100 workers. Table 8: High Point Industries of Afyon

Within this group, manufacture of sugar (ISIC 1542) displays a slight decrease in local concentration whereas a significant increase is observed in the case of manufacture of malt liquors and malt (ISIC 1553). The next group is the manufacture of non-metallic mineral products (ISIC 26) and it accounts for more than 1400 workers in the year 2000. However, the two industries in this group both display decreases in local concentration. Individually, cutting, shaping and finishing of stone (ISIC 2696) accounts for most of the firms in the group of high point industries. Manufacture of prepared animal feeds industry (ISIC1533) is the second in terms of number of firms and manufacture of articles of concrete, cement and plaster (ISIC 2695) is the third.


Share of Regional Employment

LQ 1995 LQ 2000

Percentage Change

1533 7 241 3.91 6.95 7.20 3.56 1542 1 833 13.52 7.28 7.20 -1.06 1553 1 58 0.94 4.44 5.76 29.77 1723 1 15 0.24 16.22 7.28 -55.13 2101 1 511 8.29 9.75 9.61 -1.39 2695 3 437 7.09 9.13 7.13 -21.84 2696 23 975 15.83 25.68 24.62 -4.12 2925 1 149 2.42 6.23 7.44 19.44



Provincial Total 104 6161

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The industry of cutting, shaping and finishing of stone (ISIC 2696) takes the lead in terms of employment figures as well. Manufacture of sugar (ISIC 1542) has the second highest employment number in high point industries and manufacture of pulp, paper and paperboard (ISIC 2101) has the third. In the year 2000, the highest local concentration rate belongs to the industry of cutting, shaping and finishing of stone (ISIC 2696). Manufacture of pulp, paper and paperboard (ISIC 2101) has the second highest local concentration rate. The third highest LQ value is displayed by the manufacture of machinery for food, beverage and tobacco processing (ISIC 2925). Usak As seen in Table 9, a group of industries could not be identified in Usak but there is a total of four industries in Usak province that appear as high point industries. Table 9: High Point Industries of Usak



LQ 1995 LQ 2000

Percentage Change

1721 21 1991 35.03 21.30 21.18 -0.60 1820 1 32 0.56 NA 7.99 NA 2423 1 531 9.34 4.72 5.85 23.86 2693 2 453 7.97 NA 5.17 NA




The industry that is set apart by number of firms, employment and local concentration rates is manufacture of made up textile articles except apparel (1721). However, the local concentration of this industry displays a slight decrease in the considered 5 year time period. Mugla As was the case in Usak, a group of industries could not be identified in Mugla either. Four high point industries have been identified in Mugla. All of these industries display increases in local concentration ratios. Especially, the industry of cutting, shaping and finishing of stone (ISIC 2696) displays an LQ increase of more than 380% in the considered time period. Within these industries, manufacture of pulp, paper and paperboard (SIC 2101) accounts for nearly half of the provincial employment.

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Table 10: High Point Industries of Mugla



LQ 1995 LQ 2000

Percentage Change

1554 3 53 2.67 2.30 5.78 150.93 2101 1 816 41.13 45.67 47.67 4.38 2696 11 516 26.01 8.29 40.47 388.24 3320 1 108 5.44 99.55 100.76 1.22

High point totals 16 1493 High points as percentage of provincial total 57.14 75.25


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Processing & preserving of fruit & vegetables =4.99 Manuf.of vegetable & animal oils and fats = 1.85 Manuf.of soft drinks; production of mineral waters=13.63 Manuf.of. non structural,non refractory ceramic ware=2.95 Manuf.of structurel non refractory clay & ceramic products=10.01 Casting of nonferrous metals=10.43 Manuf.of tanks reservoirs & containers of metal=6.17 Treatment & coating of metal; general mech. eng.on a fee or contract basis=9.83 Manuf.of accumulators, primary cells &primary batteries=13.18 Manuf.of TV & radio receivers, sound & video recording& rep.apparatus=20.68 Manuf. of plastics products=1.35 Manuf. of other special purpose machinery=1.35 Tanning and dressing of leather=1.52 Manu. of isolated wire and cable=1.60 Manuf. of veneer sheets; Manuf. of plywood, laminboard, particle board and other panels and boards=1.79 Manuf. of footwear=1.96 Manuf. of other fabricated metal products n.e.c.=2.05 Manuf. of preapred feeds=2.15 Manuf. of parts and accessories for motor vehicle and their engines=2.56 Manuf. of domestic appliances n.e.c.=3.01 Manuf. of pumps, compressors, taps and valves=3.30

MANİSA

KÜTAHYA

Sawmilling and Planing of Wood=7.47 Manuf.of fertilizers & nitrogen compounds=26.37 Manuf.of. non structural,non refractory ceramic ware=58.10 Manuf.of structurel non refractory clay & ceramic products=8.22

UŞAK

Manuf.of made up textile articles; except apparel=21.18 Manuf.of structurel non refractory clay & ceramic products=5.17 Manuf. of pharmaceuticals, medicinal chemicals and botanical products=5.85 Dressing and dyeing of fur; manuf. of articles of fur=7.99

AFYON

Manuf.of malt liquors & malt =5.76 Cutting, shaping & finishing of stone=24.62 Manuf. of articles of concrete, cement and plaster=7..13 Manuf. of prepared animal feeds=7.20 Manuf. of sugar=7.20 Manuf. of cordage, rope, twine and netting=7.28 Manuf. of machinery for food, beverage and tobacco processing=7.44

Manuf. of pulp, paper and paperboard=9.61

DENİZLİ

Manuf.of made up textile articles; except apparel=5.67 Cutting, shaping & finishing of stone=3.13 Manuf. of other articles of paper and paperboard=1.44 Manuf. of glass and glass products=1.83 Manuf. of insulated wire and cable=2.10 Manuf. of wearing apparel, except fur apparel=2.14 Finishing of textiles=2.26 Manuf. of other textiles n. e. c.=2.40 Preparation and spinning of textile fibres; weaving of textiles=2.71 Manuf. of basic chemicals, except fertilizers and nitrogen compounds=2.71

AYDIN

Manuf. of agricultural and forestry machinery=5.07 Manuf. of machinery for food, beverage and tobacco processing=5.19 Manuf.of structurel non refractory clay & ceramic products=6.55 Processing and preserving of fish and fish products=9.49 Manuf. of wooden containers=12.82

İZMİR

Processing & preserving of fruit & vegetables =2.59 Manuf.of vegetable & animal oils and fats = 2.23 Manuf.of dairy products =1.99 Manuf.of malt liquors & malt =3.29 Manuf.of tobacco products =5.87 Manuf.of pulp,paper & paper board=1.84 Manuf.of refined petroleum products=2.86 Manuf.of.plastics in primary forms & of synthetic rubber=9.32 Manuf.of.paints,varnises & similar coatings, printing ink & mastics=2.65 Manuf.of refractory ceramic products=5.11 Casting of nonferrous metals=4.12 Manuf.of tanks reservoirs & containers of metal=1.41 Manuf.of machinary for textile,apparel & leather production=2.65 Manuf.of.office accounting &computing machinery=6.58 Manuf.of bicycles & invalid carriages=7.58 Casting of iron and steel=1.27 Manuf. of soap and detergents, cleaning and polish prep.s, perfumes and toilet prep.s=1.29 Manuf. of corrugated paper and paperboard and of containers of paper and paperboard=1.30 Manuf. of machine- tools=1.35 Manuf. of lifting and handling equipment=1.35 Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials=1.41 Manuf. of pumps, compressors, taps and valves=1.41 Manuf. of cement, lime, plaster=1.42 Manuf. of bodies,(coachwork) for motor vehicles, manuf. of trailers and semi-trailers=1.43 Manuf. of electric motors, generators and transformers=1.44 Manuf. of plastic products=1.49 Manuf of electric lamps and lighting equipment=1.50 Manuf. of parts and accessories for motor vehicles and their engines=1.60 Manuf. of other general purpose machinery=1.71 Manuf. of medical and surgical equipment and orthopedic appliances=2.08 Manuf. of wooden container=3.00 Manuf. of optical instruments and photographic equipment=4.18 Manuf. of motor vehicles=1.09

MUĞLA

Manuf.of soft drinks; production of mineral waters=5.78 Manuf.of pulp,paper & paper board=47.67 Cutting, shaping & finishing of stone=40.46 Manuf. of optical instruments and photographic equipment=100.76

A

E

G

E

A

N

S

E

A

16

CONCLUSION This study uses employment data to identify regional high point industries. The identification of these high point industries is generally considered as a first step to identify Porter clusters – i. e. geographically co-located industries whose interrelations reinforce their competitive advantage. However, to be able to identify clusters in this sense, extensive regional interviews with representatives of high point industries, commerce chambers, local profession unions, etc. are essential to discover the true nature of interrelatedness between industries. As s third step, a regional plan should be prepared using the foresight technique. Specifically, the conclusions reached by this study may be summarized as follows. ● It has been noticed that the manufacturing industries of Aegean Region have concentrated in three provinces; Izmir, Manisa and Denizli. ● Izmir and Manisa seem to have very similar industry structures. Especially on the axis of these two provinces, the industries of manufacture of food products and beverages (ISIC 15) and manufacture of machinery and equipment not elsewhere classified (ISIC 29) appear to have concentrated heavily. ● In the province of Denizli manufacture of textiles (ISIC 17) displays a concentration. An interesting point is that Usak, a neighbor of Denizli, has a strong concentration of two textile related industries; namely manufacture of made-up textile articles, except apparel (ISIC 1721) and the industry of dressing and dyeing of fur; manufacture of articles of fur (ISIC 1820). Given the fact that the industry of dressing and dyeing of fur; manufacture of articles of fur (ISIC 1820) did not exist in Usak in 1995, the possibility of an externality effect spilling from Denizli over to Usak arises despite the slight decrease in local concentration of manufacture of made-up textile articles, except apparel (ISIC 1721) in Usak as seen in Table 9. ● An other concentration is observed in Kutahya, Afyon and Usak in the manufacture of non-metallic mineral products (ISIC 26). Given that the industry is more concentrated in Afyon and Kutahya, it is possible that an externality similar to that between Denizli and Usak in textiles may exist. A more detailed analysis may provide similar concentrations of various industries between neighboring provinces. Such an analysis would also provide stronger clues about possible externality effects and spillovers of industrial activity between provinces. The concentrations stated above also provide two possible avenues for regional development policy of Aegean Region. These points are as follows: � There appears to be a strong concentration on Izmir and Manisa axis. This possible tendency of agglomeration, however, does not intensify in the industries with ability to create a high level of value added. Thus, a regional development policy may aim to create a cluster of high-tech industry between Izmir and Manisa. The industry of manufacture of machinery and equipment not elsewhere classified (ISIC 29) may provide a solid basis of tacit knowledge for creation of a high-tech cluster.

Figure 1: Locations of Provincial High Points of Aegean Region

17

� Given the central location of Usak and possible externality effects it seems to have been receiving in the five year period between 1995 to 2000, a focus on the manufacture of textiles (ISIC 17) and the manufacture of non-metallic mineral products (ISIC 26) industries may create an industrial concentration of these two industries centered on Usak, with a potential to surpass the current strength of the mentioned industries in the mentioned area. REFERENCES Aegean Foundation for Economic Development (AFED) (2001), Afyon Search Conference, Afyon. Aegean Foundation for Economic Development (AFED) (2002), Aydin Search Conference, Aydin. Aegean Foundation for Economic Development (AFED) (2002), Denizli Search Conference, Denizli. Aegean Foundation for Economic Development (AFED) (2001), Izmir Search Conference, Izmir. Aegean Foundation for Economic Development (AFED) (2002), Kutahya Search Conference, Kutahya. Aegean Foundation for Economic Development (AFED) (2001), Manisa Search Conference, Manisa. Aegean Foundation for Economic Development (AFED) (2002), Mugla Search Conference, Mugla. Aegean Foundation for Economic Development (AFED) (2002), Usak Search Conference, Usak. DEPARTMENT OF TRADE AND INDUSTRY (DTI) (2001) Business Clusters in the UK: A First Assessment, DTI, London. (www.dti.gov.uk) PORTER, M. (1998) On Competititon, Harvard Business School Press: Cambridge, Southern Minnesota Induster Cluster Study (1996) http://www.hhh.umn.edu/centers/slp/projects/edweb/seminn.htm Understanding Your Industries, http://www.hhh.umn.edu/centers/slp/projects/edweb/indcook.htm STATE INSTITIUTE OF STATISTICS, (2002) Turkey STATE PLANNING ORGANISATION, (2003) Turkey

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INTERNATIONAL STANDARD INDUSTRIAL

CLASSIFICATION OF ALL ECONOMIC ACTIVITIES

(ISIC Rev.3) MANUFACTURING CLASSIFICATION

D MANUFACTURING

15 Manufacture of food products and beverages

151 Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats

1511 Production, processing and preserving of meat and meat products

1512 Processing and preserving of fish and fish products

1513 Processing and preserving of fruit and vegetables

1514 Manufacture of vegetable and animal oils and fats

152 Manufacture of dairy products

1520 Manufacture of dairy products

153 Manufacture of grain mill products, starches and starch products, and prepared animal feeds

1531 Manufacture of grain mill products

1532 Manufacture of starches and starch products

1533 Manufacture of prepared animal feeds

154 Manufacture of other food products

1541 Manufacture of bakery products

1542 Manufacture of sugar

1543 Manufacture of cocoa, chocolate and sugar confectionery

1544 Manufacture of macaroni, noodles, couscous and similar farinaceous products

1549 Manufacture of other food products n.e.c.

155 Manufacture of beverages

1551 Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials

1552 Manufacture of wines

1553 Manufacture of malt liquors and malt

1554 Manufacture of soft drinks; production of mineral waters

16 Manufacture of tobacco products



17 Manufacture of textiles

171 Spinning, weaving and finishing of textiles

1711 Preparation and spinning of textile fibres; weaving of textiles

1712 Finishing of textiles

172 Manufacture of other textiles

1721 Manufacture of made-up textile articles, except apparel

1722 Manufacture of carpets and rugs

1723 Manufacture of cordage, rope, twine and netting

1729 Manufacture of other textiles n.e.c.

173 Manufacture of knitted and crocheted fabrics and articles

1730 Manufacture of knitted and crocheted fabrics and articles

18 Manufacture of wearing apparel ; dressing and dyeing of fur

19

181 Manufacture of wearing apparel, except fur apparel

1810 Manufacture of wearing apparel, except fur apparel

182 Dressing and dyeing of fur ; Manufacture of articles of fur

1820 Dressing and dyeing of fur ; Manufacture of articles of fur

19 Tanning and dressing of leather ; Manufacture of luggage, handbags, saddlery, harness and footwear

191 Tanning and dressing of leather ; Manufacture of luggage, handbags, saddlery and harness

1911 Tanning and dressing of leather

1912 Manufacture of luggage, handbags and the like, saddlery and harness

192 Manufacture of footwear

1920 Manufacture of footwear

20 Manufacture of wood and of products of wood and cork, except furniture; Manufacture of articles of

straw and plaiting materials

201 Sawmilling and planing of wood

2010 Sawmilling and planing of wood

202 Manufacture of products of wood, cork, straw and plaiting materials

2021 Manufacture of veneer sheets; Manufacture of plywood, laminboard, particle board and other panels

and boards

2022 Manufacture of builders carpentry and joinery

2023 Manufacture of wooden containers

2029 Manufacture of other products of wood; Manufacture of articles of cork, straw and plaiting materials

21 Manufacture of paper and paper products

210 Manufacture of paper and paper products

2101 Manufacture of pulp, paper and paperboard

2102 Manufacture of corrugated paper and paperboard and of containers of paper and paperboard

2109 Manufacture of other articles of paper and paperboard

22 Publishing, printing and reproduction of recorded media

221 Publishing

2211 Publishing of books, brochures, musical books and other publications

2212 Publishing of newspapers, journals and periodicals

2213 Publishing of recorded media

2219 Other publishing

222 Printing and service activities related to printing

2221 Printing

2222 Service activities related to printing

223 Reproduction of recorded media

2230 Reproduction of recorded media

23 Manufacture of coke, refined petroleum products and nuclear fuel

231 Manufacture of coke oven products

2310 Manufacture of coke oven products

232 Manufacture of refined petroleum products

2320 Manufacture of refined petroleum products

233 Processing of nuclear fuel

2330 Processing of nuclear fuel

24 Manufacture of chemicals and chemical products

241 Manufacture of basic chemicals

20

2411 Manufacture of basic chemicals, except fertilizers and nitrogen compounds

2412 Manufacture of fertilisers and nitrogen compounds

2413 Manufacture of plastics in primary forms and of synthetic rubber

242 Manufacture of other chemical products

2421 Manufacture of pesticides and other agro-chemical products

2422 Manufacture of paints, varnishes and similar coatings, printing ink and mastics

2423 Manufacture of pharmaceuticals, medicinal chemicals and botanical products

2424 Manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet

preparations

2429 Manufacture of other chemical products not elsewhere classified

243 Manufacture of man-made fibres

2430 Manufacture of man-made fibres

25 Manufacture of rubber and plastics products

251 Manufacture of rubber products

2511 Manufacture of rubber tyres and tubes; retreading and rebuilding of rubber tyres

2519 Manufacture of other rubber products

252 Manufacture of plastics products

2520 Manufacture of plastics products

26 Manufacture of other non-metallic mineral products

261 Manufacture of glass and glass products

2610 Manufacture of glass and glass products

269 Manufacture of non-metallic mineral products not elsewhere classified

2691 Manufacture of non-structural non-refractory ceramic ware

2692 Manufacture of refractory ceramic products

2693 Manufacture of structural non-refractory clay and ceramic products

2694 Manufacture of cement, lime and plaster

2695 Manufacture of articles of concrete, cement and plaster

2696 Cutting, shaping and finishing of stone

2699 Manufacture of other non-metallic mineral products not elsewhere classified

27 Manufacture of basic metals

271 Manufacture of basic iron and steel

2710 Manufacture of basic iron and steel

272 Manufacture of basic precious and non-ferrous metals

2720 Manufacture of basic precious and non-ferrous metals

273 Casting of metals

2731 Casting of iron and steel

2732 Casting of non-ferrous metals

28 Manufacture of fabricated metal products, except machinery and equipment

281 Manufacture of structural metal products, tanks, reservoirs and steam generators

2811 Manufacture of structural metal products

2812 Manufacture of tanks, reservoirs and containers of metal

2813 Manufacture of steam generators, except central heating hot water boilers

289 Manufacture of other fabricated metal products; metal working service activities

2892 Treatment and coating of metals; general mechanical engineering on a fee or contract basis

2893 Manufacture of cutlery, hand tools and general hardware

21

2899 Manufacture of other fabricated metal products not elsewhere classified

29 Manufacture of machinery and equipment not elsewhere classified

291 Manufacture of general purpose machinery

2911 Manufacture of engines and turbines, except aircraft, vehicle and cycle engines

2912 Manufacture of pumps, compressors, taps and valves

2913 Manufacture of bearings, gears, gearing and driving elements

2914 Manufacture of ovens, furnaces and furnace burners

2915 Manufacture of lifting and handling equipment

2919 Manufacture of other general purpose machinery

292 Manufacture of special purpose machinery

2921 Manufacture of agricultural and forestry machinery

2922 Manufacture of machine-tools

2923 Manufacture of machinery for metallurgy

2924 Manufacture of machinery for mining, quarrying and construction

2925 Manufacture of machinery for food, beverage and tobacco processing

2926 Manufacture of machinery for textile, apparel and leather production

2927 Manufacture of weapons and ammunition

2929 Manufacture of other special purpose machinery

293 Manufacture of domestic appliances not elsewhere classified

2930 Manufacture of domestic appliances not elsewhere classified

30 Manufacture of office, accounting and computing machinery



31 Manufacture of electrical machinery and apparatus not elsewhere classified

311 Manufacture of electric motors, generators and transformers

3110 Manufacture of electric motors, generators and transformers

312 Manufacture of electricity distribution and control apparatus

3120 Manufacture of electricity distribution and control apparatus

313 Manufacture of insulated wire and cable

3130 Manufacture of insulated wire and cable

314 Manufacture of accumulators, primary cells and primary batteries

3140 Manufacture of accumulators, primary cells and primary batteries

315 Manufacture of electric lamps and lighting equipment

3150 Manufacture of electric lamps and lighting equipment

319 Manufacture of other electrical equipment not elsewhere classified

3190 Manufacture of other electrical equipment not elsewhere classified

32 Manufacture of radio, television and communication equipment and apparatus

321 Manufacture of electronic valves and tubes other electronic components

3210 Manufacture of electronic valves and tubes other electronic components

322 Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy

3220 Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy

323 Manufacture of television and radio receivers, sound or video recording or reproducing apparatus,

and associated goods

3230 Manufacture of television and radio receivers, sound or video recording or reproducing apparatus,

and associated goods

22

33 Manufacture of medical, precision and optical instruments, watches and clocks

331 Manufacture of medical appliances and instruments and appliances for measuring, checking, testing,

navigating and other purposes, except optical instruments

3311 Manufacture of medical and surgical equipment and orthopaedic appliances

3312 Manufacture of instruments and appliances for measuring, checking, testing, navigating and other

purposes, except industrial process control equipment

3313 Manufacture of industrial process control equipment

332 Manufacture of optical instruments and photographic equipment

3320 Manufacture of optical instruments and photographic equipment

333 Manufacture of watches and clocks

3330 Manufacture of watches and clocks

34 Manufacture of motor vehicles, trailers and semi-trailers

341 Manufacture of motor vehicles

3410 Manufacture of motor vehicles

342 Manufacture of bodies (coachwork) for motor vehicles, manufacture of trailers and semi-trailers

3420 Manufacture of bodies (coachwork) for motor vehicles, manufacture of trailers and semi-trailers

343 Manufacture of parts and accessories for motor vehicles and their engines

3430 Manufacture of parts and accessories for motor vehicles and their engines

35 Manufacture of other transport equipment

351 Building and repairing of ships and boats

3511 Building and repairing of ships

3512 Building and repairing of pleasure and sporting boats

352 Manufacture of railway and tramway locomotives and rolling stock

3520 Manufacture of railway and tramway locomotives and rolling stock

353 Manufacture of aircraft and spacecraft

3530 Manufacture of aircraft and spacecraft

359 Manufacture of transport equipment not elsewhere classified

3591 Manufacture of motorcycles

3592 Manufacture of bicycles and invalid carriages

3599 Manufacture of other transport equipment not elsewhere classified

36 Manufacture of furniture, Manufacturing not elsewhere classified

361 Manufacture of furniture

3610 Manufacture of furniture

369 Manufacturing not elsewhere classified

3691 Manufacture of jewellery and related articles

3692 Manufacture of musical instruments

3693 Manufacture of sports goods

3694 Manufacture of games and toys

3699 Other manufacturing not elsewhere classified

37 Recycling

371 Recycling of metal waste and scrap

3710 Recycling of metal waste and scrap

372 Recycling of non-metal waste and scrap

3720 Recycling of non-metal waste and scrap

An Industrial Cluster Study: As A Basis For The Aegean Region's Development Policy

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