Topic Three: Industrialization

strategy
Introduction
Industrial strategies lay down in
broad terms the means and
procedures by which major goals and
targets can be achieved in the
manufacturing sector
The goals indicate what is to be
achieved by a particular programme,
while the strategy shows the means to
achieve these goals
Forms
1) Industrialization through growth
pole strategy
2) Import Substitution
industrialization
3) Export –Led strategy
4) Rural Industrialization strategy
The Growth pole industrialization
strategy
This concept was first developed in
1955 by French economists, notably
Francois Perroux
Growth pole theory is closely related
to the concept of economies of
agglomeration
According to the oxford dictionary
the term agglomeration is
synonymous to the terms mass or
collection of things, an assemblage.
Therefore agglomeration is similar to
collection, mass, cluster and
concentration
The term agglomeration economies
is used in urban economies to
describe the benefits that
firms/industries obtain when locating
near each other
Industrial agglomeration
Refers to high concentration of
industrial activities in an area
When a specialized industry is
established in any area it builds up a
body of trained workers, and this
tends to attract to the area industries
of identical type or subsidiary type
With the growth of population ,
improvement in transportation, in
education and in professional services
follows, and all rendering conditions yet
more attractive for further increase in
population and industry
Forms of agglomeration
1) Concentration of related or well
linked factories together and form a
specialized industrial region
2) Concentration of various kinds of
factories in the industrial zones in
urban area
Characteristics of an Industrial
Agglomeration
Clustering of industrial activities
Functional linkages- production and
service linkages
 ◦ Production linkages – when materials move
from one firm to another
◦ Service linkages – as the firms share the
specialized services and facilities
Economies of scale
Advantages:
1) Concentration of industries have
certain economic advantage.(The
finished product is often the raw
material of another industry)
2) If workers are kept in the same
neighborhood, transport costs for the
movement of manufactured products
from the subsidiary industry to the
main factory is kept minimum
3) The concentration of the work-
people having specialized skill and
training is advantageous to employers
4) The concentration of diversified
industries is advantageous to the
workers, because there is a choice of
occupation to suit different tests, and
if one trade slack they may be able
to work in another
Disadvantages
1) Grouping of like industries has
disadvantages to employees (Demand
for goods rises and falls, and when it
falls in specialized areas
unemployment results)
2) Concentration of industries in large
cities, almost inevitably suffer
economically as a result of street traffic
congestion
3) The growth of city results in a rise of
land values
4) When concentration of industry occurs
in an underdeveloped area, industries
will demand to the public authorities to
supply roads, water, electricity, gas,
sewerage, schools, workers housing, other
community facilities etc which become a
great burden to community
5) Concentration of industry may
result adverse effect on the health of
workers, caused by the congestion of
houses. The pouring out of vast
volume of smoke, dust and noise may
cause adverse effect on environment
The growth pole theory
In fact the concept was developed on
the basis borrowed from the growth
economics of Schumpeter,
Hirschman and Myrdal
Perroux first used the term “pole de
croissance” and by “growth pole” he
meant
◦ “A center in abstract economic space
from which centrifugal forces emanate
and to which centripetal forces are
attracted. Each center being a center of
attraction and repulsion has its field
which is in the field of other centers”
Growth pole may refer to industrial or
sectoral activities and is functional in
nature and can be defined as
◦ A set of industries capable of generating
dynamic growth in the economy, and
strongly interrelated to each other via input
– output linkages around a leading industry
(or industries motrice) or propulsive
industry/ prime-moving industry
The growth pole strategy typically
involves focusing of investment at a
limited number of locations in an
attempt to encourage economic
activity and thereby, raise the levels
of welfare within the region
Growth poles are key industries that
innovate and lead
It is a leading propulsive industry
which has highly advanced level of
technology and managerial expertise,
high income elasticity of demand for
its products, marked local multiplier
effects and strong forward and
backward inter- industry linkages
Perroux says,
“ Growth does not appear everywhere and
all at once, it appears in points or through
development poles of growth with varying
intensities, it spreads along various
channels and with differing overall
effects to the whole economy”
Perroux writing about what promotes
economic growth, identified the
growth process as “polarization
process and then to carry the growth
poles (probably smaller) in the
backward areas”
Key industries of the key sectors
become ‘growth poles’
 A key industry has high investment,
high output, high re- investible funds
and high density linkages with the
activities of the region
It takes as inputs, outputs of the
activities around the area and its
output become goods of final
consumption or inputs for further
development of other industries
Sinceit reaps high degree of
economies, it provides external
economies to other industries
These leading industries(which
constitute the growth pole), create,
sustain and transmit innovation to
other sectors.
The dominant firm becomes the
“core” of the growth pole
A dominant firm is supposed to
produce a net positive balance of
spread effects over the possible
backward or backwash effects: thus,
providing maximum
downstream(forward) and upstream
(backward) linkages
As inter- industry linkages develop, a
set of industries in spatial
juxtaposition(combination) that
benefit from technological linkages
and common agglomeration
economies develop
Tanzania’s experience with the growth
pole strategy
From 1961 Tanganyika inherited spatial
structure of the economy
The polarized spatial structure means
that there were strategically areas
which were prepared by the economy
for the engagement of
industrialization forces(there were
areas/regions pointed for
industrialization since colonial era
These regions include Dar es salaam;
Tanga; Mwanza and arusha
In the first three year plan (1961 - 1964)
the emphasis was put on sectoral
development
In the first five year plan (1964 – 1969)
again the plan was highly directed to the
sectoral development
In 1969 the second FYP was done, and
this plan emphasized on regional/spatial
development
The second FYP was the first plan to take
into account regional or spatial
considerations
The plan set the following objectives to
be attained by regional planning:
1) To take into account the growth potential of
each region and role each region can best play
in the development of the country
2) To ensure that no regions are allowed to lag
behind in the provision of essential services
3) To involve people in the planning process
Objectives of urban policy outlined
in the plan were as follows:
1) Restrain overall rate of urban population
expansion
2) Distribution of that growth amongst the
various urban centers so as to disperse total
urban population among a number of towns to
maximize development impact on rural areas
3) Maintenance of general level of well –
being in the town consistent with the
requirements of an equitable urban – rural
balance
4) Minimization of capital and foreign
exchange costs for pursuing other objectives
How to reach these objectives?
There were designated plan for locating
center/regions and nine(9) centers which will be
used for spreading the local development
By so doing then development will be released
to rural( local) areas through trickling down
(multiplication) effect
The policy singled out nine (9) towns to
implement the growth pole strategy
Dar es salaam; Mwanza; Moshi; Arusha;
Tanga; Mtwara; Mbeya; Morooro;
Dodoma and Tabora
Nine towns were selected because Dar es
salaam was already a metropolitan center
These are the places where new industries
and jobs have to channel through
Criticisms
1) The ability of growth poles to spread
(diffuse) development is very limited
 The theory assumes that industries can grow
every where
 It also assumes that regional economy can be
automatically induced by mere location of
few industries in backward areas(These
industries lacked essential inputs)
 It ignores the fact that forward and backward
linkages are very decisive in regional growth
2) Growth- pole selectivity is questioned on
the grounds that it is “place prosperity
approach” of development promotion
which assumes that whatever is true to
individuals must also apply to areas or
places.
It means that the best way to help a
person is to promote the overall prosperity
of the area in which he/she lives
3) The strategy assumes that growth
poles can act as catalysts of development
by attracting more inward investment from
within and outside and thereby raise
economic growth and opportunities. The
theory ignores location factors for
individual firm such as:
 Access to national and international
markets
 Access to local markets
 Efficient transport
 Availability of service industries
 Availability of power, water etc