A STUDY published by the University of Guyana’s Institute of Development Studies (IDS) has emphasised the use of a cluster-led development policy in diversifying the country’s export base.

The study, authored by IDS researcher Ms. Dianna DaSilva-Glasgow, posits that forming firm clusters can effectively promote the development of new sectors.
“For decades, Guyana has had a narrow export base of mainly primary products in the agriculture and mining industries,” she notes.
In her paper, titled “Improving Export Diversification through Industry Clusters: Mapping for Potential Clusters in Guyana”, DaSilva-Glasgow highlights hand-crafted gold jewellery, machine-made jewellery, wooden furniture, upholstered furniture, cane furniture, garment manufacturing and business process outsourcing service as strategic business segments that could further export diversification.
“Clusters are essentially geographic concentrations of firms and institutions that are inter-connected,” DaSilva-Glasgow points out in her study.
She asserts that the growth prospects of a country are tied up in the ability of that country to be able to identify existing drivers of growth, and on a cluster-based policy, effectively promote the development of those sectors.
DaSilva-Glasgow, who also teaches economics at the university, argues that clusters encourage international competitiveness of local businesses and spur innovation.
Clusters support competitiveness, she explains, by stimulating productivity, since they “encourage strategic partnerships among all entities having an impact on an industry, including the firms in that industry and support institutions, to address common challenges.”
Stressing that innovation is seen as being very important to international competitiveness, since the viability of companies on the international market is linked to their ability to produce value-added commodities, the researcher writes that clusters support innovation by allowing for potential economies of scale to be realised by each firm by further specialising production within each firm, by joint purchasing of common raw materials to attract bulk discounts, or by joint marketing.
Continuing on the point of innovation, firms in clusters, she adds, also benefit from external economies of scale – economies of scale that set in as a result of factors external to the firm – associated with the provision of enabling services such as education and research and development (R&D).
Economies of scale occur when the cost of producing a unit of output declines.
Many countries now use clusters as a policy tool to promote export competitiveness, enterprise development and innovation, DaSilva-Glasgow points out.
“Two-thirds of European Union countries have introduced the cluster approach in their innovation policy,” the economist states.
Even developing countries have embraced the utility of clusters as a policy tool for development, she notes, pointing out examples of the high-tech industry of Bangalore, the Chilean wine clusters, and the surgical instruments cluster in Sialkot, Pakistan.
As such, DaSilva-Glasgow endorses the notion that “cluster-based policies should increasingly replace industry level and firm-level policies, because cluster policy is more efficient, minimizes distortions to competition, and is better aligned with the nature of competition in the modern economy.”
The study was published by the IDS as part of a Special Series of Working Papers to commemorate the 50th anniversary of the University of Guyana’s establishment.