The conference, Cluster Economic Development – Promoting Local Economies through SME-Cluster Approach, will look at a new approach for urban development by supporting conditions for small- and medium-sized enterprises (SMEs) to flourish around industry clusters, and the vital role played by SMEs for sustainable growth and poverty reduction.

Asia’s cities have fuelled the region’s unprecedented economic boom over the past few decades, expanding to form increasingly clustered urban regions. However, growth has come at the cost of environmental stress, overcrowding, and widening income gaps. Without change, these vast urban areas risk becoming economically uncompetitive and suffering further environmental degradation.

“Given the substantial opportunities for SMEs in areas such as manufacturing, services and agriculture - and their potential for reducing poverty - it is critical for governments to come up with effective strategies and practical investment programs to facilitate further SME cluster development,” said S. Hafeez Rahman, Director General of ADB’s South Asia Department.

Promoting the development of industry clusters in Asian cities, which has been done in India’s Bangalore, PRC’s Shenzhen, and Singapore, offers a potential solution. Research shows industry clusters, offer significant economic and environmental advantages such as economies of scale, reduced transaction costs, and better management of industrial waste.

The City Cluster Economic Development Approach, initiated by KyeongAe Choe, Lead Professional (Urban and Water Development) of ADB’s South Asia Department, provides a strategy for creating industry clusters which can unleash the potential of SMEs, to contribute to sustainable growth and poverty reduction. SMEs play a key role in employment and income generation in Asia, accounting for an estimated 90% of all businesses and 60% of the workforce, but they have been hard hit by the global economic crisis. which has seen regional exports slide and access to capital tighten.

"The six-step approach looks at the comparative advantages and drivers of competitiveness in cities, determines priority industry clusters, carries out infrastructure feasibility studies, and then develops an action plan for cluster development," says Ms. Choe. "The ultimate goal is to create an enabling environment for business which activates industrial growth, triggers local economic development and increases income and job opportunities."

It aims to arm decision makers with the information needed to make infrastructure investments which have the greatest development impact.

Conference participants, including representatives from ADB, the private sector and academe, will look at the cluster development strategy, examples of successful industry clusters, and how eco clusters can help deal with growing amounts of industrial waste. They will also look at the role SME clusters in promoting sustainable economic growth and contributing to the achievement of the Millennium Development Goals in developing Asia.