Cluster Initiatives in

Investment Promotion

Lenka Hrebickova, CzechInvest

Jakarta, 18th November 2010

Table of content

1. • Introduction to CI role in development of companies

2. • General cluster concept

3. • Cluster Programme in the Czech Republic

5. • Clusters in investment promotion

6. • Best practices – Automotive Cluster and others

7. • Lessons learned – obstacles and recommendation

CzechInvest

- Investment and Business Development Agency

- State contributory organisation of the Ministry of Industry

and Trade of the Czech Republic

Historical development:

Support of investment inflow

1993

Facilitating business support

Services and technology centres

2002

Investment Incentives Act

changes

2007

1998 Introduction of investment incentives,

development of infrastructure for investors

2003 Support for small

and medium-sized enterprises

2010

CzechInvest´s Mission

• To support foreign direct investment

- Handling of investment incentives

- Business property and supplier identification

- “Aftercare“ services

• To develop local Czech companies (SME)

and implement the business-development

programs

- Access to EU structural funds

• To improve current business environment

- Clusters and industrial parks development

- Improvement of legislative environment

All services are free of charge!

CzechInvest and its role in

business development

• several aid programmes focused on various areas of business – for cofinancing of business projects

• financed from European Union structural funds – Operational Programme Enterprise and Innovation (OPPI)

• programmes financed by EU structural funds (85%) and by the state budget (15%)

• presently 15 aid programmes

Division of structural funds

What we support

Development

acquisition of machinery and other facilities

Innovation

product innovation,

acquistion of patents

ICT in Companies

modern information

systems

Prosperity

technology parks,

business angels

networks

Eco-energy

energy savings and

use of renewable resources

Training Centres

construction or acquisition

of traning centres,

equipment

Potential

expansion of research centres,

capacity for innovation activites

Real Estate

construction and renovation

of buildings, preparation of

industrial zones

Marketing

promotional materials, support of

foreign trade fairs

participations

Consultancy

consulting, information and training

services

Programme Cooperation

Active assistence in cluster and

technology platforms founding

Consultancy, promotion of clusters and

platforms

Administration of programme

- the cooperation programme is intended for those who want

to cooperate with other companies in their branch and to

establish cluster or technology platform

What do we do

in cluster

development

Cluster promotion – our motto

“The main problem of SME‟s is not their size, but

their isolation.” OECD Seminar - Local Systems of Small Firms and Job Creation Paris

What are the Clusters?

Regionally located set of

mutually connected

companies, associated

institutions and organizations

that compete with each other

but also cooperate, and

whose bonds have the

potential to strengthen and

increase their

competitiveness.

For companies:

Identification of common

needs and its improvement

Cost sharing

Increase innovations

Business climate

improvements

Access to new markets

For universities: For public sphere:

Support of competitive

industry

Region specializations

FDI attraction

Improved competitiveness

Improved communication, common needs identification Realization of mutual projects

Knowledge of industry

needs

Tailor-made education

Applied research

Profit from R&D

Technology transfer

Access to funds

Cluster benefits

Cluster benefits

- Improve the results of

companies in the cluster,

region„s development and

synergic effects

- Increase the number of

innovations, spin-offs and start-

ups, support research base

- Increase exports and lure

attractive investments

Basic Programme conditions

in the Czech Republic

Cluster must have at least 15 independent members

University or R&D institution must be member of the cluster

At least 60% of cluster members must be small or medium enterprise

Feasibility Study on sustainable Cluster development

Building Cluster Initiatives

in the Czech Republic

• Feasibility study to identify industrial groupings in North

Moravia for targeted state aid

• Training regional authorities, universities and firms

• Certification of cluster facilitators and managers

• Promotion of the concept at different levels (conferences, PR)

ANALYSIS & AWARENESS

BUILDING

• International cooperation

• National Cluster Strategy – adopted by the government in June 2005

• National Cluster Study

• Establishment and development of clusters

STRATEGY & IMPLEMENTATION

• Adapting programme to company needs (eligible costs)

• Launching Operational Programme Cooperation – Clusters

• Monitoring and evaluation of the projects

• Launch of the new Operational Programme Cooperation – Clusters

FUNDING

2002

2009

Cluster Support

Programme

Stage 1 – Mapping

• Subsidy for regional authorities, universities, R&D institutions or other organisations entrusted with such project

• 75 % of eligible costs (€6,500 – €33,000)

• Eligible costs: surveys, questionnaires, feasibility study, seminars, workshops, promotion

Stage 2 - Cluster Development Support

• Subsidy for new CLUSTERS (manufacturing, construction, R&D, IT sector)

• max. €1.5 mil

• Eligible costs: joint projects and promotion, R&D facilities, costs of lease and equipment of offices, salaries of cluster managers and staff, consulting services, market analyses, etc.

Stage 3 – Cluster Development Support –

2nd phase

• Subsidy for old and new CLUSTERS

• €120,000 – €3.2 mil

• Eligible costs: Same as Stage 2 + real estate

Summary of the Cluster

Programme

2004 – 2008

Cluster Mapping

•Total applications: 67

•Approved applications: 42

•Total amount of support: €1.3 mil

•Used support: €1.1 mil

Cluster Development

•Total applications: 18

•Approved applications: 14

•Supported clusters: 12

•Total amount of support : €9.9 mil

•Used support: €8 mil

Summary of the Cluster

Programme 2009 - 2013

Program Cooperation 2009 - 2013

•Total applications: 31

•Approved applications: 18

•Total amount of support: 28 mil € (709 mil CZK)

Showcase of Czech Clusters

Machinery Clusters Czech Machinery Cluster, Moravian Aerospace Cluster, Moravian-Silesian Automotive Cluster

Biotechnology Nanomedic, CzechBio, MedChemBio

Wood + Furniture Moravian-Silesian Wood Cluster Cluster of Czech Cabinet Makers

New materials Omnipack, Cluster for Plastic Materials, Czech Stone Cluster, Clutex

Information technologies

Moravian-Silesian IT Cluster, IT Cluster of Hradec Kralove Region

Renewable energy Enwiwa, Envicrack, Energoklastr

Technical textile

Water resources

management

Energetics

Furniture industry

New materials processing

Water treatment

Bioinformatics

Stone industry

IT sector

Packing industry

Biotechnology

Biochemistry

IT sector

Energetics

Machine industry

Wood industry

Ecoenergy

Automotive industry

Construction

Machine industry

Waste processing

Wood industry

Plastics

industry

Machine industry

Nanotechnology

Waste

processing

Map of Czech Clusters

Cluster„s joint projects

Information and communication platforms

• Suppliers databases

• Sharing information

Training

• Different types of activities aiming to increase a number of students in specific fields

• Common training of employees

Research and development

• R&D laboratories

• Testing and research equipment

Marketing and public relation – „low hanging fruit“

• Trade fair and exhibitions, promotion

• Strenghtening image of cluster and its members

WWW

Software

&

Hardware

Studies,

information

databases

R&D

Infrastructure

Rent

Travel

expenses

Operating

costs

Wages and

insurance for

cluster

employees

Experts and

seminars

Marketing and

promotion

Program Eligible Costs

Trade Fairs &

Exhibitions

Clusters and Investment

Promotion

Coordination institution

• cluster represents its members towards potential investors

• cluster serves as a contact for investors in a specific sector

• cluster manager can help member companies search relevant business partner

• more frequent

Final supplier

• cluster as a final supplier based on partial supplies from cluster members

• cluster combines variety of relevant skills, experience, business processes for turnkey delivery (comprehensive delivery – e.g. aerospace)

• based on existing tight cooperation

Combination of both approaches

• variety of approaches

• depends on business enviroment and specific sector

Sectoral aproach in investment

promotion

Key sectors of Czech Republic – CzechInvest has specialists who

can provide investors with sector specific information

Automotive Industry

Aerospace Industry

Electrical Engineering and Electornics

Nanotechnologies

Life Sciences

Renewable Energy Sources and Cleantech

High-Tech Mechanical Engineering

IT and Software Development

Business Support Services

- use of clusters as potential supplier base!

How can CzechInvest help

investors?

Assist with the implementation of the

investment project

Find a suitable location or existing

production facility

Identify potential suppliers throughout or

extensive automotive database

Help connect with the universities and

industrial R&D

Mediation with government bodies

Handle investment incentives

Provide Aftercare services

Automotive Industry

- Czech Republic is one of the most attractive automotive R&D

locations globally

Outstanding engineering tradition

Developed infrastructure, well prepared industrial zones and facilities

High quality technical education

Cooperation between universities and industry

Highly developed supplier base with strong presence of international

companies

Well known automotive cluster can serve as supplier base and is platform

for research and development

Moravian-Silesian Automotive

Cluster Support and development of automotive industry

• 2006

• Legal form: Civic Association

• 43 cluster members

the most significant companies for automotive components in the region (Cromodora Wheels, Siemens, Visteon Autopal)

VŠB – Technical University of Ostrava + other educational institutions

• Financing: subsidy (€ 0.86 million)

self-financing

• Cluster members production: motor vehicles manufacturing, production of components for automotive industry and supporting services

Moravian-Silesian Automotive

Cluster R&D and Innovations – Cluster laboratories

• testing of heat installations and cooling equipment including unit for air handlers for automotive industry testing

• testing of noiseness of components (automotive, washing mashines, TGV)

Moravian-Silesian Automotive

Cluster

Common strategy towards foreign partners from South Korea

•Member of Czech-Korean trade and industry committee

Common marketing projects

•Projects of collecting information from regional and national automotive industry for the purpose of development of suppliers and sub-suppliers networks

Educational projects

Low trust among the cluster members

Unwillingness to cooperate, low awareness of

cluster concept

Low involvement of universities and research

institutions

Passive aproach of cluster manager or cluster

members - missing active persons / institutions

with leadership skills

Limited human resources in small companies

to introduce new activities

Lack of financial resources

Culture of non-cooperation in specific fields

Main obstacles identified

Recommendation Increase the awareness of clusters in general,

better information access, concept promotion

Motivate potential cluster members to cooperate

Strengthen the cooperation among the actual

cluster members

CzechInvest, the Investment and Business Development Agency, is an agency

of the Ministry of Industry & Trade of the Czech Republic

© Copyright, CzechInvest 2006. All rights reserved

Thank you for your attention.

Lenka Hrebickova

lenka.hrebickova@czechinvest.org