Keynote Paper Day 1

Prof. Rajah Rasiah D. Phil (Cambridge)
Rajawali Fellow, Ash Center,
Harvard Kennedy School,Harvard University, Cambridge MA, and
Professor of Economics and Technology Management
Faculty of Economics and Administration
University of Malaya

Technological Upgrading and Manufacturing Synergies in Asian Clusters: The Significance of the Systemic Quad


The concept of clusters have evolved since its first usage by Marshall in the 20th century. The development of successful clusters through the operations of small firms epitomised the Marshallian notion of clusters as small artisanal firms dominated inter-generational flows of knowledge through collaborative links and competition to shape the famous Italian industrial districts. However, clusters took on a new dimension when high technology operations required further complexities as a consequence of both stronger demand for learning and innovation that required linkages with R&D laboratories and integration with global sources of knowledge and markets. The mushrooming of science parks with new start-ups regularly graduating from incubators to mature as high tech firms have added to the pressing demand for advances in the concept of clusters. As a solution for the overwhelming changes that have faced clusters since mainstream approaches have focused on Porter’s concept of clusters, which refers to a geographic concentration of related companies, organizations, and institutions in a particular field that can be present in a region, state, or nation.While such a concept deals with connectivity and competition within a geographical space, we argue that it misses some of the fundamental elements of collective action that defines a dynamic cluster, i.e. differentiation, coordination and collaboration.Using the automotive cluster in Jakarta, button cluster in Qiaotou, and the electronics clusters in Hsinchu and Penang respectively, this lecture seeks to advancethe concept of the systemic quad to better explain the role of institutions, meso organizations and knowledge flows in the evolution of cluster synergies and technological upgrading. In doing so, the systemic quad embraces the fundamental pillars of the industrial district, i.e. cluster cohesion through connectivity, differentiation, coordination and collaboration, but argues that firm-level technological upgrading in the face of competition requires institutional change to also power improvements in basic and high tech infrastructure, and increased global integration.The agglomeration of high tech support in science parks has reduced the need for extensive internalized R&D operations so that small firms can participate in frontier innovation activities. The evidence also shows that the Schumpeterian forces of creative destruction helps renew dynamic clusters, including those located in the developing economies.

Keywords: clusters, institutions, technological upgrading, innovation synergies

Prof. Erman Aminullah
Indonesian Institute of Sciences

Learning, R&D Intensity and Economic Prosperity in Low R&D Countries (LRDCs): Envissioning the Indonesian Future


This paper is about modes of learning, R&D intensity and economic prosperity in low R&D countries (LRDCs), especially Indonesia. R&D intensity for long-term economic growth was analysed viewed from infrastructure quality and researcher in R&D. The results of analysis to the varieties of indicators revealed five points: first, simple learning by doing with very low R&D intensity is maintained by the LRDCs (in Indonesia) to produce low end products by using low and medium technology (LMT); second, high R&D intensity was the foundation of entering the global networks of production and innovation for the former developing countries (Korea and Taiwan) and followed by China, India; third, economic prosperity is related to infrastructure quality and intensity of innovation with R&D; fourth, raising the intensity of innovation with R&D require the improvement of infrastructure quality and the increase of competent researcher in R&D; and fifth, high economic prosperity with low R&D intensity is uneven phenomenon in the world. High economic prosperity coincide with technology dependence society would create instable and unhealthy economic growth in the long run. Science policy options for industrial technology development to raise R&D intensity in Indonesia are, first at macro level, the Indonesian government should: i. pushing growth through infrastructure development correspond to innovation with R&D investment, ii. driving growth through industrial innovation with R&D correspond to the sufficiency of researcher in industrial R&D, iii. implementing the effective policy instruments to raise industrial expenditure on R&D correspond to the increase of researcher in industrial R&D, and iv. focusing the limited R&D financing on the country potency for industrial technology leader in the future or make some buy some strategy. Second, at micro level, R&D institutions and universities in Indonesia should: i. invest in sophisticated research laboratories infrastructure followed by recruitting the highly competent researchers, ii. upgrade the quality and quantity of country’s higher education to produce graduates and post graduates, iii utilize competitive brain-gain by applying internationally comparative rewards to attract the returning of highly competent researcher from abroad, iv. Implement conducively legal and institutional supports to maintain highly competent researcher in industrial R&D, and v. manage new technology mastery by strong support to the priority fields of sciences, where new materials and life science-based R&D for industrial technology development will be important for Indonesian competitiveness in the future.

Key words: R&D intensity, infrastructure quality, economic prosperity, researcher in R&D, science policy, industrial technology development.

Keynote Paper Day 2

Prof. Lukman Hakim
Indonesian Institute of Sciences, Indonesia

The Chalengging Circumstances and Future Prospect of Steel Manufacturing Industry in Increasing Demand of Stell for Building Large Infrastuctures in Indonesia


Indonesia for several years has put Steel Industries as their strategic industries. Before the economic crisis in 1998 (During 1970–97), Indonesiawas able to achieve average annual economic growth of approximately 7%, with the manufacturing sector one of the driving forces behind this.
An analysis of developments over past years shows that the overall number of production and demand is increasing and the number of industry is also trending upward. The economic prospect following a decades of stagnation shows increasing demand of steel while new government launching initiative to build large infrastructures. The technologies used in any one product have become increasingly diverse and sophisticated, and as a result it is becoming difficult for firms to provide, in-house, the technologies and scientific knowledge required for innovation. On the other hand, collaboration between multiple organizations incurs costs for coordination. In this paper we conduct an analysis of industry developments by domestic public and private-sector firms in order to gain insights into the circumstances under these collaborations, even if the firms have to pay coordination costs.
We obtain the following results.Legal aspectsof steel manufacturing basically strong as stated in Constitution and followed by enactment the law of the republic of Indonesia number 4 of year 2009 concerning mineral and coal mining, where Holders of Mining Business Licenses (IUPs) and Special Mining Business License (IUPKs) are obligated to increase the added value of mineral and/or coal resources when conducting their mining, processing and refining activities and utilizing mineral and coal.Holders of Production and Operational IUPs and IUPKs are obligated to process and refine mining products domestically.
Although there are basic legal are available to build strong and sustainable Steel Industries, solid governmental policies are needed. Important understanding the basic isues relating steel industries and how the way issues framed and operationalised as a policy, the way an issue is moved to other arenas and venues to create support the way an issue finally is put forward to the decision making agendaneed properly assessed.

Keywords; Industrial Innovations; Science and Technological Policy; Added Value Creation

Michiko Iizuka

Natural Resource-Based Activities and the Role of Institutions in a Global Context


Recently, many studies have claimed that natural resources (NR) are no longer considered a ‘curse’ but are increasingly being considered an opportunity for development, as long as the institutions to sustainably manage NR are present. NR are essentially public goods. This means that government plays a critical role in shaping informal and formal rules—institutions—to define ‘access’ and ‘ownership’ and enforce them effectively to ensure sustainability. The circumstances surrounding NR-based activities nowadays have become increasingly complex due to the integration of NR into turbulent global markets, while productive activity hinges upon the sustainability of local environmental conditions. Institutions—rules that shape the behavior of stakeholders involved—have great importance in the sustainability of NR-based activities. However, the process of institutional change in meeting various challenges, especially the ways that rules are effectively created and enforced to achieve developmental goals in increasingly globalizing NR-based industries have not been systematically studied. This paper aims to do the following: (1) understand the current discussion in relation to natural resources and their potential for development (2) clarify the importance and complex nature of institutions in developing natural resources and (3) understand the process of institutional change. After going over the main points, this paper presents a case study of the salmon industry in Chile to illustrate the points related to NR raised in the earlier sections. In the last section, the paper will draw generic conclusions in light of the current discussion on NR-based industry in developing countries.

Keywords: natural resources, institutions, sustainable development, salmon aquaculture, Chile