The Automobile Industry Cluster in Malaysia

Abstract

Industrial cluster policies have been put into practice in many countries around the world, including in Asia. Our previous studies, such as Kuchiki (2005) and Kuchiki and Tsuji (2005, 2008) postulated a hypothesis regarding the formation of industrial clusters which is referred to as the ‘Flowchart Approach’. This approach explains the formation in such a way that anchor firms establish production bases first; followed by supporting firms establishing facilities near them, which constitutes the core of the industrial cluster at the initial stage, and then in accordance with clustering, more firms agglomerate in those regions and accordingly more information related to transactions, technologies, know-how, etc. are exchanged. This process leads economic activities of industrial clusters to increase more and more, and they come to play important roles such as the economic development of regions as well as a national economy. The Flowchart Approach is thus based on the success of Industrial Parks, Special Economic Zones, or Special Export Zones in East Asia such as Taiwan, Korea and China. The Development of their electronics and automotive industries are good examples. The Flowchart Approach emphasizes factors which attract firms to particular regions, including: (1) domestic demand and natural resources such as raw materials and human resources; (2) physical infrastructure including highways, roads, airports, electricity, water supplies; (3) social infrastructure such as legal, financial and intellectual property rights systems, and the degree of deregulation; and (4) incentive schemes for investment provided by governments. The Flowchart Approach as a principle of constructing policy measures involves setting a proper target, prioritizing the policy measures, and finding actors to implement the policy measures.