P Phase one - Initiation and conceptualization
The development of industrial parks or zones should be founded on a strong business case and demand(from the private or public sector) that demonstrates why serviced industrial lands are needed and what benefits will it bring when it is finalized.
It is important at the initiation stage to conduct a thorough diagnosis, to determine how the zone fits in with broader national and regional development strategies and how the particulars of the national and local political, social and economic environment could influence the choice of zone/park type, its location and the focus of its economic activity.
Identifying demand drivers is the first step in the process of understanding investors' and markets’ demand. The demand analysis should be conducted early in the project cycle and before any decision is made to initiate the project.
Very often insufficient attention is given to proper business case development and industrial park positioning, creating thus a “gap” between what firms need and what parks actually offer.
It is imperative to develop strategies that leverage the growing demand in both domestic and international markets. Special attention must be given to the production supply-side and any productive measures that are taken for the improvement of production and value-addition in the country.
Industrial park development involves a wide range of stakeholders, including institutions at various government levels , businesses, financial institutions, development partners, education and training institutions, research centers, and environmental and community organizations.
The manner in which various stakeholders are engaged can influence the planning and development of industrial parks in either a positive or a negative way. A successful industrial park requires a close partnership between stakeholders in order to deliver the best results for the industry, its host community and the natural environment within which they coexist.
A consultation strategy must be developed, planned and linked to a communication strategy, including an investor outreach program. The specific roles of local administrations, government, civil society and other development partners should be identified.
Strategies for effective stakeholder engagement include:
Binding Memoranda of Understanding (MoU) between two or more stakeholders outlining each party’s requirements, roles and responsibilities;
Ensuring full and transparent stakeholder engagement, as well as constituency and trust-building through regular communications amongst stakeholders;
Establishing a functioning governance system in order to facilitate the inclusion and collaboration of multiple stakeholders at the national, regional and local levels, as well as their coordination;
Active engagement with the community to fully integrate affected citizens’ and communities’ knowledge, suggestions, concerns and vision, in order to shape park development decisions.
Identification and engagement with these various stakeholders from early stages ensure the application of broad and diverse perspectives to the definition of the characteristics and the planning of industrial parks.
The macroeconomic policy environment and the current institutional arrangements should be analyzed in the specific context of the targeted sector and industrial park.
The framework of policies and national regulations for industry and infrastructure should be reviewed, along with its bearing on various stakeholders and organizations.
Key focus areas for business environment assessment:
- Review the government’s commitment to industrial development by assessing policy frameworks
- Support rendered to the private sector and producers by government services
- The interaction and institutional framework between various actors
- Skill development strategies in place to bridge the skill gaps in industrialization
- Identify the potential opportunities with key agriculture donors/ development partners
- Analyze the degree of organization among producers
Project ownership and governance:
- Project structuring and establishment/identification of special purpose vehicle
- Legal framework and governance structure
- Land access and rights/usage mapping including legal implications
- A very clear management plan shall be prepared in consultation with the stakeholders
- Management of common facilities
- Mobilization of resources
- Selling and leasing prices of developed land
- Propose level of government assistance
- Scope for public-private participation for commercial operation;
- Implementation and subsequent operations of the project
The macroeconomic policy environment and the institutional arrangements should be analyzed in the specific context of the targeted sector and industrial parks.
The framework of policies and national regulations for industry and infrastructure should be reviewed, along with its bearing on various stakeholders and organizations.
A pre-feasibility study will usually make use of more widely available statistical data sources nevertheless, supplemented by field data, such as qualitative information gathered through interactions with public authorities and enterprises.
The pre-feasibility studies provide guidance in the following areas:
Location/site selection
Provide alternative locations and sites that are potentially suitable for establishing an industrial park.
Market/industry identification and forecasts
Assessment of the sectoral niches likely to be attracted to the proposed industrial park, as well as their country of origin, expectations and needs;
Demand projections
Anticipated sector-specific demand for an industrial park based on historical investment patterns and current trends internationally and nationally.
Impact projections
Anticipated economic and social impacts in terms of investment, public finance expenditures, jobs, exports, tax revenues and foregone revenues, foreign exchange earnings, and other factors.
Policy analysis and stakeholder mapping
Assessment of existing policy, legal and institutional framework to identify opportunities and challenges and inform any possible reforms;
Safeguards assessment
Assessment of basic social and environmental considerations influencing the demand, investment costs and competitiveness;
Location and site selection are the main results of the pre-feasibility analysis. The location of an industrial park should strike a balance between proximity to raw materials and proximity to markets.
Key parameters should be used to identify and assess the suitability of land, with each parameter assigned a weightage in the evaluation to finalize the land for development.
Selecting a location for an industrial park involves the evaluation of several factors of different types.
The critical success factors influencing location selection criteria include:
Status and legitimacy
The institutional support required for promotion and development
Infrastructure connectivity
The availability of basic facilities such as road, power, water, communication and gateway corridor
Physical features
Suitable and quality land for industrial development (not affected by residential regulations)
Environment and social considerations
Matching the expectations of the people involved in local communities
Business considerations
Suitable and quality land for industrial development (not affected by residential regulations)
The land selection and suitability exercise should be developed and various parameters must be sought upon for the assessment of the identified location for industrial parks. The identified location should correspond with the site selection criteria to arrive at a suitable location. For most prospective firms, accessibility to trade gateways is paramount. This should be foreseen in the location analysis of the industrial parks intended site. The decision of where to locate an industrial park can therefore be influenced by pre-existing firms, universities and research centers already located in a particular area.
A detailed site analysis is necessary for the planning and developmental framework.
The site analysis contains location parameters and physical parameters examination as shown below:
Further to the completion of the land identification exercise, an indicative ‘thematic’ map is prepared to showcase the areas and features that could influence the development of industrial parks.
Sector prioritization entails some of the most important decisions to be. While developing bankable projects in selected industries could act as an incentive to increase the participation of investors, the success of these projects partly depends on effective and impactful sector identification.
Sector prioritization is based on a review of key issues that have an impact on industrial development and the capacity of a given country to produce and export manufactured products competitively. The ability to choose the right sector after due research and a consultative process with relevant stakeholders is most rewarding partly because it is close to people and the real economy. These involve identifying the opportunities and challenges associated with various sectors, including their relative competitive advantages, occupants' expectations on what parks should offer and raw material linkage.
The selection also assesses each sector’s potential in terms of job creation and employment of the target population, competitiveness in export markets, price factors (labour costs, the cost of inputs, exchange rates), investments (both national and FDI), domestic and/or international demand for a product (market potential), current and potential contributions to GDP, manufacturing value-added and spill-over effects on other economic activities.
The criteria and indicators for analyzing the attractiveness of a specific sector or value chain are shown below:
UNIDO’s industrial policy approach recommends that the assessment of priority industries and ensuing investment promotion efforts be undertaken along three dimensions: the growth dimension, the pro-poor dimension and the environmental dimension.
Considerations for industrial sector prioritization :
- Competitive advantage with respect to production and agro-processing in comparison to other countries and especially to neighboring countries. The factors considered include productivity, cost of production, existing support infrastructure and facilities (roads, logistics, marketing, etc.), and the business environment.
- The attractiveness of the industry to investors – policy environment and incentives available to investors, including FDI.
- Access to the requisite technology, infrastructure, services and facilities.
- Potential for short-term impact – sectors and commodities that can achieve significant improvements along the value chain without requiring major infrastructure investments.
Contact us
UNIDO cross-disciplinary team on industrial parks (CDTIP)
Vienna International Centre
sipp@unido.org
