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Clusters that get businesses cooperating, not competing, make for good growth strategy and profitability
Nazia Khan

Jagat Shah takes inspiration from the thought that ‘nowadays things are changing so fast that what you think is impossible to do, is already being done by someone, somewhere else.�Shah, CEO of the international trade consult ing firm Global Network, was in Oman recently on invitation from the Ministry of Commerce and Industry (MOCI) and the Gulf Organisation for Industrial Consulting to conduct a study on the implementation of a cluster development approach in Oman. He describes the approach as revolutionary in the way it changes business.

Gather and profit
“Individually, small and medium enterprises (SMEs) may not be able to target bigger markets located far away from them or supply to these markets in large quantities. What happens in a cluster is that competing SME owners work together through joint marketing, under a common brand and order-sharing concept. The models differ from cluster to cluster, but everybody benefits from this system.�The producers and manufacturers get connected to bigger markets, get better prices, and achieve integration. Buyers and end users gain access to a range of goods.

Clusters were first proposed by American academic Michael Porter to encourage urban and regional economic growth. The proof of their success can be seen in the numbers for Cluster Pulse, an NGO promoted by Shah, which supports cluster development initiatives. Since its inception in 2002, it has saved US$19mn on joint purchases through bulk negotiations and import sourcing, and generated export orders worth US$162mn.

Model groups

Shah is particularly proud of the clusters in Afghanistan. “Weaving carpets is part of their culture and their creations really are among the best in the world. But the war had hit the business very badly. We helped to form three clusters in different parts of the country and now they are well-connected to markets in the US and Europe.�

Says Shah about Oman, “We propose to implement one cluster project as a model example. Our focus areas will be foodstuff, fisheries, minerals, petrochemicals and plastics.�While here, Shah met with representatives from ministries as well as SMEs. He will submit his report to the MOCI this month, but feels the potential of clusters is obvious. “With time, trust grows among various members of a cluster. They start buying raw material jointly, and share excess capacity. The success of one cluster gets others motivated. Clusters become vibrant.�As a result of that effect, so does the business believes Shah.