Towards a Romanian Maritime Cluster CRISTIAN IANCA Ronomar Innovation Centre Constanta ROMANIA cristian.ianca@ronomar.eu http://innovation.ronomar.eu GHIORGHE BATRINCA Constanta Maritime University 104 Mircea cel Batrin Street Constanta ROMANIA gbatrinca@imc.ro http://www.cmu-edu.eu Abstract: This paper makes a short analysis of maritime clusters in terms of how they have been developed and how they evolved in the last ten years and also is trying to show the way forward for a possible and needed Romanian maritime cluster. Key-Words: business cluster, maritime cluster, maritime sector, innovation 1 Understanding Maritime Clusters Shortly defined, a maritime cluster is a business (or industry) cluster for the maritime sector. In order to have a comprehensive understanding of the maritime cluster, some clarifications are needed on the business cluster concept and on what is included in the maritime sector. 1.1 What are business clusters? A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field (e.g. maritime). Clusters are considered to increase the productivity with which companies can compete, nationally and globally. It is also a very important aspect of business strategies. Cluster development has since become a focus for many governmental programs. This business cluster, also known as a industry cluster, competitive cluster, or Porterian cluster, was introduced and the term cluster popularized by Michael Porter [1]. The importance of economic geography, or more correctly geographical economics, was also brought to attention by Paul Krugman [2]. The underlying concept, which economists have referred to as agglomeration economies, dates back to 1890 and the work of Alfred Marshall. Generally three types of business clusters, based on different kinds of knowledge, are recognized: Techno clusters - These clusters are high technology-oriented, well adapted to the knowledge economy, and typically have as a core renowned universities and research centers like Silicon Valley. Historic knowhow-based clusters - These are based on more traditional activities that maintain their advantage in know-how over the years, and for some of them, over the centuries. They are often industry specific. For example: London as financial center. Factor endowment clusters - They are created because a comparative advantage they might have linked to a geographical position. For example, wine production clusters because of sunny regions surrounded by mountains, where good grapes can grow. This is like certain areas in France, Spain, Chile or California. A business cluster is a geographical location where enough resources and competences amass and reach a critical threshold, giving it a key position in a given economic branch of activity, with a decisive sustainable competitive advantage over other places. The process of identifying, defining, and describing a cluster is not standardized. Individual economic consultants and researchers develop their own methodologies. All cluster analysis relies on evaluation of local and regional employment patterns, based on industrial categorizations. Notable databases providing statistical data on clusters and industry agglomeration include: The Cluster Mapping Project (for the USA), conducted by the Institute for Strategy and Competitiveness at Harvard Business School ISSN: 1792-4707 94 ISBN: 978-960-474-222-6
The European Cluster Observatory (for Europe), managed by the Center for Strategy and Competitiveness at the Stockholm School of Economics Following practical development of various clusters, many perceive there to be four methods by which a cluster can be identified: The geographical cluster Sectoral clusters (a cluster of businesses operating together from within the same commercial sector e.g. marine) Horizontal cluster (interconnections between businesses at a sharing of resources level e.g. knowledge management) Vertical cluster (i.e. a supply chain cluster) A cluster is not just an agglomeration of companies in the same industry sector. It requires a certain interconnection between businesses clients and suppliers, specialized business support providers, financing institutions, research institutes, universities, authorities and various associations. This synergy within a cluster leads to increased productivity of the companies, drives innovation and stimulates new businesses in the field. 1.2 Defining the Maritime Sector There is no standard definition for the maritime sector. Most usually it refers to shipping and shipbuilding. The traditional areas of the maritime sector are considered to be [3]: Inland navigation: Inland shipping and ship management; chartering-out; inland cruises and ferries; harbour and river towage; freighting Marine aggregates: Exploitation of marine aggregates Marine equipment: Manufacturing and wholesale trade in maritime equipment for all maritime (sub-)sectors Maritime services: Research and development; education; classification and inspection; bunkering; maritime insurance; maritime financing; maritime brokerage; maritime law; crewing; associations; government services; rescue; diving; ship supply Maritime works: Dredging; nautical cable and pipelines; river works; construction of canals, dykes and ports; support vessels; sand transport Navy and coastguard Offshore supply: Construction and installation of platforms, storage vessels and equipment; drilling; offshore-related transport, engineering, communication, consultancy and other support; seismic research; manufacturing, installation and maintenance of offshore and coastal wind turbines Recreational boating: Boat chartering and renting; marinas; inland boat basins; supporting services concerning the construction of and trade in recreational vessels; boating-related training and trade Seaports: Cargo-handling; shipping related storage, agency, maritime logistics and forwarding; port authorities; pilotage Shipbuilding: Construction and repair of seagoing vessels (commercial ships, fishing boats and naval ships), recreational boats and inland vessels; ship scrapping; floating sections; dry docks Shipping: Merchant shipping and ship management; short-sea shipping; chartering-out; ferry services; ocean towage In a broader perspective, some other sea-related business could also be included in the maritime sector: Coastal and sea-related (marine) recreation and tourism: tourism within 10 km from the coast and cruise tourism (service on board of cruise ships) Fisheries: maritime and inland fishing; fish processing; aquaculture 1.3 Maritime Cluster Dynamics Cluster development is a historical, natural process which relies on favourable geographical, historical and economic conditions and on the availability of certain local resources. The creation and development of the maritime clusters have been mainly driven by the forces that shape the global economy and the development of trade and shipping. Maritime clusters, as clusters in general, often go through a history of emergence, growth, and decline. The birth of maritime clusters may often be traced to specific location factors and historical circumstances. When the cluster begins to take form, self-reinforcing processes stimulate its growth. Some of the maritime industries have been for centuries, part of the global economy and although they had to face new and low cost competitors over and over again. Their competitive position was to a large extent determined by technological innovation. Cluster decline may be caused by cluster internal factors or external factors. Clusters may develop internal rigidity that weakens productivity and innovation. Union inflexibility, over consolidation, mutual understandings, cartels, or other barriers to competition may undermine local rivalry, and therewith the rate of innovation. External factors that may lead to cluster decline are, for example, changing technologies, modification of trade ISSN: 1792-4707 95 ISBN: 978-960-474-222-6
patterns or competition from other clusters. The rise and fall of maritime nations since the World War II, in particular the changing fortunes in the shipbuilding and shipping sectors, clearly demonstrate the maritime cluster dynamics. Several stages can be identified in the cluster development [4]: Formation of pioneer firms, based on historical circumstances, local knowledge, local customers initiated spin-offs and local rivalry; Development of specialised suppliers, services and manpower, providing increasing external economies and a cumulative process; Formation of organisations, such as specialised education, business associations, knowledge organisation etc., serving the cluster firms and supporting the learning process; The growth of external economies and local organisations attract outside firms, skilled workers, and fertile grounds for local firms; Formation of non-market relationships between persons and organisations. This stimulates the circulation and stimulation of knowledge/innovation; Clusters might renew themselves for decades or become a part of a new cluster. Within the cluster, leader firms and co-ordinating institutions are created. Leader firms are naturally created by the cluster processes, but may also be externally stimulated, for example, by public policy. Also, co-ordinating institutions may be created naturally by the cluster process or they may be a result of interventions by the authorities. Public policy is an instrument designed by the authorities in order to stimulate the clustering process. International trade, economic growth, and political events and decisions are the most important issues for an agglomeration in shipping. The most prominent feature of the development of global shipping markets over the last few decades is the geographical move of market dominance towards Asia, away from the historical core regions in Europe and North America. The world merchant fleet increased continuously in line with the growth in the seaborne trade for oil, dry bulk (grains, coal, and iron ore) and other cargo (mainly containerized). Most of the countries in the world have invested and still invest heavily in the port facilities to handle the dry bulk, gas liquids, refrigerated cargo or containers. The shipping industry, measured by freight costs, is a major growth industry. The challenge has been for the traditional ship owning countries (flag states) to grow with the market and withstand the strong competition from the new shipping nations. The largest ship owning country is Greece, which came almost out of nowhere to world prominence; Japan is still a good second, which also developed its fleet since World War II. Norway and the USA grew, but not enough to maintain the top-position. There are many rises of new shipping nations, and some of the traditional ones managed to stay in the ranking, but clearly lost out, like France and the Netherlands. Chinese ship-owners are growing amazingly fast. Shipbuilding is one of the maritime industries which suffered the most from the new competition of countries like Japan and later on South Korea and currently China. Consequently, a new industry model emerged for the European shipyards. The yard became the assembly plant where many subcontractors contributed to the construction. Some countries have more or less disappeared, like the United Kingdom and Sweden; some countries have grown, like South Korea and China. Another group of countries managed to remain more or less at the same ranking or remain more or less at the same ranking, like Germany or Italy. There is a direct correlation between the shipbuilding demand and the demand for marine equipment. The marine equipment manufacturers need a substantial home market in order to be able to innovate. The growth of world shipping will have a positive effect on the demand for maritime services. The challenge for each individual nation is therefore to obtain or maintain a share of these worldwide activities. Ports grow in tonnage terms, at least twice the rate of seaborne trade, as cargoes have to be loaded and unloaded. In container shipping the transhipment in hub ports increases the volume of containers handled even more. The inland shipping has modernised its fleet and increased the productivity during the last decade, helped by a scrap-and-build programmes. Its role in transport is important, but its growth has been modest. The expansion of shipping and ports around the world, results in a sharp growth of the world dredging sector. This demand is reinforced by land reclamation in coastal areas for the rapidly growing cities around the world. The growth of the yachting sector is not directly linked to other maritime sectors, but rather to the standard of living and the access to recreational waters, either rivers and lakes or coastal waters. Over-fishing of the seas has become a major problem in European waters and in almost any ocean. This will result probably in a further reduction of the world fishery fleet. The fisheries sector is therefore not a growth industry of the future. The offshore sector is very diverse, ranging from offshore survey, exploration, production, ISSN: 1792-4707 96 ISBN: 978-960-474-222-6
installation, supply, pipe laying, and so on. The offshore sector is a relatively new sector which started to grow very fast in the aftermath of the world oil crises. While demand for oil continues to grow, and oil production gets more and more difficult and costly in deep water, the offshore sector will benefit from this and will continue to grow at a higher rate than oil demand itself. The naval sector is a growth industry, but export is often difficult, since it is intimately linked to international politics and financial arrangements at the government level. [5] 2 Towards a Romanian Maritime Cluster 2.1 Is There a Romanian Maritime Cluster? Is there a Romanian maritime cluster? If we refer to the cluster definition in the first section, the answer is no. The Romanian maritime sector has several strengths, but also has significant weaknesses, which pose a great threat to its future. That is why a facilitating effort toward the creation of a maritime cluster is more important than ever, for the strengthening and development of the Romanian maritime sector. The strengths of the maritime sector are mainly related to: A significant shipbuilding and ship repair activity in Constanta, Mangalia, Galati, Tulcea and Braila; A very of a large port infrastructure in Constanta; Good maritime education and on a large scale at the universities in Constanta and Galati; Well-educated workforce, a broad set of expertise and a high level; Offshore activities in the Black Sea; Significant value creation and employment generated by maritime sector; employment in the traditional maritime sector is estimated at 80,000 [3]; High geographical concentration the maritime activities are concentrated in the South-East region close to Black Sea and Danube. Good export quote of the companies in the maritime sector. Existence of a critical mass to generate efficiencies and of several leader firms in shipbuilding, port operations and offshore activities. The main and very important weakness of the Romanian maritime sector resides in its structure: lack of strong demand drivers such as shipowning, fishing and offshore activities. Some other weaknesses are: Weak innovation, mainly due to undeveloped and underfinanced R&D. The private companies are not large enough to carry out internal R&D projects and the public R&D is underfinanced and not connected with the business. Poor institutional framework and business networks: low quality of trade and owner organisations, low quality of the cluster networks, low level of interaction with policymakers and politicians. Lack of image (branding) and communication for the maritime sector. 2.2 The Need for a Romanian Maritime Cluster A cluster creates a stimulating business environment for the companies in the maritime sector through: Proximity to specialized staff, Proximity to suppliers Demanding customers Access to specialized information Stimulating local rivalry Co-operation and networking Reduced transaction costs Learning. From a business perspective, the outcome of a maritime cluster would be: Complementarities in the use of input resources which creates a critical mass of demand necessary for producing the resource and creates scale in production; Innovation pressure caused by frequent communication with demanding customers that are not dependent upon one supplier. Reduced transaction costs of co-operation, which makes it easier for companies to specialise on a narrow part of the value chain; Better access to skilled labour; Knowledge information diffusion and learning caused by networking; Innovation would probably be the most important outcome of the cluster. Innovation is an essential condition of economic progress and a critical element in the competitive struggle of companies and of states. The ability to innovate is one of the most important factors for survival, competitiveness and economic growth in companies. Business profitability and growth create jobs, local development and wealth in the society. 2.3. Building a Romanian Maritime Cluster A plan to facilitate the creation and consolidation of the Romanian maritime cluster must include the following actions [5]: ISSN: 1792-4707 97 ISBN: 978-960-474-222-6
Raise cluster awareness The first difficulty encountered is in getting focus on the importance of the maritime cluster in the Romanian economy, is the simple fact that the maritime cluster does not exist statistically. Individual sectors of the cluster are part of different statistical entities. Things get even more complicated when companies produce both for maritime and non-maritime markets. The first step should, therefore, be defining the sectors within the cluster and establish the key economic performance indicators and communicate these data. This is an important enabler at the conceptual level in the minds of the politicians, government, labour force, educational institutions, the general public, and last but not least the entrepreneurs themselves. Without the right mindset, based on an accurate perception of reality, cluster policymaking is not possible. Elaborate a governmental policy The government should acknowledge the maritime cluster as an important building block of the economy. The competitive environment is changing continuously, and it is up to the government to create the right conditions for the maritime sector to adapt. Based on the long-term views on the development of the maritime sector, long-term policies must be formulated. The existence of an overall industrial policy for the maritime sector, formulated by the government, would be an important enabler for the maritime cluster. Strengthen the demand sectors Maritime sectors can be categorised into two groups: demand and supply sectors. The demand sectors use the capital equipment and services of the other sectors. Supply sectors, like shipbuilding, marine equipment and maritime services are more and more exposed to foreign competition. Strong and viable maritime clusters depend, therefore, on strong and internationally oriented demand sectors, such as shipping, offshore, fishing, naval, dredging and inland shipping. In particular the shipping sector offers opportunities for growth as the market is huge and the opportunities are many. The major weakness of the Romanian maritime sector is the lack of strong demand sectors. Therefore, this should be the focal point of government policies. Maintain a fair competition Companies and whole sectors may be confronted with unfair international competition. Continuously monitoring competition is an important aspect of any cluster policy. This should be done in close co-operation with the trade organizations. Promote exports Reinforcing the level of exports and the number of companies that actively export is an important enabler of cluster growth and dynamics. Up to a certain level, exports can be done from the home country, beyond that level, companies have to internationalise their activities and start local production and services in export markets. Stimulate innovation Companies can only maintain their export position in the long-term, when they constantly upgrade their products, services and production processes. This requires an advanced research and development infrastructure and policies that stimulate entrepreneurs to innovate, exchange information and take risks together. The leader firms in the cluster are able to set demanding standards, trigger innovation and even organise a number of companies (from the supply sectors) to address the innovation challenges. Innovation is an important enabler of cluster viability. Develop human resources A high quality and complete maritime educational infrastructure, in combination with a transparent and large maritime labour market form together an important cluster enabler. Without well-educated individuals and sufficient career prospects within the sectors of the cluster, the future is not assured as an inflow of more and more highly-skilled people is a necessary condition for the modern operations, innovation, management, etc. Maintaining and strengthening the educational infrastructure is an important enabler. Develop contacts with other maritime clusters Create network and develop close contacts with other maritime clusters is essential for the Romanian Maritime sector, given its weak demand sectors. European maritime clusters with strong demand sectors, such as Norway, Greece or Germany should be targeted. Support and funding from the European Union can be used for this purpose. 2.4 Public policy, leader firms and facilitator organizations The most important players in developing a Romanian maritime cluster are the authorities, the leader firms and the cluster organizations. During the recent years, a variety of public means, aimed at stimulating the cluster process, have been identified and applied by the authorities in many countries. The Romanian public policy aimed at stimulating the maritime cluster development should take these into consideration, but has to be tailored to the particular situation of Romania. The public policy should include [4]: Support for companies - financial support for companies projects, advice and consulting for individual firms and stimulation of leader firm development; Measures to attract outside firms to the cluster; Infrastructure development - physical infrastructure, knowledge infrastructure (education ISSN: 1792-4707 98 ISBN: 978-960-474-222-6
institutions), specific service or technology centres and other cluster organisations; Provision of information on technology, on general business matters, on market and export opportunities; Support for training, research and recruiting through education and training programmes, research programmes and mobility schemes; Support for collaboration - networking and collaboration programmes, contacts with other European maritime clusters The presence of leader firms may create effects that are important for other companies and the growth of the cluster. Leader firms: Encourage and enable internationalisation; Improve the transfer of knowledge; Coordinate production networks; Express the most sophisticated demands; Create standards/benchmark/strategic guidance; Create and maintain the organisational infrastructure; Improve the skills in the labour market; Create reputation. The Romanian maritime sector has several firms that can play this role and should be supported. The investments in these companies, with positive effects for other companies or institutions within a cluster, can be financially in nature, as well as in the form of time and effort, and the use of political effort. The Romanian maritime cluster should include one ore more organisations that perform joint or coordinating activities. The most important activities that should be carried out by these facilitator organizations are lobbying government, co-ordinating public-private investments, co-ordinated common marketing efforts and education/training. 2.5 How RoNoMar Project can help development of a maritime cluster RoNoMar is the short name of Romanian Norwegian Maritime Project and it was financed under Norwegian Cooperation Programme for Economic Growth and Sustainable Development with Romania. The overall objective of RoNoMar is to promote social and economic development in Romania and to strengthen the position of Romania in the global maritime sector. The aim of the project is to create activities, related to sustainable production and design of specialised ships and to management/handling of sophisticated products and services related to the maritime industry by: 1.Innovation - interaction between industries/shipping and academy - development of Maritime Programs - set up of a Business Incubator 2. Support and development of talents, business ideas and academic competence: - development of research programs - implementing Visiting professor programs - identifying tools for detection of talented students and promising business ideas - implementing "Student exchange programs" 3. Creation of sustainable development through - protection of environment - access for both genders - global division of labour Project partners are: Constanta Maritime University promoter Aalesund Knowledge Park main partner Mircea cel Batrin Naval Academy partner Aalesund University College partner SIVA Partner One of the main goals of the project is development of a business incubator for maritime sector and it can serve as the most dynamic and creative part of the future Romanian Maritime Cluster. Partners in Norway are part of Norwegian Maritime Cluster and we can use their experience in developing and managing the maritime cluster in Romania. RoNoMar can also serve a networking point between Romanian and Norwegian Maritime clusters. 4 Conclusion In order to develop a Romanian maritime cluster the government support is necessary, business networking, especially long-term relationship between firms and support from financial institutions, is essential and human resource management based on the long-term coworking spirit is vital. References: [1] Porter, M., Competitive Advantage of Nations, MacMillan, London, 1990 [2] Krugman, P. R., Geography and Trade, MIT Press, Boston,1991 [3] Policy Research Corporation, The role of maritime clusters to enhance the strength and development of maritime sectors / Country report Romania, Publishing House, 2008 [4] Isaksen, A., & Hauge, E., Observatory of European SMEs: Regional Clusters in Europe. European Commission, Luxembourg, 2002 [5] Wijnolst, N., Jenssen, J. I., Sødal, S., European Maritime Clusters, Dutch Maritime Network, 2003 ISSN: 1792-4707 99 ISBN: 978-960-474-222-6