072 2017/18 Knowledge Sharing Program with Paraguay a regional model of 100 ha, and a border city model of 150 ha. The amounts of production and the labor force that are induced in the urban IP of the three models by the location basic unit are as follows. In the metropolitan IP developed on a 200 ha scale, it is estimated that the production amount will be 4,307 million dollars and the labor force will be 13,811 persons. In the 100 ha local urban IP, the production amount will be 1,648 million dollars and the labor force is estimated to be 5,376 persons. The border city IP proved to be worth $2,669 million in production and to have 10,135 employees. These data are different from those of Paraguay because they are the basic units of the industrial parks in Korea. However, they are shown here for general reference. In addition, it is estimated that 70% of the total area of the industrial park is an area of industrial and joint support facilities.
The following tables show the production and employment of the urban IPs developed by the three models based on the following calculation procedure, applying the location unit in the typical industry and a 100% occupancy rate. The metropolitan IP is applied for automobile parts, the regional urban IP is applied for food products, and the border urban IP is applied for clothing. It is also assumed that industrial facilities and communal facilities account for only 70% of the total area.
• Set the size of the urban industrial park. • Determine the industrial composition ratio according to the nature of the complex. • Calculate the area occupied by each industry. • Multiply each industry's site unit by the industrial sector. • Estimate the number of employees and the amount of production by the size of the urban industrial complex.
Model’s Production Amount by per 1,000m²Urban IP Urban IP Production Urban IP Balance Regional National Border’s Amount Metropolitan Area Classification (Mil. US Development Base Cities dollar) Production Production Production 2 Ration Ration Ration /1.000m Amount Amount Amount Food Products 1,877 - 0.3 394 - - Wearing Apparel 2,957 0.3 1,242 0.2 414 0.4 1,242 Leather, Luggage 2,483 0.05 174 - 0 0.1 261 Footwear Cosmetic Beauty 1,766 0.1 247 - 0 0.2 371 Products Plastics Products 2,982 0.05 209 0.1 209 0.1 313 Electronic Components 5,157 0.1 722 - 0 - 0 Computer Electrical 3,059 0.4 1,713 0.2 428 0.1 321 Equipment Other Machinery 1,450 - 0 0.2 203 0.1 152 and Equipment Total 200 ha 4,307 100 ha 1,648 150 ha 2,660
Note: It is estimated that 70% of the total area of the industrial park is the area of industrial facilities and joint support facilities. Source: Author.
6. Policy Suggestion and Future Cooperation
The development of urban industrial parks is intended to induce industrial development and regional economic growth by supplying industrial land desired by companies. In the period, demand for industrial locations will emerge in the short term, but the supply of industrial locations will be long-term. An industrial park policy is important to control and eliminate the time gap.
For manufacturing companies, it is believed that a planned location provides a better location than an independent location, which is advantageous for facilitating production activities. However, despite the advantages of a planned location, there is the problem of sufficient demand for tenants. In Paraguay, domestic companies are mostly SMEs, whose competitiveness is weak. Therefore, it is important to overcome the fact that even if industrial parks are developed, the number of candidate firms moved in the urban IP will be low. This study suggests that industrial policies should
074 2017/18 Knowledge Sharing Program with Paraguay be pursued with two tracks to attract foreign companies while fostering domestic companies into urban industrial parks.
6.1. Modifying Industrial Park Law
6.1.1. Introduction of the Pre-feasibility Process
The urban IP development should be conducted after the preliminary feasibility for the industrial park development and the legitimacy of the urban IP development is secured. After the feasibility is confirmed, a development plan should be submitted and a consultation with related ministries, environmental impact assessment, and traffic impact assessment should be carried out. However, the process and structure of the lack of current IP development are not clearly defined or confirmed.
Until the feasibility of the project is confirmed before the industrial park development, various problems can occur. In addition, the IP development will be influenced by the opinions of the developer. There is a concern that the development plan will be executed without consideration of the local economy and industrial development. Therefore, the feasibility of industrial complex development is very important. The pre-feasibility process should be handled by MIC, an industry-led department.
6.1.2. Prior Consultation Process
Before the local government (Department or City) approves the development plan to the project developer, it introduces a system that allows a consultation regarding the development plan to be conducted with related organizations, such as MIC. Through a preliminary consultation, it will review the size of the IP, the invited industries in which they are located, whether they are eligible for government support, and address future challenges.
The process of consultation with related administrations and divisions (in the city) prior to project implementation approval should not be construed as a regulation on urban IP development. Urban IP development is related to the achievement of national economic goals, such as regional economic development and job creation, along with the supply of factory sites for individual companies.
This is to find the factors of success of urban IP through the cooperation of the central government and the local government and to make a business plan suitable for the project goals of the developer. Local governments may also ask for the support of the central government. In addition, the pre-consultation system has the merit of solving problems that arise in the development process in advance and
Chapter 1 _ Urban Industrial Park Development Strategy 075 solving future problems.
6.1.3. Recommendation Members of Urban IP Deliberation by MIC
When a local government establishes the Committee for Deliberation on Industrial Parks, MIC officials will be ex-officio members. This is because the urban IP development is closely related to the industrial development of the national economy and attracting foreign investment. Although MIC's opinion has been received in the consultation process in advance, an opportunity should be given to reflect on the opinions of the MIC in the deliberation process on the urban IP’s importance. This reduces the concern that local development policies may differ from those of the central government.
As mentioned above, three policy suggestions to be added during the implementation of the Industrial Location Law are presented. These proposals should be included in the development process of the urban industrial complex, as shown in [Figure 1-10].
[Figure 1-10] Urban IP Development Process (Proposal)
Submit Draft of Environment Impact Assessment, and Traffic Impact Assessment etc. Draft Consultation
Intervention in Consultations Project Developer Submit the IP Pre Feasibility with Related Central Agencies Submit Letter of Intent Development Plan (by MIC) for Investment (City Hall)
Enviro- Other Hearing MIC Complete the IP nment Related Opinions Consult- Sale and Lease Consul- Agency of ations tation Consultation Residents
Present Project Begin the IP Operator Opinion Development
Industrial Park Planning Approval about the IP Deliberation Committee Development Plan by Grant Approval the Designator, (Committee Member Mayor of City Hall Recommend by MIC)
Source: Author.
076 2017/18 Knowledge Sharing Program with Paraguay 6.2. Attraction of Foreign Investors
6.2.1. Linkage with Urban IP Development and Attracting Foreign Investment
Despite the enactment of the Maquila Act in 1997, more than 100 foreign companies entered Paraguay in 2017. This can be attributed to the absence of a suitable industrial location despite the strength of the Maquila system. Foreign investors consider the location of the factory to minimize the production costs, as well as the investment system of the host country.
The link between the two systems is a real challenge for Paraguay in settling the Maquila system and revitalizing the existing IP. For this goal, a plan should be set up to build a lease factory dedicated to foreign companies in the urban IP. This study suggests a dedicated agency (MIC) establishment responsible for linking activities. The MIC should play a role in favorable rent conditions, administrative services, and support to foreign companies that are willing to invest in Paraguay by utilizing the Maquila system. This is to attract the foreign investors with the activation of urban IPs. In addition, it introduces a free-trade zone system that can import foreign goods without paying customs duties and free investment in manufacturing. The introduction of free-trade zone systems into the border’s city industrial parks and coastal port areas can further activate the Maquila system. Korea introduced the Free-Trade Zone System in 2004 and operates seven free-trade zones in 2018.
6.2.2. Attracting Foreign Investors
Paraguay has a strong comparative advantage in foreign investment in Latin America. Nevertheless, the fact that low overseas investment performance is still evident is partly due to late provision in the investment system, but largely due to passive investor attraction activities.
For this purpose, this study presents the following action plan steps as an example. First, the Paraguay investment network will be established in the countries expected to enter Paraguay. The network will include local businessmen, experts, and related associations. The second step is to hold regular investment attraction seminars. This will identify potential investment candidates through briefing sessions. Third, it supports cooperation between Paraguayan domestic companies and foreign companies. It will select cooperation areas and promote exchanges between two countries (e.g., a partnership between a Korean electrical appliance company and a Paraguayan company).
In the case of automobile parts, foreign automobile parts companies based in
Chapter 1 _ Urban Industrial Park Development Strategy 077 Brazil are promising candidates that can be relocated to or establish factories in Paraguay. They think the Paraguay has a good business climate, such as a favorable working environment, low labor costs, stable electricity quality, low pay, abundant young workers, an excellent tax system (10-10-10 rule), and the Maquila system. Thus, this tax law system is certainly maintained.
6.3. Activating the Existing IP
There are 19 existing industrial parks. Although IP development has been completed for a considerable period, the number of companies that have moved into the IP is very small. There are even some IPs where only one company has moved in. The activation of the existing IP should be linked with the foreign investment attraction mentioned above.
This study suggests the construction of a leasing factory for foreigners by the government as a linkage method. Korea has built a standard leasing factory in the free export area to attract foreign investment. Foreign companies are more likely to invest abroad without having their own assets in view of business risks. Therefore, the construction of a standard leasing factory provides important implications for revitalizing foreign investment and existing IPs. Of course, because financial support is provided for the construction of a standard leasing factory by the government, the land should be donated to the government, but it must be compensated for in other ways.
It is also necessary to strengthen government activities to register unregistered IPs. The central government should cooperate with local governments to develop incentives for industrial park registration and induce registration. Local governments should reduce taxes on investment companies from the perspective of regional economic development.
6.4. Creating an Urban IP Environment
6.4.1. Maquila System Inside Urban IP
Paraguay's Maquila system is the core system for attracting foreign investment. This system, which is duty-free, applies to all regions, unlike those of other countries. Thus, the low labor costs and good working environment, as well as the investment situation in Paraguay, show a comparative advantage over other countries.
Here are some suggestions: First, a standard leasing factory must be built for foreign companies investing in the use of the Maquila system. Second, land acquisition is acquired by the state or local governments, and foreign companies
078 2017/18 Knowledge Sharing Program with Paraguay build standard rental factories. Third, since it is a public industrial park, an industrial park organization should be established. They are responsible for buying land.
Korea supports the rents of foreign-invested enterprises residing in foreign investment zones if they satisfy certain conditions. The following are incentives for foreign companies in Korea's foreign investment zones.
- High technology & parts sector: More than $1 million cuts the 100% rent - General manufacturing sectors: More than $5 million cuts the 75% rent
6.4.2. Strengthening Joint Ventures
Companies in countries where the manufacturing industry has developed tend to sell their existing facilities abroad while transferring factories overseas or replacing facilities. This is a good opportunity for Paraguay, where the manufacturing industry has not developed due to the lack of production facilities and labor. Paraguay can obtain the chance to nurture its manufacturing industry by utilizing the joint venture strategy.
A joint venture is a business where a Paraguayan company cooperates with a foreign company. Foreign companies transfer their existing production facilities to Paraguay and receive a share in exchange for them. Paraguayan companies install the production facilities without the burden of their own investment. This is an opportunity to advance into the manufacturing industry as well as foster a startup business.
Manufacturing is based on facilities and operations personnel. In the case of cosmetics factories, general products require only production facilities and labor forces (one for production facilities and one for electricity). Paraguayan companies provide land and buildings and hire workers, while foreign companies provide production facilities and technical personnel.
6.5. Establishing a Dedicated Organization
To successfully develop the urban IP and help promote the economy, there should be a dedicated organization that provides related services in one agency as a single-window concept. Urban IPs have various tasks and missions, such as development feasibility, attracting tenants, financing support, providing information on various permits and support types, and information on support items during the development process.
Therefore, a system for processing these tasks in one agency should be established
Chapter 1 _ Urban Industrial Park Development Strategy 079 as a dedicated organization. It is suggested that a dedicated organization would be effective as a major organization within the MIC now. This authority is an organization that oversees the promotion, development, and operation of industrial parks. This is needed when launching a public industrial park. Paraguay is at an early stage of industrial park development, which should be operated by the MIC organization as a large division. Korea is operated by KICOX, a public institution, under the Ministry of Trade, Industry, and Energy (MOTIE). Additionally, the free economic zone and free export zone are operated by MOTIE itself.
This institution should be set up with a step-by-step process that begins after the MIC has started its own organization and the pilot complex has been established. The cost of the organization installation is covered by the national budget, but the operating expenses are covered by the administrative expenses incurred by the tenant companies. The operation scope of this institution includes the creation and operation of industrial parks, attracting tenant companies, and providing enterprise support to tenants. Marketing activities plan an important role in increasing the occupancy rate of industrial parks, and this activity must be linked to foreign investment attraction activities.
6.6. Developing the Pilot Urban IP Model
The success model of urban IP development should be promoted by public sector. This is because this provides a positive signal to foreign investors as well as contributes to the improvement of the urban IP development system. The private sector also benchmarks it, and the success model literally acts as pump priming. No matter what is focused on, ignition is important. This is why there should be a success model for urban industrial parks. The success model of industrial complex development should be promoted by public industrial complex
The success model can only be found in the Central Department near Asuncion. This is because it is an area where all resources are concentrated as well as symbolic. From the perspective of foreign investors seeking to invest in South America, Asunción and the Central are competing with Sao Paulo, Mondevideo, and Buenos Aires. The urban IP developed at the national level in a metropolitan area will be used to show the Paraguayan representative the urban IP model as a success model. Asuncion and the Central Department are the best locations for foreign companies. Infrastructure and supporting facilities for corporate activities are already in place.
6.6.1. Financing
There are four funding sources for the development of the public industrial complex: government budgets, the economic cooperation funds of foreign and
080 2017/18 Knowledge Sharing Program with Paraguay international financial institutions, the utilization of the PPP system, and the attraction of private capital investment. Considering the ease of financing and the financial burden of the government, the sources of funding will be in the order of finance input → PPP → overseas development cooperation → private capital investment.
Private capital attraction is a method of transferring ownership to the central or local government (Department or City) after private capital is invested to develop the IP and guarantee the operation profit for a certain period. Overseas economic cooperation funds are long-term loans with low interest rates and late repayment periods after a certain period of time. However, the central government or the central bank is obliged to guarantee the repayment of the funds, so the passage of the National Assembly is an important task. Most countries require government guarantees when lending their development funds. Korea’s EDCF also provides guaranteed conditions for foreign funding for the central government, central bank, and local government.
On the other hand, to make the development of the urban IP in the public sector a pilot project, it is a good alternative to pursue it through the budget burden of the government. In this process, it is desirable for the government to utilize overseas development funds in addition to financing by issuing government bonds.
6.6.2. Expense and T/F Organization
The development of the IP model should be preceded by a business feasibility study. If the project is feasible, it will be necessary to establish a basic plan. This is because the basic plan should facilitate financing, such as attracting private capital. EDCF, in Korea, is a subsidy item and runs a free subsidy for the inspection and operation of the loan business. The development of model industrial parks creates temporary organizations and places them in MIC. It is desirable for not only MIC staff, but also domestic and international experts and IDB, WB, etc. to be involved in this organization.
On the other hand, the following procedures are required to establish a success model of urban IP between the two countries. The example is the Korea and Paraguay case.
1) Sign the MOU between the two countries to cooperate in the development of the Paraguayan urban IP. 2) Korea and Paraguay build a task force team to develop urban industrial park. 3) Search and list the companies that can move into the Paraguayan industrial parks.
Chapter 1 _ Urban Industrial Park Development Strategy 081 4) Formulate the urban industrial park development model. 5) Search for candidate sites for the construction of urban industrial parks. 6) Identify financial resources and establish financing methods. 7) Obtain a government support budget for the infrastructure of urban industrial parks. 8) Secure funds for the development of urban industrial parks and secure sites. 9) Start the urban industrial park development project.
082 2017/18 Knowledge Sharing Program with Paraguay References
Bank of Korea, “2013 industrial linkage table,” Dec. 2015. Dong Myung Engineering Company, “Industrial park development manual,” 2011.10. Etienne Kechichaian, Mi Hoon Jeong, “Eco-Industrial Parks,” World Bank, KICOX, July 2016. KICOX, “Korea Industrial Complex Regional Directory,” 2016. KICOX, “Industrial Complex Directory: Part 1 Industrial Park Related Institution, Part 2 Industrial Park Law, Part 3 Statistics on Factory Establishment, Part 4 Statistics on Industrial Park,” 2016. KICOX, "Examples and Implications of Local Investment Support System in Major Foreign Countries," Industrial Location Policy Brief, No. 61, May 31, 2011. KICOX Industrial Location Competitiveness Research Institute, "Determinants of Manufacturing Locations,” Planning Research 2013-05. LH, “Estimation of basic unit for industrial sites,” 2015.3. MOEF, KDI, 2015/16 Knowledge Sharing Program with Uzbekistan: Supporting Uzbekistan’s Development Strategy in Key Policy Areas: Special Economic Zone, Industrial Development, Public Budgeting and Postgraduate Education, 2016. MOEF, KIET, KOTRA, “2014 Knowledge Sharing Program II with Bulgaria – Policy Consultation for Industrial Park Development, Knowledge-based Economy Promotion, and Open Data Institutional Framework Development in Bulgaria, 2015. MOEF, KRIHS, Korea Eximbank, “2014 Knowledge Sharing Program III with Myanmar Policy Consultation on the Korea–Myanmar Economic Cooperative Industrial Complex,” August 2015. Paraguay Gov’t, DGEEC. 2012. Statistical yearbook of Paraguay 2012. Available at: http://www.dgeec.gov.py/Publicaciones/Biblioteca/anuario2012/anuario%202012.pdf Paraguay Gov’t, DGEEC.2011. Economic national census. Available at: http://www.dgeec.gov.py/Publicaciones/Biblioteca/CEN2011/resultados_finales_CEN.pdf Paraguay Gov’t, DGRRC.2011. Industry sector. Available at: http://www.dgeec.gov.py/Publicaciones/Biblioteca/Dipticos/2%20Sector%20industria.pdf Paraguay Gov’t, DGEEC.2011. Economic national census. District results. Available at: http://www.dgeec.gov.py/Publicaciones/Biblioteca/CEN2011/resultados_distritales_CEN.pdf Shin Gyeongdong, “Study on the integration characteristics of the urban and industrial industries and the development strategy”: Gyeonggi Development Institute, 2009. UNIDO, PERU MOP, ISID, “Sustainability review and recommendations for Ancon Industrial Park,” March 2016.
Chapter 1 _ Urban Industrial Park Development Strategy 083 UNIDO, “Global assessment of eco-industrial parks in developing and emerging countries,” Nov. 2016. Weixi Gong, Kanishka Raj Rathore, Hui Lyu, “Victoria J. Haykin Cities at a Crossroads: Unlocking Industries’ Potential for Sustainable Urban Development,” UNIDO, Oct. 2016.
www.seongseo.or.kr www.edcfkorea.go.kr www.kiaco.or.kr www.ochangcmc.or.kr www.kicox.co.kr
Laws and Regulations:
Act on Special Cases Concerning the Simplification of Authorization and Permission Procedures for Industrial Complexes Industrial Cluster Development and Factory Establishment Act Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act Industrial Sites and Development Act National Land Planning and Utilization Act Environment Impact Assessment Act Enforcement Decree of the National Land Planning and Utilization Act Act on the Designation and Management of Free-Trade Zones Foreign Investment Promotion Act Special Act on Designation and Management of Free Economic Zone Enforcement Decree of the Act on the Designation and Management of Free-Trade Zones Restriction of Special Taxation Act Restriction of Special Local Taxation Act
084 2017/18 Knowledge Sharing Program with Paraguay Law No. 60/90 on Tax Incentives for Domestic and Foreign Investment Law No. 1064/97 on the Export Maquiladora Industry National Politic Automotive (PAN) Law 4427/12, which establishes incentives for production, development, or assembly Law No. 523/95, which authorizes and establishes the free zone regime Law 4903/13 on Industrial Parks
Chapter 1 _ Urban Industrial Park Development Strategy 085
2017/18 Knowledge Sharing Program with Paraguay: The Policy Consultation on Development of Industrial Park Chapter 2
The Development Strategy for Paraguay’s Industrial Park
1. Introduction 2. The Current Status and Task of Paraguay 3. Korean Case and its Implications 4. Development Model of Industrial Park 5. Development Strategy for Concepcion Industrial Park 6. Policy Recommendations ■ Chapter 02
The Development Strategy for Paraguay’s Industrial Park
Chongin Lim (Korea Industrial Complex Corporation)
Summary
Paraguay has a high proportion of agriculture industry, but the basement of manufacturing industry is very weak. And infrastructure such as transportation, ICT and logistics are very fragile. Investment in SOC and service sector has been expanded after the change of the administration in 2013. They have tried to make an economic development opportunity by formulating a National Development Plan (EDEP). Although the Paraguayan Government promotes the attraction of overseas investment and industrial development strategically in terms of national development through the National Development Plan 2030, the actual situation is that the concrete plans and investigative abilities to implement such policies are lacking. Accordingly, Paraguay is showing active willingness to participate in KSP, highly appreciating Korea's experience on economic development through development of industrial complex (park). Therefore, in this research, we selected a strategic industry based on the analysis of the economic and regional characteristics of Paraguay and established a sustainable industrial park to support this, revitalize the national economy through industrial clustering. By offering a strategy, we try to provide related knowledge and technical consultation.
This study consists of following 4 sections excluding the introduction and conclusion. Section 2 analyzes the general situation of the Paraguay. Based on these
Keywords: Agro-industrial Park, Industrial Park Development Model, Industrial Park Development Procedure, Candidate Site Selection, Industrial Park Management
088 2017/18 Knowledge Sharing Program with Paraguay analyses, it is presented the Paraguay’s future tasks and challenges. Section 3 dealt with the experiences and its implications of Korea's industrial complex policy for the past 60 years. Based on this, we suggested implications for future Paraguay’s direction and strategy of industrial park development. Section 4 suggested a development model of Paraguayan type industrial park that combines with the above Korean experience. Lastly, section 5 proposed an industrial park development strategy. we also provided development methods of industrial park.
The policy direction of Paraguay’s industrial park development are as follows. First, strong and sustained support for industrial parks development and management at the central government level must be achieved. In other words, the policy interest and support by central government is very important. Second, after considering the National Development Plan 2030, Regional Industry Development Plan, etc., it is desirable to select a strategic industry, and to set up a roadmap for the development of a long-term industrial parks. Third, in order to revitalize development, management, and clustering of industrial park, Paraguay's current laws and systems need to be complemented. In other words, Paraguay should complement the current industrial park law as well as related systems by benchmarking Korea's "Industrial Location and Development Act" (development related) and “Industrial Cluster Activation and Factory Establishment Act” (management related). Fourth, it is necessary to establish guidelines for the industrial parks development in order to strengthen the enforcement power of the industrial park law and to concrete the procedures related to industrial park development. Fifth, the industrial park development and the attraction of enterprises should be promoted by creating incentives for industrial park developers and resident companies (see the Korean experience). This should be done considering the financial situation of the government. Sixth, after developing the industrial parks, it is necessary to establish exclusive agency (industrial park management organization) for efficient management and business support. It is desirable to start with organization of MIC initially, and gradually transfer them to the private sector. Finally, industrial parks should be developed into competitive innovation clusters by providing R&D and business support function as well as production function. It is desirable to organize the cluster into sub-industries (mini- cluster).
The strategies of industrial park development are as follows. First, the industrial park development should be expanded to facilitate clustering through grouping of the same or related industries, prevent indiscreet development, and facilitate systematic pollution management through joint pollution prevention facilities. Second, the development strategy of industrial parks in Paraguay, should be led by the government with a strong commitment to the development, management and support of industrial parks. This is crucial to the success of industrial complex development. Third, Paraguay requires small to medium sized industrial parks that
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 089 process agricultural and livestock products rather than large industrial parks. It is also necessary to develop free-trade industrial parks that produce automotive parts in the region adjacent to the borders, targeting the markets of Brazil and Argentina. In addition, it is desirable to nurture urban-type industrial parks such as Asuncion that produce consumer goods in the vicinity of large cities. Thus, it is desirable to develop industrial parks that take advantage of local characteristics. Fourth, because of insufficient financial resources, it is necessary to develop intensive bases in the neighboring areas of metropolitan cities first, and then spread them to the whole country. In other words, it is a strategy to use selection and concentration strategies and spread it nationwide based on success. Fifth, the industrial park should be developed as an industrial complex with R&D and residential functions as well as production functions. That is, industrial complexes with multiple functions are desirable. Finally, after selecting strategic industries according to regional industrial development plans, specialized industrial parks should be developed to support them.
1. Introduction 1.1. Background and Goal
Paraguay has a high proportion of agriculture and livestock industries, but the foundation of its manufacturing industry is weak. In addition, the infrastructures, such as transportation, communication, and logistics, are very fragile. Investment in social overhead capital and the service sector has been expanded after the administration change in 2013. It has tried to create economic development opportunities by formulating a national development plan (EDEP). In this plan, it selected poverty reduction and social development, economic growth without alienation, and entering the world market as three major core strategies. In particular, through economic and social economic development through the improvement of human resource development and the quality of employment, government administrative capability and transparency, the transportation network, price stability, rural productivity, and environmental resources, it is focusing on balance and economic development.
Although the Paraguayan government is promoting the attraction of overseas investment and industrial development strategically in terms of national development through the National Development Plan 2030, the actual situation is that the concrete plans and investigative abilities to implement such policies are lacking. Accordingly, Paraguay is showing an active willingness to participate in the KSP, strongly appreciating the Korean experience of economic development through the development of industrial complexes (parks).
090 2017/18 Knowledge Sharing Program with Paraguay Therefore, in this research, we selected a strategic industry based on the analysis of the economic and regional characteristics of Paraguay and established a sustainable industrial complex to support this and revitalize the national economy through industrial clustering. By offering a strategy for this, we will try to provide related knowledge and a technical consultation.
1.2. Contents and Configuration
This study consists of five sections excluding the introduction, and each section is as follows.
Section 2 analyzes the situation of Paraguay, including geopolitical position, demographic characteristics, economic characteristics, macro-economic and industrial structure, current status, and trends in manufacturing and industrial parks, and the current status and structure of trade. Based on these analyses of the previous situation, Paraguay’s future challenges are presented, which are divided into three perspectives: national economy, manufacturing, and industrial parks.
Section 3 deals with the experiences and implications of the Korean industrial complex policy over the past 55 years. In this section, we looked at industrial complexes, industrial location policies, and agricultural complex policies in Korea. Based on this, we suggested policy implications, success factors for industrial complexes, and implications for Paraguay’s future direction and strategy for industrial complex development.
Section 4 will propose industries that will strategically nurture Paraguay considering the economic and industry situation analysis, the Paraguayan government's plans, and its policy commitment. Based on this, we present a Paraguay type of industrial park development model combined with the above Korean experience.
Section 5 is an industrial park development strategy. After evaluating the location candidate site, we select the location and the scale of the industrial park. After that, we propose a suitable industry for the industrial park among the aforementioned strategic industries. We also present the development strategy for infrastructure and facilities, such as roads, electric power, water, and sewage treatment centers, necessary for the operation of the industrial complex. In addition, we provide development methods for the industrial complex, developing entities, financing, etc.
Section 6 proposes the policy direction and strategy for Paraguay’s industrial park development.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 091 1.3. Methodology
This study seeks to conduct a KSP consultation with Paraguay to explore strategies to develop Paraguay’s industrial parks based on the Korean experience. This study will utilize their needs and ideas through collaborative research with relevant experts in Paraguay as well as convey the Korean experience to Paraguay.
This project was conducted by a Korean research team that visited Paraguay twice (November. 25–December. 3, 2017, February. 2–11, 2018), gathered information, and consulted through field surveys and expert meetings. Paraguay’s experts also visited Korea (March 18–25, 2018) to learn about Korean industrial policies.
This study did not aim to transfer the Korean experience unilaterally, but to cooperate with local experts in Paraguay based solely on the Korean experience to enhance local participation and determine a policy appropriate for the local situation.
We surveyed policies, the economic and industry situation, and science and technology labor through visiting Paraguay, invited local experts to Korea, and conducted a demand survey, combining the results of learning about Korean cases.
• Demand Survey: Government, Professors, Entrepreneurs, Economy Group Executives • Detailed Survey: Government Policy & Organizations, Innovation Projects of Universities, Corporate Activity, etc. • Conference Invitation to Korea: Visiting Industrial Complex, Korean Industrial Complex Corporation, Universities, Corporations, and Relevant Institutes, etc.
The contents of the review and analysis through local experts are as follows.
• Science & Technology Policy of Government, Relevant Support Program • Policies for Science, Technology, Industry • Industrial Location Policy, Industrial Complex Policy
It is a very important task to analyze the Korean experience of industrial development, especially concerning the industrial complex and location policies over the past 50 years, and apply it to Paraguay. We have identified the following policies as relevant to the analysis.
• Development Strategy for Korean Industrial Complexes • Management and Activation Strategy for Industrial Complexes • Investment Attraction (including FDI) Strategy
092 2017/18 Knowledge Sharing Program with Paraguay • Advantage/Disadvantage Analysis of Korean Industrial Complexes and Policy Implications for Paraguay
2. The Current Status and Task of Paraguay 2.1. Introduction to Paraguay
[Figure 2-1] Geographical Position of Paraguay
Source: https://www.cia.gov/library/publications/the-world-factbook/geos/pa.html.
The geopolitical position of Paraguay is shown in [Figure 2-1]. It is a typical inland country with an area of 407 thousand ㎢ and a population of 6.95 million people. As shown in [Figure 2-1], it is divided into two regions centering on the Paraguay River. The eastern part is mainly composed of grasslands and woody hills, while the western part of the country is mostly low swamps (Chaco). In addition, 97.1% of the population is concentrated in the eastern region, 59.2% resides in urban areas, and 55.6% inhabit metropolitan areas. Additionally, the country consists of 17 departments and one metropolitan area, six departments of which compose two- thirds of the population (see Table 2-1).
Paraguay is an inland country surrounded by Brazil, Argentina, and Bolivia, characterized by the national economy re-exporting imported consumer goods to neighboring countries, and depends on city stalls and numerous microenterprises. In addition, much of the population is engaged in agriculture. In the case of rural areas, there are many informal parts and it is difficult to obtain accurate statistics.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 093
Major Indicators of Paraguay (unit: 1,000㎢, 1,000persons, %) Indicator Value Remark Indicator Value Remark 1.8 times of Urban Population Area 407㎢ 59.2 2013 Korea Peninsula Ratio Total Metro Area 6,954 2017 55.6 2013 Population Population Ratio Population 17.1 Workable 2017 3,156 2012 Density Persons/㎢ Population Median Age 23.9 2013(WTO) Unemployment Ratio 7.4Source: https://es.m.wikipedia.org, https://theodora.com.
Despite the drought, the global financial crisis (2008), and foot-and-mouth disease (2012) in the past 10 years, income per capita has steadily increased due to the increased production of agricultural products, global demand expansion, and price increases. Moreover, political instability, slow structural adjustment, and a shortage of infrastructure are major obstacles to long-term economic growth. However, Paraguay has been steadily increasing overseas investment recently due to the stabilization of the exchange rate from fiscal austerity and investment in infrastructure, although it is the biggest obstacle to long-term economic growth. In addition, judicial corruption is prevalent and recognized as the biggest obstacle to attracting foreign capital.
Paraguay’s GDP (2016)1) was 27.44 billion dollars (at the official exchange rate of 2016) and real GDP growth rate (estimated value) in the past 3 years was 4.7% in 2014, 3.0% in 2015, and 4.1% in 2016. According to sectoral GDP (estimated in 2016), agriculture was 20.0%, industry (manufacturing + construction + electricity) was 30.3%, and the service industry was 49.7%. The agriculture weight was very high. The main agricultural products were cotton, sugar cane, soybean, corn, wheat, tobacco, cassava, fruits, vegetables, beef, pork, chicken, eggs, milk, wood, etc. Because we cannot obtain exact statistics, the real proportion is estimated to be higher than the real value.
The labor force is estimated to be composed of 3.38 million people, and it consists of primary industry (26.5%), secondary industry (18.5%), and tertiary industry (55.0%). The unemployment rate in the first quarter of 2017 was 8.4% (7.4% in 2016). Paraguay is characterized by the fact that the proportion of young people is very high. Additionally, the composition of the whole population is similar pattern.
Manufacturing accounted for 20.9% of the GDP in 2015 and 15.1% of the labor
1) The 2016 PPP-based GDP is more than double the level of this at $64.39 billion (about $9,400 per person)
094 2017/18 Knowledge Sharing Program with Paraguay force in the first quarter of 2017. Paraguay is one of the slowest-industrializing countries in Latin America. Paraguay's industrial structure and annual trends are shown in
. There is large variation by period and industry. However, the share of agriculture and wholesale/retail is generally lower, while the share of manufacturing, construction, and transportation services is increasing (see Table 2-2). Changes in Industrial Structure (unit: %) Division 1970 1980 1990 2000 2010 2015 Agriculture 28.8 27.3 26.4 18.5 22.5 19.0 Industry* 18.2 19.2 20.6 19.8 23.3 20.9 Construction 2.5 5.8 5.3 5.0 6.8 8.6 Commerce 18.3 20.0 23.1 19.9 18.5 17.0 Transportation 5.4 5.9 5.6 7.6 6.4 6.5 Service 26.8 21.9 19.1 29.2 22.5 28.1Note: * This includes hydropower in the manufacturing industry. The industrial growth rates for 2010–2015 were 7.9%, -0.8%, 3.7%, 8.4%, 10.4%, and 7.0%. Although there are a few deviations, a stable trend is shown. Source: http://ivanstat.com/ja/profile/py.html.
In terms of the number of companies, number of employees, remuneration of employees, purchasing costs, and supply amount, the share of commerce is the highest in the industry, followed by the service industry and the manufacturing industry (see Table 2-3). However, the manufacturing industry showed that employees' compensation, purchasing costs, and supply amount are larger than those of other industries and productivity is higher. In the manufacturing industry, the number of companies is 24,704, the number of employees is 152,764, and the supply amount is 48,950 billion won. Unlike other industries, the share of female employees is less than one quarter of the total number of employees.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 095
Current Status by Industry (2010)(unit: persons) Employees Expense for Income for Number of Remuner- Purchase Supply for Division Companies ation of Goods & Goods & Men Women Total Services Services Industry 24,704 119,012 33,752 152,764 4,565 27,734 48,950 Commerce 122,503 197,242 149,816 347,058 4,008 111,502 136,084 Service 77,035 163,083 136,248 299,331 5,370 38,283 55,962 Total 224,242 479,337 319,816 799,153 13,942 177,519 240,997
Source: General Directorate of Statistics, Surveys, and Censuses, DGEEC (2011).
Manufacturing Exports by Item (unit: million USD, %) 1995 2005 2015 Item Amount Proportion Amount Proportion Amount Proportion Food 177.7 19.3 543.6 32.8 2,812.5 44.7 Beverages 2.5 0.3 0.3 0.0 4.7 0.1 Tobacco 0.0 0.0 6.3 0.4 17.4 0.3 Wood Products 89.3 9.7 77.4 4.7 40.4 0.6 Machinery and 6.2 0.7 14.2 0.9 186.0 3.0 Equipment Paper 4.6 0.5 3.8 0.2 26.8 0.4 Leather 58.5 6.4 65.5 4.0 190.6 3.0 Metallurgical 4.3 0.5 4.3 0.3 20.0 0.3 Chemical, Plastic 28.0 3.0 56.4 3.4 188.1 3.0 Products, Rubber Textile 37.2 4.0 44.5 2.7 134.4 2.1 Other Manufactured 1.4 0.2 5.8 0.4 13.9 0.2 Products Sub-total 409.7 44.6 822.3 49.7 3,631.9 57.7 Total Exports 919.3 100.0 1,655.1 100.0 6,292.0 100.0Note: 1) Mostly vegetable oil, meat, sugar, and dairy products. For 2015, more than 90% of agricultural foods were oil and meat products. 2) Mechanical and electro-mechanical. 3) Exports of electric power are excluded. Source: General Directorate of Statistics, Surveys, and Censuses, DGEEC (2011).
096 2017/18 Knowledge Sharing Program with Paraguay 2.2. Current Situation of Manufacturing Industry
According to the National Development Plan 2030, the value chain and main goals considering the comparative advantages and potential benefits of Paraguay are as follows (see Figure 2-2).
[Figure 2-2] Value Chain and Main Goals of Paraguay
Cereals Chain, Meet Chain, and other Foods Processing Foods for the World 1 Factories of High Productivity Resources
Autoparts, Clothes, Leather and Footwear, Plastics, Manufacturing HUB 2 Metalworking
3 Waterways Transport, Logistics and Servics
Pharmaceutical, Fertilizers, Organic and Inorganic Chemical Industry 4 Products
Source: MIC of Paraguay, Industry Overview, and Plan Nacional de Desarrollo (2018).
In this regard, the sectoral objectives are as follows:
• Food for the world: Soybean Chain, Livestock chain, Poultry Chain, Milk Chain, Fruit Juice Chain • Manufacturing HUB: Auto Parts Chain, Clothes Chain, Plastic Chain, Metalworking Chain, Pharmaceutical Chain, Leather chain • Waterways – Transport Hub Paraná-Paraguay: Supply Chain, Logistics Hub, Ship Builders and Shipyards, Others
Meanwhile, the strategic framework of Paraguay's industrial development plan is shown in [Figure 2-3]. This includes four tasks: business climate building, high performance, the development of clusters and the value chain, the Council for Investment and Promotion of Sustainable Exports (CIPRES), the Attraction and Promotion of Investments, and the Gross Generation of Capital/Market Access/ Technology Transfer.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 097 [Figure 2-3] The Strategic Framework of Paraguay's Industrial Development Plan
Business Climate
Attraction and High Promotion of PARAGUAYAN performance, Investments Gross Development of Generation of Capital INDUSTRIAL Clusters and / Market Access / PLAN Value chain Technology Transfer
Council for Investment and Promotion of Sustainable Exports (CIPRES)
Source: MIC of Paraguay, Industry Overview, and Bruno D, The Development Strategy for Paraguay’s Industrial Cluster (2018).
In the National Development Plan 2030, the industrial plan should be complemented by the competitiveness plan of the SME sector through the cluster formation of SMEs to secure the competitiveness of the cluster to support the value chain and the strategic sector. The development of the value chain and clusters should be complemented by the technological innovation required in each industry and market. The education plan for human resource development recommends that the value chain be centralized according to the industrial plan, and the companies participating in the cluster should actually be able to hire them.
The major manufacturing industries are sugar refining, food processing, leather goods, cement, rubber, textiles and clothing, wood, etc., and power and water resources are abundant due to the construction of two large dams. In 2016, the manufacturing growth rate of the manufacturing industry was 10.4% (estimated).
098 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-4] Distribution of Companies and Employees in Manufacturing
Source: General Directorate of Statistics, Surveys, and Censuses, DGEEC (2011).
The number of factories in the manufacturing sector is the highest in Central, followed by Caaguazú, Alto Parana, Itaugua, Asuncion, Amambay, Concepción, Cordillera, and Guairáa. The employee number of the Central department is highest, followed by Asuncion, Alto Parana, Itaugua, Cordillera, Caaguazú, and Guairáa (see Table 2-5).
Manufacturing exports are less than 5% of the total, but include semi-processed agricultural products, reaching 77%.2) There are several structural barriers to the growth of manufacturing, including a small internal market, poor infrastructure, high access cost to ports, and market openness to advanced economies, such as Brazil and Argentina.3)
Paraguay's export amount was 10.86 billion USD in 2016 (10.67 billion USD in 2015). It consisted of Brazil (35.4%), Argentina (10.5%), Russia (7.6%), and Chile (6.1%) (2016).4) The main exports were frozen meat, soy, leather, livestock feed, textiles, cooking oil, wood, and gold. In addition, the main imports were automobiles, consumer goods, tobacco, petroleum products, electrical machinery, tractors, chemical products, and automobile parts. The import amount was 9.62 billion USD in 2016 (10.16 billion USD in 2015). It consisted of China (27.3%), Brazil (24.3%), Argentina (14.3%), and the United States (7.1%).
2) Among total exports of $8.39 billion in 2016, if viewed in terms of exports by processing level, agricultural products composed $2.64 billion (31.1%) and semi-processed agricultural products composed $2.93 billion (34.5%). Moreover, manufacturing goods composed $0.75 billion (8.8%), and fuel and energy (mainly electricity) composed $2.17 billion (25.6%). Thus, the proportion of manufactured goods excluding electricity was slightly above 10%. 3) https://www.cia.gov/library/publications/the-world-factbook/geos/pa.html. 4) JETRO, Industry Trends of Paraguay, 2015.9.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 099 To promote investment and exports in manufacturing, allowing domestic sales of up to 10%, tariff exemptions, and tax exemptions are salient features by using a maquiladora system similar to that of Korea's free-trade area.
FDI through the Maquiladora System (2013–2017) (unit: Million $, persons) Division Number Amount Employees Division Number Amount Employees Alto Paraná 45 182.1 4,170 Guairáa 4 12.8 411 Central 29 61.3 3,503 Canindeyúu 4 8.1 209 Amambay 10 30.4 274 Pte. Hayes 2 17.0 25 Capital 6 1.5 508 Total 100 313.2 9,100Source: Ministry of Industry and Commerce (MIC).
In Paraguay, it is difficult to find clusters that are geographically expanding industries by integrating specific industries and combining horizontal and vertical production chains. However, there are mini-clusters that focus on the export industry. Paraguay has promoted six clusters: feed, cotton, wood, fruit, vegetables, and primary metals.5) This is to strengthen the production system from raw material production to final products along with the balance chain and to produce differentiated and competitive export products in line with market needs.
To strengthen the competitiveness of industries in the future, first, by eliminating impediments to competitiveness in the public sector, it is necessary to promote exports, establish quality, promote investment, and secure market transparency. It will not. It is also necessary to make use of projects such as the Inter-American Development Bank (IDB), the European Union (EU), and the United Nations Development Program (UNDP) to obtain funding and technical cooperation.
2.3. Current Status of Paraguay’s Industrial Parks
According to MIC's Director of Marcos, 21 industrial parks were registered in Paraguay as of the end of 2017. Of these, only five industrial parks were authorized by the Industrial Parks Act No. 4903/13. This includes TOSA, PI Francisco S. López (Capiyata, MIC), PI Almacenes Generales (ALGESA), PI Km 11 (IRUÑA), and PI Santa Mónica. There are 85 companies in these industrial parks, most of which utilize the maquiladora system. The industries include textiles, furniture, plastics, auto parts, and tobacco. Most industrial parks have their own energy supply, warehouses, and basic infrastructure for industrial safety.
5) Based on the EDEP in 2000, Paraguay has pursued six clustering strategies, including mix feed.
100 2017/18 Knowledge Sharing Program with Paraguay
Current Status of Industrial Parks in Paraguay (2018)Location Established Status No. IP’s Name (City, Department) Companies Terminal Occidental SA Villa Hayes, 1 8 Industrial Park Presidente Hayes Mcal. Francisco Solano 2 Capiatá, Central 1 López Industrial Park Formalized Ciudad Del Este, Parks (5) 3 Iruña Park (KM11) 1 Alto Paraná 4 Santa Mónica Industrial Park Hernandarias, Alto Parana 1 Ciudad del Este, 5 Algesa Industrial Park 12 Alto Paraná
In process of 6 Araucaria Industrial Park Hernandarias, Alto Paraná - been Formalized Salty River S.A. 7 Limpio, Central 3 (2) Industrial Park 8 Itaipú Technological Park Hernandarias, Alto Paraná - 9 Taiwán Industrial Park Minga Guasu, Alto Paraná 2 10 Avay SA Industrial Park Villeta, Central 10 Ciudad del Este, 11 MERCOSUR Park 14 Alto Paraná 12 Panamericano Industrial Park Villa Elisa, Central 6 13 Itauguá Logistic Park Itaugua, Central 5 Non-formalized Parks (11) 14 América Logistic Park Luque, Central 1 Ciudad del Este, 15 San Juan Industrial Park 13 Alto Paraná 16 Montecarlo Industrial Park Hernandarias – Alto Paraná 15 Nuestra Señora de Asunción 17 Luque, Central 1 Industrial Park Fortuna del Amambay Pedro Juan Caballero, 18 1 Industrial Park Amambay In Process Zona Norte (Pizon) (still not 19 Concepción - Industrial Park operating) (1)
Industrial 20 Carmen del Paraná Itapúa 4 Zone (2) 21 Hernandarias Hernandarias, Alto Paraná 13
Free-trade 22 Zona Franca Global Ciudad Del Este, Alto Paraná 6 Zone (2) 23 Zona Franca Internacional Ciudad Del Este, Alto Paraná 3
Note: In the above table, MIC counts 21 sites as industrial parks except free-trade zones. Source: Adapted by Ministry of Industry and Commerce (2018).
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 101 [Figure 2-5] Geographical Distribution of Paraguay’s Industrial Parks
Authorized General Geographical Distribution
Source: MIC of Paraguay, and Bruno D., The Development Strategy for Paraguay’s Industrial Cluster (2018).
The current status of the major industrial parks operating in Paraguay is as follows.
① Terminal Occidental S.A.
[Figure 2-6] Terminal Occidental S.A
Source: Foto de pagina web www. terminaloccidental.com.py.
• Surface: 903 ha • Investment potential: USD 4 billion – 100% private • Master plan developed as industrial area (1,200 lots), urban area (222 lots), and logistic & touristic hub • Currently one plastic company (Envapar) • Other companies use it as a logistic hub and warehouse
102 2017/18 Knowledge Sharing Program with Paraguay • It has its own port, regulation, and planning • Livestock production and industries are not allowed
② Salty River S.A.
[Figure 2-7] Salty River S.A
Source: Foto de pagina web www. terminaloccidental.com.py.
• Surface: 31ha • Investment: USD 3,148,011 – 100% private • Basic infrastructure and green areas • One company from livestock industry (Hawker Int.), another five companies are planned (pre-molded, leather, liquid concrete, pharmaceuticals, and logistics) • Workforce: 1000+ employees • Urban district affected: Limpio
③ PI Francisco S. López (Capiyata, MIC)
[Figure 2-8] PI Francisco S. López
Source: MIC.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 103 • Surface: 40ha – Government ADM • Basic infrastructure and green areas • One company installed – auto parts (Sumidenso) • Cost: USD 5 Cents/m2 • Leasing contract: 20 years • The installation of a technological university is planned • Workforce: +400/10,000m2
④ Industrial Parks in Triple Border Area
• Historically industrial and export geographical area • Territory with the highest industrial growth in recent years, mainly due to the establishment of maquiladora industries, mostly in Brazilian capital: 54
[Figure 2-9] Industrial Park Distribution in Triple Border AreaⅠ
Source: MIC of Paraguay, and Bruno D., The Development Strategy for Paraguay’s Industrial Cluster (2018).
• Area with the largest number of industrial parks: 11 • Efficient regional logistics dynamics: 4 logistics hubs • Border with biggest markets: Brazil and Argentina • High growth projection: New bridge • Fast urban growth: Ciudad del Este, Minga Guazú, Presidente Franco y Hernandarias • High productive area and natural resources found in both sides of Brazil & Argentina • Locations of industries are dispersed
104 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-10] Industrial Park Distribution in Triple Border AreaⅡ
Source: MIC of Paraguay, and Bruno D., The Development Strategy for Paraguay’s Industrial Cluster (2018).
• New bridge with Brazil • Hernandarias – investment management that promotes differentiated sales and production regimes • Promotes the Hernandarias industrial zone
The characteristics of Paraguay’s industrial parks are as follows. 1) The average installation of industries is low (approximately 15%) based on the area; 2) Most of them are used as HUB or logistics centers and not for manufacturing; 3) The industries are different, they are not integrated, and they do not cooperate with each other; 4) The main industrial parks are located in Alto Paraná (border); 5)They are installed with just basic infrastructure without high-technology industries; 6) The average cost is USD 800–2500/monthly/1,000 m2.
2.4. SWOT Analysis and Task
shows the SWOT of Paraguay regarding the development and activation of industrial parks. Based on this, Paraguay's challenges and future tasks from the national economic, manufacturing, and industrial complex perspectives are as follows. Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 105
SWOT Analysis of ParaguayStrengths Weaknesses • Adjacent to large markets, such as • Landlocked country, complex access to world Brazil and Argentina markets • Fertile and vast tracts of arable land • Lack of skilled labor • Abundant power/water resources • Social inequality and poverty • Abundant agricultural and livestock • High dependence on specific countries products (Brazil, Argentina) • Low level of external indebtedness • Narrow domestic market • Abundant young workforce (population of less than 7 million) • Low wage level • High logistics costs due to lack of logistics • Simple and cheap tax system infrastructure, such as ports, roads, railways • Good business climate • Manufacturing-based vulnerability/lack of cluster experience • Insufficient human resources development/low skill level • R&D/cluster operation experience/insufficient investment
Opportunities Threats • High availability of MERCOSUR • Significant fluctuation of supply & demand due to • Industrial development through the characteristics of agro-livestock products maquiladora • Low market transparency, lack of information • Logistics hub and connectivity for the bases Parana–Paraguay Waterway • Market erosion by developed countries through • Implementation of agro-industrial park MERCOSUR • Possibility of cultivating high-quality • Slow industrial/economic restructuring labor through young people • High level of bureaucracy and corruption • Increasing value-added through • Regional smuggling processing agricultural and livestock products • Great potential to build roads, ports, and living infrastructure
Source: Author.
First, from the national economy perspective, it is necessary to diversify the export market, which is dependent on two countries at the same time, by utilizing MERCOSUR with neighboring countries, such as Brazil and Argentina. From a mid- to long-term point of view, logistics, industrial, information, and distribution infrastructures should be constructed for economic development. In addition, the industrial structure should be upgraded by cultivating manufacturing at the agricultural center. To achieve this, we must develop the human resources necessary for economic development by utilizing the strengths of the young population and expand the base to attract FDI.
From the manufacturing perspective, it is necessary to cultivate the parts
106 2017/18 Knowledge Sharing Program with Paraguay industry aimed at the Brazilian and Argentinean markets by utilizing geographical advantages and the cheap labor force, while increasing the added value by processing agricultural and livestock products that are produced in abundance. In addition, efforts are needed to diversify export items.
Industrial parks are a key means of realizing Paraguay's economic development. Therefore, it is necessary to develop industrial parks and build the cluster by selecting strategic industries that match regional characteristics. For this purpose, a development model for industrial parks suitable for Paraguay's actual situation should be established and the candidate site should be selected based on this model. Developing selected candidate industrial parks and activating them by systematically managing and clustering them is a critical task.
3. Korean Case and its Implications 3.1. Overview of Industrial Complexes6)
An industrial complex is a designated area developed and managed for the purpose of collectively installing factories, manufacturing support facilities, and related service industries to foster manufacturing and high-tech knowledge industries.
The types of industrial complexes are divided into national industrial complexes, general industrial complexes, urban high-tech industrial complexes, and agricultural industrial complexes, which are classified according to the development subject and the development purpose (see Table 2-8).7) A national industrial complex is developed to foster the development of key national industries and advanced technology industries or the development of underdeveloped regions that need areas. In addition, industrial complex development is contained in covering more than two metropolitan cities or provinces. General industrial complexes have a goal to promote the proper local distribution of industry and activate the local economy. An urban high-tech industrial complex is an industrial complex designated in an urban area to promote the knowledge industry, culture industry, information communication industry, and other high-tech industry development. An agro-industrial complex is designated by the Ministry of Agriculture and Rural Affairs to attract and cultivate industries to raise the incomes of farmers and anglers.
6) Manufacturing complexes were referred to as industrial complexes from the end of June 1996 due to the amendment of the law in December 1995. Industrial complexes were referred to as industrial complexes from the end of June 1996 due to the amendment of the law in December 1995. Conventional manufacturing complexes are equipped with factory land and minimal support facilities. while industrial complexes are equipped with not only factory sites, but also industrial facilities, campus-related facilities, and comprehensive facilities with residential, commercial, retail, and welfare facilities. 7) This is a classification system based on industrial location and development laws.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 107 Additionally, there are semi-industrial zones, industrial zones, cooperative zones for small and medium companies, foreign investment zones (individual and industrial complex types), free-trade zones, and free economic zones. Free of SF Zone Minister invested and their to attract and living foreigners foreigners Improving Improving conditions Economic settlement of foreign- enterprises Highly likely management of Zone invest ment Mayor, Mayor, foreign foreign foreign foreign Invest - wish to Foreign in which investors Industrial Governor and areas and areas attracting Promotion Promotion complexes investment - Zone of TIE logistics Minister of trade, Attraction of foreign of foreign promotion promotion of regional of regional facilitation, investment, Free-Trade international development and promotion and promotion - SMEs Mayor, Mayor, of SMEs modern - for SMC Governor Coopera - Promotion Promotion projects of projects ization and tive Zones through the through cooperation Zone Zone sound Mayor, Mayor, factories Pursuing collective Industrial Governor of the city Industrial through the through development installation of Agro- Mayor, Types of Industrial Complexes of Industrial Types location > industrial industries Complex Alderman for raising conditions of farmers with good Industrial Supervisor, Supervisor, Local areas Local areas To cultivate To the incomes Table 2-8 Table < the Urban Mayor, Mayor, Urban Hi-tech industry- fostering Governor high-tech Complex areas with areas conditions Industrial industry in knowledge To promote promote To urban areas and local where where Mayor, Mayor, levels is Regions required the local General balanced economy Governor Complex Industrial the proper the proper at province at province distribution To promote promote To and activate of industries metropolitan metropolitan development LIT Regions required. National industries advanced Complex with good Industrial Minister of technology To foster the To promotion is promotion development development conditions for industries and tech industries core and high- core Regions where Regions where of key national : KICOX, Industrial Location Handbook (2016, 2017). Area Goal ment Target Division Develop - Approval Approval Authority
Source
108 2017/18 Knowledge Sharing Program with Paraguay As shown in
, industrial parks have several merits, but also some drawbacks. In other words, industrial complexes have good infrastructure, easy pollution management, and easy clustering. However, they take a long time to develop, which makes it difficult to supply the land on time, and, in most cases, the price is high. Merits/Demerits of Industrial ComplexesMerits Demerits
• Planned development, various taxation, and finance support types from the government • Infrastructure conditions are good due to large- • It is difficult to secure necessary land in scale complex for exchanging information the proper place and on time because between enterprises, and technical exchange development takes a long time is possible through collectivization of factories • More expensive than an individual site • Easy access of pollution emission industry due • Difficult to expand due to decided site to pollution prevention facility installation • Permission process for factory establishment is easy to access
Source: KICOX, Industrial Location Handbook (2016, 2017).
3.2. Industrial Complex Policy
3.2.1. Industrial Location Policy
The process and characteristics of the industrial location policy that has supported the growth of the Korean economy through industrialization and export-driven policy over the past 50 years are as follows.
Korea developed industrial infrastructures to promote industrialization in the 1960s and 1970s. In other words, since the early 1960s, Korea has been developing a number of industrial complexes in specific areas along with export promotion for economic growth. The target industries were labor-intensive, such as textiles and shoes in the 1960s, and heavy chemical industries, such as steel, shipbuilding, and petrochemicals in the 1970s. The characteristics of the industrial policy at that time were the development of large national industrial complexes by the central government that was led by the FDI and which were concentrated in Seoul and the east-southern coast geographically.
Because the regional imbalance in the process of development over the preceding 20 years had intensified, from the 1980s, Korea began to establish local dispersion policies. In other words, the policy direction was to correct the regional imbalance
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 109 that had deepened in the process of rapid economic growth. The main policy measures were to develop industrial complexes in small and medium cities in local areas. This period was characterized by the development of national industrial complexes in underdeveloped areas centered on the west coast and the development of small and medium industrial complexes in local areas. The target industries in this period were the steel, shipbuilding, chemical, machinery, electronics, non-ferrous metals, parts, and materials industries.
In the 1990s, the Korean government laid the foundation for fostering local industries. Specifically, the policy direction laid the foundation for fostering high-tech industry and created a law for fostering local industry. The target industries in this period were automobiles, semiconductors, machinery, electronics, parts, and non- ferrous metals. The characteristics of the 1990s can be summarized as the integration of industrial location law, the transfer of the authority to develop industrial parks to local government, and the development of seven high-tech industrial parks and six TPs in non-metropolitan areas.
From the 2000s, local industrial policy was introduced in Korea in earnest. The main policy direction was to respond to the emergence of a knowledge-based economy, mitigate regional imbalances, and promote endogenous development to enhance regional innovation capabilities. The target industries were high-tech industries, such as IT, BT, mining, medical equipment, aerospace, automobile, and parts. The characteristics of the policy at the time were the enhancement of the role of local government in industrial policy, the selection and development of strategic industries (2–3 each) in 13 provinces, and the introduction of an innovation cluster policy and a regional innovation system.
From the mid-2000s, the local industrial policy was greatly expanded. In other words, the main policy direction was to implement regional industrial policies in the local economy to enhance the international competitiveness of regional industries. The target industries were IT, BT, renewable energy, cultural content, knowledge- based services, and convergence. The characteristics of this period can be summarized as expanding the participation of local governments in the regional industrial policy, fostering leading industries in the metropolitan economy, and supplementing and expanding innovation clusters.8)
3.2.2. Industrial Complex Development Policy
The industrial complex development policy deals with matters ranging from the designation of industrial complexes to the rational and active development of
8) Lim, Chongin, Korea's Industrial Location Policy, History of 50 Years, Industrial Location (2011.6), pp. 71–74, KICOX.
110 2017/18 Knowledge Sharing Program with Paraguay industrial complexes to land disposal. Industrial complexes are developed based on this policy (see Figure 2-11).
In the legal system related to the development of industrial complexes, the "National Land Basic Law" is as a superordinate law, and the Planning and Utilization of the Land is based on the law. In addition, the "Act on Industrial Location and Development" has a specific function. This law was newly enacted in 1990 by integrating laws related to the development of industrial complexes, which were divided into three areas: the Local Industrial Development Act, the Industry Base Development Promotion Act, and the Agriculture and Rural Development Promotion Act.
The act consists of a total of 52 clauses and by-laws, largely consisting of two frames. In other words, it is a support system, such as a variety of approval and permission process systems according to development and a cost share to promote development.
[Figure 2-11] Framework of Industrial Complex Development System
Industrial Complex Development
Authorization/Permission Supporting System
Source: Author.
The authorization of the industrial complex development is configured from the designation step of the industrial complex to the land step. This leads only to the designation request → approval of the development plan → approval of the implementation plan → completion of development → selling procedure (see Figure 2-12).
The approval system is divided into vertical administrative actions, such as the approval of higher-level organizations when developing an industrial complex, and the horizontal opinion hearing on the content and approval items of the development plan. When developing all industrial complexes, the approval process must be undergone at the designation stage, the approval stage of the implementation plan, and the completion stage. For the horizontal opinion hearing, there are procedures such as listening to the residents, consultation with the heads of relevant authorities, and deliberation.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 111 [Figure 2-12] Flowchart of Industrial Complex Development System
Development Plan Industrial Operation and Review the Establish Establishment Complex Management Need for and Approve and Designation/ Construction of Industrial Development Implementation Notice and Pre-sale Complex
Source: KICOX, Industrial Location Handbook (2016, 2017).
To promote the industrial complex development project smoothly, the support system supports the development cost and promotes the selling of developed land for the project developer. It also provides tax and financial support for the resident enterprise to smooth the production activity of the enterprise.
3.2.3. Support System for Industrial Complex Development (Incentive)
As shown in [Figure 2-13], the support system related to the development of industrial complexes in Korea is divided into a support system for developers and a support system for resident companies. The support system for developers is divided into financial support for the cost sharing of project owners, such as the development cost burden, funding support, and land development support that facilitates land acquisition and development. In addition, the support system for resident companies is divided into tax and financial support and the installation of welfare facilities within the complex.
[Figure 2-13] Framework of Industrial Complex Development Support System
Industrial Complex Development Support System
Developer Support System Resident Company Support System
Land Cost Sharing and Taxation/Financial Welfare Facility Development Financial Support Support Installment Support
Source: Author.
112 2017/18 Knowledge Sharing Program with Paraguay
Development Subsidies for Industrial Complex Activities in KoreaTarget Subsidy (%) Construction of arterial roads and green spaces in industrial complexes 50 Construction of waterworks 50 Migration allowances and compensation 50 Acquisition of land for facilities/lots to be leased 50 Development of parks and other common zones 50 Acquisition of land needed for an apartment-type factory 50 Site renovation for agro-industrial complexes, infrastructure (roads, electricity, 50 communications, etc.), and land acquisition Construction of wastewater and sewage treatment facilities 100 Cultural heritage survey 100
Source: KICOX, Industrial Location Handbook (2016, 2017).
① Support for development companies (see Table 2-11)
• Cost sharing and financial support: subsidies for the construction of infrastructure, financing of development funds, subsidies for installation of public facilities • Land development support: approval of advance payment for sale, mitigation of restrictions on the disposal of public land, jurisdiction of the attribution of public facilities and land, application of land readjustment project
Support System for Industrial Complex DevelopersCategory Support Contents Support Items - Construction costs (roads, green spaces, water and sewage facilities, - Expense subsidy rate of 50% from Expense etc.) the central government or local Reduction - Land acquirement expenses of government apartment-type factories and agro- industrial parks - Roads, harbors, railways, water - Support requirements industrial park Infrastructure supply, electricity, communication, size: More than 30,000m² areas Preferential gas facilities, sewerage, wastewater of economic growth laggard or Support treatment, waste disposal facilities industrial development purposes
- Reduction of corporate tax, income Tax & Burden tax, tariff, property tax, acquisition tax - Smooth development of IP Charge - Reduction of development/ - Fostering SMEs Reduction environment charge
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 113
ContinuedCategory Support Contents Support Items - Attracting companies & tenants Financial - Apartment-type factory construction - Support - Fostering leasing business for SMEs Land - Land and public facilities return to Development - Granting the land expropriation right national and local governments Support
Source: KICOX, Industrial Location Handbook (2016, 2017).
② Support for resident companies (see Table 2-12)
• Taxation, financial support: operating funding, tax exemption • Installation of welfare facilities: neighboring convenience facilities, welfare/ medical facilities, producer service facilities, public administration support facilities
Support System for Resident CompaniesCategory Requirements Only companies that are located in agro-IP parks are required to Corporate tax, deduct 50% corporate tax or income tax National Tax income tax for 4 years from the tax year Tariff, Value- added tax None Reduction of 50% when new or Acquisition tax expanded Local Tax New and expanded Property tax construction: property: 75% reduction for 5 years Within USD 5million per SME promotion fund Financial Support company Interest difference subsidy 2.5% (the year 2015) Location Support (cutting the Support 20–70% of the sale price tenant fee) 1) Facility investment subsidy: 5% of the total investment amount Subsidization (exceeding USD 10 million) (matching rate: 2) Employment subsidy: same national vs. local ) 3) Head office transfer & corporate transfer subsidy, person per month
Source: KICOX, Industrial Location Handbook (2016, 2017).
114 2017/18 Knowledge Sharing Program with Paraguay 3.2.4. History of Industrial Complex Development system
The industrial complex development system was designed not only to cope with the surge in demand for factory sites through the facilitation of industrial land supply, but also to streamline land use.
summarizes the changes in the development system of Korean industrial complexes since the 1970s. History of the Industrial Complex Development SystemDivision Early 1970s Mid-1970s Mid-1980s Since the 1990s Local industrial Industrial Base Promotion law Industrial Location development law Development of income source and Development (1970) Promotion Act development for Act (1990) Law (1973) farming and fishing villages (1984) - National support. - National - Support for entry - National support · Access roads, responsibility roads, industrial · Public facility ports, industrial development waterways, and support water supply (early) land purchasing ·Infrastructure · Infrastructure costs to all or support - Local · Only composition some local · Fu nding governments governments · Greenery, - National subsidy -Applying healthcare, (since 1987) right of land vocational accommodation training - Application Developer facilities of land, - Admitting advance Support · Waterworks, accommodation payment System sewerage, land sewage - Restrictions on treatment - Allowance for disposal of public plants advance payment land
- Application - The imitation of - Attribution of of land other laws public facilities and accommodation land method - The imitation of other laws
-T ax relief - Tax relief - Tax relief - Tax relief · Local tax · Local tax · Local tax · Local tax Support reduction reduction System · R ecognition of · C orporate tax, for Tenant special income tax Companies depreciation of exemption. corporate tax · Fund loan (agro- industrial complex) Source: KICOX, Industrial Location Handbook (2016, 2017).
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 115 3.3. Agro-industrial Complex Policy
3.3.1. Concept of Agro-industrial Complex
The agro-industrial complex is a type of industrial complex that was designated to achieve the balanced development of the economy by reducing the gap between urban and rural areas. In other words, an agro-industrial complex is an industrial complex for attracting and developing industries that help residents to increase their income in rural areas.
An agro-industrial complex is intended to attract factories through the development of small-scale industrial parks in rural areas through the 'Law for the Promotion of the Development of Rural Communities' enacted in December 1983. It is intended to promote a regional development effect through employment creation, rural income increase, local finance expansion, exports, and SOC expansion.
3.3.2. Type of Agro-industrial Complex
The agro-industrial complex type has been divided into specialized complexes, regional specialized complexes, and general complexes to upgrade the industrial structure and foster local specialized industries (see Table 2-14).
Types of Agro-industrial Complexes (AIC)Division Standard A complex where the enterprises (more than four) of related industries in a Specialized AIC factory area occupy more than three quarters of the total number (area) of companies Regional- A complex where local-specific industries (including local industries) occupy Specific AIC 80% or more in number (area) of companies General AIC Complexes other than specialized complexes and regional-specific complexes
Source: Ministry of Trade, Industry and Energy, Internal materia (2009).
Specialized agro-industrial complexes and regional specialized agro-industrial complexes are necessary for the realization of integrated profits and may be designated by the mayor and governor and the governor of the province with the approval of the city governor. In this case, the governor of the province will consult with the Minister of Trade, Industry, and Energy. If the designated complex falls short of the designated standard and the designated requirement is lost, the designated requirement will be restored within two years. If recovery is impossible, the mayor and province governor may cancel the designation, but if the Minister of Trade, Industry, and Energy deems it necessary, the designation may not be lifted.
116 2017/18 Knowledge Sharing Program with Paraguay 3.3.3. Policy Scheme of Agro-industrial Complex
3.3.3.1. Related Ministries and Laws
The agro-industrial complex support policy is intended to increase the incomes of agricultural and fishing villages to promote the development of the revenue sources of agricultural fishing villages by attracting manufacturing and related service industries to agricultural and fishing village areas. As a result, we have been promoting the balanced development of the local economy by increasing the incomes of farming and fishing villages and increasing the income structure.
The agro-industrial complex is a project to develop the off-farm income sources in rural areas that have been alienated from the rapid industrialization process since the 1970s. Starting from the Saemaul factory in the 1970s, the Law for Promoting the Development of Rural-Income Resources in 1983 was enacted and laid the groundwork for the development of agricultural and industrial complexes.
The basis for the policy of industrial complexes is the Industrial Location and Development Law, the Industrial Cluster Activation and Factory Establishment Law, the Farming and Fishing Village Maintenance Law, and the basic law on the environmental policy. It specifies the necessary items for the designation, establishment, management, and residence enterprises of agro-industrial complexes and environmental preservation in rural areas.
The relevant ministries of agro-industrial complexes are divided by the Ministry of Trade, Industry, & Energy (MOTIE), Ministry of Agriculture, Food, & Rural Affairs (MOAFRA), Ministry of Land, Construction, & Transportation (MOLTT), and Ministry of Environment (MOE) (see Table 2-15). The development of agro-industrial complexes is carried out by local government, MOLTT, and MOAFRA. MOTIE supports the residential companies of industrial complexes, and environmental works are carried out by MOE.
Agro-industrial Complex Work by MinistryDivision Content Related Laws General policy of agro-industrial complexes, Industrial Integration Ministry of Trade, management of agro-industrial complexes, and and Factory Industry, & Energy support for resident companies Establishment Act Ministry of Regarding the division of farming and fishing Farm and Village Agriculture, Food, villages, development and support of agricultural Maintenance Law & Rural Affairs and industrial complexes
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 117
ContinuedDivision Content Related Laws Matters on environmental standards for agricultural Ministry of Environmental Policy industrial complexes, support for installation and Environment Basic Law management of wastewater treatment facilities Ministry of Land, Industrial Location Matters concerning designation and standard of Construction, & and Industrial Park agricultural industrial complexes Transportation Development Law
Source: Author.
3.3.3.2. History
Korea has achieved remarkable growth through its industrialization policy since the 1960s. However, in this process, the imbalance between metropolitan areas, large cities, large industrial regions, and rural areas has increased. In other words, as industrialization has advanced rapidly, the gap between employment opportunities, the production environment, and incomes has become larger between its regions. Therefore, the government promoted the rural industrialization policy to promote regional economic development through balanced regional development through industrial development and increasing sub-incomes.9) We overview this by each period as follows.
In the 1960s, the plan was to utilize the idle labor force in rural areas and to secure the sub-income sources of farm households and economically deprived areas. This policy can be found in the sense that it was the first project to be carried out for the purpose of increasing employment and incomes in the field of agriculture, but the achievement was smaller than originally expected.
In the 1970s, through the increase of non-agricultural income, the “Saemaul factory construction project” was carried out to reduce the income gap between rural and urban areas, disperse factories into local areas, and revitalize the local community. However, there was a social expense by over-emphasizing regional dispersion and placing factories in poor-infrastructure regions. In addition, this business was focused on production and lacked management or experience. It consequentially failed because the production, management, and marketing could not be linked organically.
In the 1980s, the government set up the “Planning Agency for the Excavation
9) The rural industrialization policy is a rural development incentive policy to attract factories in rural areas and foster them. Here, the term "rural industry" refers to an industry that has the effect of linking agricultural production, agricultural products, and other resources from the rural area to the residents in rural areas.
118 2017/18 Knowledge Sharing Program with Paraguay of Off-farm Income Sources” and established the “Law for the Promotion of the Development of Rural-Income Resources” in 1983. This meant that small- and medium-sized industrial complexes were established in areas with favorable location conditions, focusing on small- and medium-sized cities in the provinces. They attracted factories and linked them with raw materials and labor supply in the surrounding rural areas. Moreover, to attract enterprises to rural areas, the procedure of licensing the necessary facilities for the development of the complexes as well as the provision of cheap factory land, tax reduction, funding, etc. has been greatly simplified. As a result, approximately 400 agro-industrial parks were developed in rural areas throughout the country for a short period of about 20 years.
Since the 1990s, the development project for agro-industrial complexes has been transferred to the local government from the central government. In 1997, the government announced measures to revitalize agro-industrial complexes and expanded support, such as deregulation and the improvement of various funding conditions.
In 2001, we diversified the means of supporting industrial complexes by changing the industrial environment, such as the establishment of specialized complexes and regional specialized industrial complexes, to upgrade the structure of the industrial complexes linked to regional strategic industries. In 2004, the Ministry of Trade, Industry, and Energy (MOTIE) set up measures to revitalize agro-industrial complexes to improve the system of deregulation, organize and operate voluntary councils, and expand technical and management support for resident companies. In 2007, MOTIE promoted the activation of the rural economy through the creation of an additional agro-industrial complexes activation plan.
The main contents of the plan were to increase the number of new complexes through the deregulation of sites, improve the efficiency of the management of agro-industrial complexes, strengthen the support for resident companies, and revitalize the local economy through nurturing local industries.
3.3.3.3. Goal and Task
The aim of the agro-industrial complex policy is to foster the regional economy as a basic industrial complex to foster SMEs in the region and to enhance the competitiveness of resident enterprises through upgrading the structure of industry and supporting management activities.
The main tasks are 1) to promote the regional economy by strengthening the linkage with the local base industry and to enhance the structure by escaping from the simple off-farm income business, 2) to promote infrastructure development and support measures to facilitate business activities, and 3) to link with the local
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 119 industry. This is to enhance competitiveness through the development of agricultural and industrial complexes. To this end, the policy links the processing, storage, and distribution of the specialties produced in each region with neighboring industrial complexes to collectivize the related industries to create specialized complexes.
In addition, it takes the perspective of regional comprehensive development, such as the consideration of local industries as well as local infrastructure (e.g., roads, ports, water facilities, housing).
In the meantime, the policies related to the agro-industrial complexes have focused on supplying low-priced industrial sites to rural areas and attracting enterprises to nurture them. However, it is expected that the support policy to breed self-reliance will be strengthened so that the agro-industrial complexes can become a base of revitalization for the rural economy.
3.3.4. Achievements and Problems
Korea’s agro-industrial complexes had been developed actively throughout the country except metropolitan areas by the 1990s, starting with the first model in 1984. Since 2000, the focus has shifted from quantitative growth to qualitative growth. The number of agro-industrial complexes reached 468 at the end of 2017. To date, there have been many controversies over the merits and demerits of agro- industrial complexes. The performance and problems of agro-industrial complexes are summarized in
. Achievements and Problems of Agro-industrial ComplexesAchievements Problems
• Improvement of side incomes in rural areas • Lack of linkage with local agricultural products • Utilization of idle workers in rural areas • Lack of linkage with nearby affiliates • Utilization of agricultural resources and • Declining competitiveness due to small scale products • Difficult to secure demand due to poor • Suppression of population concentration location in large cities • Logistics cost is excessive due to poor • Solving land supply problem with cheap transportation climate supply • Chronic deficit management due to lack of • Balanced development between urban and money, Funds, and labor rural areas through rural industrialization • No continuous management system after • Construction of settlement areas through development population settlement and influx • Sporadic management of related ministries • Regional development and SOC expansion (4 ministries) in rural areas • Natural environment, destruction of living • Contribution to local government finance environment, increase in environmental resources pollution
Source: Some modifications were made based on the paper of Ji, Kwanghyo, Achievements and Problems of AIC, Land Information (1994.7), p.23.
120 2017/18 Knowledge Sharing Program with Paraguay In Korea, agro-industrial complexes originated from side-job complexes in the 1960s and rural factories (Saemaeul factories) in the 1970s. In this way, the purpose of agro-industrial complexes was to improve the incomes of farmers, utilize idle workers in rural areas, and employ agricultural resources. These objectives have achieved some degree of success in regional specialization complexes among agro-industrial complexes. In other words, they have contributed to the increase in the value of farming in the production process by utilizing the idle labor and local agricultural resources in rural area and raising their side incomes. In addition, employing 151,494 people from 7,073 tenant companies played a significant role in restraining the population concentration in large cities. Over the past 30 years, this has contributed greatly to the dissolution of industrial location difficulty by supplying 75.7㎢ of land (54.4㎢ of factory land) to rural areas excluding metropolitan areas and metropolitan cities (excluding rural areas). In this way, industrial complexes in rural areas have contributed to the balanced development of urban and rural areas. In this process, SOC could be expanded in rural areas and rural areas could be developed, which contributed to local finances through securing tax revenue.
Despite these achievements, it is true that agro-industrial complexes also have the following problems. First, unlike the original purpose or expectation, there was a lack of linkage with local agricultural products and local characteristics. Considering the industries in agro-industrial complexes, the major industry is the general manufacturing industry. This does not involve the processing of agricultural and marine products, and local characteristics are hard to find. In addition, in the case of industrial areas, it is also difficult to find a connection with related companies, such as large companies in nearby industrial complexes.10)
In addition, the scale is only about 10-33ha, so it is difficult to expect economies of scale as well as economies of range. Furthermore, many industrial complexes were located in vulnerable areas, so they could not secure the required facilities and were left as long-term unsold sites. Moreover, because they are located in rural areas, transportation conditions are disadvantageous and logistics costs are higher than in urban areas. There are also many shutdown companies compared to national or general industrial complexes because they cannot secure a market for manufactured products or operation ends due to a lack of funds and labor.
On the other hand, regarding industrial complex management, the budget and labor of the basic local government in charge of the management of agro-industrial complexes are insufficient, so they cannot manage them after development. In addition, as mentioned above, the tasks related to agro-industrial complexes are distributed to the local government in addition to the four ministries: the MOCIE,
10) Lim, Chongin (2012), “The Analysis of Korean Agro-industrial Complex,” Journal of Industrial Location Vol. 44, KICOX.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 121 MOAFRA, MOLTT, and MOE. This is pointed out as one of the problems with implementing systematic and coherent policies. Finally, factories in rural areas have contributed to regional development and growth, but the destruction of the natural environment and living environment and increase in environmental pollution are inevitable.
3.4. Implications for Paraguay
Korea's industrial location policy has evolved through accepting the period’s changes as well as the role of the economic growth engine. The following are the implications from four perspectives: strategy, institution, operation, and relationship.
First, it adopted goals that are achievable from a strategic perspective and appropriate development strategies. In other words, it has changed according to the stage of industrial development, which led to the supply of industrial land according to the industrial development plan. In addition, industrial complex development has played a significant role in achieving rapid economic development by effectively concentrating or dispersing resources considering the level of economic development, financial capacity, industrial development strategy, and location conditions.
Second, the legal system was established from an institutional viewpoint, and a related support plan was established. In other words, well-organized institutional arrangements for the development and support of industrial complexes contributed greatly to the success of the policy. In addition, various support policies were implemented in the process of the industrial location policy, the most representative being the labor supply policy needed in the industrial field. In February 1973, each technical education institute, starting with the vocational training center, was adjusted to the labor supply and demand plan. In addition, we changed the technology training system to supply labor according to the demand for industrial labor.
Third, in terms of policy management, industrial complexes have been supplied by government–led organizations, and infrastructure has been supported. In particular, supplying the land and infrastructure in a timely manner through a dedicated organization has led to the integration of enterprises and leveling up of productivity. The development of industrial parks with favorable location conditions has had a positive impact on the development of manufacturing industries as well as attracted foreign investment.
Fourth, we have pursued the coordination of interests and harmonious development from a relational perspective. Cooperation among relevant ministries
122 2017/18 Knowledge Sharing Program with Paraguay is necessary for the industrial location policy to be efficient and consistent. However, the coordination of inter-ministerial interests was based on strong leadership. In the course of industrialization, regional gaps in growth have emerged, and the development of industrial complexes has become a means of coordinating interests and harmonious development.
The success factors of Korean industrial complexes are as follows: 1) Based on the strong leadership of the government. 2) Relevant companies centered on attracting industries and large companies have accumulated. 3) The government and public institutions (led by LH) actively and quickly developed industrial complexes. 4) Based on the export-oriented industrialization strategy, Korea Industrial Complex (KICOX) has executed the management, support, and clustering of industrial complexes systematically. 5) By sharing industrial clusters, R&D, and human resources, it not only increased labor productivity, but also brought economies of scope.
Based on this, the direction of Paraguay's industrial location policy will be presented as follows. First, strong and sustained support for industrial parks, clusters, and industry–academia–government cooperation at the central government level must be achieved. Second, it is necessary to select a strategic industry for the country and region and prepare a roadmap to foster it systematically. Third, to revitalize industrial park development, Paraguay's current laws and systems need to be complemented. In other words, although there is an industrial park law, its concreteness as a procedural law for industrial park development is insufficient. Therefore, Paraguay should complement the current industrial park law as well as related systems by benchmarking Korea's "Industrial Location and Development Act." Fourth, it is necessary to establish guidelines for industrial park development to strengthen the enforcement power of the Industrial Park Law and to solidify the procedures related to industrial park development. Fifth, industrial park development and the attraction of enterprises should be promoted by developing incentives for industrial park developers and resident companies. Sixth, after establishing industrial parks, it is necessary to establish related organizations for efficient management and business support. Finally, industrial parks should be developed into competitive innovation clusters by providing R&D and business support as well as production functions.
In Paraguay, the development strategy for industrial parks should be led by the government with a strong commitment to the development, management, and support of industrial parks. Second, because of the lack of financial resources, it is necessary to develop intensive bases in the neighboring areas of metropolitan cities first, and then spread them to the whole country. Third, industrial parks should be developed as complexes with R&D and residential as well as production functions. Fourth, after selecting strategic industries according to regional industrial
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 123 development plans, specialized industrial parks should be developed to support them.
4. Development Model of Industrial Park 4.1. Reviewing Proper Location
4.1.1. Review of Development Needs
When developing an industrial park, it is necessary to examine various aspects according to its purpose. However, whether or not it is necessary to develop an industrial complex in the area and if it can be developed, it is crucial to secure sufficient demand for the site. In addition, it is necessary to consider the link between related plans, such as the national comprehensive plan, industrial location supply plan, regional development plan, urban plan, and infrastructure construction plans, such as roads and waterworks. In addition, if it is necessary to secure a base for regional development through industrial complexes, to what extent it will have a ripple effect on regional development should be examined beforehand. On the other hand, we should also consider the outlook for precise land demand for strategic industries in the region.
4.1.2. Selection of Proper Candidate Sites
To select appropriate industrial complexes, it is necessary to comprehensively examine the physical conditions, ease of securing land, socio-economic conditions, development constraints, and development plans related to industrial complexes.
shows the main considerations when selecting appropriate candidate sites. First, regarding the physical condition, the elevation, slope, and hilly land of the target sites and the number of villages and landowners, estimated land value, and land area of the national (regional) government should be examined. In addition, socioeconomic conditions should be examined for accessibility to back cities, education institutes and R&D facilities, and traffic facilities such as roads. The development constraints should include aircraft noise, water source protection areas, cultural property protection areas, land consolidation areas, conserved forest areas, natural environment conservation areas, development restricted areas, military facility protection areas, and flight altitude restricted areas. National and regional (city) development plans and related plans, such as roads, ports, railways, and airport planning, should be considered (see Table 2-17).124 2017/18 Knowledge Sharing Program with Paraguay
Considerations for Selecting a Suitable CandidateDivision Considerations Physical Conditions Elevation, slope, hilly area Ease of Land Acquisition Number of settlements, estimated land price, state-owned land area Socio-economic Accessibility of urban areas, R&D facilities, and transportation facilities Conditions Airplane noise, water source protection area, cultural property Development protection area, farmland readjustment area, conservation area, Constraints natural environment preservation area, development restriction area, military facility protection area, light altitude restriction area Regional Planning, roads, ports, railways, new airport planning, urban Review-related Plans planning
Source: Partial modifications were made based on LH, Guidebook of Industrial Complex Development (2015, 2016).
4.1.3. Review of Location Conditions
Once a potential candidate has been selected, location conditions should be reviewed to determine specific locations.
shows the main considerations in detail. Key Considerations for Site SelectionLocation Factor Contents Land • Price, Availability of site, Possibility of spatial expansion Raw Materials • Distance to raw material production area and Parts • Accessibility to parts and material suppliers Transportation • Accessibility of roads, ports, airports, railways, and suppliers • Availability of labor (skilled labor, professional technicians, managers) Labor Force • Wage level, Labor productivity, Labor relations (union activity) Market • Market size (or potential), Access to product markets • Access to corporate operational information Information • Accessibility to administrative agencies • Accessibility to universities and research institutes • Utilities such as power, water, gas and steam, waste. Infrastructure • Wastewater treatment infrastructure (quantity, quality) • Access to production technology services Usability of business support Services services Usability of administrative services Policy • Tax relief, financial support, deregulation, policy incentives Others • Attitudes of local residents, Others
Source: LH, Guidebook of Industrial Complex Development (2015, 2016).
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 125 First, with regard to land, the price of land (rent), number of landowners, availability of the site, and potential for spatial expansion should be considered. Regarding the procurement of raw materials and parts and materials, it is necessary to review the distance from the source material and accessibility of parts and materials suppliers. Traffic should be considered in terms of accessibility of roads, ports, airports, and railroads, as well as access to supply sources. Regarding labor, the availability of skilled labor, advanced technicians, managers, and simple labor should be considered, and wage levels should be reviewed. Moreover, labor relations, including labor productivity and union activities, are important factors to consider. In relation to the market, it is important to examine the potential as well as the scale, and access to the product sales market is very important. Access to information and the accessibility of administrative agencies, universities, and research institutes are important to obtain the information necessary for corporate management. In terms of infrastructure, quantitative and qualitative reviews of waste and wastewater treatment facilities, as well as utilities such as electricity, water (industrial water and household water), gas, and steam, should be conducted. With regard to services, the accessibility of production technology services and ease of use of administrative services, as well as the convenience of using various business support services in the course of conducting business, should be considered. Regarding the government, we need to examine tax relief, financial support, deregulation, such as approval, and policy incentives. Finally, it is also important to consider a resident attitude.
4.2. Review of Attracting Industries
From the perspective of the local government, they want local employment and income generation, industries with highly related effects, prospective growth industries, and industries with low environmental pollution. However, this should be decided with the direction of maximizing regional resource utilization at the national level.
126 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-14] Selection Process of Attracting Industry
Manufacturing Location Factors Location Factors Industry Growth by Industry by Industry Forecast by Industry
Industry-related Effect
Regional Economy Regional Spread Environmental Effect Effect Impact Assessment
Regional Demand Analysis of Employment Effect Business by Industry Setting Evaluation Criteria of Attractive Industry
Selection of Attracting Industry
Size Estimation by Industry
Source: Author.
On the other hand, when a corporation is deciding whether to move into an industrial complex, they consider location factors, such as factory site, labor, raw materials, sales market, traffic conditions, information, services, infrastructure, and the policies of federal or local government. They also review the growth possibility of target industries. This may be different from the perspective of local government. Therefore, it is necessary to judge the type of industry, size, and timing based on the strategic industries to be fostered in the region and the demand for the location of related enterprises after reviewing the local and location conditions11) by industry. The selection process is summarized in [Figure 2-14].
4.3. Land Use and Industry Layout
4.3.1. Space Layout
It is necessary to lay out the functions, such as production, production support, R&D, housing, and rest, according to the characteristics of industrial complexes, such as location, size, attracting industries, and behind-the-scenes cities. First, the production space should be arranged to maximize the productivity in consideration of the process. The main production process should aim for the systematization
11) Refer to < Appendix 1 >.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 127 and collaboration of the production process by reasonably arranging the relevant production processes. In addition, by tying together large companies and SMEs, an efficient subcontracting system can be established among companies. In addition, production and technology development should be combined by linking the production space with the R&D space. Furthermore, to maintain comfort between the housing and production support space, it is necessary to secure a buffer space of a certain distance in connection to the production space. On the other hand, it is necessary to increase the comfort of the industrial complex by securing sufficient green space to establish a leisure space for activities such as resting, walking, and exercise and to provide a buffer function between the production space and the residential area. The principle of space allocation should minimize the conflict between mutual functions, secure enough buffering green space to ensure comfort in the complex, and form a green axis. In addition to the green system of the entire industrial complex, it is necessary to establish an organic connection with the surrounding green area. In addition, development costs should be minimized by making maximum use of natural conditions and existing facilities (harbors, railways, highways, waterways, etc.).
shows the space classification and layout criteria by function. Space Classification and Layout Criteria by FunctionDivision Facilities Layout Standard • Main production space • Maximized productivity of large enterprises Main production facility, Production • The associated production space should be associated production Space arranged around the main production space, and facility a system of collaboration and integration should be constructed by linking large corporations with SMEs Business, information, • Convenience Supporting commercial, finance, • Accessibility from outside Space medical, welfare facilities • The centrality of the industrial complex Research institute, university, R&D • Placed at a low density in a pleasant environment information center, training Space • Good access to production and residential spaces center, rental research facility Residential, • Securing housing, dormitories, houses for workers Settlement neighborhood facilities, • If there are no environmental issues, harmonizing Space educational facilities the production and residential functions • The inflow and extension of the surrounding greenery axis in the industrial complex Park, greenery, • Forming the main open space in the industrial Green playground, complex Space cultural space • Convenience for employees and residents • The role of a buffer between the production and housing functions
Source: Partial modifications were made based on LH, Guidebook of Industrial Complex Development (2015, 2016).
128 2017/18 Knowledge Sharing Program with Paraguay 4.3.2. Land Use
In general, the classification of land use in industrial complexes is divided into two types: factory areas for production and public areas, such as support facilities, roads, parks, and green spaces. Some recently developed industrial complexes may include separate residential land within the industrial complex as needed.
Land use is selected according to the characteristics and size of each function, then several alternatives are set, and then the optimum alternative is selected by evaluating according to the criteria. In other words, this achieves the maximum utilization of natural topography, reasonable linkage with infrastructure (roads, water, ports, railways), and seamless linkage with cities, existing industrial complexes, or residential areas. When developing systematically, it is important to consider the completeness of function, minimization of friction between functions (production vs. residence), minimization of traffic volume within the complex, total cost of business, profitability, and ease of future expansion.
4.3.3. Industry Arrangement
The industry arrangement in the industrial complex should maximize productivity by grouping the related industries according to the characteristics of the industries to be attracted. In other words, it should be compatible with land use, transportation, and the business plan by step and should be able to exchange and divide by land lot and to respond flexibly according to the size of industry. In addition, after the development of the industrial complex, it should be arranged considering the environment of the surrounding area as well as the living environment of the residential complex in the industrial complex.
On the other hand, since the layout of the industry and the division of land are inseparable, it is necessary to rationalize the division of land to induce sequencing by industry. It is also very important to allow flexibility to enable the adjustment of the factory layout according to the actual demand, as long as it is not contrary to the purpose of the industrial complex development.
The placement criteria can be divided into environmental and industry-specific aspects. First, environmental standards should be placed as a group for biological treatment in relation to water pollution. To prevent air pollution and odor, the place should be as far as possible from residential or urban areas. In addition, considering the noise and vibration, the strength of the ground should be fully examined.
In terms of industry, large-scale factories have to be located around a main road considering transportation conditions and factory scale. In addition, as much as
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 129 possible, urban-type industries, such as groceries, textiles, and clothing, should be placed around commercial facilities and the supporting facility space.
4.4. Building the Infrastructure and Supporting Facilities
4.4.1. Infrastructure
The infrastructure includes transportation and communication networks, logistics facilities, water supply facilities, sewage and wastewater treatment facilities, wastewater and waste treatment facilities, utility supply facilities, and parks and green facilities. It is shown in detail in [Figure 2-15].
[Figure 2-15] Infrastructure of Industrial Complexes
Transportation
Infrastructure Water Supply Sewage Treatment Development Plan
Parks & Green Spaces Waste Management Energy Supply
Source: Author.
4.4.1.1. Transportation
Traffic facilities include roads, railways, ports, and airports. In general, they should aim at speedy, safe, comfortable, economical, and desirable street scenery creation. Moreover, these transportation facilities should establish a comprehensive transportation network system by interconnecting the facilities. In addition, it is necessary to minimize the amount of traffic generated within the industrial complex through a reasonable functioning arrangement. Meanwhile, when planning the road networks in industrial complexes, special attention should be paid to preventing the mixing of passing traffic and pedestrian traffic and the establishment of the road network system hierarchy.
130 2017/18 Knowledge Sharing Program with Paraguay 4.4.1.2. Water
The supply of water should be focused on industrial water, but should include household water for the employees and the rear town and the public water necessary for public service facilities. The size of the facility should be determined from a long-term perspective, taking into account the size of the current complex as well as the size of a future expansion. The water supply plan should include water- collecting and receiving facilities, water conveyance and supply facilities, water purification facilities, drainage facilities, and pipeline plans.
4.4.1.3. Sewage, Rainwater, and Sewage Treatment
The sewage exclusion plan should be designed through comprehensive considerations to prevent water pollution in public waters, facilitate the maintenance and management of exclusion facilities, operate and maintain the wastewater treatment plant, and treat the wastewater treatment facilities. In addition, the rainwater exclusion plan should be able to rational rainwater elimination, rainwater pipeline, drainage facilities, and sewage treatment considering the geographical conditions and the road network plan after determining the scope of the plan.
The sewage treatment plant should select the treatment method and location considering the ease of expansion, situation of the discharge water station, and environmental sanitation. The pipeline planning should establish the facility size and route plan considering construction, economical efficiency, maintenance of the facility, and so on.
4.4.1.4. Wastewater and Sewage Terminal Treatment Facilities
The wastewater treatment facility is for jointly treating the pollutants discharged from each workplace in the industrial complex, which is considered difficult to maintain due to worsening water pollution, or for preserving the quality of water and discharging it into the public waters. This facility is installed or operated by the central or local government or a beneficiary company. In this case, those who directly cause water pollution should bear all or part of the expenses necessary for the establishment and operation of the terminal treatment facility, as stipulated by the act.
On the other hand, the sewage treatment facility is for the final disposal to the rivers, sea, and other shared waters and for complementing the treatment facilities. The layout standard should have 1) the location of the disposal site and location for easy future expansion, 2) the most reasonable and economical position to treat existing wastewater by reviewing the existing sewer line facility, 3) the minimum
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 131 effect of treated water on discharged water, and 4) little impact on surrounding areas, such as due to odor and noise. Additionally, 5) inundation due to flooding should not interfere with the function of the treatment plant, 6) the entrance road and the entrance facility should be economical, and, regarding 7) other social conditions (locality, land use plan, etc.), it should be an area that can harmonize with the surrounding area.
4.4.1.5. Utility
Industrial complexes must supply the utilities, such as electricity, gas, and thermal energy (steam and heating, cooling), necessary for plant operation. Facilities for supplying electricity include electrical equipment, substations, switchgear, transmission lines, and distribution lines. Facilities for the gas supply include storage, charging facilities, containers, and storage tanks. Additionally, facilities to heat or cool water, steam, or another heat medium supply heat energy through heat source facilities such as a heat-generating facility (boiler, turbine, generator, incinerator, etc.), heat pump, refrigeration equipment, and heat exchanger. There are heat transfer and distribution facilities, such as heat transfer pipes and circulation pumps, which transport or distribute heat mediums.
4.4.1.6. Waste Treatment Facility
In the process of operating the industrial complex, the emission of various wastes is inevitable depending on the industry, so facilities to handle this must be installed. Although depending on the type of industry, it is typical incineration, as well as mechanical, chemical, and biological treatments, and they are ultimately landfill facilities. The installation criteria are: 1) considering land use plans so as not to be close to densely populated areas, public institutions, schools, research facilities, medical facilities, and religious facilities and not to adversely affect the residential environment; 2) considering the wind direction; the facility should be installed in an area where there is no danger of threatening the public health and hygiene; 3) considering various environmental pollution problems, such as air and water pollution (e.g., installing a fence or shielding surrounding green areas); 4) securing water and power; 5) installing facilities to be treated by landfill methods in low-lying land areas, wetlands, gorges, valleys, and shared water areas and considering land use plans after landfills.
4.4.1.7. Parks and Green Space Planning
To reduce industrial pollution and minimize environmental pollution in the surrounding area, a buffer zone should be installed only on the outskirts. In addition, green facility spaces that utilize public facilities, such as drains, main roads and
132 2017/18 Knowledge Sharing Program with Paraguay railways constructed in the industrial complex, should be installed and used as resting spaces as well as link with the green space system in the complex. Furthermore, it is necessary to establish a green space between conflicting functions, such as housing and production, to secure a buffer space.
4.4.2. Supporting Facility Planning
Support facilities should be efficiently deployed to suit the development direction and conditions of industrial complexes. In other words, the type and size of support facilities should be calculated so that resident companies can engage in efficient and vigorous production activities. In addition, the standard and location of welfare facilities should be determined not only for the leisure activities of employees, but also for a comfortable work environment. Moreover, the criteria and location of public facilities necessary for the management and operation of public administrative facilities or industrial complexes related to tenant companies should be determined. In general, the type of support facility that should be provided in the industrial complex is as shown in
, and it should be selected at an appropriate level considering the size of the industrial complex and the relationship with rear cities. Supporting Facility Type of Industrial ComplexType Function Supporting Facility Public Government office, police box, fire police box, Administration tax office, customs office, labor department office Management Management agency Public Support Operation Facilities Post, Post office, telephone office Communication Finance & Bank, security, insurance company Insurance Production and technology research institute, R&D technology information center, information-processing center Exported goods and industrial product inspection Product Inspection Production office Activity Support Logistics, Distribution center, packing center, bonded Facilities Warehouses warehouse, general warehouse Vehicles, Vehicle maintenance, car washing, auto-parts store, Transportation gas station, cargo/passenger terminal Professional exhibition hall, joint sales hall, Exhibition and Sales permanent exhibition hall, trade exhibition hall
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 133
ContinuedType Function Supporting Facility Power plant, substation, joint wastewater treatment Supply, Processing plant, sewage end treatment plant, water treatment plant, raw material storage Production Activity Support Production Facility Lease (standard) factory, apartment-type factory Facilities Chamber of commerce, various associations, Business Support business support center Education Vocational training center, working youth school, Training corporate training center Welfare center, female welfare center, working Welfare youth center, dormitory, daycare center, library Welfare Support Employee apartments, workers rental apartments, Residential Facilities dormitories, single living rooms Health center, clinic, industrial accident hospital, Medical and Health general hospital Neighborhood Living Daily commodities direct shopping mall, general Facilities shopping mall, sports facilities
Source: Partial modifications were made based on LH, Guidebook of Industrial Complex Development (2015, 2016).
4.5. Development Procedure and Type
4.5.1. Development Procedure
The development procedure of an industrial complex is largely accomplished through three steps: the designation of the industrial complex, approval of the implementation plan, and construction and completion of the complex. In the designation stage, a development plan is established, and after listening to the opinions of the residents and consulting with the relevant authorities, the land acquisition begins once the designation is approved. In the approval stage of the implementation plan, after the consultation with the related organizations in addition to the environmental and traffic impact assessments, the implementation plan is approved and the sale plan is established. In the development and completion phase, permission for use before the completion and sale is given, and the factory is built on the sold land.
134 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-16] Industrial Complex Development Procedures
Application for industrial complex designation
(Development planning) Hearing for Consultation with residents (Designation of the project manager) related departments
Industrial complex designation approval
Land Application for Environmental impact acquired implementation plan assessment
(Implementation plan)
Consultation with related departments
Approval of implementation plan
Construction of Sales planning industrial complex
Approved Completed industrial use before Land sales/lease complex completion
Factory built
Source: LH, Guidebook of Industrial Complex Development (2015, 2016).
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 135 4.5.2. Subject and Method of Development
The development of industrial complexes is carried out by developers who have certain qualifications. Development companies not only incur significant costs for development projects, but also require a certain level of civil engineering technology, so the appointer designates those who have both the ability to mobilize funds and the civil engineering technology.
The developer of the industrial complex development project should bear the responsibility from the development plan to the completion of the construction and the sale of the land. In Korea, Article 16 of the 「Industrial Sites and Development Act」 stipulates that the following organizations can become industrial park development project developers. In Korea, the following organizations are included.
• National and local government • Government-invested institutions, such as the Korea Land Housing Corporation, local public corporations • Small business corporations • Korea Industrial Complex Corporation • End-users or private developers • Corporations established jointly by the public and private sectors • Real estate trust companies
Meanwhile, as shown in
, the industrial complex developer in Korea undertake development projects independently or jointly. The development types can be divided into public development, private development, compromise, and commissioned. Types of Industrial Complex DevelopmentDivision Contents • The central or local government entrusts it to a non-profit organization (government investment institution, local public enterprise). Most industrial complex development is this type Public - National industrial complex: development by a government investment Development Type institution on the government's request - General industrial complex, agro-industrial complex: Development by government investment institutions or local public enterprises on the local government' s request
• Development by real users (private) or private developers, real estate Private trust companies, etc. They develop the industrial complex to pursue Development Type profit.
136 2017/18 Knowledge Sharing Program with Paraguay
ContinuedDivision Contents
• The public and private sectors cooperate in various forms Compromise Type - A method developed by a corporation (SPC) established jointly by the -3rd-sector Type public and private sectors -Co-development - The public and private sector develop jointly -Joint Development - Participation of private sector in public development
• The developer entrusts part of the industrial complex development project to the state or local government Entrusted - Ports, industrial waterways, roads, etc. are entrusted to central or local Development government - Buying land, loss compensation, etc. are entrusted to the governor, mayor, or supervisor
Source: KICOX, Industrial Location Handbook (2016, 2017).
5. Development Strategy for Concepcion Industrial Park 5.1. Selection of Development Candidate & Attractive Industry
5.1.1. Current Situation of Development Candidate Site
The following is a review result based on the questionnaire for each of the three development candidate sites recommended by Paraguay’s Ministry of Industry and Commerce (MIC). First, the current status of the three candidate sites (Villeta, Ayolas, and Concepcion) recommended by Paraguay’s MIC is as follows.
5.1.1.1. Villeta
Overview
Villeta is located at the edge of the Central Department, east of Paraguay, on the banks of the Paraguay River, about 38 km from Asunción City. The Central Department has a very high population density of 850 people per square kilometer. Villeta has a population of 36,228 people, and the proportion is 2.9% of the department. Access is very good because there are two national roads with a packed South Access, Ypané, and Guarambaré intersection. In the first half of 2018, a new 40km pavement between Villeta and Alberdi will be completed. This road will link the three regions between Central Department and Embucú.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 137 [Figure 2-17] Geographical Position of Villeta
Sources: DGEEC, Departamento Central.
Villeta is the harbor of the Paraguay River, with a 70 km coastline. The industry of Villeta is heavily focused on cement, mega-plastic, and electrical materials. There is no new infrastructure development plan to support industrial development or district plan for the Villeta District. The average land price is about $50,000 per ha. According to MIC, Villeta has 154 SMEs and multinationals. These are small- and medium-sized companies of plastics, shoes, cleaning products, pesticides, fertilizers, and shipyards, as well as eggs, dairy products, and the derivatives thereof. Villeta District has the Abai Industrial Complex (unauthorized), which specializes in chemical fertilizer. Additionally, the Arthur Daniels Midland (ADM), a multinational agricultural company, exports soybeans, soybean oil, and processed soy products to the world and has its own harbor.
Villeta is close to the main cities of San Antonio, Ypané, Capiyata, and San Lolenzo. They have a harbor and 70 km of Paraguayan coast. Furthermore, it is located within 100 km from agricultural and livestock raw material-producing areas. Thus, it is easy to foster related processing industries. The new route to the south (Villeta–Aberdi) not only integrates previously isolated areas, but also connects to important cities, such as Pilar and Ayolas. Through Route 7, it is linked to the southern grain zone, where it can utilize mass-produced rice, sausages, corn, wheat, and cotton.
Soybean is the most important product in production, marketing, and exports. In 2016, Paraguay was the world's sixth-largest soybean producer, growing 3,324,061 ha, tripling from the figure in the 1990s, when 1 million ha was planted. Between
138 2017/18 Knowledge Sharing Program with Paraguay the 1990s and 2000s, soybean cultivation increased significantly in the east, mainly in the provinces of San Pedro, Caaguazú, Caazapaa, and Canindeuu. This has led to the modernization of the soybean production, storage, and transportation chains. ADM, the core of soybean-related clusters, produces soybean oil and soybean flour, which are the basis of other processed foods and food processing by processing soybeans. In 2015, the ADM plant handled 42.6% of the 8.2 million ton produced this year (CAPECO, 2016). Soybean cake is exported to Italy, soybean processing and food products are exported to Denmark and Chile, and soybean oil is exported to India, Bangladesh, Egypt, Argentina, Iran, and Pakistan. The processing capacity of this plant is 4,000 tons per day. The bean material is transported from east to west along the Paraguay River, mostly using the Port of Villeta.
[Figure 2-18] Villeta's Major Industry
Sources: DGEEC, Departamento Central.
Although Paraguay's major industries are agricultural and livestock products (chicken, eggs, dairy products, confectionery, fruit, starch, etc.), other industries are also important in job creation. In other words, the logistics industry and shipbuilding related to the river contribute to the diversification of industries. The barge-building industry of Paraguay is the largest in South America. It has the world's third-largest barge-building industry after China and the United States, with over 3,000 barges, motorboats, and tugboats being built. Considering the agriculture and mineral production in the Matto Grosso do Sul region, which is adjacent to Brazil, in the mid- to long term, the demand for transportation through the river will increase, and the drying barges on the Paraná–Paraguay River will become a pillar of the Paraguayan economy.
According to the Paraguayan Industrial Union (CANAGAL), the construction of barges will provide about 5,000 jobs, as well as indirect employment and tax
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 139 revenues. There are 13 shipyards in Paraguay, which are mainly invested in through foreign capital, two of which are located in Villeta City. One of the largest shipyards is TSUNEICHI, a Japanese multinational company specializing in the construction of barges used to transport soy, flour, minerals, and cereals. Villeta has a 70km coastline on the Paraguay River, making it an ideal place for shipbuilding industry development. Many of the docks in the area are also used as repair shops for the many ships operating.
Villeta Port is managed by ANNP (National Navigation and Ports), which also has special facilities to handle large machines. All goods arrive/depart through this port, which is the only port in Paraguay where chemicals and fertilizers can be transported. The characteristics of this port are as follows.
• Villeta port terminal: 35 km, south of Asuncion • Area: 13.5 ha • Pier length: 435 m • Platform width: 25 m • Draft: minimum of 10 feet, open year round • Facility: outdoor beach of 6 ha, packaging, heavy equipment • Warehouse: 0.3 ha (100 m × 30 m), review
Candidate Site
• Site Name: Villeta • Location
[Figure 2-19] Location of Candidate Site (Villeta)
Source: DGEEC, Departmento Central.
140 2017/18 Knowledge Sharing Program with Paraguay • Scale: 130ha (1,300,000 m2)/land price: USD 50,000/ha • Characteristics: near Asuncion city (approximately 3 km), access to river, routes (new route to the south). • Target industries: soy processing, shipbuilding, industries with exporter profile
5.1.1.2. Ayolas
Overview
Ayolas is a district in the department of Misiones, south of Paraguay, on the coast of the Paraná River, which borders Argentina. It is a major attraction for fishing and tourism, and Yacyretá Dam has been established and shared with neighboring Argentina. The city of Ayolas, which is under construction, has 1,000 urban development plans for two huge blocks. In block 1, workers are stationed, while in block 2, managers, technicians, and specialists are stationed.
Ayolas is located in the south of Paraguay, near Santiago, San Juan Bautista, and San Ignacio of Misiones. Originally a secluded fishing village on the banks of the Paraná River, some 305 km away from Asunción, it became a highly modern city and was completely transformed by the construction of Yacyretá Hydroelectric (a hydroelectric power station) with huge infrastructure.
[Figure 2-20] Geographical Position of Ayolas
Sources: DGEEC, Departamento Central.
According to estimates from the General Directorate of Statistics, Ayolas has 20,135 inhabitants. In recent years, there has been a significant population increase, which shows that economic recovery and growth have begun. Ayolas is the fourth most populous city in the Misiones Department after San Ignacio, San Juan Bautista, and Santa Rosa.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 141 The main product is tourism related to Yacyreta, along with livestock and fishing, and there is little industrial activity in the area. According to the MIC's industrial registry, there are only two companies in this region: one is a chicken and egg producer (ALDEANA IMPORT EXPORT S.A.); the other is a small pottery factory. There are no industrial parks near Ayolas.
It is worth noting that this area is close to the hydroelectric dam, so we can seek a way to attract the maquiladora system or power-consuming industries. The new paved road to the south will connect Villa and Alverdi as well as Pilar with Ayolas and Enernación. The region produces a large amount of rice, sugar, derivatives, herbs, tea, yuba, and grain, so it can develop a related processing industry.
Yacyreta plays an important role in the infrastructure development of the Embucu, Misiones, and Itapúa Departments. Therefore, these regions will be able to enter the local market as well as the global market successfully by promoting various projects to encourage the industrialization of raw materials. Encarnación Airport, Encarnación Port, Civic Park, and Misiones Port are infrastructure construction works related to this.
[Figure 2-21] Ayolas' Major Industries
Sources: DGEEC, Departamento Central.
Ayolas’ major industries are as follows.
1) Rice: Rice can show its potential in the field of agricultural products and processed goods. In particular, because it is in close proximity to Argentina, it can satisfy local needs as well as the world market. The production chain of rice can be greatly improved through the connection between river logistics and other ports (Villeta) near the metropolitan area. TROCIUK, a well-known food company renowned for its balanced agricultural operations, is headquartered
142 2017/18 Knowledge Sharing Program with Paraguay in the FRAM District of Itapúa. The company intends to establish a futuristic agricultural complex in and around the city of Ayolas.
2) Soybeans: The soybeans are more than 200 km from a supply source, and the nearest district to supply enough for processing will be the Caazapá Department.
3) Wheat, Cotton, Yerbamate: They are not far away from the supply source, and cotton, one of the value chains of the textile industry, has to be supported by the Pila region and production of the Éembucú Department, forming a cotton cluster. Wheat could be representative of important industrial development because the centers of collection and distribution are in Itapúa and Misiones. Yerba Marte has an industry developed in the same region, so it may be an advantage when marketing to the outside.
4) Assembly Industry: An assembly industry that requires rich and high-quality energy can be attracted or the maquiladora system can be utilized. In other words, it will be possible to attract metallurgy, plastics, electrical materials, alloys, agriculture, cosmetics, and so on by ensuring an energy supply in nearby hydroelectric power plants and substations. The new paved roads have further increased the potential of southern Paraguay, as traditionally isolated cities such as Alberdi and Villa Oliva have been able to connect with other districts of the Misiones Department, including Théembú, as well as Pilar. In addition, a large barge can be used for Corrientes, a densely populated region in Argentina, due to its enhanced access to the port of Paraguay.
5) Sausage, Frozen/Refrigerated Meat: The industry in the southern part of Itapúa is an innovative sausage industry that has gained a reputation both locally and internationally. Studenko, located near the city of Encarnación, also has its own pig farm. The company has a strong presence in the Southeast Asian market and approaches end-users by managing its distribution network in the eastern region.
Candidate Site
• Site name: Ayolas, Misiones (Southern Part of Paraguay) • Location
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 143 [Figure 2-22] Location of Candidate Site (Ayolas)
Sources: DGEEC, Departamento Central.
• Scale: 30–60 ha (300,000–600,000 m2) • Characteristics: - Ports & roads: The site provides a unique location for a deep-water port combined with Pilar (150 km), which offers a port infrastructure for 365 days. This area also provides excellent road connections with many grain production sites in Paraguay. It also provides a direct connection to Paraguay’s main corridor (Asuncion–Ciudad del Este). - Electricity supply: Ayolas provides a unique location regarding electricity. It is next to the Yacyreta Dam, so the electricity supply is always guaranteed. - Others: This site also provides a small domestic airport as well as other support agencies and infrastructure (public land). • Target industries: Grain (soybean)-related processing industries (oil, pork, rice, fish, assembly labor-intensive plants, etc.)
5.1.1.3. Concepción
Overview
Concepción is one of the most important departments in the northeastern part of Paraguay. It was traditionally a trade route between the border cities of Salto de Guairá and Pedro Juan, Caballero.
Agricultural statistics show that many agricultural products (Mandioca, Soja, Tártago, Piña) and cattle (Bovine Meat) are produced in this region, and dynamic
144 2017/18 Knowledge Sharing Program with Paraguay trade takes place at the border with Brazil. The meat industry occupies a large part of the local economy and job creation. "Carnes Concepción" is one of the largest slaughtering plants in the country. High-quality meat is mainly consumed in overseas markets such as Chile and Russia. Concepción is also an important logistical hub in Brazil because the Paraná–Paraguay Waterway (HPP) is connected through the Paraguayan river port. The sales volume is estimated at 1 million tons per year, and production mainly takes place at Matto Grosso do Sul. Concepción has excellent connectivity through the river and frequently delivers to major cities in the eastern and western regions. The connection of the road network is also very good, so it directly connects to the Chaco area, as well as Guaíra and Campo Grande in southern Brazil, via the bridge between Paraguay and Brazil.
[Figure 2-23] Geographical Position of Concepción
Sources: DGEEC, Departamento Central.
Currently, the most populated area is the southern part of the Concepcion Department. Major cities such as Loreto, Horqueta, Azquety, or Yby Yaúú have been developed to a high level, and the main road through which river basins and roads pass is route 3. It connects the east and west along the road. It also connects to Pedro Juan Caballero and Amambay in Brazil.
The Concepcion Department has a well-developed industrial and tourism sector. Meanwhile, the limestone-based cement plant on the hills of Puerto de Vallemí produces and exports the largest amount of cement in the country.
According to Paraguay's National Development Plan 2030, the northern region has very high potential for development in the agricultural processing industry because of its close proximity to the production and collection centers of agricultural products and its access to major Brazilian urban markets. Promising industries include fish farming, apparel, furniture, and cement. Future investment opportunities include Puerto de Vallemí's cement industry, San Carlos del Río Apa's livestock industry park,
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 145 the footwear industry, logistics and transportation, shipyards, and harbors.
San Carlos del Lio Apa is located in the Concepción Department, bordered by Brazil and the Apa River. In 2016, Brazilian businesspeople became interested in financing the construction of the Apa River Bridge connecting these two regions. This is to improve connectivity to transport goods from Matto Grosso do Sul to the port of Concepción. This proposal will improve integration between the two regions and promote the development of new industries. This gateway represents the integration and development of communities that have been postponed for years, such as San Lázaro (Vallemí) and San Carlos del Apa.
Candidate Site
• Site name: Concepción, Concepción Department (northern part of Paraguay) • Scale: 30–60 ha (300,000–600,000 m2) • Special features of the site: - Ports & roads: The site is connected by road and river to production sites for grain, beef, leather, and dairy products from Paraguay and Brazil. The cost of transportation can be reduced using the Paraguay River. • Location
[Figure 2-24] Location of Candidate Site (Concepción)
Source: MIC of Paraguay.
• Others: The site also provides a small domestic airport as well as other support agencies and infrastructure (public land) needed for a future industrial park. • Attraction (target) industries: grain (soybean)-related processing industries (oil, beef, poultry, leather, dairy production etc.)
146 2017/18 Knowledge Sharing Program with Paraguay 5.1.2. Review of Development Necessity
The following are the analysis results based on the questionnaires of Paraguay’s MIC related to the three development candidate sites it recommended. 1) Is it necessary to develop an industrial park? 2) If it is developed, can it secure sufficient demand from companies for the location? 3) Is it possible to link it with related plans, such as city planning and the construction plans for infrastructure such as roads?
shows the results ofreviewing the development necessity of each industrial park candidate site. Results of Reviewing the Need for Development by Candidate SiteContents Villeta Ayolas Concepcion Is it necessary to develop an industrial park in +1 +1 +1 the area? If it is developed, can it secure sufficient +1 0 0 demand for the location? Is it connected to related plans, such as the -2 +1 +1 regional (city) development plan? Is it connected to the infrastructure -2 +1 +1 construction plan? Overall score -2 +3 +3
Note: -2: Not at all, -2: Not much, 0: So-so, +1: Yes, +2: It really is/can. Source: Author.
Villeta is favorable for securing demand but it is not included in the regional plan and is not linked to the infrastructure installation. On the other hand, Ayolas and Concepcion are highly evaluated for their development needs due to the high possibility of local planning and infrastructure installation despite low demand.
5.1.3. Evaluation of Selected Candidates
The Concepcion industrial park, which was selected as a development candidate site among the three industrial parks, was evaluated mainly by the following factors. The evaluation factors are: 1) land: land price (rent), site availability, and possibility of spatial expansion. 2) Distance between raw materials and parts, raw materials, access to parts, and material suppliers. 3) Market: the size (or potential) of the market and access to the product sales market. 4) Market access, access to the airport, and accessibility of the supply chain. 5) Labor force: availability of labor, wage level, labor productivity, and labor relations. Information: accessibility of enterprise operation information, accessibility of administrative institutions, accessibility of universities or research institutes, and infrastructure. Utilities such as electric power, water, gas and steam, and waste. 6) Services: access to production technology services, utilization of
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 147 business support services, and utilization of administrative services, etc. 7) Policy: tax reduction, financial support, deregulation, policy incentives, etc. 8) Other: Attitudes of local residents. The evaluation results of the Concepcion Industrial Park selected as a development candidate site are as follows.
Evaluation Results of Concepcion Industrial Park Location FactorsFactors Contents Score Land price (rent) +2 Land Site availability +2 Expansion possibility of space +1 Raw Materials Distance from raw material production area +1 and Parts Accessibility with parts and material suppliers 0 Roads +2 Transportation: Accessibility Ports +1 (Approximately 30 km Airports +1 from Asuncion) Access to supply points 0 Availability of labor +2 Wage level +2 Labor Force Labor productivity 0 Labor relations (union activity) +2 Market size (or potential) +1 Market Access to the product sales market +1 Accessibility of corporate management +1 information Information Accessibility of administrative organizations +1 Accessibility of universities or research institutes +1 Infrastructure Utilities such as electric power, water, gas, steam 0 (Quantity and Quality) Waste, wastewater treatment facilities, etc. -1 Access to production technology services 0 Services Utilization of business support services 0 Utilization of administrative services 0 Tax relief +2 Financial support 0 Policy Deregulation +1 Policy incentives +2 Others Attitudes of local residents +1
Note: 1) -2: Very poor, -1: Poor, 0: Moderate, +1: Sufficient +2: Highly sufficient. 2) The overall rating is +28, which is worse than Villeta (+46) in the metropolitan area. When it was compared to other candidate sites, it was better than Ayolas (+21) near Argentina. Source: Author.
148 2017/18 Knowledge Sharing Program with Paraguay 5.1.4. Setting up the Development Concept
[Figure 2-25] Determination of Development Concept
Fostering Cultivate professional Establishment of Activation of Regional workforce through Industry regional Economic linking industry– /R&D Cluster economy through research facilities Infrastructure job creation
Installation Activation of Creation of complex Development of domestic of Competitive facilities such as Complex and foreign Investment commercial, Industrial Park investment Environment education, R&D through incentive provision
Source: Author.
5.1.5. Selection of Industries to be Attracted
The selection of target industries in industrial parks is based on the growth prospects of the manufacturing industry and the candidate industries. In addition, when developing an industrial park, it is necessary to select the target industry to be attracted by taking into consideration the effects of production, employment, and the exports of the relevant industries in total and to estimate the size of the industry park. Nevertheless, it was difficult to follow this procedure because the related data was insufficient. Therefore, in this study, we consider the opinions of Paraguay's MIC, the current situation of the candidate sites, and the National Development Plan 2030. We also select soybean-related processing industries (oil, flour, feed, etc.), livestock-processing industries (beef, poultry, leather, etc.), dairy products, apparel, and furniture, which focused on the Brazilian market.
5.2. Land Use and Industry Layout Plan
5.2.1. Land Use
When developing an industrial park, the division of land according to land use is divided into industrial facility areas, such as factory sites; public utility areas, such as roads and lagoons; support facility areas, such as enterprise support, production
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 149 support, and administrative support; parks and green areas; residential areas, and business facility areas (including the above-mentioned support facility areas if the industrial park is constructed). However, depending on the size or location of the industrial park, this may be unnecessary and some of these may be adjusted.
The size of this industrial park is 30–60 ha, and the land use plan is to be developed with 30ha for the first phase and 30ha for the second phase according to the demand for the land. It is set as shown in
and [Figure 2-26]. Land Use Plan (unit: m2, %) 1st Phase 2nd Phase Total Division Area Proportion Area Proportion Area Proportion Industrial Facility Areas 180,000 60.0 180,000 60.0 360,000 60.0 Support Facility Areas 15,000 5.0 9,000 3.0 24,000 4.0 Public Utility Areas 54,000 18.0 54,000 18.0 108,000 18.0 (Road, Lagoon) Parks and Green Areas 51,000 17.0 57,000 19.0 108,000 18.0 Total 300,000 100.0 300,000 100.0% 600,000 100.0Source: Author.
[Figure 2-26] Land Use Plan
Source: Author.
150 2017/18 Knowledge Sharing Program with Paraguay 5.2.2. Space Allocation
The spatial arrangement of the industrial park is based on the land use plan described above. The criteria are divided into five categories: 1) Production Space: It consists of main production facilities and related production facilities. It should keep the layout around the main production space, linking large enterprises and SMEs. 2) Production Support Space: It consists of facilities such as business, information, distribution, finance, medical care, and welfare facilities. The convenience of use, accessibility from the outside, and center area of the park should be considered. 3) Research and Development Space: It consists of research institutes, universities, information centers, training centers, rental research facilities, etc. It should be placed in a pleasant environment with low density, and the production space, residential space, and access should be good. 4) Park and Green Space: It consists of a park, green space, playground, cultural space, etc. The influx and extension of the green axis in the surrounding area, forming the main open space in the park, should be considered, and the convenience of employees and residents should be focused on. As described above, when the industrial park is developed with 30ha for the first and second phases and a total of 60ha, the space arrangement plan is as shown in [Figure 2-27].
[Figure 2-27] Space Allocation Plan
Source: Author.
5.2.3. Industry Arrangement
The industry arrangement in the industrial park maximizes the productivity
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 151 by grouping related industries according to the characteristics of the industries to attract. Thus, it is compatible with land use, transportation, and the business plan by step, is able to be exchanged and divided by land lot, and is able to respond flexibly according to the size of the industry. Furthermore, land allotment can be permitted to induce the sequential deployment of industries. It is also very important to give flexibility to allow the adjustment of the factory layout according to the actual demand, as long as it is not contrary to the purpose of the industrial park development.
The arrangement criteria can be divided into environmental and industry-specific aspects. Environmental standards consider a group for biological treatment in relation to water pollution. To prevent air pollution and odor, these industries are placed in an isolated area as much as possible.
In terms of industry, large-scale factories are located around the main road considering transportation conditions and factory scale. Moreover, as much as possible, food and apparel factories are placed around the commercial facility and the supporting facility space.
Considering the above target industries and industry arrangement criteria, the industry arrangement plan of this industrial park is shown in
and [Figure 2-28]. Industry Arrangement Plan1st phase 2nd phase Total Lot Scale Industry Area Propor- Area Propor- Area Propor- (m2) (m2) tion (%) (m2) tion (%) (m2) tion (%) Soybean-related 1,000– Processing Industry 108,000 60.0 72,000 40.0 180,000 50.0 10,000 (oil, flour, feed, etc.) Livestock-processing 1,000– Industry (beef, poultry, 54,000 30.0 36,000 20.0 90,000 25.0 20,000 leather, etc.) 1,000– Dairy Products - - 36,000 20.0 36,000 10.0 5,000 200– Apparel - - 21,600 12.0 21,600 6.0 2,000 500– Leather 9,000 5.0 1,800 1.0 10,800 3.0 10,800 500– R&D 9,000 5.0 12,600 12.0 21,600 6.0 5,000 Total 180,000 100.0 180,000 100.0 360,000 100.0
Source: Author.
152 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-28] Industry Arrangement Plan
Note: If the R&D facility is not urgently needed, it can be replaced with a joint logistics facility for tenant companies. Source: Author.
5.3. Establishment of Infrastructure/Support Facilities
5.3.1. Construction of Infrastructure
The infrastructure of the industrial park includes the traffic network construction, water supply, sewage, sewage treatment, wastewater and sewage disposal, utilities such as electricity, gas, and steam, and waste treatment. However, depending on the size of the industrial park and the type of business, etc., it may be omitted or reduced in size. The infrastructure to be constructed in this industrial park includes the entrance road, industrial water, domestic water, electricity, communication, waste treatment facility, and wastewater treatment facility.
5.3.2. Establishment of Support Facilities
The supporting facilities that should be established together when developing industrial parks are public support facilities, production activity support facilities, and welfare support facilities. First, public support facilities comprise the following. 1) Public administration: government office, police station, fire department, tax office, customs office, and labor office. 2) Management and operation: complex management institution. 3) Post and communication: post office and telephone
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 153 office. 4) Financial institution: bank. Production support facilities include the following. ① R&D: production and technology research institute. ② Product inspection: industrial product inspection center. ③ Logistics and warehouse: logistics center, distribution center, packaging center, bonded warehouse, and general warehouse. ④ Vehicles and transportation: vehicle garage, car wash, car attachment, gas station, and cargo terminal. ⑤ Exhibition. ⑥ Supply and processing: power plant, substation, joint wastewater treatment plant, sewage terminal treatment plant, and raw material store. ⑦ Production facility: rental (standard) factory. ⑧ Business support: Chamber of Commerce, various associations, and business support center.
Welfare facilities include the following. 1) Education and training: vocational training institute, working youth school, and enterprise joint training center. 2) Welfare: welfare center, female welfare center, working youth center, and nursery school. 3) Residence: employee apartment, employee rental apartment, and dormitory. 4) Health and medical care: public health centers and hospitals. 5) Neighborhoods: convenience stores, sports facilities, and athletic fields.
However, it is possible to omit or reduce the size of the industrial complex depending on the location and size of the industrial park, the type of industry, and the development budget. The supporting facilities of the industrial park are installed in the first and second phases, as shown in
. Support Facilities Establishment Plan 1st 2nd MIC Type Usage Facility phase phase opinion Government office × × × Police box × × × Public Fire station × × △ Administration Tax office × ○ ○ Customs office ○ - ○ Public Support Labor office × ○ ○ Facilities Management and IP management agency ○ - ○ Operation Safety (guard) management × ○ ○ Post/ Post office × × ○ Telecommunication Telephone office × × ○ Financial Institutions Banks, etc. × × × Production/technology R&D × ○ ○ research institute Production Product Inspection Industrial inspection office × ○ ○ Activity Support Logistics center ○ - ○ Facilities Logistics/ Distribution center ○ - ○ Warehouses Packaging center ○ - ○154 2017/18 Knowledge Sharing Program with Paraguay
Continued 1st 2nd MIC Type Usage Facility phase phase opinion Logistics/ Bonded warehouse ○ - ○ Warehouses General warehouse ○ ○ ○ Vehicle garage × × △ Car wash × × △ Vehicles/ Car attachment × ○ ○ Transportation Gas station ○ - △ Cargo terminal ○ - ○ Exhibition × × × Production Activity Support Power plant ○ - ○ Facilities Power substation ○ - ○ Supply and Joint wastewater ○ ○ ○ Processing treatment plant Sewage treatment plant ○ ○ ○ Raw material storage ○ ○ ○ Production Facility Lease (standard) factory × ○ ○ Chamber of Commerce × × × Business Support Associations × × × Business support center × ○ ○ Vocational training center × ○ △ Education and Working youth school × × △ Training Corporate training center × × △ Welfare center × ○ ○ Women's welfare center × ○ ○ Welfare Working youth center × ○ ○ Nursery × × △ Employee apartment × × △ Welfare Support Rented apartments Facilities × ○ △ Housing for workers Dormitory × ○ △ Studio × × △ Medical Care Public health center × ○ △ and Health Hospital × ○ △ Convenience store ○ - △ Neighborhood Life Gymnasium × × △ Playground × ○ △Note: Required: ○, Medium: △, Not required. Based on the MIC opinion, some adjustments were made to account for site size. Other aspects required by MIC were one-stop windows (immigration, customs, etc.) and the installation of free zones. Source: Author.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 155 5.4. Strategies for Industrial Park Management & Business Support
5.4.1. Concept of Industrial Park Management
"Industrial park (complex) management" is employed to manage and nurture industrial parks by allowing companies that manufacture or process commodities to move as well as supporting institutions. It supports the industrial parks, which are developed according to the law. In addition, it includes the installation, maintenance, repair, improvement of necessary facilities in industrial parks, and sale and lease of land. Its activities are as follows (see Figure 2-29 ).
- Establishment and execution of basic plan for industrial park management - Establishment and operation of plans for public and support facilities - Sales, lease, and after-sale management of industrial land and moving into the industrial parks of resident companies - Establishment, sales, and lease of facilities, which are for resident companies and supporting organizations - Supply of water, electricity, steam, gas, and oil for tenant companies and supporting organizations - Collection of expenses from users due to installation, maintenance, repair, or improvement of industrial facilities - Industrial structure improvement - Support for funds, technology, personnel, sales channels, etc. for tenant companies - Establishment of eco-friendly industrial park and prevention of environmental pollution
156 2017/18 Knowledge Sharing Program with Paraguay [Figure 2-29] Concept of Industrial Park Management
Clustering of Industrial park Management, maintenance and Integrated environmental • T echnical exchange and joint repair of the Industrial park management research among firms • Promotion of master plan for • Management of environmental • Network with other industries management facility • Network among industry, university, • Maintenance of the facilities •Building of Eco-Industrial Parks institute and government • Sales and lease of land •Scenery management
Support for local industry fostering Upgrade of Industrial structure • Local strategic industry-oriented support •Upgrade of the structure of Management of • Linkage with local industrial industrial parks Industrial Complex promotion programs •Regeneration of industrial parks •Cooperation with local industry supporting institutions
Reasonable linkage with spaces Support for business operation • Linkage with urban development • Support of funds, human resources, Attraction of enterprises plans and ICT introduction and expansion of • Infrastructure expansion and • W elfare support arrangement • Development of logistics and overseas investment • Analysis on linkage with urban overseas sales channels development plans
Source: KICOX, Industrial Location Handbook (2016, 2017).
5.4.2. System of Industrial Park Management
The Minister of Industry and Commerce will establish the following items for the management of industrial parks, establish management guidelines through the deliberation of the Industrial Cluster Policy Council, and notify them. - Mat ters concerning the establishment and change of the basic plan for industrial accumulation activation - Matters concerning the designation plan of the attraction area - Matters concerning the establishment and amendment of guidelines for industrial park management - Matters concerning the establishment and change of the plan for upgrading the structure of The industrial park - Matters concerning industrial integration activation and industrial park management
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 157 When an industrial park is developed under the act, Paraguay’s Minister of Industry and Commerce establishes and implements the basic plan for industrial park management, as prescribed by the act.
5.4.3. Basic Plan for Industrial Park Management
To systematically manage an industrial park, a “basic management plan” for the industrial park is required. This includes the types of target industries and their qualifications, usage plans for industrial parks, allocation plans for facilities and industries, installation and operation of support facilities, and the follow-up management plan after moving into a park.
The basic plan for the management of industrial parks is not included in the Paraguayan industrial park law enacted in 2013. However, the “Industrial Park Management Guideline” based on this law should be prepared and used as a basic plan for industrial park management that is established accordingly. In other words, after establishing the industrial park management agency of Paraguay’s MIC, it should be notified after approval by the industrial park manager (Minister of Industry and Commerce). The following items should be included in the basic management plan for the industrial park.
- Matters concerning the area of the industrial park to be managed - Matters concerning the qualifications of the type of business and resident company - Regarding the use area of the paper in the industrial park - Matters concerning the arrangement of factories by industry - Matters concerning the installation and operation of support facilities - Matters necessary for the management of other industrial parks
5.4.4. Establishment of Industrial Park Management System
When the industrial park is developed, the MIC should set up an industrial park management agency, manage the following industrial parks, and support the businesses of the tenant companies with legal or management guidelines.
Industrial Park Management
- Establishment and enforcement of the basic plan for industrial park management under the provisions of the law - Establishment, establishment, and operation of plans for public facilities, support facilities, and public facilities - Sale and lease of industrial land, post-management thereof, and occupancy of
158 2017/18 Knowledge Sharing Program with Paraguay industrial parks - Establishment, sale, and leasing of factories and other facilities for tenant companies and supporting organizations - Water, electricity, steam, gas, and oil supply businesses for tenant companies and supporting organizations - Collection of expenses from users due to the installation, maintenance, or improvement of industrial land and facilities - Support for funds, technology, labor, market, etc. for tenant companies - Establishment of eco-friendly industrial park and prevention of environmental pollution - Security for facilities in industrial parks and prevention of industrial accidents - Other operations of industrial parks and necessary work to support production activities of tenant companies
Supporting for tenant companies
- Business related to the welfare promotion of employees - Wate r supply business, industrial accident prevention business, and environmental pollution prevention - Education and training - Business to be held in the exhibition hall - Joint sales and purchasing business of tenant companies' products - Other projects to promote export and productivity of tenant enterprises
shows examples of the functions to be carried out by the above organization (e.g., the Korea Industrial Complex Corporation).Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 159
Functions of Industrial Complex Management InstitutionClassification Function Contents ① Establishment and execution of basic - Division management by use, support for industrial management plan of upgrading, etc. Industrial industrial complex Complex - Industrial land sale and lease contract Management ② Sale, lease and (recruitment, evaluation, factory registration, etc.) follow-up of industrial - Disposal, lease, auction acquisition, register park acceptance etc. - Re-sale of industrial land for non-business purposes - Academic and research institute network (coordinator, broker) ① Building and - Technology development, technology exchange, operation of industrial technology transfer support cluster - Cooperation among overseas clusters, export and marketing support - Network Hub and Innovation Cafe operation ② Location of SMEs and - Operation of small business incubation center operation of industrial - Operation of small and medium enterprise lease integrated facilities complex ③ Support for - Construction and operation of joint logistics center installation of - Construction of comprehensive support center enterprise support Water and steam supply infrastructure - Parking lot, guide map - Financing support (industrial complex activation ④ Supporting fund, regional industrial balanced development production fund, etc.) Resident management - Labor support (job placement center, holding job- Company activities Support hunting meeting event) - Operation of foreign investment zone ⑤ Attracting foreign - Presentation of investment environment of investment industrial complex (foreigners, CEOs, etc.) - Building and operation of industrial complex portal ⑥ Information on site industrial park - Establishment of factory establishment information network, online certificate issuance, etc. ⑦ Statistical survey/ - Analysis of management status and industry trends analysis (monthly operation status, quarterly forecast, etc.) - Construction and operation of rental apartment for workers ⑧ Construction and - Construction and operation of daycare facility operation of welfare (daycare center) facilities for workers - Construction of athletic field and sports facilities - Construction and operation of workers’ welfare center
Source: KICOX, Industrial Location Handbook (2011, 2012).
160 2017/18 Knowledge Sharing Program with Paraguay 5.5. Investment Attraction Strategy
To activate Paraguay’s industrial parks, investment from foreign companies is urgently needed along with investment in Paraguay. Given the weaknesses of technology-based manufacturing in Paraguay, attracting foreign direct investment (FDI) is an urgent task.
5.5.1. Improvement of Investment Attraction Organization
The investment promotion organization is placed in the Ministry of Industry and Commerce, but it is desirable to guarantee independence. The effect of the investment attraction activity is determined by the method with which it is implemented. The investment promotion organization should not be for the organization or its employees, but for the economic personnel of the private sector to participate in the decision-making process.
5.5.2. Network-based Investment Attraction
The investment of the industrial park should be made through the networking and utilization of related agencies and personnel as well as the independent promotion and attraction of the state government. In network-based investment attraction activities, cooperation is needed in three areas: the development of investment attraction products (industrial park development), investment marketing activities, and various service activities for investors.
The targets of the network are the central government, Department government, industrial park developers, public relations agencies, small and medium enterprise support organizations, financial institutions, and major domestic enterprises. In this process, it is important that investment co-operation accompanied by a financial relationship clearly states the contents and conditions in advance and agrees on it with each other.
5.5.3. Introduction of Investment Promotion Capacity
The person in charge of attracting foreign investment should have the knowledge and ability to work. However, it is difficult to expect all the officials to cultivate these qualities and abilities. Therefore, after selecting a small number of elite candidates, they should be given education and training at professional organizations to nurture them as leading experts in foreign investment attraction.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 161 5.5.4. Enhance Follow-up Management of Investment Companies
Until now, most investment promotion policies have focused on attracting companies and have tended to neglect support for companies that have already invested. However, it is important to follow-up on existing investments as well as new investments. To this end, it is necessary to create a company-specific management card for investment companies and regularly visit them for systematic follow-up management.
In addition, it is desirable for the governor (or MIC minister) to invite investor companies or related organizations to provide information and administrative support after the investment, such as holding a conference and designating a dedicated public official.
6. Policy Recommendations 6.1. Policy Tasks
As mentioned above, there are various tasks for the economic and industrial development of Paraguay, which are presented from the viewpoint of national economic, manufacturing, and industrial park perspectives.
First, from the national economic perspective, MERCOSUR with neighboring countries, such as Brazil and Argentina, should be utilized actively and to diversify the export market, which is dependent on the two countries. From a mid- to long-term point of view, the logistics, industrial, information, and distribution infrastructures should be constructed for economic development. In addition, the industrial structure should be upgraded by cultivating manufacturing at the agricultural center. To achieve this, Paraguay must develop the human resources necessary for economic development by utilizing the strengths of the young population and expand the base for attracting FDI.
Second, from the perspective of the manufacturing industry, it is necessary to cultivate the parts industry aimed at the Brazilian and Argentinean markets by utilizing the geographical advantages and the cheap labor force while increasing added value by processing agricultural and livestock products. Efforts are also needed to diversify export items.
Third, industrial parks are a key means of realizing Paraguay's economic development. Therefore, it is indispensable to develop industrial parks and build clusters to select strategic industries that match regional characteristics. For this
162 2017/18 Knowledge Sharing Program with Paraguay purpose, it is necessary to establish an industrial park development model suitable for the situation of Paraguay to select candidate sites based on it, develop industrial parks, and activate the industrial parks through the management of the developed industrial parks and clusters.
6.2. Policy Direction of Industrial Parks
The direction of industrial location policy for industrial park development and industrial park activation is as follows.
First, strong and sustained support for industrial park development and management at the central government level must be achieved.
Second, after considering the National Development Plan 2030, Regional Industry Development Plan, etc., it would be desirable to select a strategic industry and set up a roadmap for the development of mid- to long-term industrial parks based on this plan.
Third, to revitalize the development/management/clustering of industrial parks, Paraguay's current laws and systems need to be complemented. In other words, although there is an industrial park law, its concreteness as a procedural law for industrial park development is insufficient. Therefore, Paraguay should complement the current industrial park law as well as related systems by benchmarking Korea's "Industrial Location and Development Act" (development-related) and “Industrial Cluster Activation and Factory Establishment Act”(management-related).
Fourth, it is necessary to establish guidelines for industrial complex development to strengthen the enforcement power of the Industrial Park Law and to solidify the procedures related to industrial park development.
Fifth, industrial park development and the attraction of enterprises should be promoted by developing incentives for industrial park developers and resident companies (see above for the Korean experience).
Sixth, after developing industrial parks, it is necessary to establish an exclusive agency (industrial park management organization) for efficient management and business support.
Finally, industrial parks should be developed into competitive innovation clusters by providing R&D and business support as well as production functions.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 163 6.3. Development Strategy for Industrial Parks
The strategies for industrial park development from an industrial policy perspective are as follows.
First, industrial park development should be expanded to facilitate clustering through the grouping of the same or related industries, prevent imprudent development, and facilitate systematic pollution management through joint pollution prevention facilities.
Second, the development strategy for industrial parks in Paraguay should be led by the government with a strong commitment to the development, management, and support of industrial parks.
Third, Paraguay requires small- to medium-sized industrial parks that process agricultural and livestock products rather than large industrial complexes. It is also necessary to develop free-trade industrial parks that produce automotive parts in the regions adjacent to the borders, targeting the markets of Brazil and Argentina. In addition, it is desirable to nurture urban-type industrial parks, such as Asuncion, that produce consumer goods near large cities.
Fourth, because of a lack of financial resources, it is necessary to develop intensive bases in the neighboring areas of metropolitan cities first, and then spread them to the whole country.
Fifth, the industrial parks should be developed as industrial complexes with R&D and residential as well as production functions.
Finally, after selecting strategic industries according to regional industrial development plans, specialized industrial parks should be developed to support them.
164 2017/18 Knowledge Sharing Program with Paraguay References
Anival G.K. (2018), Parques Industriales, MIC. Bruno Duarte (2018), The strategy of Paraguay's industrial cluster, KDI. Carlos A.O. Fernandez (2017), Lao MIPYMES en Paraguay, MIPYMES. Cho Sangun (2009), Strategies to Promote Urban Regeneration Policies in Incheon, Incheon Development Institute. CIA (2017), The World Factbook; Paraguay, CIA. Fatima G.A. (2017), 2017 Paraguayan Statistics, KDI. Fatima G.A.(2017), Regional Data, KDI. Fatima Gimenez (2018), KSP/KDI report 2017; Paraguayan Statistics, KDI. German–Paraguayan Chamber of Industry and Commerce, 2016/17 Business and investment guide in Paraguay, GPCIC. Haneda Y. (2014), EDEP and Cluster Strategy in Paraguay, JETRO. Heo, M. et al. (2012), Enhancing the Competitiveness of Outdated Industrial Complexes Using the Industrial Complex Vitality Index, KIET. Hur, Donghoon (2009), Appropriate Investment Inducement Policy for Songdo Innovation Cluster, Incheon Development Institute. IMF (2018), Paraguay, IMF. Jang, Chul-soon, et al. (2011), Study on Ways to Efficiently Provide Infrastructure for Industrial Parks – Report for MOLTMA. JETRO (2014), Paraguay, JETRO Sensor (2014.5), JETRO. JETRO (2014), Area report; Paraguay, 『JETRO SENSOR』 2014.5, JETRO. Juan C.M. (2017), La Marina mercante del Paraguay, Rogistro del Embarcaciones. KICOX (2007), Study on Innovation Clustering of Agro-industrial Complex, KICOX. KICOX (2011), Industrial Park Development in Korean Economy, KICOX. KICOX (2011), Integrated management manual for agro-industrial complex, KICOX. KICOX (2013), Korea Industrial Complex Directory 2014, KICOX. KICOX (2016), Industrial Location Handbook 2017, KICOX. KIEP (1996), Paraguay handbook, KIEP. KIET (2016), Policy Recommendations for Developing Industrial Clusters in Kenya, KDI. KRIHS (2008), A Study on the evaluation and operation improvement of agro-industrial complex, KRIHS.
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 165 KRIHS (2015), Policy Consultation on the Korea–Myanmar Economic Cooperative Industrial Complex, KDI. Lee, W. et al. (2008), A Study on the Improvement Policy of Industrial Complex Management in Korea, KIET. LH (2016), Guidebook of Industrial Complex Development, LH. Lim, Chongin (2011), ”The Analysis of Korean Industrial Complex,” Journal of Industrial Location Vol. 42, KICOX. Lim, Chongin (2012), “Issue and Tasks of Korean Industrial Complex”, Journal of Industrial Location Vol. 43, KICOX. Lim, Chongin (2012), ”The Analysis of Korean Agro-industrial Complex,” Journal of Industrial location Vol. 44, KICOX. Lim, Chongin (2011), ”The Analysis of Korean FEZ, EFZ, IFZ,” Journal of Industrial Location Vol. 45, KICOX. Lim, Chongin et al. (2014), A Study on Analysis and Improvement of Industrial Cluster Management System, KICOX. Lim, Chongin et al. (2007), A Study on the Efficiency of Industrial Location Policies to Activate Industrial Cluster, KIET. Lim, Chongin et al. (2014), A Study on Supply and Management of Industrial Location for Promotion of Regional Industrial Development, KIAT. MIC of Paraguay (2017), Industry Overview, MIC. MIC of Paraguay (2017), Paraguay: Land of Opportunities, MIC. MIC of Paraguay (2017), Industrial Mcal Francisco Solano Lopez, MIC. MIC of Paraguay (2017), Paraguay; El Secreto Mejor Guardado de Latinomerica, MIC. MIC of Paraguay (2018), Paraques industriales, MIC of Paraguay. MIPYMES (2016), Taller Sobre Politicas de desarrollo de las pymes, MIPYMES. MIPYMES (2017), Informe; Programa de desarrollo em [resarial para las pequenas y medianas empresas] (PR-0100), MIPYMES. MKE and KICOX (2012), Economic Development Modularization Project 2011: Industrial Complex Development Strategy and Case Studies, KICOX. PYMES (2018), INFORME, PYMES. REDIEX (2017), Paraguay; Land of opportunity, REDIEX.
166 2017/18 Knowledge Sharing Program with Paraguay Rio Tinto Alcan (2010), Economic impact study of a new park for heavy industry in Paraguay, E&B data. Secretaia Tecnica de Planificacion del Desarrollo Economico y Social, Plan Nacional de Desarrollo (2018); Paraguay 2030, STPDES. UN Comtrade (2017), 「 Trade of Paraguay 2017」, UN Comtrade. UN ECLAC (2017), Paraguay, UN ECLAC (Economic Commission for Latin America & Caribbean). UN ECLAC (2014), Study on inclusive development in Paraguay, UN ECLAC. UN Comtrade (2017), UN Data of Paraguay, UN Comtrade. Wikipedia (2017), Economy of Paraguay, Wikipedia. World Bank (2017), Doing Business 2017, World Bank. Youngwhy Yu (1998), Korean Industrial Complex, KRIHS. Yukiko Haneda (2004), 「 Seminar on EDEP(National Economic Development Survey of Paraguay) and Cluster Strategy」, JETRO.
http://www.bcp.gov.py http://www.dgeec.gov.py http://www.cia.gov http://comtrade.un.org http://data.un.org http://www.imf.org http://industryland.or.kr http://www.kicox.or.kr http://www.koica.go.kr http://www.kotra.or.kr http://www.motie.go.kr http://www.msip.go.kr http://www.rediex.gov.py http://www.wikipedia.org
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 167 http://www.wikipedia.org http://unstats.un.org http://ivanstat.com/ja/profile/py.html http://top10.sakura.ne.jp/Paraguay-p14.html http://fr.ebdata.com/wp-content/uploads/2014/02/EBDATA-Heavy-Industry-ParkEconomic- Impact-F-Dec-2010.pdf http://www.imf.org/en/News/Articles/2017/07/24/pr17295-imf-executive-board-concludes- 2017-article-iv-consultation-with-paraguay(IMF2018Paraguay) http://www.mic.gov.py/mic/site/mic/pdf/parque_industrial/ley%204903.pdf https://theodora.com/wfbcurrent/paraguay/paraguay_economy.html(CIA) http://www.ahkparaguay.com/fileadmin/ahk_paraguay/RRPP/Publicaciones_tematicas/ Business___Investment_Guide.pdf http://data.un.org/CountryProfile.aspx?crName=PARAGUAY
168 2017/18 Knowledge Sharing Program with Paraguay ReferencesAppendix
Appendix 1: Location Conditions by Industry
Location Conditions by Industry
Industry Location Conditions Food processing - Accessibility of raw material production area is important non-metallic minerals, - If raw materials are imported, they are located near the import port wood processing - Available anywhere with labor and water conditions Textiles - Apparel industry needs good access to market Leather - Located adjacent to rivers or oceans for wastewater treatment - Automated production of pulp, papermaking, and punching process is an energy-intensive industry with favorable capital-intensive Paper equipment and pollution-inducing industries. - Therefore, there is a region where the power supply is abundant and the damage from water pollution can be minimized. - Naphtha raw material, since ethylene is a liquid and vapor phase, Petrochemicals forms Kombinat, mainly naphtha cracking facility - Fine chemicals are important to supply clean water Synthetic resin - Close to the market Rubber products - Land, electricity, and labor force - Deep harbors are essential for the transportation of iron ore. Steel - Since special steel requires significant electric power, it has an abundant power supply and is located near the market. - Port facility is essential because of high import dependence of ore Nonferrous metal - Whether it is rich in power and water - Because horizontal and vertical division of labor for materials – parts – finished goods, and systematization are required, coordination with related production, large-scale land, and labor are very important Machinery - However, the computer industry should avoid humid or salty areas and soft ground. It should be located where it is easy to secure skilled artisans. - No large sheets required - Can be located in any area where there is no humidity, salt, or pollution. Electronics - However, we prefer a region where the related industries are concentrated and can pursue accumulated profits, with abundant labor power, and with high accessibility of airports. - As the assembly industry has a large effect on related industries, it is Automotive important to link with parts factories. - Securing large-scale paper is the most important location requirement Shipbuilding industry, - Deep-water area where large ships can enter oil refining
Source: LH, Guidebook of Industrial Complex Development (2011, 2012).
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 169 Appendix 2: Questionnaire for Selection of Industrial Park Candidate
※ Please answer for each candidate
A.2.1. Introduction
① Site Name: ② Location (Include a brief map): ③ Scale: ha ④ (Target) industries to attract: ⑤ Special features of the site:
A.2.2. Necessity of development
※ Legend for Answers (3. & 4.)
-2 -1 0 +1 +2 Not at all Not much So-so Yes It really is/can Very bad Bad Moderate Good Very good Very poor Poor Moderate Sufficient Highly sufficient
① Is it necessary to develop an industrial complex in that area? ( ) ② If it is developed, can it secure sufficient demand for the location? ( ) ③ Is it connected with related plans, such as the regional (city) development plan? ( ) ④ Is it connected with the infrastructure construction plan? ( )
A.2.3. Review for Selection of Candidates
① Physical conditions: Elevation ( ), slope ( ), wetland ( ), hilly land ( ) ② Ease of land acquisition: Estimated land price ( ), public land area ( ), settlement or other facility ( ) ③ Socioeconomic conditions: Accessibility of back cities ( ), accessibility of R&D facilities ( ), access to transportation facilities ( ) ④ Development constraint conditions: Is there no aircraft noise, water source protection, cultural property protection, natural environment preservation, development restrictions, military facility
170 2017/18 Knowledge Sharing Program with Paraguay protection, or flight altitude restrictions? ( ) ⑤ Review of related plans: Regional planning, urban planning, infrastructure projects, such as roads, ports, and airports. ( )
A.2.4. Assessment of Candidate (Most Likely) to be Selected
① Land: Land price (rent) ( ), site availability ( ), spatial expansion possibility ( ) ② Raw materials and parts: Distance from raw material production area ( ), Accessibility of parts and material suppliers ( ) ③ Transportation: accessibility of Roads ( ), ports ( ), airports ( ), access to supply points ( ) ④ Labor force: Availability of labor ( ), wage level ( ), labor productivity ( ), labor relations (union activity) ( ) ⑤ Market: Market size (or potential) ( ), access to the product sales market ( ) ⑥ Information: Accessibility of corporate management information ( ), accessibility of administrative organizations ( ), accessibility of universities or research institutes ( ) ⑦ Infrastructure (quantity and quality): Utilities such as electric power, water, gas, steam ( ), waste, and wastewater treatment facilities ( ) ⑧ Services: Access to production technology services ( ), Utilization of business support services ( ), Utilization of administrative services ( ) ⑨ Policy: Tax relief ( ), financial support ( ), deregulation ( ), policy incentives ( ) ⑩ Others: Attitudes of local residents ( )
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 171 A.2.5. Demand for Support Facilities
※ How much is required for the following facilities? (Required: ○, Medium: △, Not required: ×)
A.2.5.1. Public support facilities
① Public administration: Government office ( ), police box ( ), fire station ( ), tax office ( ), customs office ( ), labor office ( ) ② Management and operation: Industrial complex management agency ( ), safety (guard) management ( ) ③ Post/Telecommunication: Post office ( ), telephone office ( ) ④ Financial institutions: Banks, etc. ( )
A.2.5.2. Production activity support facility
① R&D: Production/Technology research institute ( ) ② Product inspection: Industrial inspection office ( ) ③ Logistics/Warehouses: Logistics center ( ), distribution center ( ), packaging center ( ), bonded warehouse ( ), general warehouse ( ) ④ Vehicles/Transportation: Vehicle garage ( ), car wash ( ), car attachment ( ), gas station ( ), cargo terminal ( ) ⑤ Exhibition ( ) ⑥ Supply and Processing: Power plant ( ), power substation ( ),j wastewater treatment plant ( ), sewage end treatment plant ( ), raw material storage ( ) ⑦ Production facility: Lease (standard) factory ( ) ⑧ Business support: Chamber of Commerce ( ), associations ( ), business support center ( )
172 2017/18 Knowledge Sharing Program with Paraguay A.2.5.3. Welfare support facilities
① Education and Training: Vocational training center ( ), working youth school ( ), Corporate training center ( ) ② Welfare: Welfare center ( ), women's welfare center ( ), working youth center ( ), nursery ( ) ③ Housing: Employee apartments ( ), rented apartments for workers ( ), dormitories ( ), studios ( ) ④ Medical care and health: Public health center ( ), hospital ( ) ⑤ Neighborhood life: Convenience store ( ), gymnasium ( ), playground ( ) What other support facilities are needed? ( )
Chapter 2 _ The Development Strategy for Paraguay’s Industrial Park 173
2017/18 Knowledge Sharing Program with Paraguay: The Policy Consultation on Development of Industrial Park Chapter 3
Regional Industrial Development Strategy for Paraguay
1. Introduction 2. Analysis on Paraguay’s Industrial Structure and Strategic Industries 3. Korea’s Experience in Regional Industry Strategy Development 4. Selection of Regions and Target Industries for Paraguay 5. Policy Recommendations and Conclusion ■ Chapter 03
Regional Industrial Development Strategy for Paraguay
Hee Jin Yoo (Anyang University)
Summary
This chapter will mainly analyze Paraguay’s current industrial structure and regional industrial policy, and propose policy recommendations based on Korea’s development experience during the development of its regional industrial strategies. The chapter is composed of following five sections.
Section 1 will set out the aim, scope and need of the study. It will build on Paraguay’s “National Development Plan (NDP) 2030” (2014-2030) by focusing on the country’s regional industrial development strategy. The focus of the study will lie in suggesting strategies to develop manufacturing sector (including processing of agricultural products), a roadmap of regional industrial development, and possible policy options for regional industrial development in Paraguay.
Section 2 provides an overview of Paraguay’s industrial structure and selects its strategic industries. This study mainly uses sectorial contribution in ratio to analyze Paraguay’s industrial structure. To locate strategic industries by sub-sectorial units, this study uses economic statistics, data from the Ministry of Industry and Commerce of Paraguay, the contents from discussions during the visit to Paraguay, and the National Development Plan.
Keywords: Regional Industrial Development, Strategic Industry, Paraguay’s Economy, Paraguay National Development Plan 2030 (Plan Nacional de Desarollo Paraguay 2030), Industrial Park
176 2017/18 Knowledge Sharing Program with Paraguay Section 3 gives an overview of Korea’s regional development policies and two selected cases – Iksan’s jewelry and precious metal industry and Busan’s footwear industry – are introduced based on assessment of Paraguay’s strategic industries, and highlights implications for Paraguay.
Section 4 deals with the industrial environment (e.g., general information, economic aspects, main items, industrial context, and analysis of two selected cities) of four selected regions in Paraguay – Alto Parana, Concepcion, Itapua, and Guaira. And it will allocate strategic industries of each region according to the relevance of economic activities.
Lastly, Section 5 concludes by proposing overall roadmap to regional development in three phases. By matching strategic industries and target regions, this part will provide policy recommendations for the central and regional governments to foster balanced regional industrial development of Paraguay.
1. Introduction 1.1. The Aim and Scope of the Study
The term “regional development” has evolved over the years depending on its related policies. OECD defines the term as a “general effort to reduce regional disparities by supporting economic activities (employment and wealth-generating) in regions” (OECD, 2018). While the definition targets on reducing regional disparities, this study will focus on possible plans for developing regional economy and fostering strategic industries of each region. Based on the evaluation of current status of Paraguay, this study will propose strategic industries serving as a driving force for regional economic growth. The followings are the main features of the study:
1) The study will aim to find out the key factors of regional industrial development by considering Paraguay’s “National Development Plan (NDP) 2030” (2014-2030); 2) The study will focus on fostering manufacturing, agriculture, and agro product processing industries; 3) The study will select target regions and propose strategic industries for each target regions; 4) The study will provide a roadmap for regional industrial development in Paraguay; and 5) The study will suggest specific programs for regional industrial development by 5-year period.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 177 Due to limited information and data, selective industries will be used as an index of regional development. It will measure effectiveness, efficiency, and equity of the regional industries to prevent overlaps in investments.
1.2. The Need for the Study
In December 2014, Paraguayan government adopted the “National Development Plan (NDP) 2030” (2014-2030) that elaborates strategic objectives and policy priorities of overall development of Paraguay. The “National Development Plan (NDP) 2030” (2014-2030) is comprised of three pillars: 1) poverty reduction and social development; 2) inclusive economic growth; and 3) inclusion of Paraguay in global markets. According to the President’s report, some advances have been made since “National Development Plan (NDP) 2030” (2014-2030)’s inception. In terms of industrial development, the national plan contributed to increase in foreign investments in Maquila region and developing agricultural technology.
According to the Fourth Trade Policy Review (TPR) of Paraguay, prepared by the Secretariat of the World Trade Organization (WTO), Paraguay’s economy has performed robustly for the period of 2011-2016, showing real GDP growth at an average annual rate of 4.7% (WTO, 2017). The sectoral compositions of GDP in 2016, with no significant change from the past period, are services sector (55.4%), manufacturing (12.9%), agriculture (11.9%), construction (10.8%), and livestock (7.2%) (WTO, 2017).
The sectoral compositions of employed population in 2015, with no significant change from the past year, are as follows: agriculture, livestock, hunting and fishing (20.1%); manufacturing, mining and quarrying (12.3%); electricity, gas and water construction (6.7%); construction (6.7%); commerce, restaurants and hotels (26.6%); transport, storage and communications (3.9%); finance, storage and communications (3.9%); finance, insurance, and real estate (5.4%); and community, social and personal services (24.5%) (WTO, 2017).
Considering Paraguay’s current economic structure, Paraguayan government seeks to determine key factors for regional industrial development by benchmarking Korea’s experience. Korea is known for its rapid transition from an agricultural-based economy to knowledge and technology intensive economy, and various industrial policies contributed to its transformation. Building on Korea’s experience, this study hopes to provide policy options for Paraguay’s regional industrial development, which will also contribute future economic development of Paraguay.
178 2017/18 Knowledge Sharing Program with Paraguay 2. Analysis on Paraguay’s Industrial Structure and Strategic Industries 2.1. Paraguay’s Industrial Structure
The WTO assessed that Paraguay’s real GDP growth has depended on the agricultural sector (WTO, 2017). Decrease in GDP growth rate (-1.2%) in 2012 was due to decline in agricultural production, which caused by severe drought. On the other hand, increase in GDP growth rate in 2013 by 14% was resulted due to rise in agricultural production.
Although the contribution of agricultural sector to employment declined over the years, the sector remains most influential in terms of employment in Paraguay as it occupies around 25% of the employment (WTO, 2017).
Paraguay’s trade in goods and services (non-factor services) amounted to 83.7% of GDP in 2016. The annual growth rate of exports (GDP by type of expenditure) between 2011 and 2016 was 3.7% (WTO, 2017).
shows that export growth rate is highly volatile. The WTO indicated that this is due to the dependency on world’s raw material prices as well as external trends. Annual Growth Rate of Exports of Goods and Services(unit: %) Year 2011 2012 2013 2014 2015 2016 Growth Rate 6.2 -6.7 18.4 4.3 -1.3 3.0
Source: WTO (2017).
As for the structure of Paraguay’s merchandise export between 2011 and 2016, commodities account for almost 90% of exports, and majority of them are composed of agricultural and food products which accounts for 60% of merchandise export in 2016. Top three agricultural and food products exported are soya beans and soya byproducts such as seed cake and oil (36.9%), beef (13.6%), and cereals (8.1%) (WTO, 2017). The bottom 10% of exports are in chemical products, leather articles, textiles, and clothing and the rate has remained the same during the period between 2011 and 2016.
The next part will assess regional industries in Paraguay and strategic industries that should be targeted in the first phase of the regional development plan. The list of local industries is drawn up by the higher ratio in exports in terms of HS section. Building on what is stated in the “National Development Plan (NDP) 2030” (2014- 2030), this study aims to propose a roadmap moving from current local industries to
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 179 the strategic industries in the future. Considering the availability of statistical data on Paraguay’s production at the regional and national level, this study will use export statistics instead.
2.1.1. Assessment of Regional Industries in Paraguay
In 2016, Paraguay’s exports amounted to 8,494 million USD. The top five industries by HS sections in terms of exports are: 1) live animals and animal products; 2) vegetable products; 3) animal or vegetable fats and oils; 4) prepared foodstuffs and beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes; and 5) mineral products.
As seen in
, with exception of Section 4 of HS, 77% of Paraguay’s exports are focused on agricultural and mineral products. These products require low level of processing and are not value-added products. Also, this export structure has not changed between 2011 and 2016. Changes in Export Ratio of Regional Industries in Paraguay by HS Section (unit: %) 2011 2012 2013 2014 2015 2016 1. Live animals; animal products 10.0 11.5 12.0 15.1 15.0 14.5 02. Meat and edible meat offal 9.7 10.9 11.2 14.2 14.2 13.6 05. Products of animal origin, not 0.3 0.5 0.6 0.8 0.7 0.8 elsewhere specified or included 2. Vegetable products 39.0 37.6 36.7 32.2 29.5 31.0 10. Cereals 7.7 14.1 8.2 6.4 8.7 8.1 11. Products of the milling industries 0.4 0.4 0.7 0.3 0.2 0.4 12. Oil seeds and oleaginous fruits; miscellaneous grains, seeds and 30.7 22.9 27.7 25.4 20.4 22.3 fruits; industrial or medicinal plants 3. Animal or vegetable fats and oils 4.5 2.7 5.6 5.6 5.8 5.9 4. Prepared foodstuffs; beverages, spirits and vinegar; tobacco and 7.5 5.7 12.0 13.6 12.8 12.0 manufactured tobacco substitutes 17. Sugars and sugar confectionery 1.2 1.1 0.8 0.8 0.8 0.9 23. Residues and waste from the food 5.2 3.0 10.1 11.8 11.3 10.4 industries 5. Mineral products 29.5 31.1 24.0 22.7 25.1 25.6 27. Mineral fuels, mineral oils and 29.4 31.0 24.0 22.7 25.1 25.6 products of their distributionSource: Author, using the statistics of WTO (2017), pg. 132.
180 2017/18 Knowledge Sharing Program with Paraguay 2.1.2. Assessment of Strategic Industries in Paraguay
lists 7 HS sections proposed as strategic industries for Paraguay. These are expressed in the nomenclature of HS sections to show contrast of export ratios against the industries already in place. The same industrial classification will be used to explain selection of strategic industries in Section 2.2. Export Ratio of Strategic Industries in Paraguay (unit: %) Industries (by HS Section) Export Ratio 4. Prepared foodstuffs; beverages, spirits and vinegar; tobacco and 12.0 manufactured tobacco substitutes 6. Products of the chemical or allied industries 1.4 7. Plastic and articles thereof 1.0 11. Textiles and textile articles 1.5 12. Footwear, headgear, umbrella, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof; prepared feathers and articles 0.1 made therewith 16. Machinery and mechanical appliances; electrical equipments; parts 2.0 thereof 17. Vehicles, aircraft, vessels and associated transport equipment 0.5Source: Author, using the statistics of WTO (2017), pg. 132.
2.2. Selection of Strategic Industries
Considering Paraguay’s current economic development and size of the economy, the regional strategic industries should align with the national strategy. It should be taken into an account that Paraguay’s current situation is very different from Korea’s case which heavily relied on heavy and chemical industries or technology intensive industries. Compare to Korea, Paraguay’s competitive advantage lies in low cost labor, power, and land. Paraguay also has favorable tax system, good export support system, and corporate management environment. Given these factors, it would be reasonable to choose strategic industries among the sectors where low production cost constitutes an important element of competitive advantage.
However, this study will select regional strategic industries by focusing particularly on the production cost along with each industry sector’s contribution to the overall export, employment, and resource utilization. To select strategic industries, analysis were made based on the statistics provided by the Government of Paraguay on what
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 181 they consider as promising industries. Ideas were brainstormed through meetings and discussions held in Paraguay and Korea during the project period, and officials from the Ministry of Industry and Commerce of Paraguay (MIC) actively participated in the discussion.
shows the list of sectors identified in MIC’s proposal, meetings between MIC and Korean researchers, and the “National Development Plan (NDP) 2030” (2014-2030). In the table, industrial sectors are classified into two-digit divisions in accordance with the International Standard Industrial Classification of All Economic Activities (ISIC) Revision 4 (United Nations, 2008), and the industries are limited to Divisions 10 to 32 in ‘Section C Manufacturing’.1) Through the series of discussions with government officials, Divisions 10, 13, 14, 15, 20, 21, 22, 24, 25, 26, 27 and 29 were identified as strategic industries for Paraguay. Proposed Industrial Sectors and Conclusion Based on the Discussion between Paraguay Officials and Korean ResearchersNational Brainstormed in Divisions Proposed by MIC Development Plan Meetings 2030 10 Food products Food industry Agro-food industry - 11 Beverages - - - 12 Tobacco products - - - 13 Textiles Textile - - 14 Wearing apparel Clothing Clothing Apparel Leather and related Leather and 15 Footwear Footwear products footwear industry Wood and of products of wood and cork, except 16 furniture; manufacture of - - - articles of straw and plaiting materials 17 Paper and paper products - - - Printing and reproduction 18 - - - of recorded media Coke and refined petroleum 19 - - - products Chemicals and chemical 20 Chemical products - Chemicals products
1) Division 33 (repair and installation of machinery and equipment), which is part of Section C Manufacturing is not included in the scope.
182 2017/18 Knowledge Sharing Program with Paraguay
ContinuedNational Brainstormed in Divisions Proposed by MIC Development Plan Meetings 2030 Pharmaceuticals, medicinal Pharmaceuticals, 21 chemical and botanical - - cosmetics products 22 Rubber and plastic products Plastics - - Other non-metallic mineral 23 - - - products Metallurgical 24 Basic metals and light metal - - mechanics industry Fabricated metal products, 25 except machinery and - - Metal products equipment Computer, electronic and 26 Electronics Electronic parts - optical products 27 Electronical equipment - Electrical products Electrical appliances Machinery and equipment 28 - - - n.e.c. Motor vehicles, trailers and 29 Auto parts Auto parts Auto parts semi-trailers 30 Other transport equipment - - - 31 Furniture - - - 32 Other manufacturing - - -
Source: Author, partly based on NDP 2030.
[Figure 3-1] shows list of sectors identified by MIC by considering its comparative advantages. The sectors are divided into four areas and three of them are related with manufacturing industry.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 183 [Figure 3-1] Specific Sectors for Paraguay with Comparative Advantage
1. Foods 2. Manufacturing
Auto parts, Textile, Soy, Meat, Fruits Leather and Shoes, Plastics, Metallic products
3. Waterway 4. Chemical Industry
Medicines, Organic and Transport Inorganic products
Source: Ministry of Industry and Commerce (MIC), 2017.
provides detailed statistics on number of establishments, employees, and gross added value for each sectors of Paraguay’s manufacturing industry as of 2010.2) Number of Establishments, Employees and Gross Added Value, according to the Divisions of the Manufacturing Industry (2010)Establishments Employees Gross added Divisions of the Manufacturing value Industry Number % Number % (in millions of gs) % Total Manufacturing Industries 22,643 100 129,531 100 10,947,693 100 10 Food products 2,948 13 31,868 24.6 2,579,655 23.6 11 Beverages 70 0.3 4,408 3.4 1,770,336 16.2 12 Tobacco products 81 0.4 2,549 2.0 712,632 6.5 14 Wearing apparel 3,416 15.1 11,368 8.8 302,120 2.8 Chemicals and chemical 20 459 2.0 4,688 3.6 970,339 8.9 products
2) The table does not provide for such information on Divisions 13 (Manufacture of textiles), 15 (Manufacture of leather and related products), 24 (Manufacture of basic metals), 26 (Manufacture of electrical equipment), 27 (Manufacture of electronical equipment), and 29 (Manufacture of machinery and equipment n.e.c.) as statistics are not available.
184 2017/18 Knowledge Sharing Program with Paraguay
ContinuedEstablishments Employees Gross added Divisions of the manufacturing value industry Number % Number % (in millions of gs) %
Pharmaceutical products, 21 medicinal chemicals and 73 0.3 3,797 2.9 622,960 5.7 botanical products
22 Rubber and plastic products 188 0.8 3,657 2.8 307,370 2.8 Non-metallic mineral 23 1,878 8.3 10,577 8.2 780,261 7.1 products
Metal fabricated products, 25 except machinery and 3,291 14.5 10,905 8.4 324,133 3.0 equipment
31 Furniture 3,131 13.8 11,389 8.8 519,970 4.7 32 Other manufacturing 7,108 31.4 34,325 26.5 2,057,918 18.8
Source: Author, modified DGEEC (2013).
2.3. Selection of Strategic Industries3)
Among the manufacturing sector, this part will examine two selected industries in Paraguay which are textiles and clothing industry and auto parts industry.
2.3.1. Textiles and Clothing Industry
The manufacture of textiles and clothing is composed of 4,442 economic units, which is equivalent to 20% of the total number of units in the manufacturing industry. Among them, 1,077 units correspond to the manufacture of textile products excluding garments, while 3,365 units correspond to the manufacture of clothing. There are 2,792 employees for the manufacture of textiles, and 9,421 for clothing. The sector is characterized by a strong presence of micro and small businesses which take up 96% of the economic units in the sector (DGEEC, 2011).
In 2012, exports of textiles and manufactured goods have reached 155 million USD representing only 2.1% of Paraguay’s total exports to the world (DGEEC, 2011). Paraguay exports its manufacturing goods to more than 40 countries, where Brazil received 45%, Argentina 18%, China 8%, and Uruguay 5% (DGEEC, 2011). In other words, these four countries received 75% of Paraguay’s total exports in textiles. In 2015, its amount of export recorded 94.5 million USD and the main shipping
3) This part was jointly written with local consultant, Mr. Victor Acosta.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 185 destinations were Brazil, Uruguay and Argentina (DGEEC, 2011).
At the national level, there is one large-scale textile production company, “Manufacturas de Pilar SA”, which is in the city of Pilar, Department of Neembucu, south of Paraguay. Around the company, there is a cluster dedicated to the production of cotton, textiles and clothing. Pilar exports 50% of its production destined mostly to the Mercosur region, and constitutes of 6,700,000 meters of fabrics and finished products such as sheets, tablecloths, and garments (Pena, 2014).
In addition, there is an important clothing industry cluster in Paraguay, concentrated mainly in the Department of Alto Parana and Asuncion. While companies in Alto Parana are not provided with enough infrastructure, transportation and logistics to capital city and surrounding cities are well systemized. Although there are many companies in the sector, businesses are concentrated in few companies; statistics shows that 10 leading apparel account for more than 90% of the total external sales (Pena, 2014). Manufacturas de Pilar SA is the only company that operates entire manufacturing line – from cotton production to clothing.
Investments from Brazil are mainly directed to the Department of Alto Parana, especially in the city of Harnandarias and Ciudad del Este, where Brazilian investors are attracted by tax benefits. The companies train workforce by themselves according to their needs, and usually operate under the maquila regime, even though they sometimes face complicated logistics. In many cases, the raw materials are imported from Asia to the port in Buenos Aires, and shipments move through the river from Buenos Aires to Asuncion or directly to Ciudad del Este and Hernandarias by road.
A study by Federation of Industries of the State of Sao Paulo (FIESP) in 2012 indicates that the cost of manufacturing jeans in Paraguay is 35% less than what it may cost in Brazil. In Brazil, a pair of jeans costs 7.75 USD for manufacturer, while 5.73 USD in Paraguay. Also, average wage of employees in the garment industry is 20% lower than Brazil and its labor laws are much more flexible. This explains why investors are interested in Paraguay’s textile industry.
Yet there are still some challenges remain in the sector. First is undervaluation of national products in the added value, especially the agricultural productivity in cotton. Second, low agricultural productivity associated with lack of skills to manage soil and technology. This causes high volatility in the price, which directly affects the income of the producers. Third, smuggled garments and high positioning of foreign brands that can be easily purchased on online are also threatening the textile industry.
The Industrial Plan of Paraguay lists ten new products that can be added to the
186 2017/18 Knowledge Sharing Program with Paraguay textiles and clothing sector to export when its comparative advantages increase.
compares the current products Paraguay exports to the new products that Paraguay wishes to export. Products and Opportunities for Export in the Clothing IndustryNew products that can be added and / or Products that Paraguay exports enhanced with latent comparative advantages
- Pants and shirts for ladies and gentlemen - Wadding of textile material (thermal insulation) - Bed, table and bathroom products - Sheets and travel rugs - Clothing in general (fashion). - Curtains for blinds - T-shirts, shorts, moletones - Ladies underwear - Vests and sets for motorcyclists - Underwear for men - Non-woven fabrics, special yarns, twine, ropes, cables - Sacks and bags for containers and packaging - Synthetic fiber yarns discontinuous - Synthetic filaments, threads and fabri c, etc. - Impregnated, coated, coated or laminated textile
Source: Ministry of Industry and Commerce (2017).
2.3.2. Auto Parts Industry
The “National Development Plan (NDP) 2030” (2014-2030) mentions auto parts sector as one of the priority sectors to generate the integration of the Paraguayan industry in the global value chains. There are mainly six companies in Paraguay, namely Fujikura, THN Paraguay, Yazaki, Sumidenso, Leoni, and EDC, which are mostly Asian origin, disembarked in Paraguay to invest more than 83 million USD in the production of electrical parts (wired) to supply Brazilian industry most of the time. Four are in the central Department (Itaugua, Mariano Roque Alonso, Capiata and San Lorenzo) and the others are in the east of the country. As is true with most manufacturing sectors in Paraguay, the automotive sector is directly related to the neighboring economies, mainly Brazil.
Having assembled the first car and the truck in 2016, Paraguay’s automotive industry made significant progress. The production of national motor vehicles in 2016 represents growth of 30% compared to 2015, where 643 vehicles have been manufactured. It achieved some progress to position as a new thriving sector in the economy. However, there is still a challenge remain in the auto parts industry. First, it is difficult to find local suppliers in raw materials for wiring. Majority of the raw materials used by the company are imported from Europe via port of Santos (in Brazil) and Montevideo (in Uruguay). According to the Industrial Plan of Paraguay, 4 new products on auto parts sector can be added to export (see Table 3-7).
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 187
Products and Opportunities for Export in the Auto Parts IndustryNew products that can be added and / or enhanced Products that Paraguay exports with latent comparative advantages
- Isolated cable, fiber optic cable - Parts and accessories of motorcycles, bicycles and vehicles - Parts and accessories of motor vehicles - Harness - Non-woven fabrics, special yarns, aircraft apparatus arts
Source: Ministry of Industry and Commerce (2017).
3. Korea’s Experience in Regional Industry Strategy Development 3.1. Korea’s Regional Industrial Development Policy: An Overview
Korea is known for its success in transforming from an agriculture-based economy to a leading industrialized economy. It is evaluated that the catching up strategy in early years of development was effective in terms of boosting growth and making a successful transformation to export-led industrial economy. This part will describe factors of the rapid development of industrialization policy or the catching up policy.
Starting from the late 1990s, Korea’s development strategy evolved into a policy factoring in regional development and multi-annual plans were adopted by individual sectors. Regional development plans such as Five-year Balanced National Development Plan (2004-2008) and the Five-year Plan for Regional Development (2009-2013) were introduced and implemented (OECD, 2012). Under these strategies, the regional development policy took the form of ‘targeting strategic industries in selected province’ on the outset (1998-2003) and expanding the type and number of industries designated to regions (2003-2008) (OECD, 2012). Starting from 2008, this strategy took another turn to aim at increasing the competitiveness of each region, leading to the inclusion of the concepts such as leading industries, strategic industries, and regional specific industries.
Local economic policies aim to revitalize the local economy by expanding the industrial base and creating jobs. Policy instruments can be divided into regional industry development, industrial complex innovation, and regional investment promotion. The policy instruments have been changed in accordance with the needs of the region.
188 2017/18 Knowledge Sharing Program with Paraguay The role of designing local economy policy by the Ministry of Commerce, Industry and Energy is stated in the Constitution of Republic of Korea Article 123 (2). It states that “the State shall have the obligation to foster the local economy for balanced development among the regions.” In the late 1960s and 1970s, imbalance between the regions increased due to state-led industrialization, which intensively focused on few strategic industries. In 1980s, the government began to foster local economies by introducing policies to regulate the capital region. Starting in 1999, the local strategic industries for local economic development were introduced in cities of Daegu (textile), Busan (footwear), Gwangju (light industry) and Kyungnam (mechanical).
Based on these initiatives, the National Balanced Development Act was enacted in 2004, and a special account was established for the balanced development (currently called “local development special account”). From 2009, the strategy worked for achieving economies of scale through the creation of a wide-scale industrial ecosystem by fostering leading industries in 5+2 metropolitan areas. Through the linkage and cooperation between industry and academia, it contributed to strengthening competitiveness. In 2013, it was confirmed that the region will lead the regional development policy of each region, which is supported by the central government in a customized and package manner. It was supported through the announcement of a new regional development policy “HOPE Project.” In addition to setting up policy direction to enhance the quality of life of local residents, it also strengthened existing regional competitiveness.
Through these regional development policies, two or more municipalities will voluntarily consult to form a real living space, a ‘local happiness living rights’, and the living infrastructure, industry, education, and culture for local development. The country has been working on cooperation projects in various fields such as medical care and welfare. It supported them through collaboration with relevant ministries. In the industrial sector, the government tried to promote local industrial development policies through cooperation. It provided an economic cooperation industry strengthening linkages among industries, regions, and institutions. For example, Gwangju, the city dominated by photovoltaic industry, Korea Advanced Institute of Science and Technology (KAIST), and Korea Electronics and Telecommunications Research Institute (ETRI) cooperated in fostering 'optoelectronics convergence industry'. In this way, the city and the province voluntarily formed an industrial ecosystem for regional cooperation. To foster industries that take regional characteristics into account, Korea also continued to nurture specialized local industries at the city, county, and country level. In addition, as the transfer of public institutions in the innovative cities became more important, it will be possible to start up local industry-related projects that link public institutions with innovative entities in local economies.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 189 On the other hand, in order to enhance the vitality of the local economy through the upgrading of the industrial complex, the government has amended and supplemented the old industrial complex innovation policy since 2009. Thereby it made the old industrial complex into the space for creativity and innovation. In accordance with the 'Strengthening the Competitiveness of Industrial Complexes' announced in September 2013, the entire production process was optimized through the fusion of IT, SW, and the Internet. Smart factory is going to increase as well.
This study is in line with the underlying approach of Korea’s experience in national and regional development policies. By matching selected regions with strategic industries, it recommends Paraguay to induce concentration of investment and resources to selected industries and matched regions.
3.2. Jewelry and Precious Metal Industry in Iksan
3.2.1. Overview
Korea adopted the regional strategy in which industries should be developed intensively in the capital region and the south-eastern regions. It was under the initiative of national economic development rather than regional economic development. In this process, some industrial complexes were allocated for the balanced development of a certain region, and the Iksan jewelry complex is one of such examples.
The Iksan Jewelry Metals Complex was constructed in 1975, when the Iksan Free Zone was established in Iksan, Jeollabuk-do, Southwest of Korea. In 1987, a second precious metal complex was established. Iryi Free Trade Zone converted part of export free trade zone into general industrial zone in 1989, changing its name to Iksan Export Free Zone in 1995, and to Iksan Free Trade Zone in 2000. In 2010, It became Iksan National Industrial Complex. As of 2018, the Iksan National Industrial Complex is 1,336,000 square meters in size. The first complex of precious metal located in Iksan National Industrial Complex is 48.3m², and the second complex is 32.1m², with a total of 87 companies. The Iksan precious metal industry accounts for 41% of the 210 enterprises in the national park in terms of business.
3.2.2. Development as a Regional Industry
On August 29, 1975, Korean government decided to nurture the industry as a specialized export industry at the 7th Expansion Promotion Conference. In November of the same year, the Iksan Jewelry Industrial Complex became No. 1 among the industrial complexes in Iksan. The Jewelry Sales Center was opened in December 1989, with 4,335 pyeong of land and 770 pyeong of floor space to secure export
190 2017/18 Knowledge Sharing Program with Paraguay competitiveness through domestic demand and smooth operating funds (Huh, 2006).
By the 1990s, precious metal companies in the complexes exported 95% of their total production value as a bonded factory and led the regional exports. In 1985, they exported 20 million dollars. As the labor cost increased, precious metal companies in Iksan moved to its factories to China or other metropolitan area in Korea. Nevertheless, 87 companies in the Iksan National Industrial Complex and 17 companies in the Iksan 3rd Regional Industrial Complex produce precious metals.
As of 2016, Iksan National Industrial Complex, which includes the Iksan Precious Metals Complex, has 4,183 employees, production amount of 3,669 billion won, and hfa export value of $ 268 million.
Furthermore, Iksan City opened Iksan Jewelry Museum in 2002, and it has the function of jewelry exhibition as well as experience education and plays a role as an essential facility for Iksan to create a cluster of earrings. In 2010, Jewel Palace, a jewelry store for precious metal jewelry, opened and about 60 jewelry excellent sellers are visiting the country. Iksan City has been producing the Guizhou stone industry from its production to sales and exhibition functions. It is cultivating the Guizhou stone industry as a local industry. Iksan, a local government entity, also includes excellent precious metal production and development companies in funding for SME development.
3.2.3. Implications for Paraguay
The precious metal industry produces precious metal products by processing the metals and stones, so it is used for materials such as money, jewelry, medals, and crafts. This allows the precious metal industry to have industrial characteristics that require labor-intensive and specialized personnel. Any country can have a competitive advantage if it has a skilled workforce.
As can be seen from the case of the Iksan Jewelry industry and complex, the Jewelry industry is an industry where younger people can do business by small- scale capitalization. It can be seen that not only as job creation but also product development, export increase, and emergence of new companies in the local community.
Therefore, Paraguay can nourish the local industry by creating a small-scale industrial complex with a rich manpower and low capital input. The precious metal industry is important for the manpower, so if the manpower of the jeweler or the precious metal processing industry article (the holder of the national technology certificate of Korea) is cultivated, the industrial base will be established.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 191 3.3. Footwear Industry in Busan
3.3.1. Characteristics and Reality behind Busan’s Footwear Industry
The footwear industry is divided into finished goods manufacturing and materials manufacturing industries. The technical and economic characteristics of the footwear manufacturing industry are low technology, low investment cost, labor intensive and difficult to protect designs. In recent years, the footwear industry has been defined as a knowledge-intensive industry rather than labor intensive because it is based on advanced materials and components.
Up until 2000, Busan was one of the regions in the world known for its footwear industry. The region’s case was considered as a model for this industry as it features standard traits. Characteristics of Busan’s footwear industry are as follows. First, Busan was once an important manufacturing base for the industry under the international division of labor. However, its importance deteriorated with the transfer of factories overseas. Second, it shifted from export-oriented growth to domestic demand. Third, the product is being reorganized from special sneakers to specialized sneakers. Fourth, mass production centered on large companies are being reorganized to SMEs. Fifth, it is changing from a simple assembly to product development ability.
Since 1970s and during Korea’s industrialization, three major fields such as textiles, footwear, and sewing have been developed in Busan area. However, since 1990, the size of the woolen industry declined. Competition with China and Southeast Asian countries is intensifying, and sewing industry is declining due to the transfer of production bases to these countries.
In Busan, however, the footwear subsidiary industry is developed and manufacturers with functional processing technology are concentrated. It is considered to be at the highest level in footwear production technology. As of the end of 2012, Busan has 236, or 45.7% of the nation's footwear manufacturers, with 6,053 employees, or 48.3% of the nation's employees in manufacturing (Shoenet, 2015). The footwear industry was selected as top 10 strategic industries in 1999-2003, and again in 2004-2008 as it was recognized as a promising industry and contributes to local upbringing.
3.3.2. Development as a Regional Industry
The Busan footwear industry was a regional industry that trailed the Busan’s economy by becoming the world's largest footwear production base with export- oriented growth from the early 1970s to the mid-1980s. Nike and other leading OEM manufacturers have become main industries that developed Busan's economy by
192 2017/18 Knowledge Sharing Program with Paraguay increasing employment, exports, and production scale.
Since late 1980s to 1999, 54 overseas companies moved 229 production lines to overseas, and after that, they continued to export overseas. In 1999, the number of overseas footwear companies increased by 229, and the production line was transferred overseas. During the 1991-1999 period, over 200 overseas companies transferred 1,500 production lines overseas (Lee, 2002).
The Busan footwear industry, which has undergone such structural changes, has been selected as a strategic industry by the promotion of regional balanced development initiated in the latter half of 1990, and continues to develop into a local industry. However, the effects of regional economic such as job creation and exports were significantly lower than before (Ministry of Trade, Industry and Energy, 2010). Since 1999, the government's regional strategic industries have been expanding into 36 strategic industries, including Busan (footwear), Daegu (textile), Gwangju (light). It was a policy goal to enhance the competitiveness of regional industries and to strengthen regional innovation system by inducing the development of regional specialization through upbringing business and revitalizing industrial cluster formation centering on regional strategic industries. The regional strategic industry development project was carried out from the Phase 1 (1999-2003) to Phase 2 (2004- 2008). In Phase 1, Busan footwear industry was selected to upgrade its project by receiving government funding for revitalization of its industry.
In Phase 2, the regional nurturing industry project emphasized the competitiveness of the regional level and developed a strategy through the establishment of local innovation system. It has been evaluated that the Busan footwear industry accomplished in enhancing competitiveness of companies by developing new products, high value of footwear, and cultivating professional manpower. It has also been evaluated as an opportunity to develop high-tech footwear industry that combines new technology and new materials to prepare for further industrial development. Busan Footwear Industrial Promotion Center was established in 2004 during the policy promotion period and secured a full organizational support for footwear manufacturers.
3.3.3. Implications for Paraguay
The case of the Busan footwear industry has three implications. The first is that the characteristics of the footwear industry are well suited to the current economic situation of Paraguay. The basic nature of the footwear industry is low cost, labor intensive, and relatively low-tech. It will be suitable for Paraguay's industrial environment. Generally, it costs about 3 to 500 million won to construct a line with monthly production capacity of 500,000 people, which is estimated to take only six
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 193 months to recover (Lee, 2002).
Second, the footwear industry is an industrial structure that exists in the global value chain. Global footwear companies such as Nike, Reebok, and Adidas are doing business with a global production network. If Paraguay can be well positioned to this global value chain, it can foster the footwear industry as a promising industry.
Third, as seen in the case of Korea, it is an industry that can develop if it is fostered as a strategic industry for regional development. With low labor costs and good corporate environment, Paraguay has many options, such as overseas capital investment, production line relocation, as well as the birth of its own footwear company.
4. Selection of Regions and Target Industries for Paraguay4)
The target regions were selected considering the following factors:
1) Working population, resources, economic activities, infrastructure, supporting business services, considering that this proposal aims at reaching critical mass of resources and investments; 2) Logistics infrastructure and its neighboring regions were considered as the study will propose targets export-oriented sectors or facilitating current value chain in MERCOSUR; and 3) Opinions of the MIC of Paraguay which is the main counterpart of this study.
A summary of the Departmental Development Plan is presented for individual departments. It is an official document where the Departmental Development Council, through the representatives of the different public and private institutions of the territory, express their desire for the progress path for the department and is related to Paraguay’s “National Development Plan (NDP) 2030” (2014-2030).
4.1. Department of Alto Parana
4.1.1. General Information
Alto Parana is the tenth department of Paraguay located in the eastern part of Paraguay. It is composed of 22 administrative districts; and the capital city is Ciudad del Este which is the headquarter of the department and the Sixth Judicial Court of Paraguay is located. It is second most populated department in Paraguay, with
4) This part was jointly written with local consultant, Mr. Victor Acosta.
194 2017/18 Knowledge Sharing Program with Paraguay 808,172 inhabitants living in (DGEEC, 2018) Moreover, the area of the department is 14,895km2, which is seventh largest territory in Paraguay It is bordered with department of Canindeyu, department of Itapua, department of Caazapa, and department of Caaguazu, as well as with Brazil and Argentina
4.1.2. Economic Aspects
Alto Parana contributes to 35% of the country’s GDP and its’ economy is mainly based on agriculture. It is the largest soybean producer in the country. Also, both livestock and food crop industry contributes significantly to the economy of department. Approximately 440,000ha of the territory are occupied for agriculture, and the land produces soybean, corn, wheat, mint, cotton, sugar cane, mandarin, sweet orange, tomato, cassava, sweet potato, rice, potato, carrot, strawberry, sunflower and pea. There are factories of oils, balanced foods, sausages, sawmills, rice and yerba mate mills, ceramics, packaging of palm hearts and dairy products. Furthermore, there are three hydroelectric plants located in the main rivers of Alto Parana, which generates largest electrohydraulic energy worldwide.
The main route of transportation is through the Route VII "Dr. Gaspar Rodriguez de Francia", which crosses from east to west and joins in Asuncion. There is also Route VI "Juan Leon Mallorquin", which links from Encarnacion to the south from the country. There is a road that links from Salto del Guaira to the north. An international bridge over the Parana River connects between the department and Brazil. The Guarani International Airport in the Minga Guazu district offers daily flights to Asuncion and Sao Paulo.
4.1.3. Main Industries
There are various industries exist in the department of Alto Parana, but main industries are summarized in
. Main Industries in Alto ParanaNumber of No. Industrial activity Sector Establishments 1 Various clothing 15 Textile 2 Tobacco and cigarette 14 Tobacco 3 Grains 11 Agriculture 4 Use of polyurethane 7 Plastic 5 CD 4 Support
Source: DGEEC (2013).
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 195 There are various industries department of Alto Parana, but large part of the industries or companies are Brazilian maquila industries. Therefore, their production is mostly projected for sale in Brazil. The largest industries in Alto Parana are textile manufacturers, tobacco industries, production of grains, plastic industries, and production of magnetic media or CD. In regard to maquila regime, exports of these companies amounted to 54.8 million USD as of January 2018. Their exports increased by 106% compare to the previous year.
4.1.4. Industrial Context
The industries in department of Alto Parana can be classified to micro, small, medium, and large. Summary of industries in the department are listed in
by type.5) Industries in Alto ParanaEstablishments Employees Type Number % Number % Micro 225 37 1,421 8 Small 194 32 2,872 16 Medium 108 18 3,457 19 Large 83 14 10,416 57 Total 610 100 18,166 100
Source: DGEEC (2013).
Additionally, following two parameters were used to classify industries: 1) number of employees; and 2) annual gross billing amount made in the previous fiscal year. Based on these parameters two districts – Minga Guazu and Hernandarias – were chosen for further development (see Table 3-10).
5) Classification of types of industries are as follows: 1) micro industry refers to business with maximum of 10 workers and annual production amounts to 87,720 USD; 2) small industry refers to businesses with maximum of 30 workers and annual production amounts to 438,596 USD; 3) medium industry refers to business with maximum of 50 workers and annual production amounts to 1,052,631 USD; and 4) big industry refers to businesses with more than 50 workers.
196 2017/18 Knowledge Sharing Program with Paraguay
Target Industries of Districts in Alto Parana (Minga Guazu and Hernandarias)District Target Industries - Plastic Minga Guazu - Textiles - Textiles - Footwear, headgear, umbrellas, parasol Hernandarias - Machinery and mechanical appliances; electrical equipment - Vehicles, aircraft, vessels and associated transportation equipment
Source: Author.
The following subsections will analyze economic and industrial structure in Minga Guazu and Hernandarias district.
4.1.5. Analysis of Two Districts in Alto Parana
4.1.5.1. District of Minga Guazu
Development of regional industries requires studies on the districts where industrial parks will be located, and for this purpose, two districts with different characteristics were identified for this study
Minga Guazu is a municipality and city of Paraguay, located in the central area of Alto Parana department It is located 13 km from the microcenter of Ciudad del Este, city which is also part of its metropolitan area According to the DGEEC, there are 84,410 inhabitants in Minga Guazu, where 44,317 are men and 42,438 are women, being third most populated municipality of Alto Parana Its area size is 4895 km2 and delimited between the Acaray and Monday rivers
Its economic activity is mainly based on agriculture and livestock production The latter increased significantly in recent decades, making the area to be highly industrialized For this reason, it is known as the “Industrial Capital of Alto Parana”, due to numerous industrial plants that are located in the area The Guarani International Airport is located in the city of Minga Guazu, located 4 km from Route VII "Dr Gaspar Rodríguez de Francia" and 26 km from Ciudad del Este Also, many working population are employed in the manufacturing sector in Ciudad del Este and neighboring cities
According to the Industrial Registry of the MIC, Minga Guazu district has 18 large industries and employes more than 1,853 people Most of the people are employed with Brasfumo del Paraguay SA, America 1500 SA, and Cargil Agropecuaria SACI Brasfumo del Paraguay SA manufactures chopped, flavored tobacco and cigarette
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 197 filters; America 15000 S.A. mainly produces clothing; and Cargil Agropecuaria S.A.C.I. produces degummed soybean oil, soy pellets and soybean husk pellets. As shown in
, 37% of the industries are small in its size, but it is the large industries that generates employment. Industrial Structure of Minga GuazuEstablishments Employees Type Number % Number % Micro 33 34 255 9 Small 36 37 266 10 Medium 11 11 317 12 Large 18 18 1,855 69 Total 98 100 2,693 100
Source: DGEEC (2013).
Large industries in Minga Guazu are as follows: manufacture of filters for cigarettes; manufacturer of chopped, flavored tobacco; manufacture of garments, cleaning drying and storage of grains; and production of polyethylene bags.
4.1.5.2. District of Hernandarias
Hernandarias is a municipality and city of Paraguay located in the center of the department of Alto Parana. It is located 8 km from the center of Ciudad del Este and 335 km from Asuncion. Founded in 1896, it is the oldest city in Alto Parana. It is known as the "Latin American Capital of Electric Power" or "Capital of Continental Energy" because it has two large hydroelectric dams within its territory: Acaray and Itaipu, the latter being one of the largest in the world. Its population is 79,036 people, of which 39,329 are men.
The Latin American Capital of Electric Power has two hydroelectric plants; Acaray, which was launched in 1968, and Itaipu, built between 1976 and 1982. They are largest dam in the world and electricity production is major economic activity in the district of Hernandarias.
The district is also rich in soy, palm heart, mint, corn, coffee, cotton, rice, beans, wheat and spurge. They are also dedicated to livestock industry.
Industries in Harnandarias district are mainly represented by production of textiles, plastics and fertilizers and agro-industry. In addition, the district has a strong
198 2017/18 Knowledge Sharing Program with Paraguay tobacco and brewery activity. Mining is also a part of the local economy due to extraction of limestone on the banks of the Acaray River. The real estate is vitalized as major ventures such as Parana Country Club, Santa Elena and Costa del Lago exist.
But it is the service sector that provides the city with the greatest dividends, thanks to growing financial and commercial activity. Despite of this advantage, large number of population in Hernandaris works in Ciudad del Este, 15 kilometers from the city.
According to the Industrial Registry of the Ministry of Industry and Commerce, the district of Hernandaris has 14 large industries, which are working in certain sectors in border with the State of Parana of Brazil. Largest numbers of people are employeed in Tabacalera del Este S.A., Tabacalera Hernandarias S.A., and Constuctora Acaray S.A. Tabacalera del Este S.A. produces cigarettes and chopped tobacco in addition to cigarette filters; Tabacalera Hernandarias S.A. manufactures cigarettes and filters for cigarettes; and Constuctora Acaray S.A. produces elaborated concrete and prefabricated concrete elements, in addition to the manufacture of metallic structures, metal columns and metal ceilings.
As one can observe from
, small companies are represented the most in terms of industry type, and they occupy 798 employees. However, large industries represent 17% of the total industry, but they employ largest number of people, which is approximately 4,268 or 78% of employees. Industrial Structure of HernandariasEstablishments Employees Type Number % Number % Micro 23 27 167 3 Small 32 38 798 15 Medium 15 18 213 4 Large 14 17 4,268 78 Total 84 100 5,446 100
Source: DGEEC (2013).
4.2. Department of Concepcion
4.2.1. General Information
Concepcion is the First Department of Paraguay located in north region of
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 199 .araguay Its capital is city of Concepcion, which is homonymous of the department Its total area is 18,057 km2, being the fifth largest department in Paraguay; and where total population is 242,493, which is the eleventh populated department in Paraguay
The northern part of the department is bordered with Brazil, separated by the river Apa from the mouth of Paraguay River to its confluence with the Hermoso stream The southern part of the department is bordered with the department of San Pedro del, separated by the River Ypane from its confluence with the Guazu stream until its mouth in the Paraguay River The eastern part of the department is bordered with the department of Amambay which is separated by a straight line that goes from the mouth of the Beautiful Stream with the Apa River to the source of the Chacalnica Stream; the Chacalnica and Negla streams and the Aquidaban river until the confluence of the Guazú stream From this point another straight line to the confluence of the Ypanemi and the Ypane Rivers until it meets the Guazú Stream To the west, it borders with Departments of Presidente Hayes and Alto Paraguay from which is separated by the Paraguay River between the mouths of the Ypane and Apa Rivers With 18,051 km² it is the fifth largest department
4.2.2. Economic Aspects
In agriculture sector, main items of the department of Concepcion are cotton, soybean, sugar cane, wheat, corn and cassava. As for vegetables, they produce locotes and sweet potatoes, bananas, peppers, spinach, coffee, pineapple, grapefruit, and ka’a he’e.
Livestock production ranks third in industrial production in the department of Concepcion. There is largest area of natural grass in the Conception where pigs, sheep, horses, goats are breed significantly. Also, poultry such as chickens, roosters, ducks, turkeys, geese and guineas stand out.
In Vallemi, Concepción, there is National Cement Industry, which has some 150 lime extraction plants on the banks of the Paraguay River. They are exploited on the banks of the river Apa marble quarries. Also refrigerators, cotton gins, silos and mills are settled in the region.
4.2.3. Main Industries
The industrial development in the department of Concepcion is very low, although it has all the characteristics that can be developed. It is necessary to take appropriate measures and offer this territory to investors.
200 2017/18 Knowledge Sharing Program with Paraguay
Main Industries in ConcepcionNumber of No. Industrial activity Sector Establishments 1 Quarries of raw materials for construction 5 Lime and cement 2 Stone washing 1 Quarry 3 Meat Processing Plant 1 Cattle raising 4 Leather tanning 1 Leather 5 Stone crusher 1 Quarry
Source: DGEEC (2013).
As one can observe in
, the industry of raw materials for construction constitutes the industrial support of this department. As large industrial activity in Concepcion, it is the engine of construction works. There are some large industries dedicated to the leather sector and two meat processing plants, specifically in the city of Concepcion and Belen. It should be noted that large industries of raw materials for construction, are settled within the department in the districts of Concepcion (capital of the department) and Vallemi.4.2.4. Industrial Context
To begin, it is important to show the current industrial structure of the department, classifying the industries into micro, small, medium, and large, having as main focuses of analysis the quantity according to the category of industry and the number of people employed by each category. As can be seen in
, large numbers of companies are micro companies with share of 37% of total industry. However, large companies generate biggest employment, where they employ total 57% of the population. Industries in ConcepcionEstablishments Employees Type Number % Number % Micro 24 47 116 5 Small 11 22 201 8 Medium 8 16 80 3 Large 8 16 1,970 83 Total 51 100 2,367 100
Source: DGEEC (2013).
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 201 Additionally, following two parameters were used to classify industries: 1) number of employees; and 2) annual gross billing amount made in the previous fiscal year. Based on these parameters two districts – Concepcion and Horqueta – were chosen for further development (see Table 3-15).
Target Industries of Districts in Concepcion (Concepcion and Horqueta)District Target Industries - Beverages, spirits and vinegar Concepcion - Tobacco and manufactured tobacco substitutes - Beverages, spirits and vinegar - Tobacco and manufactured tobacco substitutes Horqueta - Textiles - Footwear, headgear, umbrellas, and parasols
Source: Author.
The following subsections will analyze economic and industrial structure in Conception and Horqueta district.
4.2.5. Analysis of Two Districts in Concepcion
4.2.5.1. District of Concepcion
Concepcion is a city in Paraguay and capital of the department of Concepcion. It is located on the banks of the Paraguay River. The main route that connects to other municipalities is the General Bernardino Caballero route, crossing the city from Pozo Colorado to the city of Yby Yau. The population of the Concepcion district, according to the General Directorate of Statistics and Census’ projection, is 84,545, of which 42,581 are men and 41,964 are women.
The Paraguay River is the largest channel of transportation. The Route V "Gral. Bernardino Caballero" unites Concepcion with Pedro Juan Caballero, and this route is connected to Route III "Gral. Elizardo Aquino", which leads to country's capital, Asuncion. The "Tte. Cnel. Carmelo Peralta" airport is located in the city of Concepcion. There are also landing strips in the rest of the districts, which is important for livestock establishments. In the city, there are telephony services with direct dialing to Horqueta and Yby Yau. The AM radio stations are also available: Regional Radio, Radio Concepcion, Radio Vallemi, Radio Yby Yau, and Radio Guyra Campana. The FM radio stations available are: Megastation 95, Aquidaban, Los Angeles, Continental, Belen, Norte Comunicaciones, and others. There are also television transmission channels such as Canal 40 Television Concepcion (TVC).
202 2017/18 Knowledge Sharing Program with Paraguay The port of Concepcion sits on one side of the Paraguay River, and is the main port with more commercial and passenger traffic in the city. Franco Warehouse provides storage of merchandise that goes to Brazil. Also, many working population are employed in the manufacturing sector in Ciudad del Este and neighboring cities.
Although the industrial development in the capital of the department is low, Concepcion is the district that has largest number of large companies such as Transnorte S.A., Concepcion S.A., and Pavon Doldan Luis Enrique. Transnorte S.A. is dedicated to leather tanning up to wet blue; Concepcion S.A. is a meat processing plant, slaughterhouse and meat products derivatives; and Pavon Doldan Luis Enrique is dedicated to stone washing, manufacture of hydrated lime and manufacture of HA elements.
The number of micro industries has the highest percentage among all industries, but large industries, although they only represent 15% of the total, employ largest number of people. The second place in number of industries is small industries with 21% of the total industry (see Table 3-16).
Industrial Structure of ConcepcionEstablishments Employees Type Number % Number % Micro 16 48 72 5 Small 7 21 128 8 Medium 5 15 19 1 Large 5 15 1,353 86 Total 33 100 1,572 100
Source: DGEEC (2013).
4.2.5.2. District of Horqueta
The municipality of Horqueta is located north of the Republic of Paraguay, eastern region of the department of Concepcion, and is 434 km distant from the capital (Asuncion) by the Transcahco Route and Highway 5 and 489 km by Routes 3 and 5. Horqueta is connected to the city of Pedro Juan Caballero and Punta Porá (Brazil) through Route 5, at a distance of 172 km. The limits are to the North, Loreto, Concepcion and Aquidaban River; to the South, Ypane river (that separates it from Tacuatí, Department of San Pedro); to the West, Yby Yau; to the East, Belen and Concepcion.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 203 The maximum temperature reaches 40º C in summer, while the extreme minimum in winter is -2º C. The average temperature is 20º C. The periods of copious rain are from November to January, however, the driest are from June to September. The winds are from the north, east and southeast. The total population is 60,031 (Women, 31,157 (51.9%) and men, 28,874 (48.0%)), according to 2016 Projection of the General Directorate of Statistics, Surveys, and Censuses (DGEEC).
Land access is as follows. Route 5ta connects the area with the rest of the country, through Route 3 and Transchaco. Route 5 has 224 km of extension, of which 120 km is asphalted, and it joins Horqueta with Pedro Juan Caballero and with the city of Concepcion 44 km away on the banks of the Paraguay River.
The electric power is provided by Costa Romero located 3 km from Horqueta and it processes the energy of the Itaipu hydroelectric plant for the whole North. It is an important region dedicated to agriculture, cultivating cotton, spurge, beans, cassava, corn, and fruits of the season. Yerba mate processors, in addition to logging, oil industries and cotton gins. The region is considered the “National Capital of Ka'a He'e.”
Another important activity is leather crafts, in addition to livestock. It has industries that are dedicated to the production of agricultural products, oil and cotton gin, bakeries, ice cream shops, carpentry, tanneries, printing, sawmills, and tile and leather crafts.
There is growing commercial development in the following areas: basic necessities, stores, pharmacies, veterinaries, photocopiers, bookstores, ironworks, mechanical workshops and welding, service centers, laundries, carpentry, hardware stores, supermarkets, and others.
The industrial activity in the district of Horqueta is very small, with only two micro industries formalized and recognized by the industrial registry, which are dedicated to the preparation of baked goods and candies; it also has a medium-sized industry also dedicated to the field of preparation of bakeries.
4.3. Department of Itapua
4.3.1. General Information
Itapua is located in the extreme south of the country. Its capital is Encarnacion, composed of 30 districts, with the potential for development in the tourist, agricultural and livestock industries, placing this department among the most important nationally.
204 2017/18 Knowledge Sharing Program with Paraguay The territory of Itapua is marked, hydrographically, by the Parana River basin and, as far as the geography, by the series of elevations that constitute the San Rafael mountain range, located in the extreme north of the department, whose average altitude is between 350 and 400 meters above sea level.
In this department, heavily wavy reliefs (with gradients ranging from 20%, even 45%) to mountainous areas (45 to 70%) predominate, with the transition between sandstones and basalts.
There is a reserve for Serranias de San Rafael National Park, which covers a territory of almost 74,000 hectares, located on the elevations of the same name on the border with the Department of Caazapá. To a great extent, the economic development of Itapua is due to the intensive migratory flows that populated the department since the end of the 19th century. Itapua is home to descendants of more than 20 nationalities, including Germans, Russians, Ukrainians, Belgians, Italians, Japanese, French, Poles, and others.
The result was the formation of an important regional market, the incorporation of new technologies and, above all, the creation of a true multicultural mosaic.
4.3.2. Economic Aspects
The estimated population in 2018 is 600,011 people, of which 303,722 are men and 296,289 are women, representing 8% of the total population of the country. The Economically Active Population (PEA) amounts to 290,087, representing 9.0% nationally.
Itapua has 1.2 million productive hectares of which 70% is being exploited. In addition, of the total land, 39% are suitable for livestock and 38% suitable for agriculture. The crops are soy, corn, wheat, sunflower, canola, rice and cassava, beef cattle and swine cattle. Itapua has produced 244,000 tons of 840,000 tons of livestock products in Paraguay, accounting for 29.1% of national production.
4.3.3. Main Industries
There are various industries exist in the department of Itapua, but below
summarizes main industries. Chapter 3 _ Regional Industrial Development Strategy for Paraguay 205
Main Industries in ItapuaNumber of No. Industrial Activities Sector Establishments 1 Rice 8 Agriculture 2 Grains 5 Agriculture 3 Oil 4 Agriculture 4 Balanced 3 Agriculture 5 Yerba Mate 3 Agriculture
Source: DGEEC (2013).
Eminently, the agro industry is the engine that moves the economy of the Department of Itapua, where the rice sector includes eight large businesses, followed by grain and oilseed oil, which are in the last two places in quantity of large businesses, but which are no less important in production. There are also categories of balanced feed for animals and production of Yerba Mate.
4.3.4. Industrial Context
To begin, the current industrial structure of the department is examined, classifying the industries into micro, small, medium, and large, having as main focuses of analysis, the quantity according to the category of industry and the number of people employed in each category.
Industries in ItapuaEstablishments Employees Type Number % Number % Micro 137 48 657 5 Small 75 25 1,044 8 Medium 36 13 841 6 Large 41 14 10,464 80 Total 286 100 13,008 100
Source: DGEEC (2013).
In this table, it can be observed that the largest percentage in terms of number of business is micro industries, with 48% of the total, while big industries represent 14%, but with the highest employment capacity, reaching 80% of the total of people
206 2017/18 Knowledge Sharing Program with Paraguay employed in industries.
Additionally, following two parameters were used to classify industries: 1) number of employees; and 2) annual gross billing amount made in the previous fiscal year. Based on these parameters, two districts – Coronel Bogado and Fram – were chosen for further development (see Table 3-19).
Target Industries of Districts in Itapua (Coronel Bogado and Fram)District Target Industries - Sausage, bakery product Coronel Bogado - Furniture - Beverages Fram - Wheat flour
Source: Author.
The following subsections will analyze economic and industrial structure in Coronel Bogado and Fram district.
4.3.5. Analysis of Two Districts in Itapua
4.3.5.1. District of Coronel Bogado
Coronel Jose Felix Bogado (or simply Coronel Bogado, formerly called Ka'i Puente) is a city in the Department of Itapua. It is located 49 km from the city of Encarnacion, capital of the department. It is bordered with city of San Cosme and Damian and Gral Artigas in the north; Carmen del Parana and the Parana River in the south; and cities of Ram and Gral Artigas in the west.
In Coronel Jose Felix Bogado (or simply Coronel Bogado), is located 49 km from the city of Encarnación. Commercial activity is very important in the city, which has had contributed to the economy in recent years and is one of the commercial centers of the industrial zone.
Activities of the inhabitants are concentrated in the following areas: agriculture, cotton, wheat, cassava, yerba mate, peanuts, soy, corn, potato, rice, and watermelon. Major industries are sausage manufacturing, bakery products factories, sawmills, fine furniture factories, brick factories, rice mills, yerba mate mills, oil mills, starch factories, and chipa factories.
The micro industries represent the highest percentage of participation among
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 207 the categories, with 58%, but large industries are responsible for a larger portion of employment, with 23%.
Industrial Structure of Coronel BogadoEstablishments Employees Type Number % Number % Micro 15 58 71 13 Small 3 12 36 6 Medium 2 8 6 1 Large 6 23 449 80 Total 26 100 562 100
Source: DGEEC (2013).
As one can observe in
, the highest percentage of participation in the industrial structure is the micro industries, with 38% of the total of 13 industries within the district, while large industries are the ones that employ the most people for this analysis, with 45% of the total. It is clear that the industrial sector is still very incipient in this district. 4.3.5.2. District of Fram
Fram, or Colonia Fram, is a municipality located in the Department of Itapua of Paraguay. It is 46 km from the city of Encarnacion, 22 km from Carmen del Parana, 18 km from Route 1 “Mariscal Francisco Solano López,” and 54 km from Route 6 “Dr. Juan Leon Mallorquin”. Its main economic items are agricultural exploitation, agro-industry, and livestock, with the largest production of pigs in the country. The projection of the population for 2018 is 10,200 people. It is in first place in terms of per-capita income at the country level.
The industrial environment of Fram is largely strengthened by the company Tociuk and Compania Agricola Ganadera Industrial, established in the district, employing more than 2,500 people, in its five specific activities that are manufacturing of balanced feed for animals, manufacturing of juice concentrates of fruits, manufacturing of biodiesel, manufacturing of wheat flour, and manufacturing of silos of sheet steel.
208 2017/18 Knowledge Sharing Program with Paraguay
Industrial Structure of FramEstablishments Employees Type Number % Number % Micro 5 33 20 1 Small 2 13 58 2 Medium 3 20 194 7 Large 5 33 2,500 90 Total 15 100 2,772 100
Source: DGEEC (2013).
As shown in
, in terms of categories, the largest percentage of participation is held by small companies, with 47% of the total, but large companies still employ more people, with 76% of the total industries. 4.4. Department of Guaira
4.4.1. General Information
The Guaira is located in the central part of the Eastern region, between the parallels 25 ° 35 'and 26 ° 10' of latitude south and the meridians 55 ° 30 'and 56 ° 40' of west longitude, has an area of 3,846 km2 that, after Central, is the smallest department of Paraguay. Divided into 18 districts, the department is located southeast of Asuncion, 174 km from the capical and has Caaguazu to the north, Caazapa to the south and east and Paraguari in the west. The river Tebicuarymi serves as a limit to the north, as well as the Aguapey and Zanja Pyta streams along with artificial lines. On the east and south the Capiibary, Plurapo Guazu and Tebicuarymi rivers and the Itacua and Yacarey streams. To the west, the Cristal 10 streams divides from Paraguari.
The Department has the route VIII “Bias Garay” that emerges in Coronel Oviedo from the junction of routes II and VII, asphalted to Caazapa. From the district of Numi part, another branch totally asphalted that connects 10 with San Juan Nepomuceno. Tarnblen owns other routes asphalted: Villarrica-Paraguari, crossing Felix Perez Cardozo and Coronel Martinez, Mbocayaty-Independencia, with an extension of 50 km, and another via which connects with route VII, passing through Natalicio Talavera, Troche and Colonia Bias Garay. Guaira also has air, telephone, and tele- communications communications. There are numerous roads in its territory crossing the department in all directions.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 209 4.4.2. Industrial Structure
To begin, the current industrial structure of the department are examined, classifying the industries into micro, small, medium and large industry, having as main focuses of analysis, the quantity according to the category of industry and the number of people employed by each category.
Industries in GuairaEstablishments Employees Type Number % Number % Micro 15 28 55 2 Small 23 43 343 10 Medium 8 15 512 15 Large 7 13 2,434 73 Total 53 100 3,344 100
Source: DGEEC (2013).
In the
, one can see that, of a total of 53 industries, small companies represent 43% of the total, but that large companies, even though they represent only 6% of the total of companies settled in the department, employ the largest number of workers, with 75% of the total jobs generated by all categories. Main Industries in GuairaNumber of No. Industrial activities Sector Establishments 1 Sugar and derivatives 3 Agriculture 2 Animal feed 1 Agriculture 3 Meat processing plant 1 Agriculture 4 Raw materials for bakeries 1 Bakery 5 Yeast 1 Bakery
Source: DGEEC (2013).
As can be seen in
, the number of large business is very low, and five of the seven main ones are dedicated to the agro-industrial sector, the main ones being those dedicated to the sugar and derivatives sector. Guaira is an agricultural 210 2017/18 Knowledge Sharing Program with Paraguay department. Among its productions, sugar cane stands out, it being the largest producer in the country, with 36% of the national production. In its territory are located the four largest sugar mills in the country. It is also the leading producer of wine, and third in the production of yerba mate. Among other crops, there are potatoes, cassava, cotton, soybeans, corn, legumes, and fruits (for example, citrus). Along with cattle, sheep, and pig farming, poultry is also developed with the raising of birds, mainly chickens.
4.4.3. Production Area
Approximately 99.9% of the sugarcane production area is in the Eastern Region; the remaining 0.1% is in the Western Region. Of the total produced in the Eastern Region, 38% of the area occupied by sugar cane is located in the department of Guaira, where four of the largest existing sugar mills in the country are also located.
Paraguayan can appreciate cultivation of sugar cane in the department of Guaira, although it does not have the highest yield per hectare at the country level according to the 2015/2016 harvest, it has the highest percentage in area in its territory, with 38%, and routes the production of a large part of the rest to its industrial sector of sugar derivatives.
4.4.4. Industrial Context
Following two parameters were used to classify industries: 1) number of employees; and 2) annual gross billing amount made in the previous fiscal year. Based on these parameter two districts – Villarrica and Colonia Independencia – were chosen for further development (see Table 3-24).
Target Industries of Districts in Guaira (Villarrica and Colonia Independencia)District Target Industries - Sugars and sugar confectionery Villarrica - Meat processing - Handcraft, bag Colonia Independencia - Meat processing
Source: Author.
The following subsections will analyze economic and industrial structure in Villarrica and Colonia Independencia district.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 211 4.4.5. Analysis of Two Districts in Guaira
4.4.5.1. District of Villarrica
Villarrica is a locality and district located in the south center of Paraguay, in the Eastern region; and capital of the fourth department of Guaira It is the most populated district of its department and is one of the most important cities in the country for its history, and its artistic and academic activity
Within the vicinity of the Ybytyruzu mountain range, it is located in the central- western area of the Guaira and is bordered in the north by Mbocayaty and Yataity; to the west with Itape and Felix Perez Cardozo; to the east with Colonia Independencia, Numi and Eugenio A Garay; and to the south with San Salvador and Borja
In the district of Villarrica, garlic, cotton, rice, peas, bananas, sweet potatoes, coffee trees, sugar cane, onions, beans, lemons, corn, tangerine, cassava, peanuts, sour orange, sweet orange, pineapple (fruit), grapefruit, bean, tobacco, spinach, tomato, vine, yerba mate, and carrot The industrial activity is mainly based on sugar factories, rice mills, flourmills, spinning mills, ginning mills, linen factories, footwear factories, dairy products, and handicrafts
Villarrica, the capital of the Department of Guaira, is a locality and district located in the south-central Paraguay, in the Eastern region; capital of the 4th department of Guaira, it is the most populated district of its department and is one of the most important cities in the country for its history, and its artistic and academic activity, with a projected population for the year 2018, of 72,434 people, of which 35,621 are men and 36,813 are women
Analyzing the industrial structure of the large industries in the capital of the department, one can say that, the agro-industrial sector, moves the whole industry, since the three main industries that inhabit it are of that sector, specifically of the heading sugar and derivatives, being dedicated you are specifically making sugar and molasses; sugar products and derivatives; and manufacture of fuel alcohol, absolute, carbon dioxide and molasses
212 2017/18 Knowledge Sharing Program with Paraguay
Industries in VillarricaEstablishments Employees Type Number % Number % Micro 5 38 13 2 Small 4 31 80 10 Medium 3 23 335 43 Large 1 8 356 45 Total 13 100 784 100
Source: DGEEC (2013).
As shown in
, the highest percentage of participation in the industrial structure is taken by micro industries, with 38% of the 13 companies within the district; however, large industries employ the most people, with 45% of the total among the four categories. It is clear that the industrial sector is still very incipient in this district.4.4.5.2. District of Colonia Independencia
Independencia (also known as Colonia Independencia) is a municipality in the Department of Guaira, in Paraguay. It is located in the east of the department on the Ybytyruzu mountain range. It is a center of tourist attractions due to the beautiful landscape that surrounds it and the German cultural influence. Independencia is the second most populous district of the department, after the departmental capital, Villarrica.
Independencia is located in the western area of the department of Guaira. It bordered by following districts: North: Natalicio Talavera and Troche; South: General Garay and Jose Fassardi; East: Yobai step; West: Mbocayaty and Villarrica.
At the end of the 20th century, a German immigrant with the surname Vogt introduced the first vines and the vitivínicola production began. In addition to the vine, sugar cane, cotton and yerba mate are grown.
Independencia is the second most populous district of the department, after the departmental capital, Villarrica, with a projected population for the year 2018, of 27,201 people.
The two large businesses settled in the district are dedicated to the elaboration of balanced feed for animals and poultry and cattle slaughter, together employing 520
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 213 people. As shown in
, in terms of categories, the largest percentage of participation is held by small companies, with 47% of the total, but large companies still employ more people, with 76% of the total. Industrial Structure of Colonia IndependenciaEstablishments Employees Type Number % Number % Micro 6 32 25 4 Small 9 47 134 20 Medium 2 11 6 1 Large 2 11 520 76 Total 19 100 685 100
Source: DGEEC (2013).
5. Policy Recommendations and Conclusion 5.1. Proposal for Paraguay’s Regional Development Policy
Paraguay's economic development policy aims at expanding regional industrial base and creating employment, thereby increasing economic capacity of local residents. To this end, regional economic policies in Paraguay should concentrate in fostering local industries by creating industrial complexes and promoting regional investments. Paraguay has a strong economic disparity between regions, with the concentration of economic power in Asuncion and central provinces, Alto Paraia and Itapua. In particular, more than 60% of economic activity is concentrated in Asuncion and Central Province.
Therefore, regional industrial development strategy in the Paraguay proposed here excluded Asuncion and Central Province. Selection of the regional strategic industries and the region proposed are listed in
.214 2017/18 Knowledge Sharing Program with Paraguay
Proposed 5-Year Regional Industry Development Strategy for ParaguayPhase 1 Phase 2 Phase 3 Phase (2018-2023) (2023-2028) (2028-2033)
- Diversify industries - Shift in target sectors - Establish a framework nationwide - Expand manufacturing that supports regional Objective - Establish and activate hubs to additional initiatives for regional manufacturing hubs in regions competitiveness regions
- 4 Departments - 4 Departments - All departments Target Regions and additional departments
- Strategic industries - Shift in strategic - Leading industries Target Sectors industries - Strategic industries - Local industries
- Central government - Collaboration of - Regional and municipal Main Actor taking the initiative central and regional governments taking governments the initiative
- Establishment of a - Establishment of - Instruments planned, presidential advisory body an institutional introduced and for coordinating ministries framework for managed directly by and central/regional regional development regional and municipal governments (establishment of governments - Policies led by the central regional agencies) Policy Mix government - National-level fund - Industrial Parks for underdeveloped - Free zones regions - Research capacities and legal instruments for technical regulations
Source: Author.
This study proposes that regional industry strategy should be developed from the first phase, which is 2018-2023 period. However, prior to establishing a new policy, two main tasks remain for Paraguay.
First, industry statistics of regions should be improved. Collective statistics by region grasps the structure and distribution of manufacturing sector, and the actual state of industrial activity in each region. It also can support various economic policy establishment and industrial research analysis. The data mining can be processed as follows: business → local statistics research agency (office) and local autonomous entity (state / city) → MIC or national statistical office. It is necessary to gather necessary statistical data in next one or two years.
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 215 The second task is to establish an independent agency that oversees regional economy at the local autonomy stage. The agency should play a role of one-stop window and oversee policy-making processes of regional economic development. Such agency should make local industry development strategy effective and contribute in enhancing industrial performance of the region.
The regional strategic industry policy can be divided into government’s financial support for strategic industries and establish base for industrial activities. The central government should provide financial support for product development, research, human resource development, investment tax credit for production facilities, and establishment of new businesses. In order to establish base for industrial activities, development of industrial complex, strategic industrial ecosystem support, product certification and inspection equipment support, and foreign technology cooperation arrangement should be followed. Details of each support policies are beyond the scope of this research.
The following
shows three areas in which central government's policies for fostering regional strategic industries should be mixed. First is the creation of regional industrial complexes; second is the expansion of free trade zones; and finally, the improvement of laws and institutions. When industrial complexes are created, they should be given same benefits as free trade zones. For example, when an industrial complex is established in Villarrica or Colonia Independencia district, foreign investment should be promoted while benefiting from free trade zones. Policy Mix for Paraguay’s Regional Development PolicyIndustrial Parks Free Zones Legal Mechanisms
- Facilitating the “critical - Updating the legal system of - Improving legal mechanisms mass” strategy by operating free zone, thereby creating relevant to facilitating industrial parks in target an impetus for attracting foreign investment such as regions: foreign investment in PPP and joint venture (1) Industrial parks focusing establishment of free zones - Introducing measures for on agricultural or agro- in border areas (especially in supporting exports and processing sectors Alto Parana) domestic sales in terms of (2) Industrial parks in urban technical standards areas
Source: Author.
5.2. Conclusion
The purpose of this study is to identify economic situation and propose possible policies to develop regional strategic industries in Paraguay. Therefore, the focus of
216 2017/18 Knowledge Sharing Program with Paraguay the research was placed on the strategic elements of regional industrial development under the National Development Plan of 2030. In addition, upbringing of the manufacturing industry centered on agricultural and livestock products processing. It also suggested a roadmap for regional economic development by three phases.
The study examined the economic and industrial structure of Paraguay and its districts, relevant development experience in Korea, and proposed policy suggestions. The “National Development Plan (NDP) 2030” (2014-2030) of Paraguay mentions that it should foster strategic industries for regional economic development, and industries included apparel, footwear, automobile parts, and electrical products. It also included chemical and metal products, as well as agro-processing and light industries.
In aligning with the “National Development Plan (NDP) 2030” (2014-2030), the study selected target regions based on following rationales: 1) reaching a critical mass of resources and investments, targeting export-oriented sectors, or facilitating presence of value chain in MERCOSUR; 2) population, resources, economic activities, infrastructure, support of business services, transportation, border area, contribution to the national production and income, possibility of establishing value chain, and use of territory; and 3) and MIC’s opinion.
Based on these criteria, four departments in Paraguay were selected – Itapua, Concepcion, Alto Parana, and Guaira – and reviewed in terms of how they lead regional economies. Based on the analysis, this study concluded by identifying regional strategic industries of target regions.
Paraguay is faced with challenges in terms of economic and industrial development. First, its industrial structure is relatively underdeveloped. Compare to the agriculture sector, the share of manufacturing sector in GDP was 10.6% in 2016. The contribution of manufacturing sector to employment marked 12.3% in 2015 (together with mining and quarrying). Since the introduction of the “National Development Plan (NDP) 2030” (2014-2030), some progresses have been made, such as increasing number of foreign investment in Maquila industries. However, investment made so far fell short in forming a critical mass to accomplish economic diversification. Furthermore, as examined in Section 2, there have been no significant structural change between 2011 and 2016.
To overcome this challenge, Paraguayan government should aim at implementing “National Development Plan (NDP) 2030” (2014-2030) in each target region during the first phase of the regional industrial development policy. It should be provided as a guideline for development of strategic industries. Successful development of strategic industries will lead to formation of manufacturing hubs in target regions,
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 217 and ultimately change the economic and social structure of those regions.
Second, the national economy heavily relies on exporting agricultural raw material. This represents lack of diversity in its exports. The country is in need of other industries that can drive technological development. Paraguay must overcome narrow local market and import dependency (including smugglings from other countries). On this part, the study suggest that Paraguay should transition its agro- based industries to strategic industries such as manufacturing. Also, it proposes policy mix between industrial parks, free trade zones, and legal mechanisms. These will allow Paraguay to transform its economic and industrial structure, and contribute to sustainable economic development in the future.
218 2017/18 Knowledge Sharing Program with Paraguay References
Biettel, June S (2017), “Paraguay in Brief”, Congressional Research Service, August 31, 2017, https://fas.org/sgp/crs/row/R44936.pdf (last accessed on June 30, 2018). DGEEC (2013), “Characteristics of Paraguay Economy”, Series of Studies based on the Results of the National Economic Census (in spanish) http://www.dgeec.gov.py/Publicaciones/ Biblioteca/Dipticos/memoria_CNE2011/Caracteristicas%20de%20la%20economia%20 Paraguaya%20WEB.pdf (last accessed on September 1, 2018). ______(2015), “Population projection by sex and age according to district 2000-2025”, revised in 2015 (in spanish) http://www.dgeec.gov.py/Publicaciones/Biblioteca/ proyeccion%20nacional/Proyeccion%20Distrital.pdf (last accessed on September 1, 2018). Economist Intelligence Unit (2016), “Country Report 1st Quarter 2016: Paraguay,” Feb. 2016 Huh, Seok Bong (2007), “Pilot Study on the new Strategies for Improvement of Physical Distribution System at Iksan Jewelry Complex in Korea: Focused on Introduction of Cooperative Wholesale Marketing System for the Jewelry Industry” Lee, Won Gyu (2002), “Business Mode, Competitive Strategy, and Organizational Capability Building: Sources of Competitiveness in Footwear Manufacturer at Busan” Ministry of Industry and Commerce (2017), Export maquila industries, http://www.mic.gov. py/mic/site/contenido.php?pagina=1&id=762 (last accessed on June 30, 2018). Ministry of Trade, Industry and Energy (2010), “Knowledge Economy White Paper 2008- 2009”. National Government of Paraguay (2014), “National Development Plan for Paraguay 2030”, http://www.stp.gov.py/pnd/wp-content/uploads/2014/12/pnd2030.pdf (last accessed on June 30, 2018). OECD (2012), “Industrial Policy and Territorial Development: Lessons from Korea, Development Centre Studies”, OECD Publishing. ______(2018), Regional Development Policy, http://www.oecd.org/cfe/regional-policy/ regionaldevelopment.htm (last accessed on June 30, 2018). Pena (2014), “Study on the Value Chain of Textile and Clothing in Paraguay”. Shoenet (2015), “Statistics on Korea’s Footwear Industry”, in Korea Footwear News, Vol. 18, May, 2018 (in Korean) http://www.shoenet.org/common/fileDownload. do?attach=16812 (last accessed on June 30, 2018) United Nations (2008), “Statistical Papers Series M No. 4: International Standard Industrial Classification of All Economic Activities, Revision 4, ST/ESA/STAT/SER.M/4/Rev.4”. World Bank (2018), World Bank Data on Paraguay, https://data.worldbank.org/country/ paraguay (last accessed on June 30, 2018).
Chapter 3 _ Regional Industrial Development Strategy for Paraguay 219 World Trade Organization (2017), “Trade Policy Review Body – Report by the Secretariat: Paraguay”, Aug 2, 2017, WT/TRP/S/360.
220 2017/18 Knowledge Sharing Program with Paraguay
2017/18 Knowledge Sharing Program with Paraguay
.go.kr www. ksp ity 30149, Korea C Center for International Development, KDI cid.kdi.re.kr Knowledge Sharing Program www.ksp.go.kr www.moef.go.kr www.kdi.re.kr Tel. 82-44-550-4114 Tel. 82-44-215-7741 Korea Development Institute 263 Namsejong-ro, Sejong Special Self-Governing Ministry of Economy and Finance Korea Government Complex-Sejong, 477, Galmae-ro, Sejong Special Self-Governing City 30109,
