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Location factor Institutional factor. What is institutional factor? External forces to influence the location of industries Government intervention in.

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Presentation on theme: "Location factor Institutional factor. What is institutional factor? External forces to influence the location of industries Government intervention in."— Presentation transcript:

1 Location factor Institutional factor

2 What is institutional factor? External forces to influence the location of industries Government intervention in terms of incentives or penalties Both central and local governments can exert influence Both free and planned economy

3 Why does the government intervene?

4 Strategic reasons To avoid attack of industries during wartime, e.g USA and China To encourage the development of military industries, e.g. munitions and aircrafts manufacturing

5 Political reasons To maintain economic growth and political stability To minimize social unrest and riots To reduce regional economic inequalities or imbalance To integrate minority races, e.g. China

6 Economic reasons To ensure overall economic well-being of the country To provide job opportunities To stimulate economic growth To achieve modernisation (e.g. in many LDCs) To promote the growth of some particular industries To diversify economy To fully utilize resources/factors of production To raise productivity and increase the wealth of the country

7 Social reasons To minimize social unrest To achieve regional economic balance To lessen social problems, e.g. massive internal migration, crimes, family problems, suicides, violence brought by unemployment and poverty

8 Environmental concern To reduce environment problems/pollution To disperse industries To discourage industrial concentration in urban areas

9 Government measures

10 Infrastructure, transport & utilities

11 Providing cheap and extensive land

12 Jurong Industrial Estate, Singapore

13 Cambridge Science Park, UK

14 Silicon Valley, South California, USA

15 M4 Corridor, UK

16 Hsinchu Science-based Industrial Park

17 Policy making Slows down redundancy Reduce unemployment rates Encourage employers to take on unemployed workers Example: various employment programmes in HK Employment Services (Elementary Jobs)Employment Services (Elementary Jobs) Employment Services (Skilled Jobs)Employment Services (Skilled Jobs) Employment Programme for the Middle-agedEmployment Programme for the Middle-aged Count On Talent Not Age in EmploymentCount On Talent Not Age in Employment

18 Establish new industries To provide regional development funding To save depressed areas To develop industries in new areas To raise production

19 Example 1: China Planned economies The Chinese Government set up a large petroleum refinery and petrochemical works in Urumqi in 1950s – 1970s To achieve regional economic balance and industrial dispersion

20 Example 2: UK, France Mixed economies To establish nationalized plants in depressed regions and rural areas

21 To attract foreign investment To offer favourable terms of trade To grant tax concessions (tax holidays, low rates on profit taxes) To grant industrial land at low prices To provide loans & subsidies To provide cheap land, factory buildings and workers To provide freight concessions

22 To protect home industries To impose tariffs and quotas on imported finished products Example: USA imposed tariffs on imported Japanese cars to protect the automobile industry

23 To adopt zoning policy Specify the siting of industries Examples: HK – the setting up of industrial estates

24 To set up training institutes To retrain workers To modernize firms/production To update technological advances

25 To impose control To reduce pollution and other environmental problems Air, water, noise pollution Traffic congestion

26 To adopt town planning measures To limit the location of repulsive industries, e.g. leather tanning And environmentally dangerous industries, e.g. chemical works To encourage the development of cleaner industries To force the manufacturers to treat their sewage and waste products before disposal

27 To adopt strong central planning Common in socialist countries, e.g. China, Russia, Yugoslavia Direct government intervention Depends on top-level decisions

28 Demerits of too much intervention Excess subsides Low incentives to increase productivity Which may slow down industrial restructuring Too much protection reduce imports higher prices inflation Penalties cost of production Sub-optimal location unprofitable/close down of industries/wastage of resources Complex bureaucratic barrier inefficient management/low incentive to produce


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