METHODOLOGY OF CREATION OF INDUSTRIAL PARKS

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1 20--osios Lietuvos jaunųjų mokslininkų konferencijos Mokslas Lietuvos ateitis teminė konferencija Proceedings of the 20th Conference for Junior Researchers Science Future of Lithuania MIESTŲ INŽINERIJA IR GEODEZIJA/ CITY ENGINEERING AND GEODESY 2017 m. kovo 24 d. Vilnius eissn CD ISBN March, Vilnius, Lithuania Article Number: msk METHODOLOGY OF CREATION OF INDUSTRIAL PARKS Anastasiia Sovhirenko Department of urban engineering, Faculty of Environmental engineering, Vilnius Gediminas Technical University, Saulėtekio al. 11, Vilnius, 10223, Lithuania Annotation. The purpose of this article is to investigate phenomenon of emergence of industrial parks, to distinguish main definitions of industrial park, different types, to propose classification and allocate main key factors of creation of successful industrial park. Base on this factors methodology of creation of industrial park was developed and applied to the territory of Lithuania. Main requirements to the territory are defined. For chosen territory of Greenfield developed project of creation of industrial parks (1 st phase). Key words: Brownfield, classification of industrial parks, Greenfield, industrial park, key factors, methodology of creation, project of creation, SWOT-analysis. 1. Introduction Nowadays, creation of industrial parks is a part of the implementation of regional policy in the most of countries. Industrial parks can contribute to the realization of many goals of national innovation and sustainable development strategies. One of the goals of creation of industrial parks is to relocate of industries to peri-urban or rural areas, help to relieve congestion and pollution in metropolitan areas, strengthen the industrial base of small and medium-size towns and reduce rural-urban migration. Creation of industrial parks is very important for sustainable development of territory and can be key instrument for solution of different problems: for depressed areas which have old-established settlement and characterizing poorly developed agriculture and industry, for territories with old, abandoned industrial factories which can be renovated by means of creation here an industrial park. Experience of creation of industrial parks in different countries like Ireland, France, Slovenia, Kazakhstan (Europe and Central Asia Regional Conference on Industrial Parks, Baku, Azerbaijan 2012), Slovakia (Vidova 2010), Romania (Dodescu and etc., 2012) shows that it improved economic state of countries, increased number of work places, engaged foreign investors, helped in development of abandoned or degraded territories. At the same time a successful industrial park contributes to urban and regional economic development: to promote decentralization by preventing or checking excessive concentration or growth of single urban areas, especially large metropolitan areas; to increase the economic, productive, and employment base of urban communities; to regulate the inflow of industry and to guide its orderly location on the most suitable land within the metropolitan areas; to strengthen the economic base of small and medium sized town; to provide a healthier and more attractive urban environment by separating non-industrial and industrial areas; to minimize distance to work and to reduce load on the transport system; to maximize efficient land usage and reduce the cost of land and land development; to integrate urban marginal population into productive industrial activities; to provide sites to relocate industries displaced by urban renewal projects; to achieve economies in the provision of urban services and utilities (UNIDO, 1997). But practice of creation of industrial parks shows that not all existing industrial parks work successfully, there are a lot of examples, when existed industrial parks didn t justify their creation and even made economic losses and caused some problems like: traffic congestion and pollution; an unsustainable fashion; poor planning. These issues have a negative effect on people which work in industrial parks and live nearby. As analysis of scientific articles shows there aren t any methodology of creation of successful industrial park which can define main stages in this process. Thus, the aim of this article is: to develop methodology of creation of industrial parks which can be applied for creation of new industrial parks in Lithuania and other countries with similar economic and social conditions. 2. History and evolution of industrial parks Changing of status of economy requires in applying new mechanisms which will help in positive development of it. Industrial parks are one of the most important factors supporting positive economy development. The philosophy of industrial parks combines different functions such as: production function, service function, relaxation, education, science, research. Industrial park can provide different service: standard and non-standard. Standard services include: finance and law consulting, accounting,

2 security of assets, operation and support of a transportation and technical infrastructure environment or public greenery support. Non-standard services include: logistic services, technology transfer, procurement of research and development services, financial services, banking, agency and leasing of educated workforce, human resource services, food courts and housing, sport, publication of periodicals and different information bulletins about industrial park, organizing of various events, classes and lectures for managerial positions, as well as for employees of companies from park. Industrial park has his own unique united conception, configuration also selection of production units and takes place in specific industrial zone. Industrial parks underwent several steps of development and we can distinguish even particular generations of industrial parks. The first generation of industrial parks, which was built in the 1970s, are characterized with a rather simplistic architecture of buildings and they had mostly functions of storages and assembly halls. The second generation of industrial parks had more complicated architecture. Since the second half of the 1980s, the third generation industrial parks was built. This generation of parks are characterized with diverse use of area with wide portfolio of services. More attention to offices with information technologies was devoted. A wide portfolio of services and high-end technologies were used during fourth generation of industrial parks which were created in the mid-1990s. Since the second half of the 1990s, industrial parks have been a part of an international network of cooperating parks. Speaking about creation of the first industrial park we can mention Trafford Park which was established already in 1896 by Ernst Halls Manchester, England (Vidova 2010). This industrial park was a cornerstone in practice of creation of industrial parks. Industrial parks, whose emergence was motivated by concepts of regional policies, were being founded in crisis areas of Great Britain in the 1930s; there were 46 of them in The first, pioneering industrial areas were in cities such as Letchworth or Welwyn. An expansion of new cities caused necessity in reconstruction of residential buildings and to relive the central part of London agglomeration and also it was important to choose right location for industry within Great Britain. Common peculiarity of these parks was that their area was planned in advance and all new companies and enterprises should follow the plan. Also the process of creation of industrial parks was regulated by different acts which regulate the location of a particular industry for certain districts (Acts of 1945, 1950 and 1958). Later (after 1958) there were acts which dealt with high unemployment and with the threat of it; location of industry had an aim to improve this situation. Then these acts were cancelled as new act was approved (Local Employment Act from 1960). In 1963 industrial parks were being established in Germany (Euro-Industrizpark Munchen). Majority of other parks appeared after second half of 1980s in generally by public investors. There were 22 industrial and investment parks in West Germany in At the same time private industrial parks also were established. They locate in densely populated areas and have smaller size. Such kinds of parks still exist and develop, for example the Dusseldorf region (23 completed projects in 1992) and the Frankfurt am Mein region (19 completed projects in 1992). The establishment of industrial parks in these regions had a positive influence on economy of the country. 3. Definition of industrial parks Nowadays, there exist more than 20,000 of different industrial parks, moreover, they are expressed in different modifications and depend on purpose and country different definitions for expression can be used. We can allocate such definitions as: industrial park, industrial cluster, industrial district, industrial valley, free economic zone. In literature and legal acts, we can find different definitions of notion industrial park. At the Urban Land Institute s, 1958 Dartmouth conference (ULI, 1988) the definition of industrial park was given as: An industrial park is a planned or organized industrial district with a comprehensive plan designed to ensure compatibility between the industrial operations therein and the existing activities and character of the community in which the park is located. The industrial park must be of sufficient size and be suitably zoned to protect the areas surrounding it from being devoted to lower uses. The National Industrial Zoning Committee definitions through 1952, 1965, 1966, focused on shared land resource and common administration (ULI 1988) gave the next definition: An industrial park is a tract of land, the control and administration of which are vested in a single body, suitable for industrial use because of location, topography, proper zoning, availability of utilities, and accessibility to transportation. By Mueggenborg and Bruns (2003) industrial park defined as industrially used sites, at which on restricted area mostly legally independent enterprises have established close cooperation in terms of goods and services and at which the users of the park typically share different infrastructural facilities such sewage systems, wastewater treatment plant, pipeline network, roads, site security, canteen etc. based on private sector agreement (Salonen, 2010). In Slovak literature, the definition industrial park is basically very similar to the name of industrial district, production zone or production cluster (Vidova, 2010). In English economic literature are used terms such as industrial estate, trading estate, factory estate, or employment areas (Keppl, 2001). According to definition UNIDO (2002) industrial parks is a tract of land developed and subdivided into plots according to a comprehensive plan with or without built-up factories, sometimes with common facilities for the use of a group of industries. According to the Law of Ukraine On industrial parks, industrial park is defined by initiator of creation of the industrial park in accordance with the planning documentation equipped with proper infrastructure area, within which members of the industrial park can engage in economic activities in the industrial production and research and development activities in the field of information and telecommunications under the conditions defined by this law and agreement on the economic activities within the industrial park. In accordance to information on official web-site of Ministry of Economy of Lithuania, the industrial park means a territory defined in territory planning documents, which is intended for the implementation of more than one project of green field investments, has engineering networks and transport communications, is controlled by a single operator and is the location of the implementation of production development investment projects.

3 The industrial park, as one of the types of economic zone, can have different modifications depends on purpose and way of using. On the same stage with industrial park can be distinguished such types of economic zones as (UNIDO in Viet Nam, 2015): special Economic Zone (SEZ); eco-industrial Park (EIP); technology Park (TP); innovation District (ID). 4. Classification of industrial parks Variety of all industrial parks according to (UNIDO 1997, UNEP 2001) can be classified due to the following features: location: industrial parks can be situated in urban, semi-urban or rural areas based on the population of the central city or town in the area. Regardless of the area they are located in peripheral regions with good transportation connection; size (area of industrial park): industrial parks can be categorized as small, medium or large based on number of tenant companies or the total area. The number of tenant companies between parks varies very much, the largest ones with several thousand companies located in Asian countries (UNEP 1997). Where the average size of an industrial park is ha; sectoral diversity: industrial parks may focus on single sector or contain multiple sectors with broad spectrum of industries; Major-user or multi-user sites: typical to a major-user site are small and medium sized enterprises grouped around one big company; Classification which is given above can be supplemented with classification of UNIDO (2002): park specialization a science/technology park, research park, eco-industrial park or export processing zone/free trade zone; ownership public, private or public-private partnership; type of land Brownfield if the park is established on existing but disused facilities of former companies or Greenfield if developed in a new area. 5. Key factor of creating of successful industrial park The success of an industrial park depends on many factors. There are however, key factors that need to be taken into consideration when planning an industrial park: Location. The size and pricing of an industrial park must be planned according to business and market needs and expectations. The industrial parks need to be easily accessible (proximity to a port or an airport, and road/railway infrastructure). There also should be a large supply of human (number of residents, labour pool, employees in manufacturing, seeking employment, region average salary); (UNIDO, 2012). Infrastructure and service provision. Territory of industrial park should be supplied with hard and soft technical infrastructure for its tenants. Hard infrastructures include roads, wastewater, sewage treatment, telecommunications, stable and efficient energy supply, and common facilities. Soft infrastructures relate to the estate s management capacity. Management capacity. The success of industrial parks depends on efficient and responsive management. A park management board must provide guidance and support to its tenants. This includes marketing, information, procedural support, and quick and effective responses to customer needs (UNIDO, 2012). The management board must also develop links with other organizations and build a network. The management body should not only limit itself to maintenance of the facilities but also play a dynamic role, promoting the services offered by the estate among local entrepreneurs, suppliers, and companies in order to create backward linkages that can potentially yield innovations. Incentives. Role of authority which develops industrial parks should be more active and provide not only the infrastructures for companies to settle in newly build industrial parks but also to offer generous incentives for companies. 6. Methodology of creating of industrial parks Taking in account main key factors of successful industrial the next methodology for creating of industrial parks was developed. The methodology can be divided into two phases: analysis of output information; propositions and opportunities for creation of IP (project decisions). Also different methodologies should be applied according to the type of territory (Brownfield, Greenfield). Type of territory will define different output information and different opportunities in making project decisions. On the Fig. 1 you may see two different developed methodologies.

4 7. Applying of methodology for territory of Lithuania Fig. 1. Methodology of creating of industrial parks Nowadays, on territory of Lithuania exist 7 free economic zones where can be created industrial parks: Klaipeda, Akmene, Siauliai, Panevizys, Marijampole, Kedainia and 5 valleys: Marine Valley (Klaipeda), Nemuna, Santaka Valleys (Kaunas), Sauletekies, Santara Valleys (Vilnius). Information about almost 6 industrial parks type Brownfield we can find in public domain. Also 28 territories for new industrial parks (Greenfield) allocated on official web-site of InvestLithuania. Developed methodology for creation of industrial parks type Greenfield was applied to these allocated territories. Analysis of output information was made. Analysis of statistic information about labour pool of Lithuanian s cities shows that the highest necessity in creation of industrial parks in terms of creating of new work places have such cities: Alytis, Utena, Panevizys, Marijampole. At the same time in terms of the best opportunities for creation of industrial parks according to the possible number of laboring population the most appropriate are such big cities: Vilnius, Klaipeda, Kaunas (Fig. 2Fig. 3). Fig. 2. Labour pool according to Statistic Lithuania

5 Fig. 3. Seeking employment according to Statistic Lithuania On the official web-site the Ministry of Economy of the Republic of Lithuania there is information about location of 28 Greenfields which can be used for creation of industrial parks (Fig. 4). This map of Greenfields contains approximate information e.g.: boundaries and areas of land plots, and periodically updates. Locations of 28 Greenfields are defined based on analysis of social, economic and opportunities of territory. Also we can see on that location of these territories depends on transport accessibility (Fig. 4). Fig. 4. Map of Greenfields Fig. 5. Map of main roads in Lithuania If we will compare Fig. 9 and Fig 11, we can see that almost all chosen territories are located close to main road arteries. 8. Selection of territory for development of model of industrial park In term of development less progressive regions as Alytus, Utena, Panevizys, Marijampole, an establishment of an industrial park here is more reasonable as it will provide creation of new workplaces and engage investors to regions. Locations of Greenfields are distinguished on official web-side for regions Alytus, Panevizys and Marijampole (Fig. 6, 7, 8). Like an example for development of project of industrial park, among these three territories were chosen one through SWOT-analysis of these territories. Fig. 6. Alytus IP II Fig. 7. Panevizys FEZ I Fig. 8. Marijampole FEZ SWOT-analysis showed that all these territories have almost the same weaknesses (territories don t supply with all necessary technical infrastructure) and opportunities (large choice of employees, opportunity to develop different types of industry, opportunity to develop territory in phase) but, as we can see territory of Marijampole IP doesn t have problems such as fragmentation of land plots, it means that this territory can be more convenient for development of successful industrial park. 9. Development of project of real industrial park in Marijampole FEZ Analysis of market needs shows that the most demanding and reasonable area which has size around 1 ha. Experience of development of projects for creation of industrial parks helps to define main requirements to this territory: development of territory should be divided into phases; division of territory into equal land plots with area around 1 ha; connection between areas; transport accessibility for each territory. For territory of Marijampole FEZ (Fig. 9) analysis of output information and project decisions were made according to the developed methodology. Information about region: labour pool (high rate of seeking employment 13 %); available infrastructure (Kaunas airport -56 km; Vilnius airport 139 km, Palanga airport 231 km, port of Klaipeda 275 km, Warsaw 360 km; purpose of creation of industrial park (improvement of economic situation of region, creation new work places for seeking employment, development of technical infrastructure of region); logistical feasibility of territory (transport links: A5, A16); Project decisions: 1. park specialization: Technology park (telecommunications, chemistry, automotive, construction and food industry); 2. size of IP s territory: S=68,5 ha;

6 3. class of IP according to size of IP: industrial inner city district. Development of territory of IP is proposed to divide into two phases (Fig. 10) from a point of view of rational using of material resources and sustainable development of Greenfield territory. Fig. 9. Boundaries of Marijampole FEZ Fig. 10. Phases of development of Marijampole FEZ According to park specialization, the plan of functional use was developed (Fig. 11). 10. Conclusions Fig. 11. Functional use of Marijampole IP 1. Defined types of IP and proposed classification of IP due to features of IP. 2. Defined main factors of creating of successful industrial park (location, infrastructure and service provision, management capacity, incentives). 3. Developed methodologies of creation of industrial parks (depends on type of IP will be apply different methodologies for Brownfield IP and Greenfield IP). 4. Methodology of creation of IP Greenfield type was applied for Greenfield territories of Lithuania. 5. On base of this analysis highlighted cities with highest necessity in creation of industrial parks. In considering improving development of less progressive regions establishment of industrial parks were proposed in such cities: Alytis, Utena, Panevizys, Marijampole. For developing of project of real industrial park was chosen Marijampole FEZ on base of SWOT-analysis of all territories. 6. Main requirements to territory for creating of IP were defined. 7. As an example developed project of Marijampole IP (1 st phase). In future research will be developed detailed plan of territory. Literature Europe and Central Asia Regional Conference on Industrial Parks April 2012 Baku, Azerbaijan. UNIDO, 2015 Unido country office in Viet Nam Jamira V., 2010, Industrial parks history, their present and influence on employment, in Review of economic perspectives, Volume X. Issue 1, 2010, Anca D. ; Lavinia C.,2012, Industrial Parks in Romania: From Success Stories to Emerging Challenges, International Journal of e-education, e-business, e-management and e-learning, Vol. 2, No. 4, August 2012, Salonen T, 2010, Strategies, structures, and processes for network and resources management in industrial parks : the cases of Germany and China, Thesis, Archana S., The Landscape of Industry: The Transformation of (Eco) Industrial Parks through History, in Journal of Arts and Humanities (JAH), Volume -2, No.-9, October, 2013, 1 9. Official web-site of the Ministry of Economy of the Republic of Lithuania. Statistic Lithuania