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Meaning and Definition:

By ‘localization of industries’ is meant the tendency on the part of industries to be concentrated in regions which are most suited for their development.

Factors of Localization:

Some industries are carried on and developed in certain areas because of their natural or acquired advantages. For example in Pakistan, sugar industry is localized in Sate of the Punjab, match box industry lacalized in the State of Khyber Pakhtunkhwa, cotton industry in the States of Punjab and Sindh, simply on the basis of nearness to source of raw materials.

The important factors (reasons) which influence the localization of industries are discussed as below:

(i) Nearness to raw material. One of the very important factor which affects the birth of an industry in certain areas is the nearness to sources of raw material. The availability of raw material near the location of the industry helps considerably in reducing the transport cost and so the total cost of production of the commodity. It is due to this reason that most of the industries are established in regions where the raw material is available in abundance. Concentration of jute industry in Bangladesh.

(ii) Availability of the power source. Availability of cheap power resources is another important factor which influences the concentration of industries in particular areas. If for instance, electricity is to be carried over to a long distance where the industry is located or the coal which serves as raw material is to be transported at a far-off distance from whereat is extracted, it will not then he economical to set up the industry at such places which are far away from the sources of power.

(iii) Physical and climate conditions. Physical and climatic conditions have an important hearing on the growth of industry. If suitable climate and desirable physical conditions exist for a particular industry, that will he established and developed in that region then.

(iv) Nearness to market. Industries have a tendency to be localized in those areas where the market is near at hand. The goods produced can be easily brought in the market and there can be much saving in the cost of transportation.

(v) Supply of trained labor. Supply of trained labor is another great attraction for the concentration of an industry in a particular area. If for instance, one wishes to set up a cotton factory, it will be advantageous for him to install it in the city of Faisalabad (Pakistan).

(vi) Availability of capital. Industries may spring up in those areas where capital is available at a lower rate.

(vii) Momentum of an early start. Sometimes, it so happens, that an industry gets itself established and developed in a particularly locality not due to the reasons discussed above but just by some chance or other. Later on, that locality acquires reputation in the production of the commodity and more industries are set up-there. For instance sports goods industry is located in the city of Sialkot, Pakistan for no reason other than this that it got an early start there.

Advantages of Localization:

When an industry gets itself established in a locality, it enjoys the following advantages:

Firstly, a localized product gains reputation and thus it becomes easy for a firm to find good market within and outside the country. On the basis of reputation, it is generally able to charge higher prices than the products of their counterparts situated elsewhere. For instance, the sports and leather goods manufactured in the city of Sialkot, Pakistan have acquired very good commercial reputation and it is easy to sell them at good prices.

Secondly, when an industry is located in a particular region, it is easy to get skilled labor of that industry, industrial skills transfer from father to son.

Thirdly, localization leads to promotion and growth of subsidiary.

Fourthly, it results in the development of specialized research institutions.

Fifthly, it leads to the spread of fast means of communication and transport.

Six, localization encourages the development of financial facilities. When banks and other financing cooperation find profitable field for investment in a locality, they at once open their branches there.

Finally, localization provides opportunities both for workers and the industrialists to understand each other and to form themselves into an organization in order to safeguard their respective interest.

Disadvantages of Localization:

Localization has certain disadvantages too. They are as following:

(i) Localization is dangerous when the demand for the localized products declines due to the growth of foreign competition or due to the changes in the tastes of the people. In that case there will be mass unemployment in the particular localized industries.

(ii) Localization results in the economic independence of one locality on the other or of one country on the other; if the commodity demanded is one of the basic necessities of life, it can cause much inconvenience to the depending nations.

(iii) People can learn only one type of work in a localized industry. If they wish to go to another place, they may face difficulty in getting employment.

(iv) During war, a localized industry can easily be made a target for bombardment and the whole industry can be ruined to ashes. So it is not wise to place all eggs in one basket. The industry should be decentralized. It should be spread out in various parts of the country so that it may not become an easy target for enemy’s air attack.