Supply Capacity - UNIDO

Exporting enterprises face buyer or market requirements based on international good practices or standards where they have to demonstrate their capability to manage hygiene and food safety (HACCP/ISO 22000 or private standards), quality (ISO 9000), environmental impact (ISO 14000), or social accountability (SA 8000), etc. Non-compliance leads to their exclusion from international production or trade relations. UNIDO builds up national and regional capacities to assist enterprises in the establishment of such management systems. This takes the form of training the consultants and staff of sectoral technical centres and supporting the establishment of pilot systems in enterprises and, at the same time, strengthening national or regional certification capacity for such systems.

Clients or markets request exporters to be able to trace back a product from “shelf or fork to farm”. As part of its SPS-related activities, UNIDO provides advisory services to establish national or regional traceability centres for agro-industrial exports. These centres provide, in particular, assistance to producers, warehouses, manufacturers and plant quarantine institutions on the establishment of a documented chain of product flow from the origin of the product to the market place. A notable success is the establishment of the Egyptian Traceability Centre for Agro-Industrial Exports (ETRACE). In May 2006, ETRACE carried out a mock traceability alert in cooperation with a supermarket in the UK, which demonstrated that the source of rejected produce could be identified within 24 hours.

UNIDO provides advisory services to assist enterprises to achieve compliance with SPS requirements, in particular through the provision of good food processing practices, including good hygiene practices (GHP), good manufacturing practices (GMP), and the identification of critical control points for food contamination during processing (HACCP). UNIDO trains local consultants and institutions for the replication of such advisory services to local industries on a continuous basis. It is also involved in capacity-building initiatives in the areas of food hygiene and safety through the implementation of GHP and HACCP in the food industry, and the establishment of food safety systems that are based on risk analysis, prevention, and traceability.

Techno-economic surveys and assessments of specific industrial sectors and sub-sectors are essential for the development of competitive supply capacities targeting national, regional, and international markets.

UNIDO undertakes such assessments for key (sub-)sectors where developing countries have a potential competitive advantage to increase traditional and non-traditional exports, in particular food and fish processing, leather and leather products, textiles and garments, and wood and other forest products.

Product development and process upgrading constitute a key link between available indigenous resources and the competitive processing of such resources, and are vital for the successful integration of tradable commodities and products into national, regional and global value and supply chains. Product and process design and development activities include, inter alia, selection of species, safety requirements, eco-design and life-cycle assessment, improved characteristics, functionality, performance, product appearance, packaging and supply management. In this context, UNIDO also focuses on market intelligence, such as client and market requirements, competition potential, segmentation, branding, and effective communication of product values to consumers.

UNIDO assists in the dissemination of modern, sector-specific production and processing technologies, particularly by supporting a network of technology centers thereby enabling enterprises to better meet the quantity and product quality requirements of world markets. Focus sectors include food (edible oil, cereals, coffee, fruit and vegetables, meat, dairy and fish), textiles, and leather sectors. These centers also provide support and advice on technology-related analyses and related development options, policies and strategies to relevant government bodies, professional associations, and manufacturers. Support and advice to that end include measures to strengthen R&D capacity, technology support and (vocational) training.

Proper handling and application of appropriate technologies play a prominent role in ensuring the supply capacity of agricultural produce. Reports indicate that globally about 1.3 billion tons of food produced for human consumption with an estimated value $4 billion is lost or wasted per year. This lost food could meet the minimum annual food requirements of at least 48 million people. Without successful intervention the amount of production lost each year will continue to grow. UNIDO is assisting member states by providing technical assistance in minimizing the post harvest losses by identifying the main causes of the losses along the food value chain, and introduction of appropriate systems for agro logistics including among others storage (cold and dry), transport, marketing (linking small holder farmers to food processing industries).

In addition UNIDO provides integrated solutions in institutional capacity building for monitoring post harvest losses, human capacity development, research, design and adaptation of packaging and food preservation technologies fit for the purpose and supports the development of policy formulation and interventions for different sectors.

Since 1992, when UNIDO became the fourth implementing agency of the Montreal Protocol (MP), the Organization has been promoting innovative technologies based on ozone-friendly chemicals and clean manufacturing processes.

Montreal Protocol projects go beyond the elimination of ozone-depleting substances. UNIDO’s projects also allow SMEs for better access to new markets and keep businesses alive in developing countries by contributing to the introduction of new, clean and up-to-date technologies; the upgrade of production lines with brand new equipment; and, the dissemination of adequate training on technology and industrial safety, including human health aspects.

Many of UNIDO’s activities that relate to its thematic priority Environment and Energy are a direct response to the Montreal Protocol on Substances that Deplete the Ozone Layer, an international treaty designed to protect the ozone layer by phasing out the production and use of numerous substances believed to be responsible for ozone depletion. Since the Convention opened for signature in 1989, UNIDO has been one of the principal agencies assisting developing and transition economy countries to meet their obligations under the Convention, thereby allowing the countries to continue to access global markets.

UNIDO has completed nearly 70 projects in eight different Central and South American countries to eliminate the use of chlorofluorocarbons in domestic and commercial refrigerators. Currently, UNIDO is engaged in the phase-out plan of hydrochlorofluorocarbons (HCFC) in eight countries in the region, namely Argentina, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Suriname and Venezuela. UNIDO also has cultivated a strong relationship with Caribbean countries as well and completed over 15 Montreal Protocol projects in Barbados, Cuba, Dominican Republic and Jamaica for the phase out of the consumption of chlorofluorocarbons in the refrigeration sector and the use of methyl bromide as a fumigant in agriculture. UNIDO is currently responsible for the implementation of the HCFC Phase-out Management Plan of Bahamas, Saint Lucia and Saint Vincent and the Grenadines.

The largest potential for renewable energy (RE) for industrial applications lies in heat and power from bio- mass sources, followed by process heat from solar thermal and heat pumps. It is estimated that the activation of this potential can lead to 21% of all energy and feedstock use in manufacturing industry being renewable by 2050. Half of the 2050 potential lies in the agro-food industry, given a high demand for low temperature process heat.

UNIDO through its ongoing projects and programmes is demonstrating the use of renewable energy technologies in industrial applications around the world, including in Ukraine, Albania, India, Malaysia and Egypt, thereby enabling the countries to compete in the global market in a more cost-effective manner.

UNIDO is promoting the use of international standards for renewable energy technologies as a way of sup- porting an international free trade agreement on renewable energy technologies. UNIDO is partnering with the key organizations active in this field, such as ICTSD, IRENA, ISO and IEC, in order to operationalize this common objective. UNIDO brings its experience from implementing RE technologies in developing countries and emerging economies, and through its existing network of National Standards Bodies and national and regional renewable energy centers assists in the standardization of RE technologies, for instance in China, India and Brazil.

Improving energy efficiency in industry is one of the most cost-effective measures to help supply-constrained developing and emerging countries meet their increasing energy demand and loosen the link between economic growth and environmental degradation, such as climate change.

The final goal of the UNIDO Industrial Energy Efficiency (IEE) Programme is to effect sustained energy management and efficiency practices in industry of developing countries and emerging economies in order to reduce the environmental pressure of economic growth while improving international market access, increasing productivity, helping to generate economic growth, create jobs and alleviate poverty.

UNIDO pursues such goal through projects aimed to deliver comprehensive capacity building at the institutional level, in the market and within enterprises on energy management and energy system optimization. UNIDO is adopting such measures through its Industrial Energy Efficiency (IEE) technical cooperation pro- jects in Burkina Faso, China, Ecuador, Egypt, Indonesia, India, Malaysia, Moldova, Philippines, Russia, South Africa, Thailand, Turkey, Ukraine and Vietnam.

Existing national energy management standards (EnMS) and UNIDO program experiences show that average energy efficiency improvements of 20% or more can be achieved in industry through an integrated and sustained energy management and system optimization approach. Such evidence was acknowledged by all participants at the UNIDO EGM on Energy Management Standards in Industry in March 2007 and implicitly confirmed in February 2008 by the decision of the Technical Management Board of ISO to establish a new project committee (PC 242 – Energy Management) appointed to develop the ISO Management System Standard for Energy ISO 50001.

The activities aimed to support the development of national energy management standards have been included in almost all GEF industrial energy efficiency projects, facilitating developing countries access to international markets . UNIDO has been advocating energy management systems and ISO 50001 with its projects’ counterparts, and endorsed the promotion and support of energy management systems and standards as core components of most UNIDO Industrial Energy Efficiency (IEE) technical cooperation projects.

Waste management, phase-out of toxic substances, increasing energy efficiency, replacement of fossil fuels with renewables, monitoring carbon and water footprint, environmental impact management and ISO 14000 testing are some of the key market requirements for a number of agro-processing, textile and leather processors and exporters. In this area, UNIDO aims to improve the productivity and competitiveness of companies in developing countries, as well as their access to international and more local markets, through the application of resource efficient and cleaner production techniques and technologies. The activities focus on building national capac- ity in resource-efficient and cleaner production by awareness-raising, training, conducting in-plant demonstrations and audits within the processing sectors, and providing policy advice to the government. As a result of these activities, it is expected that many export-oriented enterprises will increase their production efficiency and thereby improve their productivity and competitiveness, as well as their environmental performance through greater resource (material and energy) efficiency. Consequently, enterprises will be in a position to reduce their production costs, improve the quality of their products, and to obtain greater access to international markets. Furthermore, national capacities will be in place to ensure the replication of cleaner production practices and methods, and to ensure that cleaner production concepts are also applied to new industrial investments.

UNIDO assists with the creation of new green industries in developing economies and economies in transition by providing technical cooperation, fostering innovation and promoting technology transfer. The new green industries include providers of both environmental technologies (wind turbines, recycling plants) and environmental services (energy consulting, chemical leasing). Underpinning the creation green start-ups will be the carrying out of technical and financial feasibility studies, as well as market analyses. Best practice studies are also conducted, focusing on best practices for new ventures, business incubators and technology parks. The start-ups are then supported with financial instrument tool-kits, capacity building measures, best practices, management strategies and international market access.

One effective way of helping SMEs to reduce risks and improve their chances of accessing export markets is to build export consortia - a specialized form of SME network. Export consortia enable SMEs to combine their knowledge, financial resources, and contacts, and therefore significantly improve their export potential, while cutting costs involved in penetrating foreign markets. UNIDO is currently implementing export consortia projects in Latin America, Northern Africa and the Middle East by supporting the creation of pilot SME groupings, training national promoters of such consortia in both the public and private spheres, and encouraging a favourable institutional and regulatory environment for their development. At the global level, UNIDO in cooperation with the Italian Federation of Export Consortia yearly organizes training courses on export consortia at the ILO International Training Centre that target representatives of public and private SME sup- port institutions from all over the world. Additionally, on line distance training courses on the same topic will be launched during the year 2009. Knowledge resources and learning materials used to this end are elaborated and updated on a regular basis and can be accessed online.

Markets have become increasingly demanding, and meeting their requirements in terms of volume, quality, and delivery time is often problematic for small-scale firms, since individual enterprises lack the necessary competence, resources, and knowledge. To address this challenge, UNIDO has developed a strategy based on improving the capacity of firms to work together and collectively address local and global markets. The approach targets clusters (i.e. agglomerations of enterprises) where geographical proximity and shared business interests facilitate collaboration between firms. UNIDO is currently implementing cluster development projects in a number of countries in Asia, Africa, and Latin America. In this framework, UNIDO provides train- ing and technical assistance in project implementation to so-called ‘Cluster Development Agents’, i.e. professionals and institutions responsible for facilitating the process of cluster development. Awareness-raising seminars and training are also provided to public sector institutions and policy-makers involved in the cluster initiative. Additionally, UNIDO promotes “cluster-to-cluster” activities, i.e. exchange and partnerships between institutions and enterprises belonging to different but related clusters, in order to expand their knowledge of markets and production processes. Learning resources and informative material on this programme are made available online.

This programme aims to increase productivity and sustainable economic progress by enabling institutions in the public and/or private sectors to establish or strengthen linkages with national and international production systems and global value chains. Such linkages promote global partnerships and the integration of developing countries into the world economy. UNIDO’s Sub-contracting and Partnership Exchange (SPXs) Centres, are usually hosted by a private sector association or an investment promotion agency (IPA) and help local firms in developing countries to identify opportunities for supplying components for large company clients through the provision of match-making services. UNIDO has over the past 25 years established more than 60 Sub-contracting and Partnership Exchanges (SPXs) in different parts of the world. In the recent past, more tools have been added to the SPX toolkit for supplier diagnosis and supplier development. More emphasis has been put on supplier diagnosis through benchmarking techniques that generate prioritized gap analyses of supplier capacities in relation to buyer requirements. This will enable suppliers to recognize their shortfalls in meeting buyer expectations, and to develop the specific upgrading and investment plans that they will need in order to become competitive suppliers. Since 2008, more than 25 “new generation” SPX Centres have been established, particularly in Africa.

The UNIDO Investment and Technology Promotion Offices (ITPOs) are active partners in this process. They are ideally placed to establish direct links with large multinationals based in their countries, identify their outsourcing strategies and supply-chain requirements, and help develop country-level programmes that favour local content increase and sector cluster development. National IPAs will be integrated into the process to give the institutional assistance that is necessary for the swift implementation of supplier upgrading and expansion plans. Overall, suppliers will benefit from greater exposure to large private enterprises and public procurement bodies, with positive effects on their output and investment volumes. Large contractors and buyers will benefit from increased levels of local content and reduced procurement costs while at the same time being accepted as important drivers of economic growth.

UNIDO’s work in investment promotion is multi-faceted based on Monitoring (analysis and assessment of challenges and opportunities created by investment flows); Learning (information sharing and knowledge dissemination for project identification, formulation and promotion); and Networking (linkages to potential partners throughout the business partnership process).

UNIDO services are aimed to provide:

• matchmaking services between buyers and suppliers and business partnership support;
• monitor investment activity in respective countries (foreign and domestic direct investment) to ascertain economic contribution and investment impact, especially in relation to SDGs;
• mobilize investment through targeted institutional cooperation be it at the macro, meso and micro level;
• strengthen the institutional capacity of public and private partners, in particular, investment promotion agencies (IPAs);
• encourage public-private partnerships and foster entrepreneurship to attract more domestic and foreign direct investment; and
• mitigate investment risk through strengthened business environment and capacity building.

To foster and generate impact investment and to promote industrial opportunities, UNIDO also organizes global events such as Investment Fora to promote investment opportunities and mobilise investment interest in developing countries. The Department also works with public and private business institutions including national and regional investment promotion agencies, financial institutions and chambers of commerce and industry, to support enterprises and investors. Partnerships are established with, inter alia, the World Association of Investment Promotion Agencies (WAIPA), the Austrian Government, the Global Impact Investing Foundation (GIIF) and the Global Impact Investing Vienna Exchange (GIIVX), the International Chamber of Commerce (ICC) and the UN Global Compact.

UNIDO has a long track record of FDI investor surveys mainly in Sub-Saharan African countries as well as in South East Asian middle income countries such as Viet Nam, through which it assisted respective country IPAs and other institutional stakeholders in unearth evidence on FDI activity, performance and impact in host developing countries as a means to inform more evidence-based investment promotion strategies. UNIDO has undertaken a number of ad hoc empirical studies focusing on understanding the impact through employment generation and skill formation, trade and international market integration, productivity and technical efficiency as well as FDI spillover effects. UNIDO is expanding its activities in the fast-evolving area of impact investing and to enhance the understanding of our main counterparts in appraising impact investing “ready” projects in developing countries and to identify and initiate discussions with potential investors or PPP partners.

CSR has become a key requirement for suppliers located in developing countries to access foreign markets. The international guidance standard on social responsibility (ISO 26000), the rise of private standards as well as the current trend to discuss this issue in the public policy sphere, have raised concerns within the private sector globally. In this context, UNIDO aims to help SMEs in developing and transition countries to meet related requirements to enhance their market access. UNIDO bases its CSR Programme on the Triple Bottom Line (TBL) Approach, which has proven to be a successful tool for assisting smaller businesses to meet social and environmental standards without compromising their competitiveness.

The organization’s CSR service portfolio encompasses capacity building on an institutional level, responsible supply chain management, pilot interventions in SMEs, the integration of CSR in government strategies and the inclusion of business ethics in the curricula of vocational schools and educational institutions.

UNIDO’s core CSR tool is called Responsible Entrepreneurs Achievement Programme (REAP) - a CSR-based management and reporting tool, developed by UNIDO to assist SMEs in their efforts to implement responsible management approaches and operation methods in line with internationally required standards and norms.

Acknowledging the lead role of the private sector in industrial development, the purpose of UNIDO’s business partnerships programme (BPP) draws on the expertise, know-how and resources of major business players and private sector foundations to bring their experience to bear on the aspirations of MSMEs to become competitive players on local, regional and international markets as well as attractive partners for larger firms. Depending on the size, structure, geographical range, financial strength and core capabilities of the potential private sector partner, three broad categories of engagement can be distinguished, i.e. core business and value chains, social investment and philanthropy and multi-stakeholder and transformational alliances.

UNIDO Industrial Upgrading and Modernization Programme (IUMP) aims at contributing to economic growth by facilitating regional integration of developing countries and economies in transition, and increasing the capacities of local industries for value-added generation, economic diversification, leading to increases in exports and employment.

UNIDO’s IUMP is integrated and based on a thorough assessment of the current situation and industrial trends in order to address existing constraints to enterprise growth at the macro- (institutional/regulatory frameworks), meso- (intermediate and support institutions) and micro-economic (or enterprise) levels. The programme follows a value chain approach to identify and address major weaknesses along the supply chain to ensure effectiveness and higher impact of its interventions.

At the (macro-economic) level, the IUMP approach involves providing a strategic diagnosis of the industrial sector in the country, a national industrial upgrading plan and promoting the establishment of national management and monitoring bodies for industrial modernization that facilitates policy development and capacity building activities rendering country’s institutional, financial and regulatory framework favorable and conducive to the development and improvement of competitiveness of domestic manufacturing enterprises and their ability to create jobs.

In order to sustain the momentum of improving enterprise competitiveness, the upgrading intends to build a country’s institutional, financial and technical capacity (meso-level) to deliver upgrading related services to local industries via provision of the necessary capacity building and development tools. Thus, several coaching and technical assistance programmes are disseminated to the national institutions to enable them to establish appropriate management and monitoring structures for the upgrading programme. In addition, fine-tuned training activities and tools are delivered for national staff and the consultancy sector aiming at providing appropriate support services for enterprises.

The intervention at industry and enterprise levels (micro-level) is first performed for demonstration purposes and usually covers a limited number of enterprises, giving them the opportunity to experience the developed tools and enable the national institutions to carry out this kind of approach before scaling up activities to the whole industry. The approach involves two goals of reaching: (i) competitiveness in terms of price, quality and innovation; and (ii) ability to follow and assimilate the development of technologies and markets. Such an approach allows existing manufacturing enterprises and their networks to acquire necessary capacities to produce larger volumes of manufactured goods in compliance with markets’ requirements. Along with building managerial, organizational, human resource and marketing skills at the level of the enterprise, industrial upgrading also involves enhancement of technology, equipment and machinery through targeted programmes.

In order to ensure the impact and sustainability of the technical assistance, IUMP assists stakeholders to come up with funding scenarios for continued implementation of industrial upgrading interventions at national, sectoral or regional levels. The Programme facilitates the creation of new financial products and services and provides advice and technical support in the establishment of a dedicated upgrading fund to finance SME upgrading needs. In this context, the role of the financial sector and its involvement in the IUMP is very important for the viability and sustainability of the industrial upgrading process. UNIDO successfully implemented a number of upgrading projects at the national and regional levels in a number of countries in Eastern Europe, Caucasus, Central Asia, the Middle East and North, West, Central and East African sub-regions. Currently, IUMP is expanding its regional coverage to Southern Africa, Arab Gulf countries, and some other regions in Latin America.