UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

economy environment employment1

The upgrading process

Enterprise Environment

Overall strategic diagnosis Institutional and regulatory environment

Formulation of the upgrading planand financing scheme

Infrastructures and services

Approval of the upgrading plan Standards, certification, accreditation

Implementation and monitoringof the upgrading plan

Investment incentives and promotion

Modernization of equipment

Organization and

management systems

Production system

Training and skills

development

Quality and certification

Marketing and market

research

Alliance and partnership

COMPETITIVENESS

Export The local market2

Restructuring and upgrading approachesand methods

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I. Globalization: the challenge of industrialgovernance in developing countries

Liberalization and globalization

The challenge of globalization

The new pattern of industrial

competitiveness4

Some preferential arrangements between developedand developing countries

ArrangementNumber of

member countries

Member countries or countries/territories in the process of joining

Agreement on free trade between theEuropean Union (EU) andsouthern Mediterranean countries

EU 15 + 12

EU + Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Libyan Arab Jamahiriya, Morocco, Palestine, Syrian Arab Republic, Tunisia, Turkey

Free-trade arrangements between EU and Eastern Europe

EU 15 + 6EU + Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia

North American Free Trade Agreement

3Canada, Mexico, United States of America

Arab Free Trade Agreement19

Algeria, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Jamahiriya, Mauritania, Morocco, Palestine, Qatar, Somalia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen

Common Market for Eastern and Southern Africa (COMESA)

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Angola, Burundi, Comoros, Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda , Sudan, Seychelles, Swaziland, Uganda, Zimbabwe

West African Economic and Monetary Union (WAEMU)

8Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo

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The new pattern of industrial competitiveness

Former pattern

At governance level: From interventionism From the State as actor From the State as operator From the State as ownerAt market level: From protection From natural standards

standardization From subcontracting based on capacity From the geographically centered

marketAt enterprise level: From economies of scale From production of tangibles From integrationNEW FACTORS OF

COMPETITIVENESS From production skills From labor From transactional strategies

New pattern

To laissez-faire To the State as facilitating partner To the State as helper To the private owner

To liberalization To international standardization To subcontracting based on skills To the area market

To economies of flexibility To production of intangibles To fragmentation

To managerial skills To acquisition of technologies and

compliance with international standards

To partnership strategies.6

II. The UNIDO program of assistancein restructuring and upgrading

Upgrading concept

Competitiveness in terms of price, quality and

innovation;

Ability to follow and assimilate the

development of technologies and markets.

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Objectives of the integrated program

Modernizingthe industrialenvironment

Promoting the

development of

competitive industries

Strengthening the capacities ofsupport institutions

Improving thecompetitivenessand development

of industrialenterprises

RESTRUCTURING AND

UPGRADING PROGRAMME

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The principal components of the integrated restructuring and upgrading programAssistance in the design, implementation

and follow-up of a national industrial restructuring and upgrading program (beneficiary: Ministry of Industry)

Strengthening the capacities of enterprise support systems (beneficiary: support institutions)

Support program for the restructuring and upgrading of pilot enterprises chosen from among the priority sectors (beneficiary: enterprises)

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UNIDO’s experience in restructuring and upgradingDiagnostic studyManagement, quality , certificationPolicy and, strategy formulationIntegrated restructuring and upgrading

programPilot restructuring and upgrading projectCapacity-building: standardization,

accreditation

Geographical cover:Poland, Romania, Algeria, Tunisia, Morocco

Kazakhstan, WAEMU countries, Egypt, Sri Lanka Rwanda, Colombia ,and Madagascar

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III. Overall strategic diagnosis and upgradingBasic principles of diagnosis

Aims of diagnosis:

Assess the strengths and weakness and identify the competitiveness.

Types of diagnosis: Overall (Strategic), Functional, and Express.

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Designing an overall strategic diagnosisAims and objectivesMethod

Strategic Upgrading Process

SUP

Overall strategic diagnosis

Selection of upgrading strategies

Implementation and

monitoring of upgrading

plan Formulation of upgrading plan

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Overall strategic diagnosis procedure

Analysis of external sources of competitiveness.

Analysis of product markets and strategic positioning.

Financial Diagnosis.Diagnosis of technical capacities.

Diagnosis of managerial skills and quality.

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Analysis of external sources of competitiveness

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Diagnosis of product markets and strategic positioning

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Financial diagnosis

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Diagnosis of technical capacities

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Diagnosis of managerial skills and quality

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Checklist for overall strategic diagnosis and the drafting of an upgrading

plan for an agro-food enterprise

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IV. Industrial enterprise upgrading strategies

Selection of upgrading strategies

Globalization and possible upgrading strategiesprice and differentiation strategies

Product cost advantageService cost differentiationProduct differentiationService differentiationInnovation differentiationMarketing differentiation

Impact of price and differentiation strategies on functions in the enterprise

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Industrial enterprises and possible upgrading strategies Strategies

Re-centering strategyPartnership strategyFlexibility strategy

Impact on resources Impact on product mix Constraints/limits

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V. Formulation of upgrading planSUMMARY OF UP GRADING PLAN

Upgrading objectives General objectives Expected results Major upgrading items Corporate concept Markets Products and services Resources Upgrading strategy Recommended actions Immaterial actions Tangible investments Budget forecast Financing Expected impact of the implementation of the upgrading

plan Implementation planning

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VI. Implementation and monitoringof the upgrading planPrior conditions for the success of the upgrading

plan.

Difficulties and problems encountered by industrial

enterprises that have implemented upgrading plans.

Monitoring of the upgrading plan.

Regular diagnosis.

Regular financial position.

Regular operating report.

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International experience of restructuring and upgrading

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I. Program for modernizing and upgradingindustry in Portugal

Prepare and adapt Portuguese industries to face European competition.

PEDIP I (1988-1993): modernization and upgrading program.

PEDIP II (1994-1999):modernization and upgrading program.

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PEDIP I

Modernization of the support infrastructure for the industrial sector;

Vocational and technical training;

Investments in enterprises, particularly small and medium-sized enterprises;

Improving productivity of small and medium-sized enterprises and quality in industry.

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PEDIP II

Foster a sustained improvement in the competitiveness of Portuguese industrial enterprises, to strengthen their capacity to adapt to the rapid evolution of technologies and markets, to encourage modernization, upgrading and diversification and to promote the internationalization of industrial structures.

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Results of PEDIP I and IIPEDIP I&II summary

(In millions of escudos)

Projects approved

Number Investment Aid

PEDIP I 6,543 656,442 232,600

PEDIP II 6,316 14,662,827 459,677

Total 12,859 15,319,269 692,277

Note: 1 euro = 200,428 escudos.

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II. The Tunisian national upgrading program

Meeting the demands of liberalization and the opening up of their frontiers.

Environment upgrading programEnterprise upgrading program

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Environment upgrading program

The role of the administration and institutions;

Strengthening agencies;

Vocational training;

Renovating existing industrial zones and developing free zones;

Stimulating information market.30

Enterprise upgrading program

Improving competitiveness through skills development and quality management;

The acquisition of new technologies;

Strengthening enterprises’ financial structure.

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Initial evaluation of upgrading program

The overall increase in sales by 35 %;

Export sales increased 65 %;

43 % of the enterprises had achieved a mean export sales growth rate of 300 %;

Increase in employment by 31 %.

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III. Industrial upgrading program in Algeria

Liberate of the economy , establish a market economy

and promote industrial competitiveness

Industrial restructuring program.

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Macro-level (Government and Ministry of Industry and Restructuring (MIR))Formulation of policies - Activation of tools -

Implementation

Meso-level (Local, sectoral, technical, technological or professional intermediaries).Restructuring and promote enterprise support

institutions

Micro-level (Enterprises wishing to benefit from the upgrading program). Improving the competitiveness of enterprises.

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IV. Industrial upgrading program in Morocco

Liberalization and structural adjustment of

the economy.Free-trade agreements.Dismantling of tariffs.Supporting program to enable

enterprises to improve their competitiveness.

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Improving reception facilities;

Promoting exports;

Improving vocational training;

Strengthening professional associations;

Developing technological infrastructure.

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V. Industrial upgrading program in Egypt

Liberalization and to facilitate integration of Egyptian industries and

SMEs in the world economy.

The integrated industrial modernization program has three focuses:Modernization of enterprises, Upgrading of the industrial sector and, Industrial policy and sectoral support.

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Modernization of enterprises:

Strengthening competitiveness;

Training;

Management and marketing support;

Foreign direct investment (FDI), (match-

making);

Export development;

Promotion of financial services;

Modernization of machines and tools.38

Upgrading of the industrial sector:

Creation of a network linking information

centres;

Establishment of “EGYnet;

Capacities of professional associations;

Creation of groups of industrial enterprises;

Promotion of the national quality system.

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Industrial policy and sectoral support

Modernization of the Ministry of Industry and

Technology;

Modernization of industrial policies;

Sectoral studies;

Strengthening of the legal and regulatory

framework;

Improving the finance and banking system.40

Impact of executionGrowth in the value of production: 8.07 % during

the first year, totaling 34.5 % by the end of the five-year period.

Growth in gross domestic product (GDP) totaling 34 % by the end of the five-year period.

For 1 pound provided by the Fund an output of: 11 pounds in the value of production 4 pounds in the GDP

For 1 pound provided by the Fund, based on subsidized interest rates (7 per cent instead of 15 per cent), an output of: 8.7 pounds in the value of production 3.04 pounds in the GDP.

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THANK YOU

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