From practice to policy: UNIDO’s approach and lessons learned

Why the cluster approach? Cluster are conducive environments for enterprise development Clusters exist aplenty in the world, some doing very well, most not competitive enough Public policy can help under performing clusters improve their outcomes and dynamics Clusters can be vehicles for pro-poor growth

Why the cluster approach? Clusters are conducive environments for enterprise development Clusters exist aplenty in the world, some doing very well, most not competitive enough Public policy can help under performing clusters improve their outcomes and dynamics Clusters can be vehicles for pro-poor growth

Clusters and Poverty: the conceptual challenge CLUSTERS Growth and competitiveness Collective efficiency and linkages Local institutions Social capital Global buyers Local clusters in global value chains POVERTY Income Employment and wages Vulnerability Risk Participation Empowerment Social protection Social provisioning

Pro-poor growth A pattern of growth based on the development of a competitive private sector that generates opportunities for the poor - Economic : income/employment, material assets, access to resources but also - Human : training and health improvement that allow for the engagement in production activity - Socio-cultural : overcoming discrimination, improving social status to increase participation in the economy - Organizational : representative bodies, voice and rights that allow advocacy of economic interests - Protective : reduce insecurity and vulnerability to shocks that hinder risk taking

Clusters for pro-poor growth What poor? How can the poor benefit? - Entrepreneurs, workers, unemployed and trainees – gains in turnover/salary, employment creation/preservation, investment in productive activities - Farmers and inputs suppliers – value chain linkages, stable supply contracts - Consumers – affordable, better quality and increased variety of goods/services produced in the cluster - The local community – via investments in firms’ CSR and as a spillover effects from investments in education, infrastructure and basic services (roads, electricity, water) and from increased tax revenues

Pro-poor effects can be a spillover of cluster development: Chontales, Nicaragua: public-private efforts for investment in the electricity grid – beneficiaries: cheese producers, schools, poor communities However, to maximize pro-poor outcomes, a cluster initiatives needs to: -Focus on clusters where income/employment potential of the poor targets are the greatest; -Give visibility to the poor – participation and organization -Target assistance to marginalized groups e.g. women, minorities… -Invest in human capital to increase productivity/employability e.g. handloom cluster of Chanderi Field experience shows…

Example: Chanderi (India) Selection: rural, low skill handloom Process: inclusive, participatory, giving voice to marginalized groups Target: Women weavers Dimensions of poverty: income, health, empowerment, representation Poverty related outputs/outcomes: Women’s literacy programme and leadership courses Access to health facilities and health education 600 weavers organised into 150 SHGs Average wage rises by 10-15% Improved access to formal sector credit 290 families enrolled in health insurance schemes 2005, total turnover US$ 200,000

Conclusion: Cluster development can be effective to produce pro-poor outcomes… when geared towards this objective

Participating countries Ecuador Colombia Mexico Bolivia

Cluster and network projects - Examples Senegal: networks, associations, development of capabilities of local government (municipalities), mutual credit guarantee scheme India: from pilot projects to homegrown cluster movement reaching hundreds of clusters with over 100 m USD budget allocation Nicaragua: networks, supplier development, clusters, value chain integration, SME policy, cluster-to-cluster cooperation Ecuador: sectoral technical assistance, networks, chambers and common service units, municipalities, vocational schools, participative LE planning

Horizontal networks Institutions and brokers Vertical networks (VN) Horizontal networks (HN) Clusters Integrated Networks BDS and brokers Large/medium/small enterprise integration Technical skills Local government Governance systems and joint development vision Country wide coverage Policy makers and private sector leaders Broader skill development (universities) Start up phase Increasing impact Integrating the local system Policy and Diffusion 20 HN (150 SMEs approx.) HN: 44 (480 SMEs approx.) / HN brokers trained: 32 VN: 13 SMEs & 4 LE Clusters: 5 Diffusion: 250 policy makers and private sector leaders Building capacity: 11 clusters, 22 cluster brokers &7 universities Local coordination

The UNIDO approach: 1.Run cluster pilot initiatives – to show viability and benefits 2.Upscale Objective: Assist national institutions to develop ownership of the approach as a policy tool Strengthen institutional capacities and skills at all relevant levels Establish a knowledge management system (incl. M&E mechanism) – lessons learned in the field feed back into policy Cluster policy

includes: -Govt: train officials, set up a policy framework, link departments, establish a budget, identify/train implementing agencies, set up a monitoring and evaluation system -Investment in skill development: facilitators and cluster governance institutions (municipalities, private sectors organizations and leaders), private sector (link with education institutions) -Connect with and mainstream in other private sector support policies Cluster policy

Services  Technical assistance projects 1.Technical guidance and advice on project formulation, management, evaluation 2.Capacity building and training activities (training of trainers and training for final beneficiaries: entrepreneurs, BDS, policy makers, schools, academia) 3.Policy advice and institutional capacity building for dissemination of the approach  Methodologies, Manuals, Training Kits  Expert Group Meetings and Joint Learning programs  Global training courses (Turin) and regional ones  Action-oriented research

For more: Thank you! Giovanna Ceglie Unit Chief Cluster and Business Linkages Unit UNIDO