Changing Paradigm of Cluster Development: Learning from Global Experiences Poverty Intensive Cluster Development in Iran February 2014, New Delhi Issa Mansoori UNIDO NPC 1

Outlines MSME Sector in Iran Trends in MSME sector and poverty Poverty intensive cluster development 2

Geography Europe Africa Asia Middle East

MSMEs in Iran; Share (%) No. of Employee Type Micro Small Medium 0.4>150Large 44

5 Value creation capacity in different segments of the chain by traditional MSMEs SupplyDesignProduction/ Process MarketingSale Value

6 Focus of Supports by Government and Banking System SupplyDesign Production/P rocess Marketing Sale Value of Supports Value Creation by SMEs

Level/area of intervention National Industry بنگاه Firm 7

Share of MSMEs linked to any value chain in 2008 and 2013 (among 40,000 MSMEs in the clusters) 8 Simple Market based End Market Leader/Branded Co Key Supplier Preferred Supplier Certified Supplier Tier 1 Tier 2 Tier 3 Strategic Partner %96% 12% 4% Share from total number of firms Year Linked to the VC

Japan’s experience 9 Value creation capacity

Countries’/regions’ experiences 10

From pro-poor to competitiveness 11 Crafts Agriculture Automotive Electronic Textile Economic Value Complexity of Technology

Back to Traditional Sectors 12 Crafts Agriculture Automotive Electronic Textile Economic Value Complexity of Technology Focused sectors Pro-poorCompetitiveness

3 categories of sectors With High Constrain by int. relations Such as automotive, home appliance, ICT, etc. With little constrain by int. relations Such as carpet, saffron, pistachio, etc. With growth in domestic and regional market demand Such as textile, footwear, petrochemical down- stream, furniture, etc. 13

Periods of economic contraction tend to favor a higher increase in informal sector activity 14 Source: OECD 2010

15 Cluster Dev. Program Milestones In Iran UNIDO Strategy Doc. On Iran SME Sector UNIDO-ISIPO Collaboration ISIPO Facilitated projects (80Initiations) 2008 Establishment/Activities of ABCD Foundation Approach year 2010 Cluster Dev. In 5 th National Dev. Plan (Passed by Parliament) Being Applied by Other Organizations 2013

Under 2 nd strategy ISIPO Clustering Projects 41 cluster projects 3 pilot projects 16

Under 3 rd strategy Laws & regulations resolution -National General Policies for Industry Sector (Supreme Leader advisory council, 2005) - Fifth 5-year National Dev. Law (Parliament, 2011) Articles 80 and 150 are on Clusters and Networks development - Approval of a budget line for cluster and network development ( Government, 2011) -National/Multi-sector regulation for clusters & networks dev. (ongoing) -ISIPO regulation on Cluster Dev. Known as reference among the related organizations across the country 17

Sustainable Livelihood as a tool for facing poverty Old New Individual Players Market system Direct solutions (grants and subsidies) for the problems of individuals Managing constraints through the market dynamics … How can market system provide solutions for individuals and firms? What are the systemic constraints? Individual Empowerment Enterprises Development within the market system Tool Cluster Development 18

Shift from traditional to new approach of intervention for poverty alleviation Community based interventions e.g. rural infrastructure improvement, establishment of education centres Individual empowerment e.g. direct grants and subsidies, training the individual Market system Business/sectors development Direct Supports e.g. direct payment to the poor, providing basic stuff 19 Group Individual Local National

Case study 2: Greenhouses ( vegetable and flower) Linked to the neighboring countries such as Kuwait, Russia, CIS countries. 100% increase in efficiency per hectare Management of energy carriers consumption Water resources management Preventing degradation of lands 20

Case Study 3: Pistachio farms in rural areas Common purchase of inputs like fertilizers, pesticides organic production Jointly water resources management 60% decrease in water consumption in the farm Getting hygienic standards Preventing migration to cities 21

Case study 4: Qom Footwear Cluster Establishment of export consortium Export to CIS, Iraq and Afghanistan Establishment of a common brand 22

Case study 1: Yazd Textile cluster (550 MSMEs) Establishment of 22 design service providers 30 percent decrease in the waste of raw materials through Technology upgrading Local copy right Design bank 23

Networking within the cluster Buzz Pipeline SME 24

25 BDS support framework SME BDSp Contract Finance Inst. Marketing Market X Buyer 1 Contract SME Networks of SMEs

Thank You 26