Panel 6 Sustainable Business Linkages in the Production Chains „UNCTAD‘s preliminary findings on good practice in linkages policies and project approach“ Ethos International Conference, Sao Paulo, June 2006 Christiane Stepanek-Allen Chief, Office of the Director and Linkages Programme Division on Investment, Technology and Enterprise Development UNCTAD

1.How are business linkages addressed in UNCTAD’s work? 2. What are preliminary findings regarding linkage policies and international initiatives? 3. How does PV benefit? Main questions addressed

Crosscutting: Research/analysis on FDI (trends, drivers) Policy advice on enabling investment environment Capacity building in investment promotion Research/analysis on enterprise competitiveness Policy advice on SME support measures and programmes (Empretec) International best practice in corporate responsibility International guidelines for CR reporting (ISAR) Products: PV and other national support programmes in Africa and Asia Business linkages blueprint, catalogue on good practice policies 1. How are business linkages addressed in UNCTAD‘s work?

Improving the investment climate Strategic FDI attraction Strengthening absorptive capacity Specific linkage policies Providing strategic guidance and policy coordination 2. What are preliminary findings regarding policies and and support measures? An analytical framework for the analysis of an systemic policy approach to linkage building

Encouraging“ policy approach (mainly non-restrictive) aimed at matchmaking, coordination, technology transfer, i.e.: Horizontal, non-selective policies to compensate for market failures (information, access to technology, R&D,payment delays) Selective, sector-specific and cluster policies (also to advance socio- political goals) Tax and financial incentives to strengthen the absorbtive capacity of SMEs Complementary government activities Linkages aspect need to be addressed in all five policy areas 2. What are preliminary findings regarding policies ?

Who are the key players and institutions of a successful linkages promotion programme?

2. What are preliminary findings of a best practice linkages programme? Sector-specific approach Sector-unspecific functional approach  difficult to get companies from the same sector to share experiences  introduces implicit bias on manufacturing outsourcing  encourages horizontal learning and exchange of information  similar to BDS: addresses market failures

2. What are preliminary findings of a best practice linkages programme? FacilitationUpgrading  share information on suppliers, make them more visible  involve meso institutions  strengthen BDS market  work with individual TNC to develop local suppliers  funding upgrading effort in suppliers  facilitate upgrading, e.g. match spun-off small enterprise with additional customers Facilitation approach in line with the recent donor thinking on promoting market-based solutions

2. What are preliminary findings of a best practice linkages programme? Strategic policy orientation and coordination with public and private stakeholders Identification of specific role of all stakeholders (public, private, meso, donors, NGOs) Target lead firms of production chains and high brand recognition Spread experience and learning of TNC linkgage initiatives Subregional initiatives are more successful than national initiatives Performance measurement to calculate cost (for TNC and government)

Growing importance of CSR in corporate governance, TNC strategy formulation and reporting CSR advocacy a promising driver to engage TNCs in government linkages initiatives (or international, i.e. UN, donors), if integral part of gov. policy Growing international trend in CSR to favor linkages with socially underprivileged groups in developing countries, through: - Support to the supplier - Selling basic products and services to poor communities Companies with high brand recognition or market leaders engage more often in CSI. Degree of commitment varies, companies that have announced specific targets are more likely to take it seriously Careful mix of CSR and operational interventions interventions determine success of promoting sustainable business linkages Project needs clear message! The Role of Corporate Social Responsibility

Coalition of national and international stakeholders (Steering Committee/Advisory Board) to focus on different aspects and localize best practice learning Policy advice (addressing different aspects, access to different government stakeholders) Building upon earlier intiatives (Empretec, IPR, CSR Reporting) Appreciated for understanding international investment and TNC requirements, the local business climate, SME sector Project offers „opportunity“ for TNC initiative International exposure 3. How does PV Benefit?