UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION economy environment employment 1

The upgrading process EnterpriseEnvironment Overall strategic diagnosisInstitutional and regulatory environment Formulation of the upgrading plan and financing scheme Infrastructures and services Approval of the upgrading planStandards, certification, accreditation Implementation and monitoring of 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 market 2

Restructuring and upgrading approaches and methods 3

I. Globalization: the challenge of industrial governance in developing countries Liberalization and globalization The challenge of globalization The new pattern of industrial competitiveness 4

Some preferential arrangements between developed and developing countries Arrangement Number of member countries Member countries or countries/territories in the process of joining Agreement on free trade between the European Union (EU) and southern Mediterranean countries EU 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 EU + Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia North American Free Trade Agreement 3Canada, Mexico, United States of America Arab Free Trade Agreement 19 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) 19 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) 8 Benin, Burkina Faso, Côte d’Ivoire, Guinea- Bissau, Mali, Niger, Senegal, Togo 5

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 owner At market level: From protection From natural standards standardization From subcontracting based on capacity From the geographically centered market At enterprise level: From economies of scale From production of tangibles From integration NEW 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 assistance in restructuring and upgrading Upgrading concept  Competitiveness in terms of price, quality and innovation;  Ability to follow and assimilate the development of technologies and markets. 7

Objectives of the integrated program Modernizing the industrial environment Promoting the development of competitive industries Strengthening the capacities of support institutions Improving the competitiveness and development of industrial enterprises RESTRUCTURING AND UPGRADING PROGRAMME 8

The principal components of the integrated restructuring and upgrading program  Assistance 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) 9

UNIDO’s experience in restructuring and upgrading  Diagnostic study  Management, quality, certification  Policy and, strategy formulation  Integrated restructuring and upgrading program  Pilot restructuring and upgrading project  Capacity-building: standardization, accreditation Geographical cover: Poland, Romania, Algeria, Tunisia, Morocco Kazakhstan, WAEMU countries, Egypt, Sri Lanka Rwanda, Colombia,and Madagascar 10

III. Overall strategic diagnosis and upgrading Basic principles of diagnosis  Aims of diagnosis : Assess the strengths and weakness and identify the competitiveness.  Types of diagnosis:  Overall (Strategic),  Functional, and  Express. 11

Designing an overall strategic diagnosis  Aims and objectives  Method Strategic Upgrading Process SUP Overall strategic diagnosis Selection of upgrading strategies Implementation and monitoring of upgrading plan Formulation of upgrading plan 12

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. 13

Analysis of external sources of competitiveness Competitive socio-economic environment Political environment Industrial environment climate Legal environment Export policy Tariff system Investment policy Competitive industrial environment Industrial support agencies Industrial investment incentives Cost of production factors Competitive technological environment Technical support centers for industry Promotion and transfer of technology Research and development Analysis of external sources of competitiveness 14

Diagnosis of product markets and strategic positioning Analysis of product markets and strategic positioning Analysis of commercial performance Segmentation of activities into strategic fields of activity Analysis of performances by strategic field of activity Evaluation of strategic positioning Analysis of marketing mix Product policy Price policy Distribution policy Promotion policy Sales management Market study Brand image Product quality After-sales service Price 15

Financial diagnosis Conversion of accounting data Analysis of financial statements Financial structure Working capital Cash flow analysis Analysis of income statement Sales development Costs development Analysis of production costs and cost prices by strategic field of activity Product costs Analysis of break-even point Decisions to manufacture or outsource 16

Diagnosis of technical capacities Analysis of production operations Analysis of inputs Analysis of production system (technology and process) Analysis of production Evaluation of technical performance Productivity Costs Quality of finished products Analysis of technical support functions and environmental aspects Technical support functions Engineering Maintenance Control and inspection Environmental aspects Waste management Clean production 17

Diagnosis of managerial skills and quality Evaluation of managerial skills Vision, mission and strategy Management information system (MIS) Corporate culture Evaluation of the organizational structure Organizational chart Human resources management Pay and motivation Quality audit Quality system (ISO 9000, ISO 14000) Quality assurance Product standards Metrology Control and inspection Inputs, process, production 18

Checklist for overall strategic diagnosis and the drafting of an upgrading plan for an agro-food enterprise 19

IV. Industrial enterprise upgrading strategies Selection of upgrading strategies Globalization and possible upgrading strategies price and differentiation strategies  Product cost advantage  Service cost differentiation  Product differentiation  Service differentiation  Innovation differentiation  Marketing differentiation Impact of price and differentiation strategies on functions in the enterprise 20

Industrial enterprises and possible upgrading strategies Strategies  Re-centering strategy  Partnership strategy  Flexibility strategy Impact on resources Impact on product mix Constraints/limits 21

V. Formulation of upgrading plan SUMMARY 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 22

VI. Implementation and monitoring of the upgrading plan Prior 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. 23

International experience of restructuring and upgrading 24

I. Program for modernizing and upgrading industry in Portugal Prepare and adapt Portuguese industries to face European competition. PEDIP I ( ): modernization and upgrading program. PEDIP II ( ):modernization and upgrading program. 25

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. 26

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. 27

Results of PEDIP I and II PEDIP I&II summary (In millions of escudos) Projects approved NumberInvestmentAid PEDIP I 6,543656,442232,600 PEDIP II 6,31614,662,827459,677 Total 12,85915,319,269692,277 Note: 1 euro = 200,428 escudos. 28

II. The Tunisian national upgrading program Meeting the demands of liberalization and the opening up of their frontiers. Environment upgrading program Enterprise upgrading program 29

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. 31

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 %. 32

III. Industrial upgrading program in Algeria Liberate of the economy, establish a market economy and promote industrial competitiveness Industrial restructuring program. 33

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. 34

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. 35

Improving reception facilities; Promoting exports; Improving vocational training; Strengthening professional associations; Developing technological infrastructure. 36

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. 37

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. 39

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 execution Growth 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. 41

THANK YOU 42