Mainstreaming ISID into national policies and programs

Vienna, 26 November 2015 Ludovico Alcorta UNIDO – Research, Statistics and Industrial Policy Branch

Overview 1.The context for ISID 2.Synergies and trade-offs 3.The ISID policy mix 4.The policy making process for ISID 3

The context for ISID Lima Declaration in 2013; SDG9: build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation; Operationalization of UNIDO’s ISID through Partnership Country Programs (PCPs); 4

ISID and growth 5 ISID LDC threshold

Overview 1.The context of ISID 2.Synergies and trade-offs in LDCs 3.The ISID policy mix 4.The policy making process for ISID 6

Value added and structural change 7 Changes in value added per capita in manufacturing industries LDC threshold

Structural transformation and inclusiveness 8 LDC threshold

9 Structural transformation and sustainability

Linking structural transformation, growth inclusiveness and sustainability At lowest levels of income a focus on the food, textile and the garments labor intensive industries will lead to improvements in growth, employment and emissions reduction At low levels of income, as GDP per-capita increases, there is a deterioration of ISID, mainly because of emerging wage-inequalities linked to skill differences and the beginning of the shift to energy intensive industries. Significant trade-offs between growth, employment and the environment begin emerging as LDCs start approaching middle income levels due to the fact that resource intensive industries, which predominate at middle income levels, are more polluting than other industries Left to its own devices we will never see ISID, thus we need policies very early on! 10

OVERVIEW 1.The context for ISID 2.Synergies and trade-offs 3.Identifying the ISID policy mix 4.The policy making process for ISID 11

ISID policies for LDCs: some objectives 12 Diversification –Objective: diversify away from agriculture to take advantage of a thriving manufacturing sector Investment –Objective: attract manufacturing-oriented investment (both domestic and foreign) through incentives and other policies (below) Technology –Objective: imitating, adapting and learning technologies streaming from the industrially advanced economies Skill development –Objective: complement formal education with technical vocational training (TVET) to meet the demand for industrial skills; Pollution abatement –Objective: reduce the discharge of industrial waste in the environment (landfills, water, air) in industrialised urban areas

13 Policy domain Instruments Market basedPublic goods/direct provision Product market Import tariffs, export subsidies, duty drawbacks, tax credits, investment/FDI incentives, Procurement policy, Export market information/trade fairs, linkage programmes, FDI country marketing, one- stop shops, Investment promotion agencies, Labour market Wage tax credits/subsidies, training grants Training institutes, Skills councils Capital market Directed credit, interest rate subsidies, Loan guarantees, Development Bank lending, Land market Subsidised rental, pricing of effluents EPZs/SEZs, factory shells, infrastructure, legislative change, incubator programme, provision of pollution control Technology Technology transfer support, technology extension programme ISID policies for LDCs: some examples

14 ISID policies for LDCs: the need to bundle

1.The context for ISID 2.Synergies and trade-offs 3.The ISID policy mix; 4.Improving the policy making process for ISID 15 OVERVIEW

Improving the policymaking process for ISID Mainstreaming ISID in national policies and program requires political leadership LDCs need to have a long-term commitment to ISID Strengthening the capacity of government institutions to design and implement ISID policies Need for ISID experimentation, learning by doing and evaluating 16

How can the international community support LDC in realizing ISID Increasing awareness of the trade-offs and synergies of the ISID dimensions; Supporting governments to formulate realistic evidence-based interventions that allow them experiment with ISID and learn from it; Helping governments with a conceptual framework, operational goals, indicators, targets and policy instruments that are related to ISID; Providing capacity building programs in LDCs should consist of aimed at achieving concrete outcomes; 17

Thank you very much! 18