2. Industrial Development Report 2016 “The Role of Technology and Innovation in Inclusive and Sustainable Industrial Development” The Polish Chamber of Commerce Warsaw, 20 th January 2016 Ludovico Alcorta Director Research, Statistics and Industrial Policy United Nations Industrial Development Organization (UNIDO )

3. Overview Background to the report Inclusive and Sustainable Industrialization Growth, Industrialization and Technological Change Inclusiveness, Sustainability and Innovation Policy Imperatives Industrial Competitiveness Index 3

4. Background 4

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7. Every country achieves a higher level of industrialization in their economies, and benefits from the globalization of markets for industrial goods and services. No one is left behind in benefiting from industrial growth, and prosperity is shared among men and woman in all countries Broader economic and social growth is supported within an environmentally sustainable framework. The unique knowledge and resources of all relevant development actors are combined to maximize the development impact of ISID 7 ISID for UNIDO means that…

8. Goal17 Technology Enhance access to ST&I..through global technology facilitation mechanism Promote the development, transfer…of environmentally sound technologies to developing countries on favorable terms. Fully operationalize the technology bank and ST&I capacity-building mechanism for LDC MOI Technology Facilitation Mechanism TFM was established by AAAA to support SDGs TFM will be composed of UN Interagency TT on ST&I for the SDGs (UNDESA, UNIDO, UNESCO, UNCTAD, ITU, WIPO & WB) and on-line platform On-line platform will establish comprehensive mapping of, and serve as a gateway for, information on ST&I initiatives, programmes, etc. 9 Science Technology & Innovation and SDGs

9. Inclusive and Sustainable Industrialization 10

10. IDR 2016 Key message 1 Reaching advanced levels of inclusive and sustainable industrial development requires not only increasing incomes but also conscious efforts to sustain growth, promote social inclusiveness and move towards greener structural transformation—as well as managing the trade-offs between them. ISID

11. Poland: Employment intensity 12

12. Poland:Equity-adjusted wages 12

13. Poland: Sustainability 13

14. Poland: ISID Index 14

15. Growth, Industrialization and Technological Change 15

16. IDR 2016 key message 2 16 Diversification into manufacturing can help to achieve rapid average growth rates, longer periods of growth and less volatility in growth—thus sustaining growth in the long run.

17. IDR 2016 key message 3 17 Manufacturing’s share of gross domestic product (GDP) has remained stable over the last 40 years.

18. IDR 2016 key message 4 18 Industrialization, a major force in structural change, shifts resources from labour-intensive activities to more capital- and technology-intensive activities. It will remain crucial to future growth

19. IDR 2016 key message 5 19 Premature deindustrialization smothers economic development potential by limiting the application of technology to production and generating low productivity and informal services activities. Mature de – industrialization often leads to dynamic high tech services When deindustrialization is premature countries obtain fewer of the growth enhancing benefits of manufacturing When deindustrialization is premature manufacturing tends to be replaced by the wrong kind of services. When “mature” deindustrialization sets in – in an advanced economy – subsectors of the expanding sectors have the dynamic characteristics attributed to manufacturing in the past: strong linkages, productivity increases and innovation

20. IDR 2016 key message 6 20 Technology and capital equipment are the main drivers of both manufacturing growth and aggregate growth in developed and developing countries although in developing countries energy and natural resources use affects growth in middle and low tech industries

21. IDR 2016 key message 7 20 The choice of sector matters for economic growth and structural change since the technological opportunities between them vary significantly. Growth in Total factor productivity 1995 – 2007, 37 countries

22. IDR 2016 key message 8 21 Technological capabilities are developed in developed countries through tinkering with the frontiers of science and technology R&D in manufacturing is a key driver to expand the frontiers of science and technology through technological capabilities AgricultureManufacturingMining, construction and utilities Services China 0.043.780.640.21 Poland 0.060.700.050.19 Turkey 0.011.230.050.30 Australia 0.564.291.850.86 France 0.446.820.440.94 Germany 0.657.930.150.42 Korea, Rep. of 0.128.811.580.47 USA -10.50.30.7

23. IDR 2016 key message 9 22 Index of innovation system and institutional capabilities Technological capabilities are strengthened by investing in human capital, institutions, improving innovation systems and upgrading in industrial clusters and global value chains Manufacturing contributes most to growth precisely in the low income countries that have invested the most in education

24. Inclusiveness, Sustainability and Innovation 23

25. IDR 2016 key message 10 24 Promoting social inclusiveness in manufacturing requires matching the choice of technologies to a country’s resource and skill endowment.. More can be done to invent technologies that promote the capabilities of humans to create new sources of value. It is essential to complementarity between human skills and new technologies (appropriate technology) Appropriate technology is the technology which makes best use of country`s resources to achieve its development objectives. Appropriate technology in developing countries must be labour intensive, small scale, use local materials and includes techniques and products for rural production. In South Africa unemployment and exclusion were strongly related to the large capital intensive minerals industry.

26. IDR 2016 key message 11 25 Improving the environmental sustainability of industry may require adopting production technologies that are not economically viable, although the profitability of these technologies is increasing over time An example of profit driven environmental technological change An example of non profit driven environmental technological change “In both developed and developing countries, Investing in industrial energy efficiency makes financial sense. Yet the potential for further investments remains high,” (UNIDO Industrial Development Report 2011). “Unfortunately carbon capture and storage is not a mature technology and has yet to be demonstrated on a large scale. The development and evolution of that technology has an economic rationale only if the medium/long term impact is considered.” (UNIDO IDR 2016)

27. IDR 2016 key message 12 27 Hi-tech industries produce an environmental bonus since they are less polluting than other industries. Environmental productivity is value added/emissions ratio

28. IDR 2016 key message 13 28 The recycling industry exhibits the win-win-win properties of sustaining growth, generating employment and equity and being environmentally friendly. The recycling waste industry exhibits higher growth rates than total trade for many items

29. Policy Imperatives 29

30. IDR 2016 key message 14 30 Policy instruments for industrial development depend on the type of technology and innovation being targeted and the country’s level of development, ranging from protecting property rights at one extreme to providing grants for machinery imports at the other..

31. IDR 2016 key message 15 31 Pooling financial and research resources internationally in a global knowledge base can contribute much to building technological capabilities for inclusive and sustainable industrialization. A market economy cannot generate the optimal level of investments of innovation (underprovision of public goods) To counter this, governments aim to restore optimality by providing different forms of support to firms` investments. Technology and innovation in policy making is usually conducted at national level. International cooperation is needed to tackle transboundary challenges such as to share large research infrastructure, to improve the global knowledge base and to pool financial resources for technological change.

32. Industrial Competitiveness Index 32

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36. MANY THANKS 36