The UN System and UNIDO

The UN system consists of a large number of specialized agencies, funds, programmes and other bodies with different areas of expertise and mandates. Specialized agencies support developing countries in a variety of important sectors, including health, education, agriculture, industry and labour. Funds and programmes have been established to address issues related to children, population or HIV/AIDS; and the United Nations Development Programme (UNDP) assumes an overall funding and coordination function on such cross-cutting issues as poverty reduction and good governance. At the country level, a UN Resident Coordinator is in charge of ensuring overall coherence of UN activities in the country. UNIDO is present in some 30 countries with Country Directors.

UNIDO was established in November 1966 as the organization responsible for coordinating the industrial development activities of the United Nations. In 1986 it became an independent specialized agency with its own governing bodies. Assessed contributions from all members finance the Regular Budget, while almost all technical cooperation projects are financed by contributions outside this budget from donor governments and multilateral funds.

UNIDO grew rapidly up to the early 90s, with most of its highly varied programmes funded by UNDP, responding to demand from developing countries for support in their efforts to accelerate industrial development. When UNDP moved away from funding specialized agencies in the mid 90s, and some member states left the organization, a serious crisis resulted. In response, in 1997 a “business plan” was developed with, and approved by the member states. Hungary played an important role, as it presided over the session of the UNIDO Board where this plan was agreed.

UNIDO’s Programmes

The business plan contained two main lines: UNIDO should 1) focus its services in a limited number of areas, and 2) aim at delivering complementary services through integrated packages. Several rounds of reorganization and reform later, this has resulted in a leaner organizational structure, streamlined managerial processes, better measurement of impact, a sharper programmatic focus and improved delivery mechanisms for technical cooperation. This has resulted in recent years in an increasing volume of technical cooperation delivered to our clients, although our core budget has stagnated. In 2004 UNIDO delivered almost $ 100 million in grant technical cooperation, while in the same year almost $ 130 million was mobilized for activities in the coming years, mainly from donor governments and from multilateral funds (this latter category focusing mainly on the environment and energy fields). [1]

UNIDO focuses today on three main priority themes, all three directly responding to international development priorities, and in our view, critical for developing countries. These are:

• Poverty Reduction through Productive Activities. Under this priority UNIDO directly addresses poverty through projects dealing with private sector development including capacity building for industrial policies and strategies, improving the “enabling environment” for businesses, the development of medium, small and micro enterprise, development of clusters of small enterprises, rural and women entrepreneurship development, agro-based industries, etc. This priority evidently directly responds to the main target of the Millennium Development Goals, the reduction of poverty.
• Trade Capacity Building. Based on long established expertise of UNIDO, this theme includes the building up of the key infrastructure required for a country to participate in international trade as per Uruguay round WTO agreements, including a national standards system, a legal and commercial metrology system, accreditation of testing laboratories so that these are recognized by trade partners, product certification systems, etc. This is preferably combined with projects aimed at strengthening the capacity of key export sectors to compete and export so that the new infrastructure will be utilized and sustainable. The programme was in this form launched at the Finance for Development Conference in Monterrey in 2002, together with the European Commission. The overall approach also includes activities to help the development of export consortia (of small and medium scale enterprises that would otherwise not be able to export) as well as the promotion of investment and technology transfer and other forms of business partnership.
• Energy and Environment. Under the “Energy” theme UNIDO developed a programme called “Rural Energy for Productive Use”, which was launched in 2002 at the World Summit on Sustainable Development in Johannesburg. This initiative emphasizes the use of renewable sources of energy for promoting rural production activities. Further the theme includes an industrial energy efficiency programme as well as activities in support of the Kyoto Protocol. Under “Environment” UNIDO is one of three organizations carrying out projects for the implementation of the Montreal protocol on the protection of the ozone layer. It also is one of the main organizations helping countries with the implementation of the Stockholm Convention on the elimination of Persistent Organic Pollutants as well as with projects to reduce pollution of international waters, financed by the Global Environment Facility. Finally UNIDO has established and operates a network of now some 30 National Cleaner Production Centres, aiming at reducing the negative environmental impact of industrial pollution. The theme responds directly to Millennium Development Goal 7 on environmental sustainability.

Traditionally, like most development agencies, UNIDO works through projects, aiming at solving specific but limited development problems, or at strengthening national capacities to manage development problems. Such projects are designed in close consultation with the partner, and managed by UNIDO. They normally utilize international experts complemented by local experts and other inputs including equipment to work with national parties in carrying out the project, training local staff outside the country or “on the job”, helping in the establishment and initial operation of national organizations etc. UNIDO also runs an investment promotion programme with a number of offices in developed countries financed by the host country, promoting a variety of business- to-business partnerships, a network of some 50 subcontracting exchanges it has helped establish, and several specialized international technology centres to support its overall aim of assisting developing countries.

Integrated Programmes

Responding to the recommendation in the business plan of delivering integrated packages of services, UNIDO developed a different modality of operation. Following consultations with national stakeholders agreement is reached with a country to focus on one overall objective for our activities. Together with the government and other national partners, a package of activities is designed that would be required in order to achieve that objective. The aim is to develop and carry out a series of mutually supportive projects as an “integrated programme”, maximizing synergy. This could for instance include advising the government on better policies, and what we call a better “enabling environment” for private sector development, promotion of (foreign) investment in sectors with key export potential, establishing business development services focused on those sectors, establishing the required quality assurance services as well as working with the industry to help them upgrade productivity and quality. It is easy to see how these components support each other. UNIDO’s strength, as identified in the Business plan discussions lies in the fact that we can deliver such complementary packages.

The next step:

With this approach, larger integrated packages of activities focused on a few high priority themes, we have had considerable success in a number of cases, and external funding is increasing rapidly as mentioned before. However, we consider that, on the one hand we have reached the limit of increasing our internal efficiency, and on the other we have experienced limits on the reach of our interventions, even with the integrated programmes.

Development challenges in the real world are not neatly compartmentalized. They tend to be rather complex – and thus call for consolidated action with partners. For instance one can look at the case of trade. Helping developing countries to participate in global trade requires productive firms with the capability to produce goods of high and consistent quality, but also the standards, quality, product testing and certification infrastructure and the national mastery of related technologies. It further requires markets being open, knowing customs procedures and market requirements, developing or finding distribution channels etc. Several of these requirements are outside the mandate of UNIDO, and we do not intend to try to cover these.

In order to extend our reach, and become more effective, UNIDO is therefore developing strategic alliances with complementary organizations. During the WTO meeting in Cancun in the autumn of 2003, an agreement was signed between the two organizations, to jointly assist developing countries to strengthen their capacity to benefit from international trade. A first round of joint presentations and programme development covering nine countries is being completed. In the context of this theme we also work closely with ITC and UNCTAD. Together we can cover most of the requirements mentioned above effectively.

In September 2004 a similar arrangement was signed with UNDP [2] inter-alia to jointly respond to the report of the UN commission on Private Sector and Development, co-chaired by Paul Martin, the Canadian Prime Minister, and Ernesto Zedillo, former President of Mexico which had been appointed by the UN Secretary-General.

The Commission was established to review the role of the private sector in development. Essentially it emphasizes that all around the globe, private sector enterprises drive both economic and industrial development. This is true at the grass-roots level where myriads of micro-enterprises serve local markets and produce basic goods that in particular poor population groups can afford. It is equally true at the global level where transnational corporations determine production patterns, decide on investment locations and shape trade flows between countries. The key challenge for development agencies is to harness the expertise and resources of private business for broad-based development objectives, and to link global and local players.

The Commission strongly recommends that the operational strategies of development agencies (multilateral and bilateral alike) be redirected towards a better coordination of collective actions. It is precisely this challenge that the strategic alliance between UNIDO and UNDP will meet. Both organizations will pool their complementary expertise and jointly formulate private sector development programmes. For instance, UNIDO’s well established approach on rural and women entrepreneurship development will be combined with UNDP’s long-standing experience in the provision of micro-credit – and thus create synergies in the fight against poverty. UNIDO can also mobilize its expertise in helping small and medium scale enterprises to cooperate through “export consortia” to overcome the disadvantages of small size and access international markets. Also the investment and partnership promotion tools of UNIDO may be mobilized. The development of joint programmes is under way in some 10 countries, with other organizations joining at as appropriate at the country level.

Thirdly, a cooperation agreement with the UN Office on Drugs and Crime (UNODC) is being finalized with an initial coverage of four countries. Under this agreement the focus for UNIDO will be on small and medium scale enterprise development and private sector development to help provide alternative livelihoods for people involved in illegal drug production while ODC focuses on enhancing the capacity of member states to counteract illicit drugs and crime.

The UN reform discussion

Following the same logic, the Director General of UNIDO has, in the context of overall UN reform, launched a proposal for strengthening the economic development functions of the UN. It has been published in the form of a book entitled: ”Economic Development and UN Reform- Towards a “Common Agenda for Action”, and is available on the website of UNIDO. It is proposed that the UN strengthens the position and effectiveness of its considerable but fragmented economic development activities through a sort of Common Agenda. The proposal is being considered at the highest levels with the UN. Under the proposal each agency would take the lead in agreed priority themes within an overall agreed set of themes. This would ensure that the UN system would focus its vast research capacities towards accumulating knowledge in a given line of thought, and achieve a critical mass in delivering well orchestrated and much more effective and visible support to the developing countries.

Back in 1997, the UN Secretary-General set in motion a process of reform towards improved coordination. Significant progress has been achieved, but when reporting to the General Assembly two years ago, Kofi Annan stated: “We have to do better still, however, if the United Nations is to achieve the system-wide coordination demanded by the daunting social, economic and political challenges that it confronts each day. The lives and well-being of large numbers of people depend on our ability to work together more effectively.” This diagnosis still stands, and may be more urgent than ever before. The UN system has to deliver, and UNIDO is responding to this call.

[1] For more information on UNIDO and its activities please refer to www.unido.org

[2] For more information please refer to http://www.unido.org/doc/18233