Industrial Value Chain Development
The approach
The clients • The countries of the “bottom billion” trying to break into global markets for manufactured goods, and • the middle-income countries attempting to move up to more sophisticated manufacturing.
Industrial Challenges • Build up industries so as to benefit from value addition in commodities originating from local sources, • Turn non-competitive industries into competitive ones that create income and employment, • Meet the SDGs • Make industrial development compatible with a sustainable use of natural resources and • The elimination of negative effects on climate change through energy use.
The Chain
UNIDO’s approach • Industrial value chains are complex both in terms of the various segments they cover (from primary materials to consumption), and the impacts that their progress and development can generate. • It is in this context that UNIDO’s value chain diagnostics aim to provide guidance. • The main objective is to draw a complete picture of the chain using a set of diagnostic dimensions, as broad in nature as possible, to describe the current situation in a given context. • Once this is established the diagnostics also help to reflect on opportunities and constraints that impact on certain dynamics in the value chain, automatic or induced through governments and development agents.
The aim • The tool should not be used to justify a predetermined intervention. • It is best used in situations where the aim is to put together all of the necessary pieces for value chain development. • This tool focuses on attaining development goals through business development.
Getting the whole picture • • • • • • • • • • •
Who are the actors that participate in businesses across value chains? Are there actors that coordinate activities in the overall value chain? What are the contractual arrangements under which actors buy and sell products? How do actors exchange information and learn about solutions to improve products and business performance? What technical, business and financial services are available to support actors in the chain? How much value do actors add to the product in the different steps in the chain, what are their costs and how is this value distributed? What are the power relations in the chain and to what extent do they determine how economic gains and risks are distributed among chain actors? What kinds of barriers exist for firms to enter the value chain? What is the level of competitiveness of firms in the value chain? What bottlenecks exist and what opportunities are available for development (upgrading) of the value chain? Which policies and institutions constrain/support chain actors and facilitate value chain development?
Linking diagnostics to development • Develop technological, organizational and marketing solutions to extend production and sales of firms in a value chain. • Reduce barriers of entry and facilitate the participation of those who are not included in or profit from value chains and enable them to benefit from value addition. • Develop value chains where a significant number of small and medium-sized firms and poor workers participate and thus profit from development. • Identify and support key players and the provision of key services in order to foster development of actors in the entire value chain. • Develop and manage technologies in such a way that they enable a more energy efficient and cleaner production and compliance with environmental standards. • Foster collaboration and vertical integration between different actors in the value chain and improve chain governance and management. • Improve regulatory frameworks and induce policy reforms to create an enabling environment for value chains to function
Major goals 1. 2. 3.
4. 5.
Reduction of poverty in general and/or targeting certain vulnerable groups in the society Income generation and employment creation, in general and/or for certain groups in the society, while also complying with the criteria of decent work Promotion of economic growth through the creation of competitive industries and businesses in certain regions and/or sectors of the economy Development of productive firms, especially small-to-medium sized, and their involvement/inclusion in local and global value chains Promotion of cleaner production and better environmental performance including the application of standards for increased environmental sustainability
Linking dimensions and goals