UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION UNIDOs Programme for

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION UNIDO’s Programme for Industrial Upgrading and Restructuring 1

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION UNIDO’s Programme for Industrial Upgrading and Restructuring Gerardo Patacconi - Otto Loesner, Quality & Productivity Group Quality, Technology and Investment Branch UNIDO - P. O. Box 300 A-1400 Vienna, Austria Tel. +43 -1 -26026 -3605 Fax +43 -1 -26026 -6840 e-mail: gpatacconi@unido. org 2

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL Quality & Productivity Group Quality, Technology and Investment Branch Trade Facilitation: QSM for Market Access UNIDO Integrated Programmes and Projects UNIDO Industrial Upgrading and Restructuring Accreditation: Pre-peer Evaluation Process PPEP (IAF and ILAC) Global Forum, Software, manuals, surveys 3

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL A) Strengthening the legal and regulatory framework • Develop/implement quality and productivity policies including quality awards. • develop/harmonize legal and regulatory framework relating to quality, standardization and metrology for better protection of consumer health and safety, of the environment and to act against frauds. Quality and Productivity B) Standardization and Conformity Assessment • Establish or strengthen the capacity of existing standardization bodies • Promote the adoption of standards at national and regional level, and assist participation in regional and international standards setting fora and networks. • Establish or strengthen the capacity of accreditation bodies to achieve recognition by the International Accreditation Forum (IAF) or the International Laboratory Accreditation Cooperation (ILAC) by conducting pre-peer evaluations • Establish or strengthen laboratory capacities for sampling, inspection, material and product testing including microbiological and chemical analysis • Support for the harmonization of testing procedures. 4

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach Quality, Standardization and Metrology Group UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL C) Metrology (measurement) • Establish or strengthen laboratory capacities for industrial and legal metrology by identifying calibration, verification and equipment requirements, assisting in the physical set-up and start-up of laboratories; upgrading of measurement equipment according to international standards; training of technicians and assistance in networking, inter -comparisons, mutual recognition arrangements and accreditation. • Implement UNIDO software Measurement and Control-Chart Toolkit (MCCT) to improve laboratory management and facilitate the implementation of ISO 17025 D) Industrial Restructuring and Upgrading • Build capacities in public and private sector institutions to develop national industrial upgrading and restructuring policies, support mechanisms including financing schemes, restructuring and upgrading (mise à Niveau) programmes. • Develop national consulting capability to address the restructuring and upgrading needs. 5

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach Quality, Standardization and Metrology Group UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL E) Global Forum functions • Foster linkages and cooperation among regional and international organizations, standardization and accreditation bodies such as ISO, WTO, ILAC, IAF, PTB, OIML… to facilitate networking, promotion of mutual recognition of certificates and harmonization of standards. • Monitor global trends in standardization, conformity assessment, metrology and testing to facilitate trade and ensure protection of consumers and of the environment • Conduct applied research and benchmarking studies to identify best practices and produce handbooks, manuals and improvement tools • Conduct training of trainers in QSM field • Develop and improve business excellence software tools such as the business performance navigator (PHAROS) 6

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL Quality & Productivity Group Quality, Technology and Investment Branch 7

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL A new Initiative for CEE/NIS: E 4 PQ - E-Productivity and Qu@lity • UNIDO has launched the development of an innovative high-tech Regional Programme to upgrade and restructure SMEs and improve their productivity and quality through web-based technologies in the countries of Central and Eastern Europe and the Newly Independent States. • To review the proposed programme, UNIDO, in cooperation with the Polish Government, a Regional Forum on e-Productivity and Qu@lity brought together high-level representatives, national and international experts, public and private institutions and enterprises: 21 -23 November 2001 in Warsaw, Poland. • The programme is expected to lead to the setting up of a regional structure for industrial quality and productivity with emphasis on application of web-based technologies. Audit and Inspection via Internet is one of the key areas addressed in the Programme Contact: gpatacconi@unido. org www. unido. org/e 4 pq 8

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL A new Initiative for CEE/NIS: E 4 PQ - E-Productivity and Qu@lity • To foster the competitiveness of Central and Eastern competitiveness European enterprises through the upgrading of quality & productivity, skills, systems and processes and the implementation of world “best-in-class” practices; best-in-class • To facilitate the process of integration of the target integration countries in the European Union and in the global (traditional and e-)economy; economy • To increase the overall standard of living. Contact: gpatacconi@unido. org www. unido. org/e 4 pq 9

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL Economies in transition Have a Quality Infrastructure and skills not always updated nor conforming to international standards/regulations……. and most of their Enterprises: • are often unable to produce goods with proven, credible and constant quality at a competitive price; • Have problems to meet stringent standards and the challenges of globalization; • Need to become to World Class to compete in foreign and domestic markets; • Should be upgraded in order to enter international production and trade chains. 10

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The CHALLENGE To enter and stay in both the traditional and in the emarket, enterprises need: • High QUALITY • RELIABILITY (production and delivery) • COST-effectiveness • CONFORMITY to standards and technical regulations • CUSTOMER-focus (satisfaction to delight)…… 11

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The CHALLENGE TO PRODUCE GOODS AND SERVICES Right CUSTOMER (s) Right PRODUCT (s) Right QUANTITY (ies) Right QUALITY (ies) Right TIME Right PRICE (s) 12

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The CHALLENGE TO IMPROVE QUALITY AND PRODUCTIVITY It is a Total Business (company-wide) concept rather than just the “rationalization of production”: • Doing things right at the least possible cost • In the least possible time • With the highest possible quality • To the maximum level of satisfaction of the customers and employees; employees • Implies Continuous Improvement 13

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The RESPONSE TO IMPROVE QUALITY AND PRODUCTIVITY The UNIDO Quality Approach enables the enterprises to enter into selfsustained and continuous improvements without the need for continued assistance by: • Building institutional and human capacity at the level of Governments and Institutions for implementing quality assurance/management methodologies and systems (TQM, ISO 9000: 2000, QS 9000, 6 -Sigma, SPC, lean manufacturing, eproductivity…. . • • Identifying, adapt and promoting best manufacturing practices. Improve quality throughout the production and distribution supply chains Facilitating trade and overcoming TBTs • 14

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The RESPONSE TO IMPROVE QUALITY AND PRODUCTIVITY The UNIDO Quality Approach enables the enterprises to enter into self-sustained and continuous improvements without the need for continued assistance by: • Promoting productivity by establishing Regional and National Quality and Productivity Centers that act as one-stop -shop for productivity and quality improvements in manufacturing sector at the level of enterprises, industrial sectors, supply chains, technology institutes and policy -related government bodies. • Practical demonstration in groups of pilot-enterprises for improving their quality and productivity. 15

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The RESPONSE TO IMPROVE QUALITY AND PRODUCTIVITY Practical demonstration in groups of pilot-enterprises for improving their quality and productivity. • Allow to create a cooperative environment where full understanding of the performance and enablers of "best in class" business processes can be obtained and shared at reasonable cost. • Allows to use the efficiency of the groups to obtain process performance data and related best practices of companies including those that are ISO Certified. • Allows to save consultancy and certification costs. 16

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The RESPONSE TO IMPROVE QUALITY AND PRODUCTIVITY Practical demonstration in groups of pilot-enterprises for improving their quality and productivity. • Allows to transfer know-how and to train national trainers and experts • Allows to bring professionals of companies together to share information on how to improve business processes and enterprise business performance and carry out upgrading and restructuring plans 17

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL THE MODEL: UNIDO’s Continuous Improvement System Approach 1 has been applied in in hundreds of enterprises in developing countries and economies in transition. 1 Cfr. Juran Quality Handbook, 5 th edition, Mc Graw Hill, 1999, J. M. Juran, A. B. Godfrey 18

UNIDO’s Continuous Improvement System Approach UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION THE EXTERNAL ENVIRONMENT Industrial Upgrading and Restructuring: the UNIDO’s Approach Competitors Suppliers Government policies Physical infrastructure Economic performance (National and International) Local regulations Industrial property, patents… ISO 9000, WTO Environment regulations STRATEGIES PRODUCTION UNIT Production unit potential Skilled workers Raw material Parts and components Suppliers / Services Maintenance Standards and Metrology Target market Relative quality Performance Success factors Quality Loop Mgmt. Loop RESULTS OBJECTIVES UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL TECHNICAL PERFORMANCE MEASUREMENT Productivity and quality levels Plant level Inspection Statistical Process Control…. . BUSINESS PERFORMANCE MEASUREMENT Consumer satisfaction Production Operation Financial Quality Timing 19

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL NEW APPROACH: INDUSTRIAL UPGRADING and RESTRUCTURING • From business plan to e-business plan • Emphasis on quality, cost reduction and market access • Look at supply chain/clusters • Stronger export-orientation and trade facilitation infrastructure • Larger use of local experts and consultancy companies 20

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL NEW APPROACH: INDUSTRIAL UPGRADING and RESTRUCTURING • Comprehensive and multidisciplinary overall approach for restructuring and upgrading priority industries (with high value added and export potentials) and their environment. • UNIDO approach is inspired by similar successful programs implemented in countries such as Portugal, Ireland Chile with the support of the EU 21

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL NEW APPROACH: INDUSTRIAL UPGRADING and RESTRUCTURING Objective: The aim of the restructuring and upgrading program is to support the process of recovery of industrial productive capacity, to strengthen capacities of support institutions, to improve productivity, increase growth of industries and employment, facilitate market access and foster integration in the context of economic and trade liberalization. 22

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL EXAMPLE TUNISIA INDUSTRIAL UPGRADING Tunisia signed a free trade zone agreement with the European Union in 1995. With the assistance of UNIDO, Tunisia developed a National Upgrading Programme (NUP). UNIDO assisted in the implementation of the pilot programme in 1996 and is now implementing the integrated programme focusing on Upgrading and Improvement of Industrial Competitiveness. 23

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL FUNDING TUNISIA INDUSTRIAL UPGRADING Sources of funding of the Tunisia National Upgrading Programme: • the national fund for improvement of competitiveness (FODEC) established in 1995 in order to cover financial incentives provided to enterprises accessing to the NUP; • the European Union, through the MEDA programme; • the World Bank (through loans for upgrading technical centers); • UNIDO and other international agencies. 24

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL FUNDING TUNISIA INDUSTRIAL UPGRADING Progress of the Tunisia Upgrading Programme (as of December 2001) Number of enterprises which access to the programme 2005 enterprises; Upgrading programmes approved and under implementation: 1100 enterprises; Total Upgrading Investment: around US$ million 2080; from which non material investments: US$ million 300; Financial incentives provided to the enterprises: around US$ million 300; 25

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL FUNDING TUNISIA INDUSTRIAL UPGRADING Impact of the Tunisia Upgrading Programme: (based on assessment of 590 enterprises) - Production and sales: increase per year: 11%; - Export: increase per year: 18%; - Export by new enterprises: 11% in year 2001; - Employment (workers): increase per year: 9%; - Employment (supervisors): increase per year: 16%; - ISO Certification: 220 enterprises. 26

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL The aim of the integrated restructuring and upgrading programme is to support the process of restructuring, competitiveness, integration and growth of industries in the context of economic and trade liberalisation. Modernizing the Industrial environment Strengthening the capacities of support institutions Restructuring and upgrading programme Promoting the development of competitive industries Improving the competitiveness and development of industrial enterprises 27

THE UPGRADING PROCESS with focus on Supply Chains/Clusters UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach CLUSTER/ENTERPRISE LEVEL AT THE ENVIRONMENT LEVEL Strategic and value chain diagnosis Institutional & regulatory environment Formulation of the upgrading plan and financing scheme Infrastructure and services UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL Banking and financial environment Approval of the upgrading plan Investment incentives and promotion Implementation and follow-up of the upgrading plan Modernisation of equipment Organisation & management systems Production systems Export Consortia/cluster & supply chain Training & skills development B 2 B B 2 C B 2 G Quality & certification Marketing & Export Alliance Partnership Supply chain Productivity, Price, Quality COMPETITIVENESS The local market Export market 28

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UPGRADING PROCESS: SUMMARY TABLE OF RESULTS AND ACTIVITIES First Component Assistance in the design, implementation and follow-up of a national industrial restructuring and upgrading programme (BENFICIARY: Ministry of Industry) Result 1 Formulating and assisting in the implementation of an upgrading programme Activity 2 Designating the steering committee and agency to be responsible for implementing the upgrading programme; identifying the other interface agencies and organizations Short Long term X X Activity 3 Establishing an information and awareness-raising programme Activity 4 Training a body of specialists to be responsible for implementation Result 2 Design and formalization of the procedures and regulatory framework Activity 1 Formalizing the procedures for implementing the upgrading programme Activity 2 Updating legislation or regulations directly concerned with enterprise recovery Result 3 Study for setting up an upgrading monitoring programme Activity 1 Identifying needs by a survey of users (enterprises, administration) Activity 2 Drawing up specifications Activity 3 Defining a mechanism for inputting, processing and retrieving information; identifying the technical, financial and regulatory conditions for its operation X Activity 4 Submitting the project to the steering committee X X X X 29

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UPGRADING PROCESS: SUMMARY TABLE OF RESULTS AND ACTIVITIES Second Component Strengthening the capacities of enterprise support systems Short term Long term Result 1 Strengthening the capacities of research organizations Activity 1 Organization of a training session on strategic diagnosis and the upgrading plan X Result 2 Strengthening the capacities of the banks and investment promotion agency Activity 1 Organizing a training session on diagnosis and preparation of the upgrading plan X Activity 2 Organizing a trig. session on the evaluation and follow-up of the upgrading plan X Result 3 Blueprint for a network of technological and commercial resources (all priority sectors) Activity 1 Surveying and identifying the existing facilities (all priority sectors) Activity 2 Programming the upgrading of existing facilities (all priority sectors) Result 4 Study of the foreign-trade support mechanism Activity 1 Activity 2 Studying of the establishment of an enterprise foreign-trade information and promotion mechanism Studying the enterprise access and network operating conditions Activity 3 Setting up the financial and banking procedures X X X 30

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL ENTERPRISES RESTRUCTURING • What is Restructuring? ? • A Definition: “fundamental rearrangement of factor inputs (human, financial and physical resources) in search of factor productivity, system equilibrium, and enterprise competitiveness” • Goal: “a redefinition of the relationship between products, markets and technologies, and the underlying corporate structure” Restructuring - Privatisation -Commercialization 31

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL ENTERPRISES RESTRUCTURING SUB-SECTOR ECONOMY ENTERPRISE Competition Technology Factor prices Investment climate Industry R & D Demand pattern Management Organisation Marketing/Sales Operations Management Finance/Cost Accounting Quality Management Maintenance Strategic Plans Human Resource Development Research & Development INTERNAL Environment Trading policy The INTERNAL and EXTERNAL Environments Taxation Tariffs Economic climate Legal environment Political environment Policy framework Institutional structure EXTERNAL Environment INFLUENCE the operation of all ENTERPRISES 32

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL ENTERPRISES RESTRUCTURING • • • Product/Market Focus Sell Excess Non core assets Reduce costs/ Cost Controls Improve liquidity/ Financial controls Improve Operations Management –(Management, Quality, Production Planning, maintenance) • Improve Organizational Structure • (structure, staffing, incentives/motivation) 33

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO ENTERPRISES RESTRUCTURING PROJECTS • Enterprise Restructuring CEE/FSU (Poland, Slovakia, Romania, Albania) (Kazakstan, Uzbekistan, Tajikistan) OTHER (North Africa, Lesotho, Sri Lanka, Tanzania. Vietnam, Thailand) • Management Consulting Development Romania, Moldova • Company Towns Kazakstan 34

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL “CLASSIC”ENTERPRISES RESTRUCTURING l Financial Restructuring l Production & Operations Restructuring l Physical Restructuring l Ownership Restructuring (Privatisation) 35

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL Reasons for Government Intervention in Restructuring • Debt/equity swap necessary prior to any investor interest • Labour reduction/resistance to sale-better by Government • Privatisation takes time, restructure to keep company afloat • Higher total value and more buyers, when large/vertically integrated enterprises restructured/broken up • New owners cannot restructure (Specially MEBO) • No investor interest without restructuring (bad shape) • Strategic enterprise/ Ensure future sector competitiveness • Value, viability, future investments need to be determined 36

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL KEY OBJECTIVE OF RESTRUCTURING Enhancing Enterprise Performance and Competitiveness RESULTS FROM THE UK/UNIDO RESTRUCTURING PROJECT POLAND 1991 - 1996 • 20 Enterprises assisted • Not privatised at the time- only commercialised • Converted to Joint stock companies 37

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO Restructuring Project in Poland 38

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO Restructuring Project in Poland 39

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO Restructuring Project in Poland 40

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO Restructuring Project in Poland Key changes in restructuring (1991 - 1997) 41

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL UNIDO Restructuring Project in Poland 42

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL CONCLUSIONS • Complex problem facing CEE/NIS countries • No clear cut methodology or answers • Restructuring first or privatise first – Privatise first or not – Political climate in the country is important – Capacity building in the country important • Clear evidence that Restructuring works – Poland enterprise data UK/UNIDO – Poland general economic data 5% GDP growth – Poland - other positive factors also contributed 43

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Industrial Upgrading and Restructuring: the UNIDO’s Approach UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL CONCLUSIONS The Upgrading approach seems to be more appropriate at this stage of development of the EU Candidate Countries For CEEC/NIS countries (with state ownership still important) the “classic” restructuring Programme could be more appropriate. 44