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Industrial Development Report 2016 “The Role of Technology and Innovation in Inclusive and Sustainable Industrial Development” Ludovico Alcorta Director Research, Statistics and Industrial Policy United Nations Industrial Development Organization (UNIDO) The Polish Chamber of Commerce Warsaw, 20th January 2016 Overview • Background to the report • Inclusive and Sustainable Industrialization • Growth, Industrialization and Technological Change • Inclusiveness, Sustainability and Innovation • Policy Imperatives • Industrial Competitiveness Index 3 Background 4 5 6 ISID for UNIDO means that… • 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 Science Technology & Innovation and SDGs • 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 Inclusive and Sustainable Industrialization 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 Poland: Employment intensity 12 Poland:Equity-adjusted wages 12 Poland: Sustainability 13 Poland: ISID Index 14 Growth, Industrialization and Technological Change 15 IDR 2016 key message 2 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. 16 IDR 2016 key message 3 Manufacturing’s share of gross domestic product (GDP) has remained stable over the last 40 years. 17 IDR 2016 key message 4 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 18 IDR 2016 key message 5 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 19 IDR 2016 key message 6 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 20 IDR 2016 key message 7 Sector Electrical and optical equipment Transport equipment Machinery, n.e.c. Manufacturing, total Other non-metallic mineral Transport and telecom Rubber and plastics Basic metals and fabricated metal Chemicals and chemical products Trade etc. Textiles and textile products Wood and products of wood and cork Manufacturing, n.e.c.; recycling Aggregate economy Paper, printing and publishing Leather, leather and footwear Agriculture Food, beverages and tobacco Finance and bus services Utilities Public and other services Mining Construction Coke, refined petroleum and nuclear fuel Median 9.5 4.4 4.0 3.4 3.2 3.2 3.1 2.7 2.5 2.2 2.0 1.9 1.9 1.9 1.7 1.4 1.3 1.0 0.9 0.4 0.1 -0.2 -0.4 -0.7 Growth in Total factor productivity 1995 – 2007, 37 countries The choice of sector matters for economic growth and structural change since the technological opportunities between them vary significantly. 20 IDR 2016 key message 8 R&D in manufacturing is a key driver to expand the frontiers of science and technology through technological capabilities Agriculture Manufacturing Mining, construction and utilities Services China 0.04 3.78 0.64 0.21 Poland 0.06 0.70 0.05 0.19 Turkey 0.01 1.23 0.05 0.30 Australia 0.56 4.29 1.85 0.86 France 0.44 6.82 0.44 0.94 Germany 0.65 7.93 0.15 0.42 Korea, Rep. of 0.12 8.81 1.58 0.47 - 10.5 0.3 0.7 USA Technological capabilities are developed in developed countries through tinkering with the frontiers of science and technology 21 Inclusiveness, Sustainability and Innovation 23 IDR 2016 key message 10 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. 24 IDR 2016 key message 12 Environmental productivity is value added/emissions ratio Hi-tech industries produce an environmental bonus since they are less polluting than other industries. 27 IDR 2016 key message 13 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 28 Policy Imperatives 29 IDR 2016 key message 14 Country category Early stage Objective of innovation Improve productivity and process technology Favour the generation of inclusive innovation to improve welfare and access to business opportunities. Middle stage Middle and late stage Type/source of innovation Incremental innovation based on adoption of foreign innovations and technologies. Innovation needs to respond to specific “local” conditions for outcomes Incremental innovation based on combination of foreign technology and/or local, traditional knowledge Build up innovation capacities try to reach the world technological frontier Build-up niche competencies Incremental and radical innovation capacity to compete with leading world innovators Climb the value ladder in global value chains Incremental and radical innovation capacity to differentiate contributions Keep competitiveness in frontier industries Innovation is identical to that in developed countries exposed to the global market Incremental innovations based on applying foreign innovations and technologies strategically to support industrial development Main agents involved Universities and research institutes, private businesses, especially those with exposure to foreign markets Nongovernmental organizations, small firms, public and private associations engaged in disseminating knowledge via networks Private firms, universities and research institutes, public institutions Public institutions to address coordination challenges, private sector initiative including foreign companies Private sectors with support from public agents, intermediaries, diasporas; large firms Private sector in interaction with public research institutions, universities and large firms 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. . 30 IDR 2016 key message 15 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. 31 Industrial Competitiveness Index 32 33 34 35 MANY THANKS 36