Promoting Sustainable Business Linkages UNCTAD s Approach

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1 TRADE AND DEVELOPMENT BOARD COMMISSION ON ENTERPRISE, BUSINESS FACILITATION AND DEVELOPMENT EXPERT MEETING ON BEST PRACTICES AND POLICY OPTIONS IN THE PROMOTION OF SME-TNC LINKAGES GENEVA, 6-8 NOVEMBER 2006 PAPER SUBMITTED TO THE EXPERT MEETING* Promoting Sustainable Business Linkages UNCTAD s Approach by Christine Thompson Christine Thompson Ms. Tatiana Krylova Head, Investment Enterprise Competitiveness Branch Division on Investment,Technology and Enterprise Development * The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.

UNCTAD s Approach by Christine Thompson Christine Thompson Ms.

2 Promoting Sustainable Business Linkages UNCTAD s Approach Expert Meeting on Best Practices and policy options in the promotion of Small and Medium Enterprises and transnational corporation linkages 6-8 November 2006 Division on Investment, Technology and Enterprise Development UNCTAD

and Medium Enterprises and transnational corporation linkages 6-8

3 Main issues Context of UNCTAD activities on business linkages promotion Main principles on which the Linkahges programme is built Main mechanisms to deliver the results Outputs and projects Main lesson learned Conclusions

Linkahges programme is built Main mechanisms to deliver

4 CONTEXT OF UNCTAD ACTIVITIES Facilitate integration of developing countries into the world economy on an equitable basis Part of UNCTAD`s work on building productive capacity and international competitiveness in developing countries and countries with economies in transition that is also tailored towards Aid for Trade initiative, MDG This includes an integrated treatment of investment facilitation and enterprise development with a Focus on enhancing SME competitiveness

and countries with economies in transition that is also tailored towards Aid for Trade initiative, MDG This includes

5 Main principles on which the Linkahges programme is built Coherency (enabling environment policies, integration with cross-cutting areas, synergies with existing projects) Coordination (main public and private stakeholders, strategic partnerships, international cooperation) Long-term sustainability (institutional framework, design of the projects based on transfer of the methodology and knowldedge to local counterparts, local capacity building, CSR compenent)

strategic partnerships, international cooperation) Long-term sustainability (institutional framework, design of the

6 Main mechanisms to deliver the results Integrated mechanisms of Research Intergovernmental discussions Technical assistance Outreach (raising awareness and dissemination) Innovative arrangements with the private sector (Unilever) Existing Empretec centers (Uganda, Ethiopia, Argentina, Romania); IPAs

awareness and dissemination) Innovative arrangements with the private

7 Outputs and projects World Investement Report 2001 Video Business Linkages for Sustainable Development 2002 Roster of Good Practices in the Promotion of Business Linkages 2004 Facilitation of intergovernmental discussions, issue notes on enhancing SMEs through business linkages Case studies on India, Malaysia, Mexico, South Africa and Uganda forthcoming Business linkages programme guidelines, 2006

of intergovernmental discussions, issue notes on enhancing SMEs through business linkages Case

8 Current technical assistance projects Brazil Uganda Vietnam

9 Brazil Business Linkages Promotion Project Projeto Vinculos Partners: GTZ, UNCTAD, Ethos Institute, Fundacao Dom Cabral Sponsor: BMZ (Germany) / GTZ Amount: EURO 1,500,000 Duration: 2 years Objective: To promote the creation of sustainable business linkages between TNCs and large local companies & SMEs in the Northeast of Brazil in close partnership with a bilateral implementing agency (GTZ) and local agencies (Ethos & FDC)

promote the creation of sustainable business linkages between TNCs and large local companies & SMEs in the

10 Operational set-up and partners contributions UNCTAD Providing a linkages concept Policy advice to the Brazilian national and regional governments on improving the framework for business linkages Providing Best Practices in business linkages from selected states Providing technical backstopping to the project GTZ General management and monitoring of the project implementation in Brazil Guiding the interventions at the meso level Fostering linkage formation in Brazil FDC Qualification of SMEs Transfer of expertise for inter-firm cooperative arrangements Analysing, systematically processing and disseminating best practices Instituto Ethos Advisory services on corporate social responsibility (CSR) issues Monitoring the application and the compliance with CSR principles in inter-firm cooperative arrangements

Guiding the interventions at the meso level Fostering linkage formation in Brazil FDC Qualification of SMEs Transfer of expertise for inter-firm cooperative arrangements Analysing, systematically

11 Projeto Vinculos - Status SME upgrading activities underway with suppliers and potential suppliers (total of 65 SMEs) of: Institutional agreements with Ministry of Industry and Development, SEBRAE, Federation of Industries in Bahia to streamline on-going linkages initiatives and forge new linkages Current phase focuses on strengthening institutional partnerships (incl. With BDS providers such as SEBRAE) to ensure sustainability of the project beyond initial funding through business linkages capacity building Policy advice components will kick-in strongly in early 2007

forge new linkages Current phase focuses on strengthening institutional partnerships (incl.

12 Uganda Business Linkages Promotion Programme Partners: Enterprise Uganda, Uganda Investment Authority, and UNDP Sponsor: Swedish International Development Agency (SIDA) Amount: US$ 450,000 Duration: 2 year pilot project Target sectors: Objective: Telecommunication, Agribusiness, Real Estate development, Manufacturing & Petroleum distribution. To promote the creation of durable and mutually beneficial partnerships between TNCs and large local companies & SMEs so as to enhance the productive capacity, efficiency, competitiveness and sustainability of their relationships.

Estate development, Manufacturing & Petroleum distribution.

13 Uganda Business Linkages Promotion Programme UNCTAD s contribution: Initialization of the project, soliciting of donor support Policy advise on enabling linkage environment Facilitate the transfer of methodology in terms of SME selections and preparation; Secure the commitment of TNCs to a rigorous mentoring and coaching programme; Facilitate brokering of business linkages in Uganda; and To benchmark and disseminate experiences and best practices. Enterprise Uganda s contribution: To promote selected linkages between TNCs & SMEs To upgrade SMEs to TNC requirements; To create a capacity within Enterprise Uganda on forging linkages. Uganda Investment Authority s contribution: To improve the policy environment to enable the creation of TNC-SME linkages; Sensitize TNCs, existing and potential, on the importance and benefits of business linkages; To promote and share experiences on linkages with potential investors in order to tt t dditi l FDI

benchmark and disseminate experiences and best practices.

14 Vietnam Business Linkages Programme Partners: RMIT International University Vietnam (RMIT), Investment Promotion Center of North Vietnam (IPCN) Sponsor: Unilever Amount: US$ 200,000 Duration: 2 year pilot project Objective: To create linkages between TNCs and SMEs in various sectors and to improve the competitiveness of the SME sector in the country. UNCTAD s contribution: Advise on the right policy environment for business linkages; Transfer of its business linkages methodology; Provide technical expertise, monitor implementation, assure quality control and raise awareness of global best practices. A MOU has been signed between RMIT, IPCN and UNCTAD.

15 LESSONS LEARNED A number of countries have deepened the development impact of FDI through measures to stimulate BL The current dynamics of global production favour the creation of business linkages between TNCs and their suppliers (found motives include locations and technological factors, economies of scale, length of presence in a country, geographical proximity and transaction costs between TNCs and affiliates, corporate culture; as well as issues of corporate responsibility, etc.) Thinking globally becomes an increasing trend among SMEs Requires participation of all stakeholders: governments through supportive policies, TNCs and SMEs through their vision and commitment Still remain an isolated phenomena Importance of a coherent policy framework and of a full picture of the existing mix of relevant FDI and SME-related policies Importance of concerted efforts by the governments towards implementing a coherent and fully worked out policies to developing enabling private sector, particularly SME, environment Impact measurement is an area that requires further attention

TNCs and affiliates, corporate culture; as well as issues of corporate responsibility, etc.

16 Conclusion: Role of UNCTAD Integration of BL programmes into the development agenda in a coherent manner, integrating with other cross-cutting areas Facilitation of public-private dialogue Facilitation of government support both among donor countries and among potential recipients Ensure consistency of the methodology through best practice dissemination and feedback from the programmes Documenting and analyzing lessons learned Providing international fora for addressing these issues, including through intergovernmental machinery, with the participation of relevant stakeholders Increasing technical assistance in the are of BL, entrepreneurship and SME development

practice dissemination and feedback from the programmes Documenting and analyzing lessons learned Providing international fora for addressing these issues, including

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