Strategic Industrial Governance for enhancing competitiveness and innovation

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National Industrial Strategy for enhancing
competitiveness and diversification First
steering committee meeting, Riyadh, Dec 7 2005
Strategic Industrial Governance for enhancing
competitiveness and innovation in the new global
setting
Presentation by Frederic Richard, Special
Adviser to the Director General UNIDO
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Strategic industrial Governance
Refers to the institutions and processes through
which the government, the private sector and
other organizations co-operate in the
formulation, implementation and monitoring of
industrial strategies, policies and programmes
for enhancing competitiveness and innovation and
the contribution of industry to a sustainable
development
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Outline

• Goal to achieve a sustainable development
  through innovation in industry
• Global setting trends, opportunities and
  challenges
• Focus of intervention the innovation and
  learning system
• Organisation and process

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The Strategic Industrial Governance System

• The Goal to achieve a sustainable development
  through innovation in industry

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Sustainable Development
Economic growth
Innovation
Environmental sustainability
Social development
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Industry as key engine of innovation

• Applying technological progress
• Driving and diffusing innovation
• Developing new skills and attitudes
• Stimulating modern services
• Internationalizing economies

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Technological Classification of Industries

• Resource-based industries (f.i processed food,
  wood, leather, refined petroleum rubber
  products)
• Low technology industries (f.i textiles,
  garments, footwear, furniture, glassware, toys)
• Medium technology industries (f.i automotive
  industry, chemicals, metal products, machinery)
• High technology industries (f.i electronics,
  pharmaceuticals, biotechnology, precision
  instruments, aerospace ).

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Innovation Path
High Tech
Medium Tech
Low Tech
Resource based
High value added segments
Low value added segments
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The High Road to Compete To innovate and learn

• The only path to a sustainable development is to
  compete through innovation the alternative is to
  compete through lower wages and standards or to
  be marginalized
• To innovate means to improve products and
  processes to move to higher value added
  industry segments to enter in technologically
  more complex industries
• To innovate requires to up-grade technological,
  managerial and marketing capabilities it is a
  risky and difficult learning process with
  important efforts of research, investment and
  time
• In developing and emerging economies, the
  innovation and learning process is usually based
  on the mobilization and adaptation of
  technologies and management practices already
  existing in the global pool of knowledge
• The innovation and learning process is driven by
  firms and supported by an framework of
  institutions and policies

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The Strategic Industrial System

• The global setting trends,
• opportunities and challenges

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Global Trends

• Increased financial, trade and investment flows
• Rapid and accelerating technological progress
  electronics ICTs biotechnology new materials
  fuel cells nanotechnologies etc
• New managerial and organizational processes and
  systems to design, produce and distribute
  products
• New international regulations and standards
  trade, product, labor, environment, intellectual
  property rights.
• Increased level and changes in global competition
  on both domestic and export markets

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World exports by type of industry ( b.)
Source Lall
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Export growth rates,
1990-2000 ( p.a.)
Source Lall
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Changes in world market shares 1990-2000
Source Lall
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Globalization and localization of industry

• Reductions in cost of transport and
  communications drive a process of segmentation
  and globalization of value chains in all types of
  industries
• At the same time increased competition drives a
  process of localization of the segments of the
  global value chains in highly specialized and
  innovative clusters which offer unique
  competitive advantages.

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The Strategic Industrial Governance System

• The focus of intervention the innovation and
  learning system

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Industrial clusters are at the core of the
innovation and learning system
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What is an Industrial Cluster?

• A geographic agglomeration of producers,
  buyers and suppliers operating in a particular
  industry

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Integration of Industrial clusters in global
value chains
National boundary
Domestic industrial cluster
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Main types of industrial clusters

• Clusters of large national firms
• Clusters of Small and Medium Enterprises
• Clusters of subsidiaries of foreign firms

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Drivers of cluster development

• GLOBAL LINKS
• Global Buyers
• Foreign Investment
• Technological Acquisition

LEAD FIRMS
DOMESTIC SUPPLIERS
DOMESTIC BUYERS

• DOMESTIC CAPABILITIES
• Enterprise Development
• Skills
• Technological Efforts
• Infrastructure

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Strategies of innovation and learning of
clusters in global value chains
Clusters in developing countries enhance their
competitiveness through a pro-active strategy of
innovation and learning driven by the lead firms
which includes

• LINKING with more advanced foreign partners in
  global value chains
• LEVERAGING local competitive advantages to
  acquire the knowledge and technology of the
  foreign partners
• LEARNING to up-grade capabilities by adapting,
  using and improving the acquired technology
• And continuously repeating the LLL cycle to move
  up from low to higher value added segments of
  the value chains

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Innovation paths of industrial clusters in
global value chains
Value added by worker
Assembly and Manufacturing
RD
Design
Distribution
Marketing
Source Ministry of Industry and Trade of
Malaysia (1996)
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The Innovation and learning Support System
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Importance of framework conditions

• Quality and stability of the political system
• Reliable and efficient legal system
• Macroeconomic stability
• Trade, investment and competition policies
• Tax system and business regulations

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Resources, services and support institutions

• Utilities, Infrastructure and logistics
• Human resources and education/training
• Technological development and Research,
• Entrepreneurship and Business Development
  Services
• Financial resources and institutions
• Information on markets and industries
• Product and environmental standards and support
  institutions

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Support systems for global links

• Attracting foreign investment,
• Promoting exports
• Developing partnerships with global buyers
• Acquiring foreign technologies

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The Industrial Innovation and Learning System
INDUSTRIAL GOVERNANCE SYSTEM
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The Strategic Industrial governance system

• Organization and
• Process

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Mission
Responsible for the formulation, implementation
and monitoring of strategies, policies and
programmes to enhance competitiveness, innovation
and learning and in particular

• to promote and support the development of
  competitive and innovative industrial clusters
• to build at national and regional level
  appropriate innovation and learning support
  systems

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Key problems to be addressed

• Continuous changes at global level
• Large number of clusters in different types of
  industries
• Support institutions unable to respond to
  cluster needs
• Inadequate framework conditions
• Large number of ministries and institutions
  involved
• Lack of trust between the government, the private
  sector and the support institutions

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Main Stakeholders

• CENTRAL GOVERNMENT
• Guides the overall strategy process
• focuses on framework conditions and strategic
  policy issues

• SUPPORT ORGANIZATIONS
• Analyze performances and trends
• Support development and establishment of clusters
• Promote innovationbuild capabilities and global
  links

• PRIVATE SECTOR ASSOCIATIONS
• Key actors in the strategy process
• organize collective responses to challenges and
  opportunities at cluster and national level

Strategic Governance System

• REGIONS
• Manage Regional cluster development strategies
• Develop local clusters and support organizations

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Steering Committee

• Key institution for coordination and
  co-operation between the government, the private
  sector and other stakeholders for the formulation
  and monitoring of strategies, policies and
  programmes to promote and support the development
  of competitive and innovative industrial clusters

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Organization

• Authority high-level membership under the
  chairmanship of the Government
• Inclusiveness Representatives of all key
  stakeholders from the public and private sector
• Technical support to carry out analytical and
  support activities
• Transparency analyses and reports are published
  and disseminated to inform and mobilise support

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Main Functions

• Participate actively in the formulation,
  implementation and monitoring of the Industrial
  Strategy
• Recommend policies and support programmes
• Promote partnerships and cooperation
  initiatives between the government and the
  private sector
• Organize workshops on policy issues and global
  trends
• Asess, benchmark and monitor competitive and
  innovative performances of national industries

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Strategic Guidelines

• Strategy is based on a long term vision all
  stakeholders and the population
• Strategy and policy framework aim at the
  development of competitive and innovative
  clusters in all types of industries, and does NOT
  focus on the development of a limited and
  exclusive number of clusters (picking winners)
• Strategy follows a flexible, action-oriented and
  experimental approach with continuous assessment
  and monitoring of results
• Strategy is implemented through Public-Private
  partnerships and initiatives

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Thank you for your attention