promoting sustainable business linkages unctad ’ s approach
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PROMOTING SUSTAINABLE BUSINESS LINKAGES Unctad ’ s approach. “. Fulvia Farinelli UNCTAD, Division on Investment and Enterprise Development. Backward linkages with suppliers. Backward linkages with suppliers. Linkages with technology partners. Forward linkages with customers. - PowerPoint PPT PresentationTRANSCRIPT
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PROMOTING SUSTAINABLE
BUSINESS LINKAGES
Unctad’s approach
Fulvia FarinelliUNCTAD, Division on Investment and Enterprise Development
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Types of TNC-SME LinkagesTypes of TNC-SME Linkages
Linkages and
Spillovers between TNCs and
SMEs
Backward linkages with
suppliers
Forward linkages with
customers
Linkages with technology
partners
Other spillover effects
Backward linkages with
suppliers
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Main objectives of backward Main objectives of backward linkage promotion programmeslinkage promotion programmes
1. Generate additional economic activity2. Stimulate improvements in the products and
services of local suppliers (domestic sales to TNCs perform the role of exports in terms of building local competitiveness).
3. Giving local suppliers a foothold in international markets with products meeting international production and quality standards.
4. Attract FDI by offering a local supplier base capable of offering quicker delivery times, reduced transportation and inventory costs.
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According to internal surveys:
A variety of initiatives to promote linkages exists.
From purely donors-driven and government-driven programmes, to public-private sector partnerships.
There are also purely private sector-driven programmes, e.g. totally independent supplier development programmes carried out by TNCs in their own self-interest and within corporate social responsibility programmes.
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Success stories
Successful policies promoting linkages can be found in Ireland, Jordan, Malaysia, Mozambique, Thailand, Singapore and South Africa.
Large TNCs - Toyota, Unilever, FIAT,
AngloAmerican, DymlerChrysler, Volkswagen, INTEL, IBM and Tata implement their own supplier developing programmes.
Many donors and international organization are active in linkages building. Among others, DFID (the Business Challenge Fund), IFC, ITC, UNDP, UNIDO, USAID, the World Bank, GTZ, UNCTAD.
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Main lesson learned from successful cases
1. The establishment of sustainable linkages does not happen automatically, as a direct consequence of the presence of TNCs, but requires the participation and collaboration of all interested stakeholders (i.e. TNCs, local suppliers, government).
2. Only if a conducive policy environment is set up, specific linkages promotion programmes have a chance to be transformed from isolated cases, to sustainable and inclusive mechanisms to build the local productive capacity.
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A systemic policy A systemic policy approach to linkage approach to linkage buildingbuilding
Improving the investment climate
Strategic FDI attraction
Strengthening absorptive
capacity
Specific linkage policies
Providing strategic guidance and policy
coordination
Source: UNCTAD 2010
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Policies for strengthening Policies for strengthening business linkagesbusiness linkages
Interventionist approachFocus on “hard” requirements: market reservation, local content, techno-logy sharing, foreign equity
HorizontalFocus on non-selective policies to compensate for market failures in information, R&D
SelectiveFocus on selective sector-specific and cluster policies, social targeting
Minimalist approachFocus on business-friendly investment climate, equal level playing field
Increasing level of policy intervention
“Encouraging” policy approach
Source: UNCTAD 2010
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UNCTAD‘s main mechanisms UNCTAD‘s main mechanisms to deliver resultsto deliver results
Research Intergovernmenta
l discussions Technical
assistance
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Main outputsMain outputs
World Investement Report, 2001
Video titled “Promoting Business Linkages in Malayisia„ 2002
Publication “Roster of Good Practices in the Promotion of Business Linkages„ 2004
Issue note on “Enhancing SMEs through business linkages: from policy formulation to policy implementation„ 2005
Publication “Deepening Development through Business Linkages„ 2006
Publication “Promoting business linkages from a policy perspective: the case of India, Malaysia, Mexico, South Africa and Uganda„ 2009
Publication on “Integrating Developing Countries‘ SMEs into Global Value Chains„ 2010
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Current technical Current technical assistance projectsassistance projects
Brazil Uganda Vietnam Argentina Zambia Mozambique Tanzania Peru
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All are « ENGAGING THE PRIVATE SECTOR »
Business Linkage Programme, Uganda Supported by UNCTAD and its local EMPRETEC
centre, SIDA and the Uganda Investment Authority (UIA)
e.g. linkages partnership with Uganda Breweries, Toyota, MTN
Projecto Vínculos, Brazil Supported by UNCTAD, GTZ, Ethos Institute,
Fundacao Dom Cabral, SEBRAE e.g. linkage partnership with Philips, BASF,
and Petrobas under the National Mobilization Programme for the Oil and Natural Gas Industry
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UNCTAD’s role:UNCTAD’s role:
Sensitization of TNCsSensitization of TNCs Challenge, suggest, innovate for more Challenge, suggest, innovate for more
linkageslinkages Deepening of linkages where successful Deepening of linkages where successful Horizontal, vertical extension of linkagesHorizontal, vertical extension of linkages Global benchmarkingGlobal benchmarking Stimulating a conducive policy Stimulating a conducive policy
environmentenvironment
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UNCTAD Business Linkage UNCTAD Business Linkage programme perspectiveprogramme perspective
Approach:Approach:
From “input driven” (upgrading From “input driven” (upgrading
capacity of SME's in general)capacity of SME's in general)
To “output driven” (meeting needs To “output driven” (meeting needs of TNCs’ affiliates)of TNCs’ affiliates)
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Partnering with TNCs Partnering with TNCs affiliatesaffiliates
Explore linkages opportunities that are Explore linkages opportunities that are beneficial to both TNCs and their beneficial to both TNCs and their potential suppliers potential suppliers
Define potential candidates for linkagesDefine potential candidates for linkages Agree requirements in quantity, price,Agree requirements in quantity, price, specifications, etc.specifications, etc. Align business processes, information Align business processes, information
flowsflows Joint implementation of suppliers Joint implementation of suppliers
upgrading programmeupgrading programme
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• Sharing a common business culture and languageSharing a common business culture and language• Attitude of linkage partnersAttitude of linkage partners• Sharing information on forward plans & Sharing information on forward plans &
requirementsrequirements• Availability of BDS providersAvailability of BDS providers
• Transfer of know-howTransfer of know-how• Transfer of technologyTransfer of technology• Feedback, coaching, mentoringFeedback, coaching, mentoring• Access to finance Access to finance
Important success determinantsImportant success determinants