UNIDO’s Programme for Industrial Upgrading and … · • Develop national consulting capability to address the ... • Implement UNIDO software Measurement and Control-Chart Toolkit

UNIDO’s Programme forIndustrial Upgrading and Industrial Upgrading and

RestructuringRestructuring

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION


Gerardo Patacconi - Otto Loesner,Quality & Productivity Group

Quality, Technology and Investment BranchUNIDO - P.O. Box 300 A-1400 Vienna, Austria

Tel. +43-1-26026-3605 Fax +43-1-26026-6840 e-mail: [email protected]

UNIDO’s Programme forIndustrial Upgrading and RestructuringIndustrial Upgrading and Restructuring


UNIDO - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ONUDI ~ ORGANISATION DES NATIONS UNIES POUR LE DEVELOPPEMENT INDUSTRIEL

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Industrial Upgrading and Restructuring: the Industrial Upgrading and Restructuring: the UNIDO’s UNIDO’s ApproachApproach

Trade Facilitation: QSM for Market Access

UNIDO Integrated Programmes and Projects

Global Forum, Software, manuals, surveys

Quality & Productivity GroupQuality, Technology and Investment Branch

Accreditation: Pre-peer Evaluation Process PPEP(IAF and ILAC)

UNIDO Industrial Upgrading and Restructuring



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A) Strengthening the legal and regulatory framework

B) Standardization and Conformity Assessment

• 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.

• 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.

Qua

lity

and

Prod

uctiv

ity



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C) Metrology (measurement)

D) Industrial Restructuring and Upgrading• Build capacities in public and private sector institutions to develop national

industrial upgrading and restructuring policies, support mechanismsincluding financing schemes, restructuring and upgrading (mise à Niveau) programmes.

• Develop national consulting capability to address the restructuring and upgrading needs.

• 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

Qua

lity,

Sta

ndar

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roup



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E) Global Forum functionsE) 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)

Qua

lity,

Sta

ndar

diza

tion

and

Met

rolo

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roup



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Country Amount $ Albania 1,271,780 Armenia 166,000 Belarus 23,320 Bosnia & Herzegovina 157,880 Kazakhstan 225,010 Macedonia 33,000 Moldova 15,420 Polonia 1,396,920 Romania 3,003,150 Russia 2,571,430 Slovakia 272,520 Turkey 901,170 Uzbekistan 1,379,610 TOTAL 11,417,210

UNIDO assistance in QSM and industrial upgrading in CEE/NIS 1981-2001

Quality & Productivity GroupQuality, Technology and Investment Branch



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Contact: [email protected] www.unido.org/e4pq

• 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 Audit and Inspection via Internet is one of the key areas addressed in the Programmeis one of the key areas addressed in the Programme.

A new Initiative for CEE/NIS:E4PQ - E-Productivity and Qu@lity




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• To foster the competitivenesscompetitiveness of Central and Eastern European enterprises through the upgrading of quality & productivity, skills, systems and processes and the implementation of world “bestbest--inin--classclass” practices;

• To facilitate the process of process of integrationintegration of the targetcountries in the European Union and in the global global ((traditional and etraditional and e--))economyeconomy;

• To increase the overall standard of living.Contact: [email protected] www.unido.org/e4pq





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Economies in transitionHave 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.



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• High QUALITY

• RELIABILITY (production and delivery)

• COST-effectiveness

• CONFORMITY to standards and technical regulations

• CUSTOMER-focus (satisfaction to delight)……

• High QUALITY

• RELIABILITY (production and delivery)

• COST-effectiveness

• CONFORMITY to standards and technical regulations

• CUSTOMER-focus (satisfaction to delight)……

The CHALLENGETo enter and stay in both the traditional and in the e-

market, enterprises need:

The The CHALLENGECHALLENGETo enter and stay in both the traditional and in the e-

market, enterprises need:



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The CHALLENGE

TO PRODUCE GOODS AND SERVICESThe The CHALLENGECHALLENGE

TO PRODUCE GOODS AND SERVICES

112

2

3

4567

8

9

1011

Right CUSTOMER (s)Right PRODUCT (s)Right QUANTITY (ies)Right QUALITY (ies)Right TIMERight PRICE (s)

Right CUSTOMER (s)Right PRODUCT (s)Right QUANTITY (ies)Right QUALITY (ies)Right TIMERight PRICE (s)



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It is a Total Business (company-wide) concept rather than just the “rationalization of production”:

• Doing things right at the least possible costcost• In the least possible timetime• With the highest possible qualityquality• To the maximum level of satisfaction of the customers and

employeesemployees;• Implies Continuous Improvement

The CHALLENGE

TO IMPROVE QUALITY AND PRODUCTIVITYThe The CHALLENGECHALLENGE

TO IMPROVE QUALITY AND PRODUCTIVITY



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The UNIDO Quality Approach enables the enterprises to enter into self-sustained 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, e-productivity…..

• Identifying, adapt and promoting best manufacturing practices.• Improve quality throughout the production and distribution supply

chains• Facilitating trade and overcoming TBTs

The The RESPONSERESPONSETO IMPROVE QUALITY AND PRODUCTIVITY



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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.

• Practical demonstration in groups of pilot-enterprises for improving their quality and productivity.




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• 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.

Practical demonstration in groups of pilot-enterprises for improving their quality and productivity.




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• 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

Practical demonstration in groups of pilot-enterprises for improving their quality and productivity.




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THE MODEL:UNIDO’s Continuous Improvement System

Approach 1has been applied in in hundreds of enterprises in developing countries and economies in transition.

1 Cfr. Juran Quality Handbook, 5th edition, Mc Graw Hill, 1999, J.M. Juran, A. B. Godfrey



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RES

ULT

S

BUSINESS PERFORMANCE MEASUREMENTConsumer satisfactionProductionOperation

FinancialQualityTiming

QualityLoop

Mgmt.Loop

PRODUCTION UNITProduction unit potentialSkilled workersRaw materialParts and componentsSuppliers / ServicesMaintenanceStandards and MetrologyO

BJE

CTI

VES STRATEGIES

Target marketRelative qualityPerformance

Success factors

TECHNICAL PERFORMANCE MEASUREMENTProductivity and quality levels Plant level InspectionStatistical Process Control…..

THE EXTERNAL ENVIRONMENTCompetitorsGovernment policiesPhysical infrastructureEconomic performance(National and International)

SuppliersLocal regulationsIndustrial property, patents…ISO 9000, WTOEnvironment regulations

UNIDO’s Continuous Improvement System Approach



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• 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

NEW APPROACH: INDUSTRIAL UPGRADING and INDUSTRIAL UPGRADING and

RESTRUCTURINGRESTRUCTURING



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RESTRUCTURINGRESTRUCTURING• 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 and Chile with the support of the EU



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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.


RESTRUCTURINGRESTRUCTURING



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EXAMPLE TUNISIA INDUSTRIAL UPGRADINGTUNISIA 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 programmefocusing on Upgrading and Improvement of

Industrial Competitiveness.



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FUNDING TUNISIA INDUSTRIAL UPGRADINGTUNISIA 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.



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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;



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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.



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Improving the competitiveness and

development of industrial enterprises

Modernizing theIndustrial environment

Promoting the development of

competitive industries

Strengthening the capacities of support

institutions

Restructuringand upgrading

programme

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.



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Industrial Upgrading and Restructuring: the Industrial Upgrading and Restructuring: the UNIDO’s UNIDO’s ApproachApproachCLUSTER/ENTERPRISE LEVEL AT THE ENVIRONMENT LEVEL

Export marketThe local market

THE UPGRADING PROCESSTHE UPGRADING PROCESS with focus on Supply Chains/Clusterswith focus on Supply Chains/Clusters

Productivity, Price, QualityCOMPETITIVENESS

Strategic and value chain diagnosis

Formulation of the upgrading plan and financing scheme

Approval of the upgrading plan

Implementation and follow-up of the upgrading plan

Institutional & regulatory environment

Infrastructure and services

Banking and financial environment

Investment incentives and promotion

Modernisation of equipment

Organisation &

management systems

Productionsystems

Training &skills

developmentQuality &

certificationMarketing & Export

AlliancePartnership

Supply chain

Export Consortia/cluster & supply chain

B2BB2CB2G



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Result 1 Formulating and assisting in the implementation of an upgrading programme

Study for setting up an upgrading monitoring programmeResult 3

Result 2 Design and formalization of the procedures and regulatory framework

Submitting the project to the steering committee

FirstComponent

Assistance in the design, implementation and follow-up of a national industrial restructuring and upgrading programme (BENFICIARY: Ministry of Industry)

UPGRADING PROCESSUPGRADING PROCESS: : SUMMARY TABLE OF RESULTS AND ACTIVITIES

Shortterm

Longterm

X

Activity 1

Designating the steering committee and agency to be responsible for implementing the upgrading programme; identifying the other interface agencies and organizations X

Activity 2

Establishing an information and awareness-raising programme X XActivity 3

Training a body of specialists to be responsible for implementation X X

Activity 1 Formalizing the procedures for implementing the upgrading programme XActivity 2 Updating legislation or regulations directly concerned with enterprise recovery X

Activity 1 Identifying needs by a survey of users (enterprises, administration) XActivity 2 Drawing up specifications

XActivity 3 Defining a mechanism for inputting, processing and retrieving information; identifying the technical, financial and regulatory conditions for its operation

X

Activity 4 X

Formulating and assisting in the implementation of an upgrading programme X

Activity 4



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Study of the foreign-trade support mechanism

Blueprint for a network of technological and commercial resources (all priority sectors)Result 3

Result 1 Strengthening the capacities of research organizationsActivity 1 Organization of a training session on strategic diagnosis and the upgrading plan

Activity 1

Organizing a trig. session on the evaluation and follow-up of the upgrading plan

X

Activity 2

Organizing a training session on diagnosis and preparation of the upgrading plan

Result 2 Strengthening the capacities of the banks and investment promotion agency

Activity 1 XActivity 2 Programming the upgrading of existing facilities (all priority sectors) XResult 4Activity 1 Studying of the establishment of an enterprise foreign-trade information and

promotion mechanism XActivity 2 Studying the enterprise access and network operating conditions

XActivity 3 Setting up the financial and banking procedures

X

XX

Surveying and identifying the existing facilities (all priority sectors)

Longterm

SecondComponent Strengthening the capacities of enterprise support systems

Shortterm

X

UPGRADING PROCESSUPGRADING PROCESS: : SUMMARY TABLE OF RESULTS AND ACTIVITIES



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• 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

ENTERPRISES RESTRUCTURINGENTERPRISES RESTRUCTURING



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Taxation

Tariffs

Economic climate

Legal environment

Political environment

Policy framework

Institutional structure

Competition

Technology

Factor prices

Investment climate

Industry R & D

Demand pattern

ManagementOrganisation

Marketing/SalesOperations ManagementFinance/Cost Accounting

Quality ManagementMaintenance

Strategic PlansHuman Resource Development

Research & Development

INTERNALEnvironment

Trading policy

EXTERNALEnvironmentThe INTERNAL

and EXTERNALEnvironments

INFLUENCE the operation of all ENTERPRISES

SUB-SECTOR ECONOMYENTERPRISE




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• 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)




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• Enterprise RestructuringCEE/FSU (Poland, Slovakia, Romania, Albania)

(Kazakstan, Uzbekistan, Tajikistan) OTHER (North Africa, Lesotho, Sri Lanka,

TanzaniaVietnam, Thailand)

• Management Consulting DevelopmentRomania, Moldova

• Company TownsKazakstan

UNIDO ENTERPRISES RESTRUCTURING PROJECTSUNIDO ENTERPRISES RESTRUCTURING PROJECTS



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Financial Restructuring

Production & Operations Restructuring

Physical Restructuring

Ownership Restructuring (Privatisation)

“CLASSIC”ENTERPRISES RESTRUCTURING“CLASSIC”ENTERPRISES RESTRUCTURING



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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



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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



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UNIDO Restructuring Project in Poland

Employment levels by enterprise 1991 - 1997

0200400600800

100012001400160018002000

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1991199219931994199519961997



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Changes in fixed assets by enterprise (1991 - 1997)

0

5000

10000

15000

20000

25000

30000

35000

40000

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Sales by enterprise ('000 USD) 1991 - 1997

05000

10000150002000025000300003500040000

Silwan

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Zatra

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Sale

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1991199219931994199519961997



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SilwanaBumar FablokJotesZatraButbędzinĆmielówHydomatApatorMorpakElzab


Decrease in fixed assets

0%

50%

100%

Per

cent

age

chan

ge

Increase in sales per fixed assets

0%

100%

200%

300%

400%

500%

600%

700%

800%

Per

cent

age

chan

ge

Key changes in restructuring (1991 - 1997)

Decrease in employment

-50%

0%

50%

100%

Per

cent

age

chan

ge

Increase in sales per employee

-50%

0%

50%

100%

150%

200%

Per

cent

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Sales per employee by enterprise (USD) 1991 - 1997

05000

100001500020000250003000035000400004500050000

Silwan

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Bumar Fab

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Zatra

Hydom

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Sale

s per

em

ploy

ee (U

SD) 1991

199219931994199519961997



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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



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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.

Documents

UNIDO’s Programme for Industrial Upgrading and … · • Develop national consulting capability to address the ... • Implement UNIDO software Measurement and Control-Chart Toolkit