Interview with Li Yong, Director General of the United Nations Industrial Development Organization

The head of UNIDO talks to Christine Holzbauer about his organisation’s work with the world’s least developed countries (LDCs).

The United Nations Industrial Development Organisation (UNIDO) has put the 47 least developed countries (LDCs) – 33 of which are in sub-Saharan Africa – at the heart of its agenda for inclusive and sustainable industrial development.

“Building global partnerships: Enhancing growth and inclusiveness in LDCs” was the theme discussed by public and private stakeholders in Vienna on 23 and 24 November 2017 at the 7th LDC Ministerial Conference. UNIDO director general Li Yong talked to African Business about the work of his organisation in partnership building and resource mobilisation for sustainable industrial development in LDCs.

The least developed countries face many challenges. How can UNIDO contribute?

In the process of development, each challenge is an opportunity. But opportunities are not guarantees of sustainable wealth creation. Converting challenges into opportunities and opportunities into sustainable sources of wealth and the creation of decent jobs is an ongoing process. UNIDO remains committed to being an effective and efficient development partner to support the process which enables LDCs to graduate and continue to grow beyond that point.

What has prevented more countries graduating from the LDC category since the Istanbul Conference in 2011?

The Istanbul Conference was dedicated to assessing the results of the 10-year action plan for LDCs adopted at the 3rd United Nations Conference on LDCs in Brussels, Belgium, in 2001 and to adopting new measures and strategies for the sustainable development of the LDCs into the next decade. The resulting Istanbul Programme of Action (IPoA) prioritised productive capacity, agriculture, food security and rural development, trade, commodities, human and social development, multiple crises and other emerging challenges, mobilising financial resources for development and capacity-building, and good governance at all levels.

UNIDO continues to support these priorities through a range of technical assistance interventions from strengthening agro industries to supporting productive work for young people and entrepreneurship development. Nevertheless, since then, only two LDCs have graduated: Samoa and Equatorial Guinea, with Angola and Vanuatu expected to graduate by 2021.

A range of factors have prevented countries from graduating the LDC category, including the cost of energy, political instability, and unfavourable business climates. The absence of accreditation frameworks, slow regional integration, and weak cross-border infrastructure are all at stake.

Furthermore, weak logistics and trade facilitation systems and a pervading lack of competitiveness add to the challenges that LDCs face in graduating. UNIDO is committed to working on these issues with global partners to support LDCs in their inclusive and sustainable industrial development efforts. For example, in a country like Gambia, UNIDO, with the help of the Global Environment Facility (GEF) has trained young women to design, install and maintain stand-alone power systems. From supporting banana processing in Uganda by ensuring that processed banana products meet international quality and safety standards for consumption and market competitiveness, to supporting urban micro economic activities in Senegal, UNIDO actively supports LDCs in sub-Saharan Africa in a wide range of ways.

What benefits can the least developed countries expect from global partnerships?

The scale of the challenge facing LDCs means that multi-stakeholder partnerships and investment promotion, as well as innovative financing solutions for industrial development, are needed. Global partnerships are integral to the graduation of LDCs from their category. Through combining efforts and learning from one another on both national and regional levels, the scope for upscaling and maximising the effectiveness of efforts is significantly enhanced. By focusing on that specific theme, UNIDO’s recent LDC Ministerial Conference was able to gather public and private sector stakeholders from the 47 LDCs. Innovative schemes and mechanisms were identified by enabling partnership building and resource mobilisation for sustainable industrial development.

African countries form the largest number of LDCs in terms of regional representation in this category. Among these, African countries also dominate the 10 least developed. Overcoming the many challenges they face requires a multi-pronged approach, with partnerships at the heart. Lower foreign investment in leading commodity-rich LDCs persists, with risk perceptions ensuring that many potential investors continue to feel nervous about investing in many African LDCs (as well as other LDCs). Coordinated, strategic efforts are required to overcome such challenges.

The cost of energy is one of the main hindrances in industrialising LDCs. How does UNIDO support those countries in overcoming this major obstacle?

The renewable energy industry presents opportunities to improve energy access by lowering the cost of bringing power to rural areas. In spite of the initial investment costs, the long-term economic benefits from higher productivity of green and clean technologies, greater markets for green and clean technologies, and the economic incentives for further skill upgrading, innovation and job creation are significant. UNIDO promotes resource efficiency and renewable energy, as well as supporting countries in executing internationally agreed environmental agreements, including those on climate change.

Strengthening institutional and enterprise capacities lies at the heart of this area of work, as well as supporting LDCs at the upstream level of policy and institutional frameworks to mobilise greater investment and increased transparency in management for energy infrastructure. UNIDO coordinates the Global Network of Regional Sustainable Energy Centres in cooperation with various regional economic communities and organisations. Burundi, Rwanda, and Uganda are just some of the countries that currently benefit from these centres.

PPP does not seem to be a one-size-fits-all solution to entering the process of industrialisation. What could be a good balance between the private and public sector in order to maximise the positive impact on LDCs?

There is undoubtedly no one-size-fits-all solution to industrialising. Public-private partnerships and blending public and private financing are just one option. A wide range of broad-based, multi-stakeholder partnerships involving governments, the private sector, development partners, development finance institutions, multilateral/ bilateral development agencies, civil society and others can be leveraged for greater development impact. UNIDO’s innovative Programme for Country Partnership (PCP) approach provides a platform for multi-stakeholder partnership for the promotion of inclusive and sustainable industrial development and encourages a scaling-up of efforts through a country-wide programme

It is a country-owned process that builds on partnerships with various stakeholders, including development finance institutions and the private sector, to mobilise large-scale resources and achieve a greater development impact. There are clear guidelines in place for having a PCP though, and again this approach might not be the best fit for all countries. Nevertheless, we strongly believe that only through global partnerships will the scale of impact needed across LDCs and beyond be achieved.

China plays a major role in supporting Africa on its path to inclusive and sustainable industrialisation. What can other countries learn from China’s approach?

Manufacturing and industrial development were core to the “miracle” of the southeast Asian countries – countries like Japan and the Republic of Korea, who moved very fast after the Second World War. Those “tigers” and “dragons” moved quickly up to the middle and high-income country level. China learned from them in the 1980s, and we opened up a very, very poor country, with a big population, to the world.  China transformed from an agricultural-based to a more industrialised country in 30 years.

I would say that African countries can learn a lot from China’s experience. Africa can draw inspiration from China but must not aim to be China. Each continent should bear in mind its own local context when industrialising and look to international partners for inspiration. Ultimately though, they must take ownership of their industrial development efforts. For the same reason, the PCP model is a country-owned process, with a strong focus on the host country and ensuring that efforts are aligned with existing and emerging national and regional priorities.

A country’s business climate and political stability are detrimental to mobilising investment. Many LDCs are constrained by these aspects. What can be done to ensure that they overcome this impediment?

As far as possible, UNIDO seeks to support capacity-building in the LDCs aimed at improving their abilities to attract Foreign Direct Investment (FDI). A targeted programme is being developed with contributions from a range of partners, including the World Bank, which is aimed at actively assisting the LDC Investment Promotion Agencies (IPAs) by designing and implementing tailored capacity-building activities, taking into account the diverse needs of the various LDCs.

This programme represents a vital milestone in creating a positive investment promotion environment and contributing to the structural transformation and sustainable economic growth of LDCs. A one-size-fits-all approach will not work for LDCs, and therefore a tailored approach to supporting these countries is adopted, in order to maximise the effectiveness and efficiency of our interventions. In light of reduced FDI flows to LDCs – following a high of $44bn in 2015, FDI inflows to the LDCs contracted by 13% to $38bn in 2016 – a range of strategic approaches have been developed for IPAs. These include adopting a spatial approach to investment promotion – providing information about specific regions, industrial corridors, more elaborate investment promotion programmes to increase the benefits of FDI, as well as IPAs becoming focal points for broader regulatory reforms and investment facilitation activities.