VEDAT KUNT TCI ANNUAL CONFERENCE DECEMBER 1 st 2011 AUCKLAND, NEW ZEALAND. Vedat Kunt

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2 CLUSTER DEVELOPMENT APPROACH OF UNIDO JOINT ACTIONS- PERFORMANCE- CONTRIBUTION TO POVERTY REDUCTION CASE from Turkey: Harnessing sustainable linkages in the Textile Sector of Turkey VEDAT KUNT TCI ANNUAL CONFERENCE DECEMBER 1 st 2011 AUCKLAND, NEW ZEALAND

3 Atatürk; the commander of the Turkish armies during the battle in Gallipoli Founder of the Modern Turkish Republic; sent a letter to Anzac mothers in 1934 in order to acknowledge the heroism displayed by their fallen sons as well as signifying the friendship which was born from the ashes of the war. There is no other known example of a such letter written by anyone, nor any friendship was born like this one after a war of any kind.

4 UFT State Aid for Competitiveness Those heroes that shed their blood and lost their lives... You are now lying in the soil of a friendly country. Therefore rest in peace. There is no difference between the Johnnies and the Mehmets to us where they lie side by side now here in this country of ours... You, the mothers, who sent their sons from far away countries wipe away your tears; your sons are now lying in our bosom and are in peace. After having lost their lives on this land they have become our sons as well MUSTAFA KEMAL ATATÜRK

5 UNIDO (United Nations Industrial Development Organization) established in 1966 Specialized UN agency since 1985 Only UN organization promoting the creation of wealth and tackling poverty alleviation through sustainable industrial development Focus on three inter-related thematic priorities:ungency Poverty since Reduction 1985 Through Productive Activities Only UN organization promoting the creation of Trade Capacity Building Environment and Energy wealth and tackling poverty alleviation through

6 CBL Project Map Mexico El Salvador Nicaragua Colombia Ecuador Peru Jamaica Morocco Serbia Turkey Russia Iran Tunisia Honduras Egypt Pakistan Panama Senegal India Cote d Ivoire Uganda Ethiopia Bolivia Uruguay Zimbabwe South Africa Thailand Vietnam Cluster/Network Development Ongoing Cluster Development Upcoming/initiated Cluster/Network Development - Closed Export Consortia Promotion Regional partnerships

7 UNIDO s approach to Cluster Development Obvious to everyone: SMEs are too small and usually powerless to do it alone (to become more competitive and internationalize), concentrations occur naturally and bear competitiveness potential, which can be significantly enhanced through collaboration UNIDO special approach: + specific focus on poverty reduction and sustainable growth

8 1. Social Capital /Trust Norms, values and institutions that support collaborations UNIDO s cluster initiatives provide an external and neutral brokering function that: -Triggers collaborative endeavors among firms and support institutions; -Promotes trust building -Strengthens values, norms and institutions that facilitate interaction

9 2. Joint Actions Business Networks, Export Consortia, Supplier- Buyer Linkages and joint (business) projects Joint actions increase firms negotiation power, facilitates access to resources and information; promote learning and experience sharing that lead to innovation; allow firms to reap the benefits of scale and scope economies; Coordination between firms and support institutions enhances the effectiveness of services Coordination between private sector and policy makers enhances the effectiveness of policies

10 3. Performing Cluster A performing private sector generates income and employment opportunities A thriving private sector generates public revenues (taxes) that can be invested in the provision of basic services Participation in private sector activities enhances self-esteem and reduces marginalization Responsive support institutions open up opportunities of access to assets, provide voice and support capability enhancement

11 4. Poverty Reduction Economic: employment, wages/income, assets Human: education / health Organizational: voice, empowerment Socio-cultural: participation, gender

12 Growth... is an important means to enlarge human choices but it is not an end in itself. Growth at all costs can result in: *Jobless growth (that does not expand employment opportunities); *Ruthless growth (the fruits of growth mostly benefit the rich); *Rootless growth (stifles cultural diversity and identity); *Futureless growth (depletes natural resources); *Voiceless growth (growth without expansion of democracy, empowerment) ❿UNDP Human Development Report (1999)

13 WHO ARE THE POOR??? The poor addressed in a cluster initiative are 1. Poor cluster entrepreneurs 2. Poor farmers and/or suppliers supplying cluster firms 3. Poor workers in cluster firms and job-seekers 4. Poor consumers of clusters goods/services

14 Pro-poor economic opportunities (1) For poor entrepreneurs: increased productivity, investments, sales, returns and income from business activities For poor suppliers and farmers: increased sales (volume and frequency), better prices, higher returns

15 Pro-poor economic opportunities (2) For poor employees and job-seekers: new / more stable employment, higher wages, better working conditions, registered work For poor consumers: increased affordability of goods/services produced by the cluster, improved quality of the products

16 4. Need for a rigorous M&E approach The Causal Chain is the backbone of any Cluster Development Project for UNIDO. i.e. why certain things are done and what results are expected both during and after the project lifetime. On what parameters there is going to be an evaluation, i.e. what is expected out of the projects How to improve project design and logical frameworks

17 Social capital/ Trust Joint actions Performing cluster Poverty Reduction Norms, values and institutions that support collaboration (contracts, BMOs, governance) Business networks, Export consortia, Supplier- Buyer Linkages and joint (business) projects PPP, Collaboration with institutions and tailored services provision Competitive enterprises: productivity/ efficiency / costs/ sales / returns / investments Responsive institutions Economic: employment, wages/income, assets Human: education / health Organizational: voice, empowerment Socio-cultural: participation, gender

18 CASE:MDG-F 2067 Harnessing Sustainable Linkages for SMEs in Turkey s Textile Sector Joint Program UNIDO, UNDP, ILO 3 year long in order to contribute to the achievement of Millenium Development Goals Aims to enhance the international competitiveness of SMEs in textile and clothing sector of Turkey, especially those located in poor and vulnerable regions, in order to integrate them into the global and domestic value chains.

19 4 cities in Eastern Turkey Malatya, Adıyaman, Gaziantep, Kahramanmaraş National Stakeholder İTKİB (Istanbul Textile and Ready Made Garments Exporter s Union)

20 The JP help the local business community reach a state of responsible competitiveness and decent work environment, involving both upgrading the productivity and market access of firms in poor regions, as well as benefiting local disadvantaged communities and populations, especially women.

21 Some facts and figures about the region according to a comprehensive Diagnostic Study carried out by UNIDO team The population of the region is Total registered workforce including civil servants and agricultural workers Almost 10% ( people) of the regional population depend on the textile and clothing industry One of two largest industry concentrations in the region is Textile and Clothing (37% of industrial companies and 69% of all regional jobs).

22 Some of the challenges: Most of poor and unskilled people prefer to work unregistered. Despite sufficient levels of technical and academic infrastructure, government supports and incentives, innovation and R&D capacities of regional companies are not sufficient. Structural challenges are unemployment, informal economy, low level of GDP, outward immigration of skilled people, inward immigration of unskilled people

23 Cluster Development Process Comprehensive study in 4 provinces, face to face interviews with more than 130 companies and institutes with a view to assess the degree of rivalry, supply and demand factors, related and supporting institutions. Value chain analysis in order to identify possible areas of vertical and horizontal growth

24 Criteria for selecting the willing niche groups: Economic impact (export level, employment, product diversification, innovativeness, size) Potential to create a success story Potential for short term success Feasibility of the cluster work Potential for pro poor

25 Two sub sectors are selected accordingly 1. Kahramanmaraş ready made garments industry, 25 companies 2. Adıyaman Ready made garments industry, approximately 20 companies

26 Activities planned and are at the implementation stage Export capacity development, target market penetration Process upgrading Human resources development Development in fashion design Project management training and application to state incentives Alignment with other project components such as CSR activities in order to create a sustainable, effectiveefficient-healthy work environment both for the employees, and employers.

27 Synergies with other Cluster Related Governmental Programmes. 3 Ministries active in Cluster Development, Min. of Economy, Min. of Science-Technology and Industry, Min. of Development Grant scheme available by MoE (about 70 Export Consortiums are supported at the moment) RDAs (26 total) began to support clusters at local level. MoSIT will lauch a new program by mid By 2013, roughly there is expected to be 200+ mio Euro project support realized in cluster based projects/activities

28 MoE s SME Development and Networking project (EU funded) 5 cities + 5 Co-op regions in the west 5 priority sectors 5 Cluster Info Spots established

29 Thank you very much UNIDO Cluster Advisor Partner, VEGO CONSULTING