THE UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION (UNIDO)

BACKGROUND:

Industrialization is one of the primary goals of the developing countries, to increase their share of world manufacturing output and decrease their dependence on imported goods and services and on their traditional raw-materials export economies. The United Nations Industrial Development Organization (UNIDO), the newest specialized agency of the UN, seeks to further that goal through its programs of technical cooperation with developing countries, designed to aid in the planning and implementation of industrial projects, the training of personnel in manufacturing and managerial skills, the transfer of technology and the provision of information, and the promotion of investment in industry in developing countries.

CREATION

UNIDO was established by the General Assembly in November 1966 as an autonomous organization within the UN to promote and accelerate the industrialization of developing countries and to coordinate the industrial development activities of the UN system.

The first General Conference of UNIDO was held in Vienna in 1971. The second General Conference, held in Lima in 1975, proposed the conversion of UNIDO into a specialized agency "in order to increase its ability to render assistance to developing countries in the most efficient ways." The conference also adopted the Lima Declaration and Plan of Action, which called for developing countries to reach the target of 25% of world industrial output by the year 2000.

In 1979, a conference of plenipotentiaries, meeting in Vienna, adopted a constitution for UNIDO, to become effective when at least 80 states had ratified it. This was achieved on 21 June 1985, and UNIDO's conversion into a specialized agency became effective on 1 January 1986.

PURPOSES

UNIDO's mandate from the General Assembly is to act as the central coordinating body for industrial activities within the United Nations system and to promote industrial development and cooperation at global, regional, national, and sectoral levels.

In the wake of the reorganization of the activities of the United Nations and its specialized agencies in the early 1990s, UNIDO identified five development objectives that provide a new conceptual framework for the organization's future programs:

• industrial and technological growth and competitiveness;
• human resource development;
• equitable development through industrialization;
• environmentally sustainable industrial development; and
• international cooperation in industrial investment and technology.

By applying its expertise at three levels—policy, institution, and enterprise—UNIDO acts as:

• the central coordinating agency for matters related to industrial development;
• a focal point for industrial technology;
• an honest broker for industrial cooperation;
• a center of excellence on industrial development issues; and
• a global source of industrial information.

MEMBERSHIP

As of 21 August 2003, UNIDO had a membership of 171, an increase of 21 countries since 1987. The growth in membership was mainly caused by the emergence of the newly independent nations of Central and Eastern Europe in the wake of the collapse of the Soviet Union. A few of the most industrialized countries chose to withdraw from UNIDO, claiming that the organization is inefficiently operated. In December 1995, the United States decided to withdraw, followed by Germany in November 1996 and the United Kingdom in December 1996. The United Kingdom and Germany later rejoined, but as of 2003, the United States had not.

STRUCTURE

The four organs of UNIDO are the General Conference, the Industrial Development Board, the program and budget committee, and the secretariat, headed by a Director-General.

General Conference

UNIDO's strategies and policies in regard to industrial development are outlined at its General Conference, which meets every two years and is composed of representatives of all members. Since the organization's inception, the General Conference has met in 1971 (Vienna), 1975 (Lima), 1980 (New Delhi), 1984 (Vienna), 1985 (Vienna—UNIDO's transition to a specialized agency), 1987 (Bangkok), 1989 and 1991 (Vienna), 1993 (Yaoundé), 1995, 1997, 1999, 2001, 2003, and 2005 (Vienna).

Industrial Development Board

The Industrial Development Board consists of 53 members elected by the General Conference for four-year terms. The board reviews the implementation of the work program and the budget and makes recommendations to the General Conference on policy matters, including the appointment of the Director-General, when required. It meets once during General Conference years, and twice in other years.

As of 2 December 2005 the members of the Industrial Development Board were: Afghanistan, Algeria, Austria, Belgium, Bolivia, Brazil, Burkina Faso, Chile, China, Colombia, Côte d'Ivoire, Cuba, Czech Republic, Egypt, Ethiopia, France, Germany, Ghana, Greece, Guatemala, India, Indonesia, Iran (Islamic Republic of), Ireland, Italy, Japan, Kenya, Luxembourg, Mexico, Morocco, the Netherlands, Nigeria, Norway, Pakistan, Paraguay, Poland, Republic of Korea, Russian Federation, Saudi Arabia, Senegal, Slovakia, South Africa, Spain, Sri Lanka, Switzerland, Syrian Arab Republic, Thailand, Tunisia, Turkey, Ukraine, United Kingdom, Uruguay, and Zimbabwe.

Program and Budget Committee

The program and budget committee is composed of 27 members elected for two-year terms. Member states meet once a year to assist the board in the preparation and examination of the work program, budget, and other financial matters.

As of 2 December 2005 the members were: Algeria, Austria, Burkina Faso, China, Côte d'Ivoire, Cuba, Ethiopia, France, Germany, Greece, Guatemala, Hungary, Iran (Islamic Republic of), Italy, Japan, Democratic People's Republic of Korea, Republic of Korea, Mexico, Pakistan, Peru, Poland, Russian Federation, South Africa, Switzerland, Tunisia, Turkey, and the United Kingdom.

Director-General and Secretariat

The Director-General of UNIDO, elected by the General Conference in December 2005 for a four-year term was Kandeh Yumkella of Sierra Leone.

Prior to its conversion into a specialized agency, UNIDO was headed by an executive director appointed by the Secretary-General of the UN. The first two executive directors were Ibrahim Helmi Abdel-Rahman (1967–74) and Abd-El Rahman Khane (1975–85). Domingo L. Siazo, Jr., of the Philippines was the first Director General of UNIDO when it became a specialized agency in 1985. He served as Director General from 1985 to 1993, when he was succeeded by Mauricio de Maria y Campos of Mexico (to 1997). Carlos Alfredo Magarinos of Argentina served from 1997 to 2005.

UNIDO maintains a professional staff of more than 500 at its Vienna headquarters, including engineers, economists, and technology and environment specialists, and more than 100 in the field.

Offices

UNIDO is headquartered in Vienna, Austria. It maintains liaison offices at UN headquarters in New York and at the UN office in Geneva. UNIDO maintains 43 field offices worldwide. UNIDO operates Investment Promotion Units (IPUs) in Egypt, Jordan, Morocco, Tunisia and Uganda, all of which are financed by the Italian government, and an associate member in Turkey. It also has 35 National Cleaner Production Centers (NCPCs), established by UNIDO and UNEP, and 10 International Technology Centers in Brazil, China, India, Italy, the Republic of Korea, and the Russian Federation.

BUDGET

Funding for UNIDO activities is drawn from the regular budget, the operational budget, and voluntary contributions. The regular budget is derived from member states' assessed contributions. The operational budget is derived from the implementation of projects. The estimated volume of UNIDO operations for 2006-07 was €355.8 million. The breakup was as follows: regular budget €150.8 million, operational budget €19.9 million and anticipated voluntary contributions €185.1 million. Most costs of expert advice, equipment, and other forms of technical assistance, in partnership with and at the request of developing countries, are met by the UNDP, for which UNIDO is an executing agency. Special UNIDO projects use the Industrial Development Fund (IDF), established in 1976 with a "desirable funding level of us$50 million annually." UNIDO annually awards about 200 contracts valued at about us$20 million. Spending on training in the form of fellowships, study tours, and group training annually amounts to about us$15 million.

ACTIVITIES

Forty-nine integrated programs were formulated and approved as of May 2006, most of which had been developed and were in operation.

A. Technical Cooperation

For 2005, UNIDO's programs and projects totaled approximately us$463 million. Of that total, 41% had been allocated to sub-Saharan Africa and 43% to the least developed countries in the world.

UNIDO's objectives in technical cooperation are the following:

• To elaborate programs and projects for the industrial development of developing countries, including special measures for the least developed countries;
• To formulate policies and strategies for the development of UNIDO's operational activities, from different sources of finance and with particular focus on the country, subregion, and region concerned;
• To prepare technical cooperation programs and formulate specific projects, in collaboration with other UN bodies and with governments, as well as through participation in roundtable meetings or consultative groups;
• To help improve the effectiveness of technical cooperation programs by assessing the progress made and the results achieved by projects at intermediate and final stages and by feeding back into the programming process the results of their impact; and
• To maintain a program of UNIDO country directors that enhances the services rendered to the developing countries.

In seeking to industrialize their economies, developing countries face a wide spectrum of problems, ranging from preparation of national plans, development of sectoral programs, and elaboration of appropriate policies and strategies of industrial development, to concerns relating to the technical processes to be employed

in manufacturing any specific product, preparation of preinvestment studies, organization of production facilities, training of personnel in new skills, management of factory operations, and establishment of an industrial infrastructure to support industrial enterprises and to mobilize financial resources for investment in industrial production.

UNIDO assists in addressing these problems by in-depth studies on specific priority problems of industrialization in particular countries, with consideration given to important concerns, such as the rehabilitation of troubled industries, international cooperation for small-and medium-sized industry development, institutional development for technology transfer and adaptation, and technical cooperation among developing countries.

UNIDO also works to increase the resources available for technical cooperation purposes, working with traditional as well as new funding sources, such as trust funds under which the developing countries themselves finance UNIDO technical assistance projects, and mobilizing the support of nongovernmental organizations.

Industrial Operations Technology

A common problem of developing countries is how best to exploit their natural resources and other comparative advantages in order to ensure a worthwhile share for themselves in world production and trade in manufactured products, including replacement of imported industrial products with locally manufactured ones. In order to increase industrial production in developing countries, UNIDO assists them, through the implementation of technical cooperation projects, in acquiring the technological base and know-how that will enable them to establish, expand, rehabilitate, and improve the efficiency and productivity of industrial facilities in the main branches of industry. It provides this help through direct assistance to manufacturing enterprises or through the establishment or strengthening of specialized technology centers servicing individual industrial sectors.

UNIDO also extends assistance in the efficient utilization of energy resources by industry, in the industrial-scale production of fuel and feedstock from renewable resources, and in promoting environmentally sustainable industrial development. Continued attention is given to the establishment of pilot and demonstration plants to accelerate the utilization of locally available raw materials, including industrial and agricultural wastes. Particular attention is given to technical assistance in chemical industries and in the production of capital goods, including equipment for telecommunications and transportation, especially in support of rural development and in the manufacture of pesticides, fertilizers, and agricultural equipment.

Industrial Institutions and Services

In order to increase industrial production, developing countries have to make extensive use of planning techniques and preinvestment studies and also need to establish and strengthen institutional infrastructures and support services and the skills required to set up and operate manufacturing enterprises. Institutional infrastructures are particularly critical in order to compensate, at least in part, for the absence of a long tradition of industrial development in most developing countries. There is a continuous demand for the establishment or strengthening of institutions dealing with standardization and quality control, industrial research, small-scale industries, and rural development. The lack of production, managerial, and entrepreneurial skills is frequently the greatest obstacle to industrial development.

Through its technical cooperation programs, UNIDO seeks to assist developing countries, particularly in the development of human resources, by identifying priority areas for industrial training and for the establishment of national institutes for research and development and for training and consultancy that may become centers for training of personnel, including training in management and in the preparation of preinvestment studies, project implementation, and operation of industrial enterprises. UNIDO extends assistance through fellowships, study tours, and group training programs.

B. Investment Promotion

Another major focus of UNIDO activities is the acceleration of investment in the private and public sectors of developing countries, in a manner consistent with their national plans and policies, and through the implementation of technical cooperation projects in the field of industrial investment.

Although there is a need for a massive flow of financial and technical resources from outside sources to implement projects necessary to achieve the targets of industrial growth laid down in the plans of developing countries, the lack of sound and well-prepared investment projects backed by suitable entrepreneurs has been a more serious obstacle to the flow of these needed resources than the lack of investment funds. Information is scarce regarding the sources of financing and the identification of enterprises that are suitable and willing to participate in manufacturing projects in developing countries or to redeploy their industrial plants to developing countries. At the same time, there is often a lack of awareness among development finance institutions and entrepreneurs in industrialized and selected developing countries of the possibilities for cooperation with project sponsors in developing countries.

UNIDO seeks to stimulate industrial development in developing countries by promoting cooperation between industrialists in both developed and developing countries in the generation, formulation, and promotion of investment projects through investment promotion services, access to information stored in computer data banks, and links with international, regional, subregional, and national development finance institutions.

UNIDO's Investment Promotion Resources Information System contains thousands of records on industrial investment project proposals, potential partners, development finance institutions, investment-related institutions, and project sponsors. UNIDO also maintains investment service offices in Athens, Vienna, Paris, Cologne, Seoul, Tokyo, Zurich, Warsaw, Washington, and Milan, which serve as a direct link to businesses and governments in developing countries and can be the "eyes and ears" of firms in industrialized countries interested in investment opportunities in developing countries.

C. Information and Consultations

Through its Industrial and Technological Information Bank, UNIDO seeks to accelerate the flow of information to developing countries, many of which lack access to such information and to technological trends and advances. It also assists in advancing the capacities of developing countries for acquisition of technology through workshops and advisory services and through its System of Consultations. At both the regional and interregional levels, UNIDO's System of Consultations is an instrument in promoting industrial cooperation among developing countries.