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Industrial policy and the road to recovery

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The COVID-19 pandemic is posing enormous challenges to economic development, yet it may also unveil new opportunities to ‘build back better’. Renewed industrial policies can play a significant role in shaping the road to overcome the crisis and set countries back on the path of economic development. 

Opening the second episode of the webinar series, “Future of Industrialization in a post-pandemic world”, LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO) said, “Strengthening the industrial sector is the key to the recovery. To achieve this important goal, industrial policies must be at the centre of governments’ reactions.”

A similar view was shared by Mario Cimoli, Deputy Executive Secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC), who emphasized that the post-pandemic recovery must be transformative and countries should place a primary focus not only on economic growth, but also on the direction of growth. “We need growth, but the quality of growth is important. Equality is the pre-condition for industrial policy, growth and development,” said Cimoli.

Drawing on her experience as a policy advisor on innovation-led inclusive and sustainable growth, Mariana Mazzucato, Professor of Economics of Innovation and Public Value at the University College London (UCL) and Founding Director of the UCL Institute for Innovation and Public Purpose, discussed the role of public-private partnership in providing an effective response to the global challenges accelerated by the pandemic – from decarbonization to the digital divide, to any issue around the health system.

Using examples from developing economies, such as Viet Nam and the Indian state of Kerala, Mazzucato stressed the importance of investing in state capacity for a more inclusive, sustainable and resilient recovery. “With COVID-19, we realized we need state capacity”, she said.

She also remarked on the need to place SDGs at the centre of industrial strategy by transforming them into missions to orientate governments’ actions. “SDGs are complex goals. We need to transform governments’ activities – even everyday ones, such as industrial procurement – to be SDG-focused”, said Mazzucato. Pursuing such outcome-focused industrial strategy requires a renewed collaboration across sectors and stakeholders to redesign policy instruments together. In this regard, Mazzucato highlighted the transformational purpose of attaching goal-focused conditions to recovery packages, and how this can lead to more sustainable solutions and social outcomes.

The crucial role of governments in supporting the recovery was also highlighted by Justin Lin, Professor and Dean of the National School of Development at Peking University. Building on his New Structural Economics approach, Lin discussed how industrial policies are necessary to sustain structural change and build more resilient and competitive economies. “To develop an industrial sector, we need a facilitating State,” he said. “If the government is not playing a facilitation role, a spontaneous structural transformation cannot occur.”

In discussing the main challenges to structural change posed by the COVID-19 pandemic, Lin emphasized that the pandemic recession will leave developing countries with less resources to allocate to industrial policies for structural change. For a fast, inclusive and sustainable recovery, “we need to aim for a quick-win,” he said. “This implies helping existing firms with trade credit, tax exemption and debt rescheduling to get back to production and to provide jobs, export and revenues.” Then, he concluded “the government can use industrial policy to identify priority industries and facilitate the investments to achieve sustainable industrialization”.

All panellists agreed that industrial policies will have a renewed role in shaping the road towards recovery from the COVID-19 crisis and in ‘building back better.’ Recovery packages should be shaped in a way to accelerate a transformative recovery towards a more inclusive and sustainable industrial development, acceleration that can be supported by the industrial application of advanced digital technologies of the Fourth Industrial Revolution. The importance of aligning efforts to achieve a resilient industrial development will be at the core of the next flagship report of UNIDO, the Industrial Development Report 2022, which will focus on the impact that the pandemic on the future of industrialization.

About 500 participants from diverse backgrounds followed the “Industrial policy and the road to recovery” webinar via Zoom and YouTube, and contributed to the discussion with a range of interesting questions.

Development

Saint Lucia Builds Investment Reference Guide to Boost Sustainable Development

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In partnership with the Government of Saint Lucia, the World Economic Forum is launching the Country Financing Roadmap for the SDGs. It aims to help Saint Lucia unlock sources of funding, remove investment bottlenecks and develop a more coordinated approach for financing projects that are environmentally friendly or can help people develop new skills.

The Country Financing Roadmap for Saint Lucia provides an overview of priority initiatives for leaders to assess and action project work – potentially saving money and helping to identify synergies across funding areas.

For example, the initiative brought together reskilling programmes with $12 million in total budget that can support the country’s economic recovery efforts – potentially supercharging efforts. These include a collaboration between the European Commission and Forte, to help 500–600 people develop skills related to hospitality, digital skills and green or blue economy by the end of 2022, at no upfront cost to the government.

Another project, the Caribbean Climate-Smart Fund initiative by the Rocky Mountain Institute (RMI) and Lion’s Head Global Partners (LHGP), is working towards mobilising both private and below market rate capital to finance a $80 million project pipeline dedicated to renewable energy in Saint Lucia.

“Finding viable solutions in the short, medium and long term to the myriad challenges that plague small island developing states (SIDS) like Saint Lucia is critical to safeguarding and putting the needs of our people first while achieving meaningful post-COVID socioeconomic recovery and implementing the Sustainable Development Goals,” said Wayne Girard, Minister in the Ministry of Finance, Economic Development and the Youth Economy, Government of Saint Lucia. “The CFR not only presents Saint Lucia with actionable options to unlock some of the financing and investment bottlenecks that limit sustainable development, it also presents a useful mechanism for replication across other SIDS in the Caribbean region. Saint Lucia is committed to continuing its work with the Sustainable Development Investment Partnership (SDIP), to advance a regional approach to driving our collective capacities to build back better.”

“Saint Lucia has demonstrated its commitment to meeting the SDGs by embarking on several important initiatives, with some of the most important focusing on financing targets,” said Sean de Cleene, Member of the Executive Committee of the World Economic Forum. “We hope that this CFR initiative will create opportunities for Saint Lucia and other countries to fast track similar impact projects.”

The CFR is a country-led initiative in collaboration with the Sustainable Development Investment Partnership (SDIP) and a joint initiative of the World Economic Forum and the Organisation for Economic Co-operation and Development (OECD). Its goal is drive economic recovery and achieve the Sustainable Development Goals by presenting viable solutions that address barriers to investment and attract greater sources of capital.

As a small island nation, Saint Lucia is vulnerable to economic shifts and continues to expand recovery efforts due to the consequences of the COVID-19 pandemic, which pushed the country to an 86.5% debt-to-GDP ratio for 2020. In 2019, tourism accounted for 80% of the nation’s labour market which faced a reduction in jobs from 63,400 in 2019 to 41,600 in 2020 as a result of the crisis, according to the World Travel and Tourism Council. Barriers to sustainable growth also hinge on the population’s dependence on fossil fuels which, through a successful transition to renewable energy, could increase self-sufficiency, equity, and environmental sustainability.

Alongside the CFR, the government in collaboration with the United Nations Office for Project Services (UNOPS) and the University of Oxford launched the Saint Lucia National Infrastructure Financing Strategy developed using the Sustainable Infrastructure Financing Tool (SIFT), which complements the CFR and further explores the opportunities for sustainable infrastructure financing in the country.

The Sustainable Development Investment Partnership plans to continue its support to the Government of Saint Lucia and regional organisations in hosting a series of discussions on reskilling and renewable energy solutions with over the next six months.

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Development

World Bank Supports Croatia in Transforming Its Primary Education

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The World Bank Board of Directors today approved a loan to the Republic of Croatia in the amount of EUR25 million ($28.9 million equivalent) for a project to improve the learning environment in selected primary schools. 

The Croatia: Towards Sustainable, Equitable and Efficient Education Project (SEE Education) will support the Ministry of Science and Education’s (MSE) introduction of the Whole Day School (WDS) system in selected schools, which is designed to improve student learning outcomes, particularly among disadvantaged students, through increased instructional hours and improved teacher training and school infrastructure. Since school days will be better aligned with common working hours, young mothers and fathers, of children attending WDS will find it easier to participate in the labor market and thereby increase their earnings. The project will also strengthen the capacity of MSE to scale up the WDS system at the national level and to implement other needed sector reforms.

Croatia has committed to a set of sweeping reforms, outlined in the National Recovery and Resilience Plan (NRRP) 2021-2026, to modernize and improve the education system and respond to the learning challenges which have been further exacerbated by the COVID-19 pandemic and the two large earthquakes that struck Croatia in 2020.

“We are so pleased to partner with Croatia in this vital effort that will ultimately bring benefits to the whole Croatian society through better learning outcomes, higher labor force participation and increased productivity,” said Jehan Arulpragasam, World Bank Country Manager for Croatia and Slovenia. “The SEE project comes at a critical stage of the transformation of Croatia’s education system and will substantially improve educational opportunities for current and future generations of children, including those from disadvantaged backgrounds and vulnerable groups.”

The proposed project will support a systemic transformation of Croatia’s basic education sector. It will initially help to implement the WDS reform in 50 demonstration schools by providing both technical assistance and the needed infrastructure. The capacity built as a result of these efforts will help authorities to introduce the WDS model at the national level. The direct beneficiaries of the project will include approximately 32,500 students, their parents and teaching and administrative staff.

The project will also support the design of new infrastructure standards for Croatian schools, incorporating seismic resilience into building upgrades, and encompassing best practice OECD-EU climate, environment, and energy-efficiency standards, contributing to the European Green Deal agenda.

The World Bank has been a partner to Croatia for over 27 years. During this period, the Bank has supported more than 50 projects, worth almost US$5 billion, produced numerous studies, and provided technical assistance to help strengthen institutions and support the design of policies and strategies. The Bank’s current program focuses on mitigating the economic and social impact of COVID-19, post-earthquake reconstruction, transport, justice, innovation, business environment, land administration, science and technology, and economic development of the Pannonian region.

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Development

Despite COVID-19 connectivity boost, world’s poorest left far behind 

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Digital connectivity is indispensable to overcome the pandemic, and for a sustainable and inclusive recovery. Photo: United Nations/Chetan Soni

Some 2.9 billion people still have never used the internet, and 96 per cent live in developing countries, a new UN report has found. According to the International Telecommunication Union (ITU), the estimated number of people who have gone online this year actually went up, to 4.9 billion, partially because of a “COVID connectivity boost”.   

This is good news for global development, but ITU said that people’s ability to connect remains profoundly unequal – as many hundreds of millions might only go online infrequently, using shared devices or facing connection speeds that hamper their internet use. 

“While almost two-thirds of the world’s population is now online, there is a lot more to do to get everyone connected to the Internet,” Houlin Zhao, ITU Secretary-General said. 

“ITU will work with all parties to make sure that the building blocks are in place to connect the remaining 2.9 billion. We are determined to ensure no one will be left behind.” 

‘Connectivity boost’ 

The UN agency’s report found that the unusually sharp rise in the number of people online suggests that measures taken during the pandemic contributed to the “COVID connectivity boost.” 

There were an estimated 782 million additional people who went online since 2019, an increase of 17 per cent due to measures such as lockdowns, school closures and the need to access services like remote banking.  

Uneven growth 

According to the document, users globally grew by more than 10 per cent in the first year of the COVID crisis, which was the largest annual increase in a decade. But it pointed out that growth has been uneven. 

Internet access is often unaffordable in poorer nations and almost three-quarters of people have never been online in the 46 least-developed countries.  

A ‘connectivity Grand Canyon’ 

Speaking in Geneva, Doreen Bogdan-Martin, Director of the ITU said: “The internet divide runs deep between developed and developing countries. Only a third of the population in Africa is using the internet. 

“In Europe, the shares are almost 90 per cent, which is the gap between those two regions of almost 60 percentage points. And there is what the UN Secretary-General António Guterres, has called in his Common Agenda blueprint for the future, “a connectivity Grand Canyon”. 

‘Digitally excluded’ 

The report found that younger people, men and urban dwellers are more likely to use the Internet than older adults, women and those in rural areas, with the gender gap more pronounced in developing nations. 

Poverty, illiteracy, limited electricity access and a lack of digital skills continued to hinder “digitally excluded” communities, ITU noted. 

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