The Director General of the United Nations Industrial Development Organization (UNIDO), Gerd Müller, presents the organization’s Industrial Development Report 2022 and explains how the industrial and manufacturing sectors of developing countries, including Egypt , can recover from the Covid-19 pandemic.
How has the Covid-19 pandemic affected industrial and manufacturing sectors around the world?
Industrialization has been a crucial engine of growth for countries throughout modern history. It is no coincidence that very few countries have successfully transitioned to high-income status without a concerted policy geared towards industrialization.
From our data in the UNIDO Industrial Development Report 2022 (IDR 2022), we can see a clear trend in terms of resilience and recovery from the Covid-19 pandemic: industrialized economies on average suffered production losses of 3.9%, while this almost doubles to 7.7% for emerging and developing economies.
In 2020, we witnessed the worst global recession in 70 years. An estimated 255 million full-time jobs were lost as a result. In terms of sectoral data, there is a clear distinction in the resilience of high- and medium-tech sectors and low-tech sectors. In this regard, the high-tech sectors grew significantly above 7.1%, while the low-tech industries experienced a moderate recovery, although their growth still represented a substantial acceleration from the levels of before the pandemic.
Higher value-added sectors such as chemicals, pharmaceuticals, IT and electronics, electrical equipment and machinery grew faster and showed greater resilience than sectors with low added value. In the long term, an industrial policy framework aimed at the transition towards higher value-added sectors is important, as well as measures for job creation, upskilling and training, innovation and entrepreneurship, specifically targeting young people and women in particular.
I would certainly encourage readers to peruse the UNIDO Industrial Development Report 2022 and also explore the UNIDO World Manufacturing Report which provides more detailed data on the performance of various industrial sectors in the world.
What measures should be taken by developing countries to help their industrial and manufacturing sectors recover?
There is no “silver bullet” or “one size fits all” solution for the industrial and manufacturing sectors to recover. Each country should identify policies that reflect that country’s context, including its resource and skill endowments, priorities, capacities, development potential, priority sectors and enabling environment.
UNIDO’s Industrial Development Report 2022 shows that three important megatrends will shape the post-pandemic landscape, namely digitalization, rebalancing of production and industrial greening. Countries will need to invest in the productive capacities of the manufacturing sector to capitalize on the potential of these megatrends. Countries will compensate for the losses caused by the pandemic through innovation. My motto is “progress through innovation”.
Our Rebuild approach must put industrial greening, industrial policies promoting social inclusion, support for the digitalization of manufacturing, planning for resilience and risk management, and multilateral action at the forefront. Building back better requires new approaches to industrial policies and coordinated action by the international community.
Moreover, industrial capabilities and digitalization have supported the resilience of countries during the pandemic. Increased and robust industrial capacities were found to have reduced the expected output loss, while digitally advanced companies were found to be better able to mitigate the negative effects of the pandemic on sales, profits and employment .
How do these considerations apply to Egypt?
UNIDO supports industrial development in Egypt through its Country Partnership Program (PCP), a multi-stakeholder framework owned by the Egyptian government and implemented in close cooperation with the private sector and development finance institutions.
The PCP in Egypt is a five-year program operating within a €172 million framework.
Based on the findings of a diagnostic analysis of the country’s industrial ecosystem, the Egyptian PCP focuses on industrial policy and governance, investment promotion, green industry, smart cities and sustainable industrial parks, value chains and industry integration in priority industrial sectors, including chemicals. , electronics, food, textiles, leather, furniture and crafts. Together with the Egyptian government, we see them as sectors through which Egypt can achieve long-term inclusive and sustainable industrial development.
How do you see the industrial and manufacturing sectors in Egypt?
In recent years, Egypt has gained greater trade competitiveness in different sectors, including agriculture, textiles, chemicals and plastics. Additionally, manufacturing in Egypt has recorded notable achievements over the past decade. In terms of economic contribution, the share of the manufacturing sector has increased in three main dimensions: employment, exports and foreign direct investment inflows.
The country has not yet reached its full potential to modernize its manufacturing sector. The share of manufacturing value added is still around 15 percent of GDP and is mainly concentrated in low-tech sectors. There is future potential for Egypt to upgrade its industrial sectors to higher technology sectors, supported by a high level of preparedness for the challenges introduced by the new wave of technological revolution.
Improving technological capabilities and intensity is a necessity to equip ourselves fully for the future. In addition, some measures can be envisaged to tackle youth unemployment in particular, such as targeted measures aimed at upskilling, training and harnessing the innovative capacity of young entrepreneurs. Professional training will be one of my priorities during my tenure as Director General of UNIDO.
What policies are needed to modernize the industrial sector?
UNIDO’s Industrial Analytics Platform helps inform decision makers on potential industrial recovery measures. According to UNIDO national data, Egypt is listed in the group of lower-middle-income countries and ranks 64th in UNIDO’s Competitive Industrial Performance Index.
Egypt’s manufacturing share of total value added is slightly lower than many emerging economies, as is its share of manufacturing employment. Additionally, many of Egypt’s most important industries fall into the low value-added category or have proven less resilient to slower growth due to the pandemic.
In the long term, a concerted policy focused on increasing productivity, competitiveness and manufacturing value added can help, along with a gradual transition to higher value-added sectors. This may require measures to establish a more conducive business environment, as well as investments in skills and training, enterprise-level digital transformation, improving infrastructure and quality standards, and strengthening business ecosystems. ‘innovation.
Industrialization remains an engine of economic growth and diversification, poverty reduction and social mobility, even as the nature of industrial development is changing rapidly. UNIDO is committed to supporting its Member States, including Egypt, to achieve inclusive and sustainable industrialization and the sustainable development agenda up to 2030.
*A version of this article appeared in the February 17, 2022 edition of Al-Ahram Weekly.