PROMOTING
SUSTAINABLE BUSINESS
LINKAGES
Unctad’s approach
Fulvia Farinelli
UNCTAD, Division on Investment and Enterprise Development
“
Types of TNC-SME Linkages
Backward
Backward linkages
linkages
with
with suppliers
suppliers
Linkages
and
Spillovers
between
TNCs and
SMEs
Linkages with
technology
partners
Forward linkages
with customers
Other spillover
effects
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Main objectives of backward
linkage promotion programmes
1.
2.
3.
4.
Generate additional economic activity
Stimulate improvements in the products and
services of local suppliers (domestic sales to TNCs
perform the role of exports in terms of building
local competitiveness).
Giving local suppliers a foothold in international
markets with products meeting international
production and quality standards.
Attract FDI by offering a local supplier base
capable of offering quicker delivery times, reduced
transportation and inventory costs.
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According to internal surveys:

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A variety of initiatives to promote linkages
exists.
From purely donors-driven and governmentdriven programmes, to public-private sector
partnerships.
There are also purely private sector-driven
programmes, e.g. totally independent supplier
development programmes carried out by TNCs
in their own self-interest and within corporate
social responsibility programmes.
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Success stories



Successful policies promoting linkages can be
found in Ireland, Jordan, Malaysia, Mozambique,
Thailand, Singapore and South Africa.
Large TNCs - Toyota, Unilever, FIAT,
AngloAmerican, DymlerChrysler, Volkswagen,
INTEL, IBM and Tata implement their own
supplier developing programmes.
Many donors and international organization are
active in linkages building. Among others, DFID
(the Business Challenge Fund), IFC, ITC, UNDP,
UNIDO, USAID, the World Bank, GTZ, UNCTAD.
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Main lesson learned from
successful cases
1.
2.
The establishment of sustainable linkages does not
happen automatically, as a direct consequence of
the presence of TNCs, but requires the participation
and collaboration of all interested stakeholders (i.e.
TNCs, local suppliers, government).
Only if a conducive policy environment is set up,
specific linkages promotion programmes have a
chance to be transformed from isolated cases, to
sustainable and inclusive mechanisms to build the
local productive capacity.
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A systemic policy approach to
linkage building
Improving the investment
climate
Providing strategic
guidance and policy
coordination
Strategic
FDI attraction
Specific
linkage
policies
Strengthening
absorptive
capacity
Source: UNCTAD 2010
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Policies for strengthening business
linkages
Increasing level of policy intervention
Interventionist
approach
Focus on “hard”
requirements:
market reservation,
local content,
techno-logy sharing,
foreign equity
“Encouraging” policy approach
Horizontal
Focus on nonselective policies to
compensate for
market failures in
information, R&D
Selective
Focus on selective
sector-specific and
cluster policies,
social targeting
Minimalist
approach
Focus on businessfriendly investment
climate, equal level
playing field
Source: UNCTAD 2010
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UNCTAD‘s main mechanisms
to deliver results



Research
Intergovernmental
discussions
Technical assistance
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Main outputs

World Investement Report, 2001

Video titled “Promoting Business Linkages in Malayisia„ 2002

Publication “Roster of Good Practices in the Promotion of Business
Linkages„ 2004

Issue note on “Enhancing SMEs through business linkages: from policy
formulation to policy implementation„ 2005

Publication “Deepening Development through Business Linkages„
2006

Publication “Promoting business linkages from a policy perspective:
the case of India, Malaysia, Mexico, South Africa and Uganda„ 2009

Publication on “Integrating Developing Countries‘ SMEs into Global
Value Chains„ 2010
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Current technical assistance
projects

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
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Brazil
Uganda
Vietnam
Argentina
Zambia
Mozambique
Tanzania
Peru
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All are « ENGAGING THE
PRIVATE SECTOR »

Business Linkage Programme, Uganda



Supported by UNCTAD and its local EMPRETEC
centre, SIDA and the Uganda Investment Authority
(UIA)
e.g. linkages partnership with Uganda Breweries,
Toyota, MTN
Projecto Vínculos, Brazil


Supported by UNCTAD, GTZ, Ethos Institute,
Fundacao Dom Cabral, SEBRAE
e.g. linkage partnership with Philips, BASF, and
Petrobas under the National Mobilization Programme
for the Oil and Natural Gas Industry
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UNCTAD’s role:

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Sensitization of TNCs
Challenge, suggest, innovate for more linkages
Deepening of linkages where successful
Horizontal, vertical extension of linkages
Global benchmarking
Stimulating a conducive policy environment
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UNCTAD Business Linkage
programme perspective
Approach:


From “input driven” (upgrading capacity
of SME's in general)
To “output driven” (meeting needs of
TNCs’ affiliates)
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Partnering with TNCs affiliates





Explore linkages opportunities that are
beneficial to both TNCs and their potential
suppliers
Define potential candidates for linkages
Agree requirements in quantity, price,
specifications, etc.
Align business processes, information flows
Joint implementation of suppliers upgrading
programme
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Important success determinants
•
•
•
•
Sharing a common business culture and language
Attitude of linkage partners
Sharing information on forward plans & requirements
Availability of BDS providers
•
•
•
•
Transfer of know-how
Transfer of technology
Feedback, coaching, mentoring
Access to finance
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THANK YOU!
fulvia.farinelli@unctad.org
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