Regional Conference
16-17 May 2013, Minsk, Belarus
The Middle-Income Countries
Perspective
on Sustainable Development
in CIS, Eastern and Southern Europe
Olga Memedovic
Chief, Europe and NIS Programme
Bureau for Regional Programmes
Programme Development and Technical Cooperation
Division, UNIDO
Addressing challenges
Middle income countries (MICs)
of Europe and Central Asia
are facing in the context of the post2015 development agenda
Outline
I.
II.
Middle income countries classifications
MICs confront a wide range of challenges
simultaneously
III. Is there a Middle Income trap or there
are various traps?
IV. Post 2015 agenda
V. MICs development priorities and Role of
UNIDO
I.
Middle income countries classifications
EUR & NIS Programme: country coverage
28 countries, diverse in terms of geography, population, history, endowments , political
systems and the levels of socio-economic development. The region extends over 25 million
square km, and includes around 480 million people
Country Classifications
Sub-groups
Eastern Europe, Central
Asia and Caucasus
High Income
Countries
(HIC) >$12,476
Middle
Income
Countries
(MICs)
$1,026 $12,475
Armenia, Azerbaijan,
Belarus, Georgia,
Kazakhstan, Moldova,
Russian Federation,
Turkmenistan,
Uzbekistan, and Ukraine
Low Income
Countries
(LIC) <$1,025
Kyrgyzstan
Tajikistan
World Bank country income groups (GDP per capita)
Low income: $1,025 or less
Lower middle income: $1,026 to $4,035
Upper middle income: $4,036 to $12,475
High income: $12,476 or more
South East Europe
EU New Member States
Croatia
Cyprus, Czech Republic,
Hungary, Malta, Poland,
Slovakia, and Slovenia
Albania, Bosnia &
Herzegovina, FYR
Macedonia, Montenegro,
Serbia, and Turkey
Bulgaria
Romania
II. MICs confront a wide range of challenges
simultaneously
Global challenges (globalization,
international rules and regulations,
climate change, environmental
degradation
Challenges of transition, post-transition
and middle-income economy
Regional challenges
Geopolitical issues
Post 2015
Agenda
New realities of globalization
New rules and regulation: liberal trade and investment regimes;
international environmental agreements, conventions, initiatives
.
ICT and modularization leading to functional and geographical
fragmentation of value chains in production and services, and rising
demand to comply with plethora of internationally agreed and private
standards
Early and late developers did not face all these issues
Metrology
Certification National
Testing
Quality
Infrastructure
Standardization
Accreditation
GVC mediated trade accounts for around 80% of global trade
Global trade in intermediate, consumption and capital goods
1962 – 2011
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Imports Intermediate Goods
Imports Consumption Goods
Imports Capital Goods
20
10
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
19
68
19
66
19
64
0
19
62
Billions
Imports
Global trade in intermediate, consumption and capital goods, 1962 – 2011
Billions
Exports
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
62
19
64
19
66
19
68
19
70
19
72
19
74
19
Exports Intermediate Goods
76
19
78
19
80
19
82
19
84
19
86
19
88
19
Exports Consumption Goods
90
19
92
19
94
19
96
19
98
19
00
20
Exports Capital Goods
02
20
04
20
06
20
08
20
10
20
.
MICs Dilemma:
What industrial development path to choose?
Engaging in GVC-mediated division of labour dynamics, or
in nationally or regionally bounded division of labour
 Engaging in international and regional DoL (GVC and GPNs) creates
opportunities for fast track technological learning and catching up,
for more efficient use of resources, and for reaching welfare gains
Stages of catching-up Industrialization
Creativity
Arrival of
manufacturing
FDI
Agglomeration
(acceleration of
FDI)
Monoculture,
agriculture, aid
dependency
Pre industrialisation
STAGE THREE
STAGE TWO
STAGE ONE
STAGE ZERO
Technology
absorption
Simple
manufacturing
under foreign
guidance
Have supporting
industries but still
under foreign
guidance
Management &
technology
mastered, can
produce high
quality goods
STAGE FOUR
Full capability
in innovation
and design as
global leader
Japan, US, EU
Korea, China
Middle Income Trap
Initial FDI
absorption
Internalizing parts Internationalizing
and
Internationalizing
skills and
components
innovation
technology
MICs Dilemma: What industrial development
path to choose?
.
New
realities of globalization
but
innovation
 Engaging in international and regional DoL (GVC and GPNs)
compress development time and stages;
 Sequential developments now occur simultaneously, and forces
MICs need to address a number of challenges at the same time,
 Simultaneous de-industrialization and re-industrialization
 Extreme wealth and poverty
The social frictions associated with the co-mingling of pre-industrial,
industrial, and post-industrial societies
This is challenging sequential and liner model of development
Billions
Trade in intermediate goods 1992-2011
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1992 1993
1994 1995 1996 1997
1998 1999 2000 2001
Industrialized
2002 2003 2004 2005
Developing
CIS
2006 2007 2008 2009
2010 2011
III. Is there a Middle Income trap or there are
various traps?
Multiple traps facing Europe and Central Asia
Modern market economy
(non-state-owned enterprises)
Sustainable development
issues
Planned economy
(state-owned enterprises)
Transition to a market
economy
Stagnating growth
Slow structural
transformation
Lack of innovation
Weak institutions
Ageing population and
shrinking labour force
Loss of competitiveness
Economic development
(industrialization)
Slower economic growth
Slow transition to market
economy
Poor market regulations
Political reforms and
democratization before
economic and educational
reforms
Where do MICs in the region stand
in terms of facing various traps?
Slower economic growth
GDP growth (current US$)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
European Union
Source: World Bank
Middle income
EECA MICs
EU NMS
20
11
20
08
20
05
20
02
19
99
19
96
19
93
19
90
19
87
19
84
19
81
19
78
19
75
19
72
19
69
19
66
19
63
19
60
0
Sustainable development challenges
(details are in Annex)
Social
Environmental
Rising poverty: almost 30% of
the people are living in poverty
Still one of the most energy
intensive region in the world, but
with progress in energy efficiency
Rising inequality
Renewables represent smaller
shares in total energy generation,
but have demonstrated growth
35% of population is excluded
from the formal economy
Material efficiency rising but still
significantly below the EU-15
average
Youth unemployment rates vary
from 10 to 35%
Economic
Shallow regional integration
processes in EECCA countries
Tertiarisation
since 1970
Industrial diversification
based on high value
added goods still elusive
development goal
Deterioration of competiveness
in NMS and marginal
improvements in other countries
Little investment in innovation
and technological development
Waste and water quality issues
Industrial modernization too
slow
Gender inequality (index)
Western Europe 0.13 Eastern
Europe: 0.21
Eco innovation capabilities low:
Import dependency of
environmental goods
Business environment conditions
in some countries need
significant improvements
Structural changes in the region: strong tertiarisation
process in economy
Value added by sub-sectors, based on UNIDO database (INDSTAT2 2011).
Note: shares in current prices and exchange rates, in US$.
Structural transformation- Increasing urbanization in
MICs
Growing urban populations
ul
ga
ze
r
C
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p
Re ru
pu s
b
Es lic
t
H oni
un a
ga
r
La y
tv
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M
al
Po ta
Sl
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R
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a
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an
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in
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ia ia
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d e va
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kr
ai
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C
B
Patterns of export specialization
For many countries in the region, the share of competitive high value-added
manufacturing sectors in manufacturing exports remain low
60
50
NMS
SEE
EECCA
2005
2009
40
30
20
10
0
Source: UNIDO; Share in % of medium and high technologies in exports
Economic - Intra-industry trade (IIT) scores (0-10) –
two way trade of products within the same sector
IIT growth is associated with and expansion in trade through greater specialization and
economies of scale, foreign direct investment, innovation and the accumulation of
knowledge.
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
1992
1994
1996
1998
2000
NMS
Source: UNIDO, based on UN Comtrade
2002
2004
EECA MICs
2006
2008
2010
Share in world manufactured intermediate goods exports and imports
The share in world manufactured intermediate goods exports and imports remains very low.
> economic diversification still remain elusive development goals for many countries in the
region
Imports
Exports
100
%
90
100
80
90
70
80
60
70
60
50
%
40
50
40
30
30
20
20
10
10
0
1988
1994
Industrialized countries
Developing countries
CIS
2000
2010
0
1988
1994
2000
2010
Global Innovation Index rankings (INSEAD)
Europe and NIS Region
Country/Economy
Score (0-100)
Rank
(1-125)
Income
Rank
Region
Rank
GII Past Years
2010
2009
Switzerland
63.82
1
HI
1
ECS
1
4
7
Sweden
62.12
2
HI
2
ECS
2
2
3
Singapore
59.64
3
HI
3
EAS
1
7
5
Estonia
49.18
23
HI
23
ECS
14
29
29
Hungary
48.12
25
HI
25
ECS
16
36
47
Czech Republic
47.30
27
HI
27
ECS
17
27
33
Cyrus
46.45
28
HI
28
ECS
18
32
45
Slovenia
45.07
30
HI
29
ECS
19
26
36
Latvia
39.80
36
HI
34
ECS
23
44
60
Slovak Republic
39.05
37
HI
35
ECS
24
37
35
Moldova, Rep.
38.66
39
LM
2
ECS
25
n/a
116
Lithuania
38.49
40
UM
3
ECS
26
39
42
Bulgaria
38.42
42
UM
4
ECS
27
49
74
Poland
38.02
43
HI
36
ECS
28
47
56
Croatia
37.98
44
HI
37
ECS
29
45
62
Romania
36.83
50
UM
8
ECS
30
52
69
Serbia
36.31
55
UM
10
ECS
31
101
92
Russian Federation
35.85
56
UM
11
ECS
32
64
68
Ukraine
35.01
60
LM
6
ECS
33
61
79
Turkey
34.11
65
UM
15
ECS
35
67
51
Global Innovation Index rankings (INSEAD)
(continued)
Country/Economy
Score (0-100)
Rank
(1-125)
Income
67
UM
Rank
16
Region
ECS
Rank
36
GII Past Years
2010
2009
77
89
Macedonia
33.47
Armenia
33.00
Georgia
31.87
Bosnia & Herzegovina
30.84
Albania
30.45
Kazakhstan
30.32
Kyrgyzstan
29.79
Azerbaijan
29.17
88
UM
26
ECS
43
57
57
Tajikistan
24.50
116
LI
13
ECS
44
115
112
Yemen
20.72
123
LM
32
MEA
15
n/a
n/a
Sudan
20.36
124
LM
33
SSF
24
n/a
n/a
Algeria
19.79
125
UM
30
MEA
16
121
108
69
LM
11
ECS
37
82
unable
to
compete
with
low
income,
73
LM
12
ECS
38
84
low 76wage UM
economies
in
18
ECS
39
116
manufacturing
exports
and
unable
to
80
UM
22
ECS
40
81
compete
with
advanced
economies
in
84
UM
25
ECS
41
63
high85skill innovations
LI
2
ECS
42
104
104
98
n/a
121
72
122
Source: INSEAD (2011)
Note: World Bank Income Group Classification (January 2011): LI = low income; LM = lower-middle income; UM = upper-middle income; and HI
= high income; World Bank Regional Classification (January 2011):
ECS = Europe & Central Asia; MEA = Middle East & North Africa; SSF = Sub-Saharan Africa; EAS = East Asia & Pacific; SAS = South Asia;
NAC = North America; and LCN = Latin America & Caribbean
DOING BUSINESS 2010
DOING BUSINESS 2013
Georgia
11
9
Georgia
FYR Macedonia
32
23
FYR Macedonia
Azerbaijan
38
32
Armenia
Armenia
43
49
Kazakhstan
Bulgaria
44
51
Montenegro
Romania
55
58
Belarus
Belarus
58
66
Bulgaria
Kazakhstan
63
67
Azerbaijan
Montenegro
71
71
Turkey
Turkey
73
72
Romania
Albania
82
83
Moldova
Serbia
88
85
Albania
Moldova
94
86
Serbia
Bosnia & Her
116
112
Russian Fed
Russian Fed
120
126
Bosnia & H.
Ukraine
142
137
Ukraine
Uzbekistan
150
154
Uzbekistan
Economic - World Bank
Doing Business 2010/2013
rankings
• Georgia and FYR Macedonia best
performing countries in 2010 and
2013
• Many EECCA countries have
improved their rankings between
2010 and 2013, but remain near the
bottom of the table
Social - % population aged 65 and above
Many MICs in the region have rapidly ageing populations
Source: Word Bank
Social - % population below the poverty line in MICs
Social - Youth unemployment, % of labour force ages 15-24
Source: World Bank 2012
Income inequality: distribution of income by quintile
Ukraine
Turkey
Tajikistan
Serbia
Russian Federation
Romania
Poland
Montenegro
Moldova
Macedonia, FYR
Latvia
Kyrgyz Republic
Kazakhstan
Hungary
Georgia
Croatia
Bulgaria
Bosnia and Herzegovina
Belarus
Azerbaijan
Armenia
Albania
0%
10%
20%
30%
Poorest 20%
40%
Second 20%
50%
Third 20%
60%
70%
Fourth 20%
80%
Richest 20%
90%
100%
Croatia
Cyprus
Czech Republic
Lithuania
Hungary
Poland
Slovak Republic
Slovenia
Armenia
Azerbaijan
Belarus
Bosnia and
Bulgaria
Georgia
Kazakhstan
Macedonia, FYR
Moldova
Montenegro
Romania
Russian
Turkey
Turkmenistan
Ukraine
Uzbekistan
Kyrgyz Republic
Tajikistan
Environment - CO2 emissions (metric tons per capita)
18
16
14
12
10
8
6
4
2
0
1992
Source: Word Bank
2009
Material productivity –rising material and energy
efficiency, but not enough to close gap with EU 15
Source: UNIDO and SERI
‘Green economy’ patents filed under Patent Cooperation Treaty, 1992-2010, annual average
per technology type.
Source: UNECE 2011
Imports of environmental goods
IV. Post 2015 agenda
Leveraging globalization
and deep
regional integration
Industrial diversification
/modernization
Competitiveness
Innovation
Post 2015 agenda
Environmental
sustainability
Inclusive
economic
development
Poverty reduction
Equality
Social and economic inclusion
Job creation
Energy efficiency
Renewable energy
Material efficiency
Energy and Water access
Eco-innovation
Peace &
Security
Inclusive social
development
Global/regional
governance
Addressing public
goods/bads
V. MICs development priorities and UNIDO
role
Development priorities of MICs and LICs, by sub-region
Region
Thematic priorities
Bulgaria
Romania
Central & Eastern Europe –
EU member states




South Eastern Europe –
non-EU member states






Environmental protection
Social inclusion
Region
Thematic priorities
Caucasus
o
Armenia
o
Azerbaijan
o
Georgia



Energy efficiency
SME development
Agro-industry
Social inclusion of disadvantage group,
including youth and ethnic minorities
Industrial parks
Trade capacity building
Light industry








Agro-industry
Waste management
Environment protection
Cleaner production
Trade capacity building
Investment and technology promotion
SME development
Diversification of economy
Russian Federation






Environment protection
Trade capacity building
Automotive industry
Energy efficiency
Investment and technology promotion
Waste management
Western NIS
o
Belarus
o
Moldova
o
Ukraine






Industrial energy efficiency
Renewable energy
RECP
Automotive industry upgrading
Environment protection
Technology foresight
Central Asia
o
Kazakhstan
o
Turkmenistan
o
Uzbekistan
Albania
Bosnia and
Herzegovina
FYR Macedonia
Montenegro
Serbia
Turkey







Renewable energy
Environmental protection
Cleaner production
Trade capacity building
Eco-tourism
Social inclusion of
disadvantage group,
including youth and ethnic
minorities
Textile industry upgrading




o
o
Kyrgyzstan
Tajikistan
MICs are recipients and donors of development assistance
Matching donor and recipient needs: UNIDO solutions
Donor country priorities
(including MICs donors)
International
financial institutions
priorities Regional
Communities
priorities
Multilateral funds
requirements
UNIDO
solutions
tailored to the
country and
sub- regional
context and
priorities ( HIC,
MIC and LIC)
UNIDO Thematic Priorities
Poverty Reduction
Trade Capacity-building
Energy & Environment
Recipient country
development priorities
(UNDAF-14 / DAO- 4),
MICs and LICs
Global challenges
UNIDO TC response
SME Development
Women &Youth entrepreneurship
Transition and post
transition economy
challenges
Regional challenges
Innovation and technology promotion
UNIDO response
Normative and standard
setting
Industrial Energy Efficiency
Analysis & Policy Advice
Industrial upgrading and modernization
Agribusiness strengthening and upgrading
Green industry and green jobs
Water and waste management
Cleaner Production
Trade capacity-building
Skills development
Knowledge dissemination
and networking
Middle
income trap
42
UNIDO solutions for inclusive growth
Securing jobs for marginalized and vulnerable groups
The empowerment of poor and
vulnerable in rural areas
Youth employment
SME development and
women entrepreneurship
Addressing challenges and UNIDO solutions:
Securing jobs through industrial diversification and
upgrading
Industrial modernization Agribusiness upgrading
Automotive industry
supply chain upgrading
Trade capacity building
Achieving sustainable production and consumption using
smart business models
Greening of industry under the Montreal
Protocol
Greening of industry
and green industry
Waste and water management
Eco industrial parks
Leveraging new opportunities for IEE under GEF-6
Thematic Focus:
 Industrial energy efficiency: ISO 50001 and system optimization
 Low-carbon technologies (Hydrogen and Carbon Capture and Storage-CCS)
 Renewable energy for industrial applications
46
Industrial energy efficiency
Ensuring commitment to sustainable development through
partnership with private sector
1. UNIDO and METRO Group agreement
Joint commitment to more efficient supply
chains and better food supplies
Countries: Egypt, India and in Russian Federation;
Planned: Armenia, China, Indonesia, Kazakhstan,
Pakistan, Turkey and Viet Nam
2. UNIDO and H&M
Cooperation on sustainable supply chain development in the textile industry (applying Corporate
Social Responsibility (CSR) principles and practices): pilot project in Turkey
3. AEON, Auchan Group, Migros and Walmart
Current Negotiation with leading retailers and manufacturers to establish partnerships for sustainable
supplier development in Malaysia, Russian Federation.
Funding possibilities and prospects
• East- East (South-South) cooperation
• BRICS UNIDO platform and triangular cooperation
• EU financial instruments: Eastern Partnership on Cleaner Production and Resource
Efficiency (co-financing requirements)
• Partnerships with regional groupings: Economic Cooperation Organization-ECO on
thematic areas such as TCB, SMEs development, woman entrepreneurship, WTO
accession, FDI inflows, and technology transfer); Regional economic integration
initiatives (Eurasian Economic Community-EurAsEC)
• Strengthening partnerships with national and regional institutions, other
international organizations (UNDAFs and DAOs) and civil society for joint fund
mobilization.
• Multilateral Funds (Montreal and GEF-co-financing requirements)
• Self-funding through trust funds
Thank you for your attention!
o.memedovic@unido.org