EAC Industrial Upgrading and Modernisation Programme Objectives

Posted in Industrialization & SME Development

The global objective of the Industrial Upgrading and Modernisation Programme (IUMP) in the East African region is to contribute to the economic growth, poverty reduction and environmental sustainability, and to facilitate regional socio-economic, industrial and trade integration of the East African countries through increasing regional capacities for value-added generation, economic diversification and specialisation, and employment creation.

Specific objectives

The Programme will focus on sustaining Small and Medium-sized Enterprises’ (SMEs) growth and upgrading to the internationally competitive levels, and supporting intra-regional partnerships and inter-regional market integration so as to prepare the countries for the market liberalisation and opening to foreign trade and investment. The programme pursues the following specific objectives:

1. to render institutional and regulatory framework favourable and conducive to the development and improvement of competitiveness of domestic small and medium-sized producers;
2. to establish / strengthen capacities of the national / regional technical support / business advisory infrastructure with focus on the creation and development of SMEs;
3. to develop and improve productivity and competitiveness of local manufacturing enterprises through enhancing investment, export and employment opportunities of selected private sector enterprises operating along the priority industrial sectors; and
4. to facilitate scientific, technical and business transfer of modern technologies and innovation practices and their industrial application in the EAC states, and to promote exchange, collaboration and partnerships in this area with industrialised developing and developed countries.

Priority Sectors for the Pilot Phase

Factoring in all the contributions of the experts and sectoral priorities of the region, the IUMP will focus on the following three (3) priority sector value chains in the pilot phase of the programme implementation:

• agro-food industries,
• leather and leather products, and
• pharmaceuticals.

EAC Industrial Upgrading and Modernisation Programme Overview

Posted in Industrialization & SME Development

Small and medium-sized enterprises (SMEs) represent the biggest part of all registered entities in nearly all activities in majority of the East African countries, averaging 60% in number or reaching 90% if the micro enterprises are also considered.

Over the last decade, hundreds of thousands of micro enterprises have flourished in East African countries in the areas of trade, services and industry as the region’s economies opened up.

Only a few of these firms will grow into medium- and large-sized firms or expand to reach markets beyond their area of operations.

This is because they face a number of constraints limiting their expansion including:

1. Absence of a holistic regional trade and industry development approach including private sector and SME promotion policies;
2. Low level of product transformation and industrial value-added, and industry dependence on imported products, resulting in a low value-added ratio per capita;
3. Poor internal technical, technology and managerial practices affecting their competitiveness on local and external markets;
4. High public service and other transaction costs;
5. Inadequate financing and access to investment and financial services;
6. Insufficient integration to the international capital markets;
7. Difficult access to technology and information, and lack of the local and regional Research & Development institutions related to manufacturing activities, among others.

The EAC Secretariat has recognised both the important role played by the SMEs in employment creation and development of the EAC region and also the challenges they face, and has prioritised their development in its programmes.

The EAC Industrialisation Policy (2012-2032) calls for the provision of a framework that supports growth and development of SMEs to facilitate their integration into regional and global value chains enhancing their prospects for effectively contributing to economic development goals.

Further, Article 80(1) of the EAC Treaty calls upon Partner States to: “facilitate the development of: (i) small-and-medium scale industries including sub-contracting and other relations between larger and smaller firms”. The EAC Development Strategy 2012-2016 calls for the Implementation of the EAC Industrial Upgrading and Modernisation Programme for SMEs.

The EAC Industrial Upgrading and Modernisation Programme focuses on sustaining SMEs’ growth and addressing some of the constraints to private sector growth, including SMEs’ access to financial services and information, business environment and regulatory framework favourable for expanding private sector’s productive activities. The programme was developed by EAC in collaboration with United Nations Industrial Development Organization.

Financing Mechanisms for Industrialisation Programmes

Posted in Industrialization & SME Development

To ensure availability of long-term financing for industrial development in the region, the EAC Industrialisation Policy provides the following interventions:

1. Facilitating the integration of financial markets in the region, including the integration of the capital market to support mobilisation of funds for industrialisation;
2. Establishing / strengthening regional industrial development banks to mobilise funds to support investment in long-term industrial development projects. The regional industrial development fund to be established will be administered by the regional bank. The fund will be capitalised through EAC Partner States contributions as well as contributions from development partners;
3. Exploring the possibilities of establishing regional industrial bonds as a means of raising funds for industrialisation;
4. Setting up a regional credit guarantee scheme and other innovative financial products (seed & venture capital, leasing & inventory financing) to enhance SME access to credit lending by commercial banks; and
5. Increasing national and regional budgetary allocation to the industrialisation programmes and projects.

Planned Interventions to achieve Industrialisation Objectives

Posted in Industrialization & SME Development

The EAC Industrialisation Policy outlines measures and strategic interventions necessary for achievement of industrialisation objectives and targets in the region as follows:

Diversifying the manufacturing base and raising local value-added content of manufactured exports.

Interventions include:

1. Mapping of priority regional value chains (agro-processing, mineral processing, pharmaceuticals, iron & steel, energy & bio-fuels, petrochemicals & gas processing) and preparing investment and value addition action plans;
2. Creating / establishing a framework for public-private sector partnership for co-ordinated development of the strategic regional industries;
3. Setting up a regional enterprises (industry) promotion and award scheme to stimulate investment into priority strategic regional value chains; and
4. Setting up a centre for the development of strategic regional industries / enterprises to administer the scheme and also undertake comprehensive and innovative investment campaigns.

Strengthening national and regional institutional capabilities for industrial policy design and management

Interventions include:

1. Enhancing the technical and management competencies of national and regional institutions to design, implement and monitor industrialisation policies and related regulations effectively;
2. Conducting awareness seminars among various stakeholders including national and regional parliamentarians, NGOs, private sector leadership, policy technocrats, to ensure regional industrial development agenda is accorded priority in resource allocation;
3. Creating regional and national industrial development coordination mechanisms to facilitate synergy building between industrial development and other sectoral initiatives. At regional level, a Sectoral Council on Industrialisation will serve as the platform for setting the regional agenda for industrial development. At national level, national industrial development councils will be created to facilitate coordination of industrial development; and
4. Setting up national and regional industrial observatories for monitoring global industrial development trends and bench-marking competitiveness drivers of industrialisation relative to industrialising countries.

Strengthening Research & Development (R&D), Technology and Innovation capabilities

Interventions include:

1. Aligning science, technology and innovation infrastructure to meet the needs of industrial development in the region. This will entail a reviewing of regional innovation systems and creating instruments / incentives to enhance triple helix collaboration between universities, industry and governments;
2. Facilitation of networking among research institutions, academia and industry for best practice sharing, and building partnership for collaborative R&D, technology and innovation initiatives;
3. Supporting the establishment of Regional Centres of Excellence in Technology Transfer and Innovation;
4. Strengthening intellectual property rights (IPR) regimes as well as IPR protection infrastructure and capabilities in the region;
5. Establishing a regional industrial innovation grant and award scheme as a means to catalyse innovation efforts and support collaborative Science, Technology and Innovation initiatives; and
6. Organising regional technology conferences and exhibition to showcase latest trends in science, technology for industrial development.

Expanding trade in manufactured products through:

(i) increasing intra-regional manufacturing exports relative to total manufactured imports to at least 25% by 2032 and

(ii) increasing the share of manufactured exports relative to total merchandise exports to at least 60%

Interventions include:

1. Creating a competitive production and business environment to enhance competitiveness position of the manufactured exports. Export promotion infrastructure such as special economic zones will be developed along major economic corridors to facilitate integrated production and cross-border linkages, and attract critical mass of investment in manufacturing;
2. Developing quality assurance, product certification and traceability schemes for manufactured products to meet regional and international market requirements;
3. Fast-tracking progress in elimination of Non-Tariff Barriers and Technical Barriers to Trade that affect trade in manufactures across the borders;
4. Creating awareness on export requirements and aligning rules of origin to enhance intra-industry trade in manufactures;
5. Developing strategy to support the enhancement of packaging and branding of manufactured products within the Region;
6. Supporting the development of regional brands for manufactured products; and
7. Setup a regional export award scheme to encourage export expansion of manufactured products.

Transforming Micro Small and Medium Enterprises (MSMEs) into viable and sustainable business entities capable of contributing at least 50% of manufacturing GDP.

Interventions include:

1. Formulating a regional SME policy and charter to support coordinated development of the sector and minimise regulatory burden on the small businesses;
2. Creating an SME business portal where SMEs can show case their products and services, and also access a variety of market information such as technology services, government contracts and market opportunities;
3. Formation / strengthening of regional association of SMEs and network of intermediary organisations to facilitate sharing of best practices in SME policy promotion tools;
4. Setting up a regional web-page containing a directory of SMEs and database on various business support programmes available at regional and national level;
5. Promoting development of SME clusters and regional entrepreneurship programmes covering business plans preparation, proper maintenance and reporting of accounting and financial information, etc.;
6. Developing regional credit rating and credit information reference and referral systems for SMEs (capacity building programme for the financial institutions and SME credit providers); and
7. Developing a regional programme for the upgrading of SMEs to enable the sector take advantage of common market opportunities and integrate into regional and global value chains.