Posted 31 August 1999
Prepared by Robert Hallett, Senior Industrial Development Officer, United Nations Development Organization (UNIDO)
Industrial processing of agricultural produce plays a key role in rural development; providing food, shelter and clothing, generating employment and income and contributing to overall economic growth. But access to the appropriate technical processes, machinery and equipment, technical inputs and markets must be carefully developed and maintained. Furthermore, this "production chain" must stretch continuously from the raw material producer through to the processor, distributor and buyer, with each link being strengthened and improved in the process.
Importantly, just as the production chain must be continuous, so must the chains of governance and assistance. All too often administrative barriers and competition between public and private sector interests hamper efforts to optimize these chains. Cooperation is a key component in the development of industrial processing.
The United Nations Industrial Development Organization (UNIDO) is the specialized UN agency with the mandate to support industrial growth. Although new approaches have been adopted since its creation in 1967, UNIDO continues to concentrate efforts on sound technical advice and a realistic understanding of industry and private sector/public sector relationships.
The current structural and programmatic reform of UNIDO has enabled it to focus more clearly on these strengths and so respond in the most efficient way to the needs of developing countries and those countries in economic transition. In accordance with the Business Plan approved at the 1997 UNIDO General Conference, the Organization is concerned with agro- based industries, investment promotion and small- and medium-sized industries.
The issues facing agro-based industries are manifold, ranging from transferring basic technologies to introducing sophisticated computer controlled processes, creating employment, adding value to natural resources in small enterprises, introducing environmental and health and safety certification systems, and monitoring adherence. Underlying these considerations is the focus on furthering industrial competitiveness in support of gainful employment, economic growth and sound environmental practices.
Most agro-related sectors are affected increasingly by environmental regulations and the need to introduce monitoring and bench marking systems. Waste reduction and the safe disposal of unwanted and often hazardous by-products of processing pose continual problems to enterprises and threaten existing and potential employment. This applies particularly to leather tanning and textile dyeing. Many investment projects are frustrated because there is either no consultancy capacity or funding with which to undertake the required environmental impact analysis. The food sector has the additional need to ensure food quality for safety and health reasons. The wood sector is confronted with biases against the use of timber in construction and the lack of quality control and certification systems which would open up large domestic markets. Non-wood forest products such as bamboo can contribute greatly to wealth creation but their potential is not always recognized.
There is an almost universal need for information and advice on technological trends, processes and equipment, market requirements and commercial contacts, in order for enterprises to maintain competitive status within the global economy. There is therefore a need to support national research, development and training at the sectoral level so that information demands are focused and staff capabilities improved.
In some cases, legislation prevents institutions from carrying out paid consultancy and advisory work for industry, yet they lack the funds to provide these services from their own budgets. The gap between developed and developing countries will increase unless help is given to provide services, monitor developments and apply new processes, introduce new products, make use of by-products and follow market developments.
Progress will be limited unless there is greater interchange of ideas and information between the public and private sectors. Collaboration and constructive dialogue - rather than competition - is the key. There is a great need for forging stronger links between those who govern and those who are in the business of production and contributing to the economy. This includes the process of rationalizing the organizations representing industry, as well as the policies and mechanisms of governance to support industrial development.
Several external factors have a negative effect on the development of agro-industrial sectors, such as the sale of used clothing, shoes and surplus food products at transport costs (or very low prices), as well as the common practice of "outward process trading" for garment and footwear manufacture, food and even log processing. These practices distort local markets and hinder entrepreneurial growth. In short, a fuller understanding of the respective problems is needed on both sides.
There is a growing demand for nutritional and pharmaco-oriented manufactured food products (e.g. diet food which may be low-fat, vitamin-enriched, high fibre or protein-rich) and for semi-processed food products as inputs for further manufacturing in developed countries often as "own-brand" foods. In order to take advantage of these demands, food product manufacturers need to become more automated and flexible, link with global technical and market information and improve business and technical management skills.
Major constraints include a lack of technical knowledge and limitations to its transfer, limited access to export markets due to non-tariff barriers and the dominance of transnationals (and their brand names) in world trade. Some sectors such as cereal, milk and meat products are over saturated due to overproduction, especially in North America and Europe. Aggressive marketing reduces opportunities for import substitution. It is also difficult for local producers to introduce the required health and safety elements and for national institutions to monitor and certify compliance, owing to the lack of skilled and qualified personnel and the means to control the processes.
The global volume of chemicals used in leather processing is considerable: it is estimated that every year nearly 4 million tonnes (with only some 20% remaining in the leather) and 300 million tonnes of waste water and 8 million tonnes of solid waste and (dewatered) sludge are produced.
Technical assistance is needed to increase awareness, advise on legislation, strengthen capacities to monitor adherence and implement pollution control measures at plant level. The first step has usually been to treat waste water, but the long-term solution is to reduce effluents at the process level. The safe disposal of solid waste, and particularly sludge, is currently the subject of research, together with efforts to encourage local authorities to coordinate regulations on disposal with the approval of appropriate sites and control measures. There has been strong support and encouragement from Expert Group Meetings and the Leather Panel for UNIDO to play a leading role in the introduction and operation of a world-wide eco-labeling scheme.
Attention is being focused on transferring accepted and proven methods to those without access to the basic processing knowledge and changing attitudes to quality and marketing. Major constraints to achieving high-quality hides and skins are improper flaying, lack of proper slaughter facilities in rural areas, insect infestation, and poor collection and preservation techniques.
During the last two decades this sector has been characterized by low growth, intensive global cost pressures and cut-throat competition, reduced spending on textile and apparel research and development, and increased consumer expectations.
Environmental concerns are growing around the world and, in future, ecological factors in garment and apparel production will become more prominent. Major changes can be expected in waste elimination (reduction, reuse and redesign), reclamation, recycling and energy conservation. The expiry of the Multi-Fibre Agreement (MFA) in 2005 will have serious consequences for this sector and involve a global redistribution of activities and markets. UNIDO will have great opportunities to assist in forging linkages and maximizing this potential in many countries.
While no major changes in technology of the apparel industry are expected in the near future, the production of (synthetic) fibres might be strongly influenced by developments in biotechnology. Micro-organisms rather than petro-chemicals might be used to produce the basic chemicals through fermentation of sugar and starches to produce the intermediates required for the production of synthetics such as nylon and polyester. By using recombinant DNA, scientists have already created synthetic "spidersilk" as a model for a new generation of "natural synthetic" fibres.
UNIDO has a major role to play in promoting the development of the forestry, forest- and wood-based industries. This sector is confronted with problems related to raw material supply, technology transfer (training and awareness), management, institutional support and structural dysfunction.
Wood from natural forests is increasingly subject to demands for certification of sustainable forest management, investment in plantations is inadequate and plantation species are not as acceptable as more "noble" species. Technical inputs (chemicals, hardware and tooling) are either expensive locally or unavailable. There may be a lack of basic information disseminated amongst the operational, supervisory and managerial staff of woodworking enterprises. Woodworking machinery may be selected without proper knowledge of options or technical justification.
Management in general has a poor appreciation of industrial processing. Many enterprises grow from carpentry shops with artisanal methods of production, compared to serial or industrial production with interchangeable parts and industrial design for efficient use of resources. Few, if any, management consultancy firms in developing countries are aware of wood processing technologies, problems and markets. Training tends to be in carpentry or artisanal (vocational) skills rather than in industrial processing and machine operation and maintenance. Research and development is often unrelated to the particular needs of the wood industry in a given country.
Furthermore, there is poor linkage between forestry, primary and secondary processing and manufacturing, as well as between public and private sectors, which leads to a poor appreciation of the value of forests. Industry interests are fragmented and cohesive policies are lacking for development. Investment and export promotion efforts lack the technical knowledge needed to prepare and evaluate bankable projects and information is hard to find. Environmental impact assessments are in increasing demand but many countries lack the capacity to undertake them, while smaller projects cannot afford international inputs.
Engineered wood products must be introduced into developing countries to reduce wastage and increase structural efficiency. Environmentally sound preservative treatments that increase the durability of components should also be introduced.
Agro-chemical industries are characterized by increasing regulation and control for human and environmental protection, together with increased momentum to link genetics, sound modern farming practices and integrated pest control.
However, some developing countries bypass high-quality pest control agrochemicals in favour of cheap - and toxic - ones which cause illness. This use of cheaper controls is linked to limited regulatory frameworks for monitoring and compliance systems and higher registration costs.
A fitting term for this issue is "appropriate equipment and technologies", considering the many (micro- and macro-economic) aspects involved and the complex technical considerations. The manufacture of agricultural equipment and machinery reflects the level of economic development of a country, and "state of the art" equipment cannot be manufactured (or even applied) in many developing countries. An important factor in this sector is training, which should be provided in related specialties such as welding, electrics, hydraulics and pneumatics and mechanics as well as maintenance.
Agro-industrial processing can form the basis for environmentally sustainable rural development, providing rural populations with basic needs and fostering economic growth. Increasingly, ACC Network Thematic Groups are addressing the benefits of agro-industrial processing to fuel development: the Thematic Group in Tunisia, for example, has highlighted the promotion of agro-industry as a priority theme in their workplan.