International

THE CHALLENGE OF GLOBALISATION AND INTERNATIONAL CO-OPERATION

It is the basic contention of UNIDO that the globalisation process is not a zero- sum game. It holds the potential to accelerate the industrialisation process in the developing and transition countries as well as bring considerable benefit to the industrialised countries. But the realisation of these potential gains will require effective management of the process at both the national and international levels to identify and alleviate the adjustment and social costs engendered by policies that lead to closer integration into the world economy. This will also require active co-operation between Governments and the private sector. In this context, UNIDO and its sister UN agencies can play a major facilitating role.

UNIDO's work, therefore, highlights the opportunities and challenges which globalisation presents to the developing and transition countries as well the industrialised world. In particular, it seeks to identify the key issues confronting policy makers as they strive to achieve gainful participation and integration into the global economy. In this regard, UNIDO believes that the main focus of technical and investment co-operation should be on the major constraints that disadvantaged countries face particularly in terms of human resource development, technological capabilities and innovation, and, sustainable environmental development. In this context, it is especially important to identify appropriate policies and other measures that policy makers may wish to consider to overcome constraints to full participation in the global economy. It should be underlined that even for the most disadvantaged countries--mostly African countries and LDCs--progress is within reach. Much progress has already been made. However, greater efforts are required to improve policies and structural measures to achieve an environment conducive to private-sector development and accelerated, but sustainable economic growth and competitiveness. Still, more equitable development among and within countries is an increasing challenge. This is to

¹⁹ Charles Osman, Globalization and Regionalisation: The Challenge for Developing Countries, OECD Development Centre, Paris, 1994.
a great extent a function of Governments, but a socially responsible private sector has an important role to play to ensure world peace and stability.

UNIDO has responded to the challenge of globalisation in its recent reform process by refocusing its activities and services on the basis of clear objectives and priority themes. We have given special emphasis to our role as a Global Forum for Industry and priority support for private-sector development. In particular, in the context of the recent United Nations system- wide Special Initiative on Africa, UNIDO has developed a special programme-

-an Alliance for Africa's Industrialisation--to respond to the urgent need to support Africa's industrialisation efforts. In this way, UNIDO hopes to respond directly to the major issues of globalisation and support those countries most in need of assistance in their efforts to integrate more fully into the global economy.

I want to conclude this paper by stating what I believe to be the major challenge of globalisation. In my view with any process of dynamic change, there are winners and losers. The winners are those countries, cities and workers with the developmental capabilities and skills to reap the full benefits of the globalisation process. The losers in the short run are generally those who do not have the developmental capabilities or skills--African countries, LDCs, primary producers, rural areas and unskilled workers.²⁰

Today's global economy provides the framework for mutually beneficial trade, great opportunities and a coincidence of interests for developing countries, economies in transition as well as the industrialised countries. Some would argue that it may be the first time this coincidence of interests and opportunities has happened. There are enormous opportunities for industrialised countries in trading with the developing world and transition countries. The Russian Federation, China, India, and Brazil represent huge markets. And, if present estimates of future growth are to be believed, the dynamism of the world economy will increasingly be provided by the fast developing countries of Asia and Latin America.

At the same time, for developing and transition countries, trade represents great opportunities for much needed private capital flows particularly in the form of FDI and associated access to new markets, know-how, managerial skills and technology. The increased integration of these countries into the global economy will help improve living standards, reduce poverty and

²⁰ In terms of labour, the winners are those skilled workers whose skills are internationally mobile. And the losers are those unskilled workers, whose skills cannot be transferred easily to other countries.
disease, risks of population explosion and attendant risks of large-scale migration and significant damage to the global environment.

Developing countries, therefore, urgently need to facilitate transfer and absorption of new technologies and relevant know-how; build-up significantly modern physical infrastructure and their human capital base; and create a strong entrepreneurial climate for private sector development. It is imperative that developed countries resist protectionist tendencies, improve the flexibility of their labour markets and realise especially that ODA has an important role to play in helping developing countries participate in the global economy. Clearly aid needs to be better targeted--especially towards poverty alleviation-- but this does not undermine the still crucial need for aid for poor countries.

There is no doubt that in this period of dramatic change there are justifiable fears to be addressed. We should not ignore these fears; rather, we should identify them and urgently develop measures to combat them and in that way ensure that globalisation is a force for good and for the benefit of all of us. In this connection a renewed commitment from the donor community-- particularly to the poorer African countries and LDCs many of whom are suffering from donor fatigue--is required. There is also a need for a comprehensive development framework and a common understanding of global development to address the risks of globalisation. This framework, understanding and commitment to a more sustainable and equitable pattern of development is essential to the stability and the viability of the new world order established in the 1990s. The United Nations System in general and UNIDO in particular are important elements of this framework and understanding.

The major challenge of globalisation in the 1990s, therefore, is to ensure that globalisation is made compatible with social and political stability and, in particular, that social cohesion is not seriously compromised, as the winners in the process distance themselves from the losers. It is a challenge, first and foremost, of how to maintain and expand the global economy and at the same time integrate new actors--such as the countries in transition, African countries and LDCs--while also increasing or at least maintaining living standards and employment levels in the industrialised countries to prevent a backlash and a return to protectionist policies. It is a challenge in the developed countries of ensuring that the pressing problems of unskilled and low-wage workers are addressed by adequate training, broader human resource development, incentives for flexibility in working time arrangements and mobility; temporary entry-wages, particularly for youth and the long-term unemployed; and, most importantly, the provision of a safety net for those left unemployed

and retraining opportunities; part-time work and local employment initiatives to foster new jobs and greater labour market participation. The central task of the developed countries, rather than to guard themselves against low wage competition by protectionist measures, should be to raise productivity ahead of wage levels to retain their competitiveness.


The challenge for an international organisation such as UNIDO is to identify obstacles to gainful participation in the global economy and in co- operation with other international development partners and the private sector to assist in the development of appropriate policies and other supporting measures. In this way UNIDO can help spread the geographical and sector focus of FDI flows, reduce income inequalities and promote more sustainable global development.