The Banking Executive Magazine - June 2025 Issue

The integration of lower- and mid- dle-income countries (LMICs) into global and regional value and supply chains has significantly contributed to the economic development and poverty reduction of the last 30 years. However, mere integration is insufficient – it matters what coun- tries produce, and how they produce it. Countries that merely export raw ma- terials and unprocessed commodities have seen slower paths to economic transformation,1 while those that produce and trade higher value- added goods and services – from food products to textiles to complex batteries – have seen more sustained growth rates and higher incomes per capita. UNIDO’s SDG 9 tracker shows that Morocco has almost dou- bled the share of high-tech manufac- turing value added in just 10 years, landing far above the average for middle-income industrializing coun- tries. Côte d’Ivoire has also made sig- nificant advances, almost doubling manufacturing value added per capita in the same period. These numbers translate into better jobs, higher wages and faster poverty re- duction: Côte d’Ivoire’s extreme poverty rate fell below 10% for the first time in 2022. At the heart of this transformation lies sustainable industrialization: the process of shifting from low-produc- tivity, informal sectors to higher- value-added manufacturing and services. This shift is essential for long-term development, and it is central to the mandate of the United Nations Industrial Development Or- ganization (UNIDO), which pro- motes Inclusive and Sustainable Industrial Development (ISID) glob- ally. STRUCTURAL TRANSFORMATION THROUGH REGIONAL VALUE CHAINS Structural transformation is more than a buzzword—it is a develop- ment imperative. In many Arab and African economies, the majority of workers are employed in low-pro- ductivity sectors, often in informal or subsistence-level jobs. According to the World Bank, fewer than 20% of workers in Africa hold wage-paying jobs, and over 90% of firms are micro-enterprises with fewer than five employees. These firms often lack the scale, technology, and capi- tal to grow. Sustainable industrialization offers a way out of this trap. By integrating into regional and global manufactur- ing value chains, countries can move up the ladder of economic complex- ity. This means not only attracting foreign direct investment (FDI) but also ensuring that local micro, small, and medium-sized enterprises (MSMEs) are included through back- ward and forward linkages. When MSMEs become suppliers, service providers, or distributors within larger value chains, they gain access to markets, technology, and fi- nance—key ingredients for growth. MOROCCO AND EGYPT: INDUSTRIAL SUCCESS STORIES Some countries in the Mediterranean have already begun to chart this path. Morocco, for instance, has emerged as a regional industrial hub, particularly in the automotive and aerospace sectors. The country’s In- dustrial Acceleration Plan has fo- cused on building integrated industrial ecosystems, attracting global manufacturers, and linking them with local suppliers. Morocco’s success in renewable energy—espe- cially solar and wind—has also en- abled greener industrial growth. Egypt, too, has made significant progress. The development of the Suez Canal Economic Zone has at- tracted investment in textiles, chem- icals, and food processing. The government has prioritized industrial zones and infrastructure, while also working to integrate MSMEs into for- mal supply chains. These efforts are helping to diversify the economy and reduce reliance on volatile sectors like tourism and hydrocarbons. UNIDO’S ROLE IN THE MEDITERRANEAN INDUSTRIAL LANDSCAPE UNIDO has been a key partner in supporting these transformations. Across the Mediterranean, the organ- ization has implemented a range of programmes that promote sustain- able industrialization, environmental stewardship, and inclusive growth. One of the flagship initiatives is SwitchMed, a regional programme that supports the transition to circular and resource-efficient economies in eight Southern Mediterranean coun- tries. Through its MED TEST III com- ponent, SwitchMed helps SMEs adopt cleaner production tech- niques, reduce waste, and improve energy efficiency. This not only low- ers environmental impact but also enhances competitiveness. Another important initiative is Cre- ative Mediterranean, which fosters entrepreneurship and job creation in creative industries such as fashion, crafts, and design. Active in countries like Algeria, Egypt, Jordan, Lebanon, Morocco, Palestine, and Tunisia, the programme supports value chain de- velopment and market access for creative entrepreneurs. UNIDO has also supported the development of Eco-Industrial Parks (EIPs) in the region. These parks promote industrial symbiosis, where companies share resources, energy, and infrastructure to reduce costs and environmental impact. EIPs are a practical example of how in- dustrial development can align with sustainability goals. In Lebanon and other countries, UNIDO’s Enterprise Development and Investment Promotion (EDIP) programme has helped build entre- preneurial ecosystems through link- ing financial services with non-financial support. EDIP is a package approach that provides ca- pacity building, mentorship, and in- vestment readiness support to MSMEs, linking them with financial institutions and investors. It also con- ISSUE 198 JUNE 2025 the BANKING EXECUTIVE 9 UAB-UNIDO