Our world is facing tremendous challenges: climate change, resource depletion and the destruction of our environment. Continued widespread poverty and hunger are further worsened by armed conflicts and political instability. These challenges result from a complex web of factors. Some are deeply rooted in history, woven into longstanding consumption and production patterns and deprivation in developing countries. Others are more recent, such as demographic shifts and migration, energy crises, and disruptions in global supply chains. Regardless of these factors’ origins, one thing is clear: the world’s poorest suffer the most from these crises. The exploitation of people and planet must end. Thus we must answer the question: what solutions can we offer to these challenges? Sustainable industrialization is a powerful catalyst for transformative global progress. History shows that the most successful countries are those that have transitioned from being low to high-income through industrialization. Why? Because manufacturing drives productivity and growth, spurring technological advancement and innovation, and creating opportunities in manufacturing and beyond. Every manufacturing job, on average, creates more than two jobs in other sectors of the economy. However, history also teaches us that industrial development can have detrimental impacts on both people and the planet. What we need is a new approach to industrialization, one that prioritizes social and environmental goals to make sure that we prioritize lifting people out of poverty, ending hunger, and effectively fighting climate change.
This paper, prepared for the second edition of UNIDO’s Multilateral Industrial Policy Forum (MIPF 2024), highlights a critical issue: the countries most in need of industry’s transformative power to drive growth are falling behind. With a few notable exceptions, developing countries are witnessing alarmingly slow industrialization or even deindustrialization. We need immediate action. The future of sustainable industrial growth depends on our ability to address these challenges swiftly and effectively, while navigating the fundamental shifts reshaping the industrial sector. The ongoing energy transition, rapid technological advancements including artificial intelligence, the reconfiguration of global value chains and the evolving nature of how we work and what we consume are just some of the megatrends revolutionizing industrial production and are shaping the industries of the future.
How can countries build competitive, future ready industries? This paper identifies several key areas for action: We need to improve basic conditions such as in infrastructure and institutional capabilities. We must equip workforces with future ready skills We need to enable the use of emerging technologies and help build competitive industrial ecosystems with strong connections to complementary service and agricultural activities. We must strengthen regional integration to address the fragmentation of global supply chains.
We have the technologies, expertise and money to provide effective solutions to address these global challenges. Our goal is a world without hunger and poverty, where industry creates decent jobs and shared prosperity for all, drives low emission economies, and safeguards our planet for current and future generations.
No country can confront these challenges on their own. What we need is true global solidarity and robust international partnerships. We live in an interdependent world, everything is interconnected. Global developments ultimately impact us all. Industrialized countries must live up to their commitments to the developing world. The private sector must play its part. Despite all of the challenges facing us, together we can ensure sustainable industrialization benefits not just some of us, but all of us.
Preface
The world faces a stark reality today. Despite notable strides in poverty reduction between 2000 and 2015, progress has slowed significantly. By 2022, the number of people lifted from extreme poverty compared to 2013 was only onethird.1 Currently, around 10 per cent of the global population nearly 700 million people still live in extreme poverty2 while nearly 800 million suffer from chronic hunger.3 The ambitious goals of eradicating extreme poverty and achieving zero hunger by 2030 now seem increasingly unattainable, especially in developing countries, where the impacts of recent crises, including the COVID19 pandemic, armed conflicts, and climate change, have further exacerbated inequalities.4 Sub-Saharan Africa, in particular, continues to grapple with deeply entrenched challenges, with poverty more pervasive than it has been in decades.
The labour market presents an equally troubling picture. Although some recovery from the COVID19 crisis has been reported, a notable jobs gap6 of 11.1 per cent persists, affecting 435 million people globally.7 Gender disparities are particularly pronounced, with women in low-income countries (LICs) facing a jobs gap of 24.3 per cent, compared to 17.4 per cent for men. Additionally, population growth and migration in developing countries, especially in Africa, have further intensified the need for job creation. Many of these regions experience high birth rates and a rapidly growing youth population, yet they often lack the necessary infrastructure and education systems to harness the potential demographic dividend.
At the same time, there is growing pressure on global supply chains(GVCs), which will have a considerable impact given that around 80 per cent of world trade relies on these interconnected networks of production, distribution, and logistics.9 In recent years, GVCs have experienced severe disruptions due to shortages and price increases (including energy, materials, food and key components). These challenges, exacerbated by the pandemic and geopolitical tensions, have forced many firms to find new suppliers in different locations. Meanwhile, the world is consuming natural resources at unsustainable rates, with the extraction of raw materials tripling over the past five decades. High income countries consume six times more resources and generate ten times the climate impact compared to LICs. This unequal distribution of resource consumption has profound implications for global development, highlighting the urgent need for responsible sourcing practices and sustainability standards that minimize environmental harm while promoting local development in LICs.
Food insecurity poses a significant challenge globally. As consumer preferences shift towards more sustainably produced, higher quality food, demand for affordable options in poorer regions remains urgent. Over 1.7 billion people in urban and peri urban areas are currently experiencing food insecurity,12 while more than 500 million resource poor smallholder farmers in developing countries are struggling to increase productivity. The need for investment in sustainable agricultural practices is clear. The growing scarcity of essential resources such as water, land and energy disproportionately impact developing countries, placing an even greater strain on food production. To meet global demand by 2050,13 food production must increase by 70 per cent. Agroindustries have the potential to transform agricultural practices, enhance food availability, and generate jobs, but require modern infrastructure and better integration into value chains to meet rising global demand.
Climate change further complicates the current situation, disproportionately impacting LICs, with projections indicating that they may experience annual GDP losses of 1 per cent due to climate related disasters – five times more than high income countries. While energy is critical to driving industrial growth and economic development, 685 million people remained without access to electricity in 2022; and population growth in many regions threatens to outpace the expansion of energy infrastructure. Additionally, energy production, which is largely dependent on fossil fuels, contributes approximately 75 per cent of the world faces a stark reality today. Despite notable strides in poverty reduction between 2000 and 2015, progress has slowed significantly. By 2022, the number of people lifted from extreme poverty compared to 2013 was only onethird.1 Currently, around 10 per cent of the global population nearly 700 million people still live in extreme poverty2 while nearly 800 million suffer from chronic hunger.3 The ambitious goals of eradicating extreme poverty and achieving zero hunger by 2030 now seem increasingly unattainable, especially in developing countries, where the impacts of recent crises, including the COVID19 pandemic, armed conflicts, and climate change, have further exacerbated inequalities. Sub-Saharan Africa, in particular, continues to grapple with deeply entrenched challenges, with poverty more pervasive than it has been in decades.
The labour market presents an equally troubling picture. Although some recovery from the COVID19 crisis has been reported, a notable jobs gap6 of 11.1 per cent persists, affecting 435 million people globally.7 Gender disparities are particularly pronounced, with women in loincome countries (LICs) facing a jobs gap of 24.3 per cent, compared to 17.4 per cent for men. Additionally, population growth and migration in developing countries, especially in Africa, have further intensified the need for job creation. Many of these regions experience high birth rates and a rapidly growing youth population, yet they often lack the necessary infrastructure and education systems to harness the potential demographic dividend. 8 At the same time, there is growing pressure on global supply chains(GVCs), which will have a considerable impact given that around 80 per cent of world trade relies on these interconnected networks of production, distribution, and logistics.9 In recent years, GVCs have experienced severe disruptions due to shortages and price increases (including energy, materials, food and key components). These challenges, exacerbated by the pandemic and geopolitical tensions, have forced many firms to find new suppliers in different locations. Meanwhile, the world is consuming natural resources at unsustainable rates, with the extraction of raw materials tripling over the past five decades. High income countries consume six times more resources and generate ten times the climate impact compared to LICs. This unequal distribution of resource consumption has profound implications for global development, highlighting the urgent need for responsible sourcing practices and sustainability standards that minimize environmental harm while promoting local development in LICs.
Food insecurity poses a significant challenge globally. As consumer preferences shift towards more sustainably produced, higher quality food, demand for affordable options in poorer regions remains urgent. Over 1.7 billion people in urban and peri urban areas are currently experiencing food insecurity,12 while more than 500 million resource poor smallholder farmers in developing countries are struggling to increase productivity. The need for investment in sustainable agricultural practices is clear. The growing scarcity of essential resources such as water, land and energy disproportionately impacts developing countries, placing an even greater strain on food production. To meet global demand by 2050,13 food production must increase by 70 per cent. Agroindustries have the potential to transform agricultural practices, enhance food availability, and generate jobs, but require modern infrastructure and better integration into value chains to meet rising global demand.
Climate change further complicates the current situation, disproportionately impacting LICs, with projections indicating that they may experience annual GDP losses of 1 per cent due to climate related disasters – five times more than high income countries.14 While energy is critical to driving industrial growth and economic development, 685 million people remained without access to electricity in 2022;15 and population growth in many regions threatens to outpace the expansion of energy infrastructure. Additionally, energy production, which is largely dependent on fossil fuels, contributes approximately 75 per cent of tured goods, for example for construction, infrastructure development and many industrial sectors, can reduce reliance on otherwise costly imports; iii) Pharmaceuticals: demand for affordable medicines is growing, especially as global supply chains face disruptions; (iv) Energy: industries must reduce emissions and local solutions need to be developed to generate energy from renewable sources such as solar, biomass and hydrogen. Technologies need to be explored to reduce CO2 emissions from traditional energy sources;
(iv) Mining: many developing countries are rich in critical minerals and rare earth metals which are essential for modern technologies, such as semiconductors and emobility. There is also potential to develop local capacity for value addition in the equipment and maintenance sectors; v) Digitalization: production processes can be connected and controlled smartly, saving resources and substantially increasing industrial productivity; vi) Market development: developing countries offer substantial potential, particularly in terms of traditional and local products, including textiles, furniture, decoration items, handicrafts, food and health products; and finally vii) Value addition to local products: there is tremendous potential to substitute costly imports, and promote the export of higher value added industrial products.
This paper explores the challenges and opportunities associated with industrial development in depth; it is structured as follows: Section 1 presents projections and scenarios on how the world may look by 2050, given the current global challenges we face. Section 2 focuses on the future of industry, examining key industrial megatrends such as the energy transition, digitalization, GVC reconfiguration, and demographic shifts, along with their implications for industrial development. Section 3 discusses solutions for promoting sustainable industrial development, with a special focus on the needs of developing countries. Section 4 concludes the paper and offers final reflections.
Acknowledgements
This paper was developed under the overall guidance of Gerd Müller, Director General of the United Nations Industrial Development Organization (UNIDO), and supervised by Cecilia Ugaz Estrada, Deputy to the Director General and Managing Director of the Directorate of Strategic Planning, Programming and Policy (SPP) and Ciyong Zou, Deputy to the Director General and Managing Director of the Directorate of Technical Cooperation and Sustainable Industrial Development (TCS). It was drafted by Nobuye Haraguchi, Frank Hartwich and Alejandro Lavopa, with valuable research and statistical support provided by Fernando Cantu, Carolina Donnelly, Gina Martí and Joao Bernardo Almeida dos Reis.
We are grateful for the background contribution produced by Jostein Hauge, University of Cambridge, and Kyle Chan, Princeton University, which informed sections 2 and 3 of the paper. The paper also benefitted from constructive comments and administrative support of UNIDO staff members Stephanie von Ehrlich, Anders Isaksson and Fernando Santiago.
We extend our sincere appreciation to Iguaraya Saavedra for her extensive administrative support, Niki Rodousakis for assistance with copyediting, and Florian Haspel for the design of the paper.
1. The future world
1.1 The world in 2050: Projections on poverty, hunger, jobs, climate change and resource scarcity
When the UN 2030 Agenda for Sustainable Development was adopted, the world had emerged from the 200708 global financial crisis, and economic prospects looked promising. Extreme poverty was declining at an unprecedented rate, and the first Millennium Development Goal (MDG) to cut the 1990 poverty rate in half by 2015 had been achieved six years ahead of schedule.21 The momentum generated by these successes fuelled ambitious targets set within the 2030 Agenda, which sought to build on the accomplishments of the past decade.
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This paper, prepared for the second edition of UNIDO’s Multilateral Industrial Policy Forum (MIPF 2024), highlights a critical issue: the countries most in need of industry’s transformative power to drive growth are falling behind. With a few notable exceptions, developing countries are witnessing alarmingly slow industrialization or even deindustrialization. We need immediate action. The future of sustainable industrial growth depends on our ability to address these challenges swiftly and effectively, while navigating the fundamental shifts reshaping the industrial sector. The ongoing energy transition, rapid technological advancements including artificial intelligence, the reconfiguration of global value chains and the evolving nature of how we work and what we consume are just some of the megatrends revolutionizing industrial production and are shaping the industries of the future.
How can countries build competitive, future ready industries? This paper identifies several key areas for action: We need to improve basic conditions such as in infrastructure and institutional capabilities. We must equip workforces with future ready skills We need to enable the use of emerging technologies and help build competitive industrial ecosystems with strong connections to complementary service and agricultural activities. We must strengthen regional integration to address the fragmentation of global supply chains.
We have the technologies, expertise and money to provide effective solutions to address these global challenges. Our goal is a world without hunger and poverty, where industry creates decent jobs and shared prosperity for all, drives low emission economies, and safeguards our planet for current and future generations.
No country can confront these challenges on their own. What we need is true global solidarity and robust international partnerships. We live in an interdependent world, everything is interconnected. Global developments ultimately impact us all. Industrialized countries must live up to their commitments to the developing world. The private sector must play its part. Despite all of the challenges facing us, together we can ensure sustainable industrialization benefits not just some of us, but all of us.
Preface
The world faces a stark reality today. Despite notable strides in poverty reduction between 2000 and 2015, progress has slowed significantly. By 2022, the number of people lifted from extreme poverty compared to 2013 was only onethird.1 Currently, around 10 per cent of the global population nearly 700 million people still live in extreme poverty2 while nearly 800 million suffer from chronic hunger.3 The ambitious goals of eradicating extreme poverty and achieving zero hunger by 2030 now seem increasingly unattainable, especially in developing countries, where the impacts of recent crises, including the COVID19 pandemic, armed conflicts, and climate change, have further exacerbated inequalities.4 Sub-Saharan Africa, in particular, continues to grapple with deeply entrenched challenges, with poverty more pervasive than it has been in decades.
The labour market presents an equally troubling picture. Although some recovery from the COVID19 crisis has been reported, a notable jobs gap6 of 11.1 per cent persists, affecting 435 million people globally.7 Gender disparities are particularly pronounced, with women in low-income countries (LICs) facing a jobs gap of 24.3 per cent, compared to 17.4 per cent for men. Additionally, population growth and migration in developing countries, especially in Africa, have further intensified the need for job creation. Many of these regions experience high birth rates and a rapidly growing youth population, yet they often lack the necessary infrastructure and education systems to harness the potential demographic dividend.
At the same time, there is growing pressure on global supply chains(GVCs), which will have a considerable impact given that around 80 per cent of world trade relies on these interconnected networks of production, distribution, and logistics.9 In recent years, GVCs have experienced severe disruptions due to shortages and price increases (including energy, materials, food and key components). These challenges, exacerbated by the pandemic and geopolitical tensions, have forced many firms to find new suppliers in different locations. Meanwhile, the world is consuming natural resources at unsustainable rates, with the extraction of raw materials tripling over the past five decades. High income countries consume six times more resources and generate ten times the climate impact compared to LICs. This unequal distribution of resource consumption has profound implications for global development, highlighting the urgent need for responsible sourcing practices and sustainability standards that minimize environmental harm while promoting local development in LICs.
Food insecurity poses a significant challenge globally. As consumer preferences shift towards more sustainably produced, higher quality food, demand for affordable options in poorer regions remains urgent. Over 1.7 billion people in urban and peri urban areas are currently experiencing food insecurity,12 while more than 500 million resource poor smallholder farmers in developing countries are struggling to increase productivity. The need for investment in sustainable agricultural practices is clear. The growing scarcity of essential resources such as water, land and energy disproportionately impact developing countries, placing an even greater strain on food production. To meet global demand by 2050,13 food production must increase by 70 per cent. Agroindustries have the potential to transform agricultural practices, enhance food availability, and generate jobs, but require modern infrastructure and better integration into value chains to meet rising global demand.
Climate change further complicates the current situation, disproportionately impacting LICs, with projections indicating that they may experience annual GDP losses of 1 per cent due to climate related disasters – five times more than high income countries. While energy is critical to driving industrial growth and economic development, 685 million people remained without access to electricity in 2022; and population growth in many regions threatens to outpace the expansion of energy infrastructure. Additionally, energy production, which is largely dependent on fossil fuels, contributes approximately 75 per cent of the world faces a stark reality today. Despite notable strides in poverty reduction between 2000 and 2015, progress has slowed significantly. By 2022, the number of people lifted from extreme poverty compared to 2013 was only onethird.1 Currently, around 10 per cent of the global population nearly 700 million people still live in extreme poverty2 while nearly 800 million suffer from chronic hunger.3 The ambitious goals of eradicating extreme poverty and achieving zero hunger by 2030 now seem increasingly unattainable, especially in developing countries, where the impacts of recent crises, including the COVID19 pandemic, armed conflicts, and climate change, have further exacerbated inequalities. Sub-Saharan Africa, in particular, continues to grapple with deeply entrenched challenges, with poverty more pervasive than it has been in decades.
The labour market presents an equally troubling picture. Although some recovery from the COVID19 crisis has been reported, a notable jobs gap6 of 11.1 per cent persists, affecting 435 million people globally.7 Gender disparities are particularly pronounced, with women in loincome countries (LICs) facing a jobs gap of 24.3 per cent, compared to 17.4 per cent for men. Additionally, population growth and migration in developing countries, especially in Africa, have further intensified the need for job creation. Many of these regions experience high birth rates and a rapidly growing youth population, yet they often lack the necessary infrastructure and education systems to harness the potential demographic dividend. 8 At the same time, there is growing pressure on global supply chains(GVCs), which will have a considerable impact given that around 80 per cent of world trade relies on these interconnected networks of production, distribution, and logistics.9 In recent years, GVCs have experienced severe disruptions due to shortages and price increases (including energy, materials, food and key components). These challenges, exacerbated by the pandemic and geopolitical tensions, have forced many firms to find new suppliers in different locations. Meanwhile, the world is consuming natural resources at unsustainable rates, with the extraction of raw materials tripling over the past five decades. High income countries consume six times more resources and generate ten times the climate impact compared to LICs. This unequal distribution of resource consumption has profound implications for global development, highlighting the urgent need for responsible sourcing practices and sustainability standards that minimize environmental harm while promoting local development in LICs.
Food insecurity poses a significant challenge globally. As consumer preferences shift towards more sustainably produced, higher quality food, demand for affordable options in poorer regions remains urgent. Over 1.7 billion people in urban and peri urban areas are currently experiencing food insecurity,12 while more than 500 million resource poor smallholder farmers in developing countries are struggling to increase productivity. The need for investment in sustainable agricultural practices is clear. The growing scarcity of essential resources such as water, land and energy disproportionately impacts developing countries, placing an even greater strain on food production. To meet global demand by 2050,13 food production must increase by 70 per cent. Agroindustries have the potential to transform agricultural practices, enhance food availability, and generate jobs, but require modern infrastructure and better integration into value chains to meet rising global demand.
Climate change further complicates the current situation, disproportionately impacting LICs, with projections indicating that they may experience annual GDP losses of 1 per cent due to climate related disasters – five times more than high income countries.14 While energy is critical to driving industrial growth and economic development, 685 million people remained without access to electricity in 2022;15 and population growth in many regions threatens to outpace the expansion of energy infrastructure. Additionally, energy production, which is largely dependent on fossil fuels, contributes approximately 75 per cent of tured goods, for example for construction, infrastructure development and many industrial sectors, can reduce reliance on otherwise costly imports; iii) Pharmaceuticals: demand for affordable medicines is growing, especially as global supply chains face disruptions; (iv) Energy: industries must reduce emissions and local solutions need to be developed to generate energy from renewable sources such as solar, biomass and hydrogen. Technologies need to be explored to reduce CO2 emissions from traditional energy sources;
(iv) Mining: many developing countries are rich in critical minerals and rare earth metals which are essential for modern technologies, such as semiconductors and emobility. There is also potential to develop local capacity for value addition in the equipment and maintenance sectors; v) Digitalization: production processes can be connected and controlled smartly, saving resources and substantially increasing industrial productivity; vi) Market development: developing countries offer substantial potential, particularly in terms of traditional and local products, including textiles, furniture, decoration items, handicrafts, food and health products; and finally vii) Value addition to local products: there is tremendous potential to substitute costly imports, and promote the export of higher value added industrial products.
This paper explores the challenges and opportunities associated with industrial development in depth; it is structured as follows: Section 1 presents projections and scenarios on how the world may look by 2050, given the current global challenges we face. Section 2 focuses on the future of industry, examining key industrial megatrends such as the energy transition, digitalization, GVC reconfiguration, and demographic shifts, along with their implications for industrial development. Section 3 discusses solutions for promoting sustainable industrial development, with a special focus on the needs of developing countries. Section 4 concludes the paper and offers final reflections.
Acknowledgements
This paper was developed under the overall guidance of Gerd Müller, Director General of the United Nations Industrial Development Organization (UNIDO), and supervised by Cecilia Ugaz Estrada, Deputy to the Director General and Managing Director of the Directorate of Strategic Planning, Programming and Policy (SPP) and Ciyong Zou, Deputy to the Director General and Managing Director of the Directorate of Technical Cooperation and Sustainable Industrial Development (TCS). It was drafted by Nobuye Haraguchi, Frank Hartwich and Alejandro Lavopa, with valuable research and statistical support provided by Fernando Cantu, Carolina Donnelly, Gina Martí and Joao Bernardo Almeida dos Reis.
We are grateful for the background contribution produced by Jostein Hauge, University of Cambridge, and Kyle Chan, Princeton University, which informed sections 2 and 3 of the paper. The paper also benefitted from constructive comments and administrative support of UNIDO staff members Stephanie von Ehrlich, Anders Isaksson and Fernando Santiago.
We extend our sincere appreciation to Iguaraya Saavedra for her extensive administrative support, Niki Rodousakis for assistance with copyediting, and Florian Haspel for the design of the paper.
1. The future world
1.1 The world in 2050: Projections on poverty, hunger, jobs, climate change and resource scarcity
When the UN 2030 Agenda for Sustainable Development was adopted, the world had emerged from the 200708 global financial crisis, and economic prospects looked promising. Extreme poverty was declining at an unprecedented rate, and the first Millennium Development Goal (MDG) to cut the 1990 poverty rate in half by 2015 had been achieved six years ahead of schedule.21 The momentum generated by these successes fuelled ambitious targets set within the 2030 Agenda, which sought to build on the accomplishments of the past decade.
Click for more...
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