Opening Statement of the Director-General

19th session of the Industrial Development Board, Vienna, Austria, 18 May 1998

Mr. President,
Your Excellencies,
Distinguished Representatives,
Ladies and Gentlemen,

I would like to welcome you warmly to this nineteenth session of the Industrial Development Board. For me, of course, this is a very special occasion as it is my first Board experience as Director-General of UNIDO. I am looking forward to a fruitful exchange of views and to your guidance for the future course of action you want this Organization to take.

At the outset, in expressing my appreciation for the work of the outgoing President, some very special words must be said on the role played by Ambassador Posta during UNIDO's watershed year of 1997. Indeed, having been entrusted by the Board early last year with the crucial task of chairing the intersessional working group on the future role and functions of UNIDO, the subsequent election of Mr. Posta to the presidency certainly placed that office in the most capable of hands. My special thanks go to him for his untiring and successful efforts to forge a consensus among Member States. These thanks of course also include all the members of his Bureau. I wish also to congratulate the new President, Ambassador Pittaluga Fonseca of Uruguay, and his Bureau members on their election.

Mr. President,
Before looking to the future, allow me to take a look back on my first five months in office. Let me share with you the milestones on the road towards the transformation of UNIDO. It has been, at times, a bumpy road and not always a pleasant ride but this was not unexpected. After all, UNIDO had just been through tremendous turmoil and, in its aftermath, major adjustments still needed to be implemented.

What was the situation I found when I took office? I found an Organization with an impressive record of administrative and operational reforms that had been recognized by the international community. I found an Organization with a lot of potential, with excellent, highly qualified staff, and with a good track record in many of its programmes. However, I was also faced with an Organization with insufficient focus, with only lukewarm support from some of its Member States and generally, with many unutilized opportunities and therefore scope for further improvements. In a nutshell: The final step towards a genuine transformation of UNIDO, towards renewed international recognition and support, towards excellence still lay ahead.

Indeed, I was faced with a very challenging situation characterized by a combination of:

  • first, new substantive demands and priorities for UNIDO's future work as established in the Business Plan and the programme and budgets;
  • second, financial constraints emanating from the approved programme and budgets 1998-1999, coupled with a precarious cash flow projection for 1998;
  • third, a significant over-incumbency of posts requiring the immediate launching of a staff reduction programme;
  • fourth, an organizational structure which did not correspond to the Business Plan and thus needed to be drastically reshaped;
  • fifth, and maybe most importantly, a fragmentation of UNIDO activities into an array of small projects lacking integration and sufficient focus;
  • sixth, low morale and insecurity on the part of the Organization's staff; and finally, significant arrears by Member States in the payment of assessed contributions. In this context, I wish to thank Ambassador Benmoussa for his valuable work in leading the discussion group on timely payment of assessed contributions.

This situation required that I had to set immediate and clear priorities for a strategy to address a multitude of interlinked problems. I decided to concentrate first on solving the pressing financial and personnel issues before tackling the programmatic transformation. Let me provide you with a chronological account of what action I have taken and what results we have achieved.

At the outset, in my first Administrative Instruction, I decided to implement a set of emergency measures to bring the cash flow situation under control. Specifically, I introduced a ban on new purchases, procurement and consultancy contracts with the exception of those related to the technical cooperation component of the budget. I also assumed responsibility for authorizing all official travel for a 60 day period. Through these temporary measures which of course are not sustainable in the long run, approximately one-half million US-dollars of savings were generated.

The launching of a staff separation programme was the next immediate and pressing requirement. It was swiftly implemented and has resulted in:

  • first, the abolishment of 143.5 posts as required by the programme and budgets 1998-1999;
  • second, the approval of 92 voluntary staff separations; and
  • third, the placement of staff on abolished posts against existing vacancies.

This approach obviated the need to launch a non-voluntary staff separation programme. It has thus contributed greatly to alleviating the concerns of staff and improving staff-management relations. Compared to the initial cost estimate of .9 million, the staff reduction programme will cost less than .8 million, thus representing savings of at least .1 million.

As Member States did not provide the Organization with additional dedicated resources for staff separations , this programme had to be accommodated within the prevailing financial constraints. The programme has thus been budget-driven and has resulted in keeping on board a number of staff whose skill profile is not fully in line with programmatic requirements. This will necessitate either their re- training in the course of 1998, or their eventual separation from UNIDO by the end of 1998.

The staff separation programme was accompanied by a special interim measure ensuring that existing staff contracts were extended only on a short-term basis. At present, contracts are being extended generally until the end of 1998. I am planning to introduce, in the long run, a significantly revised staff career development system, the principles of which were issued last week. This new system will be based on objective criteria to ensure open and fair competition in both recruitment and promotion. It will also feature, as a cornerstone, a rotation of staff between Headquarters and the field, and will foresee periods for maximum length of service in the Professional category. Member States will be informed about this issue in the afternoon when the Board will discuss personnel matters.

While concentrating on administrative matters, I also considered it essential to launch, as early as possible, a dialogue on the critically important issue of UNIDO's decentralization. Therefore, in January 1998 I convened the first global UNIDO Country Director meeting. This meeting, which was also attended by representatives from the UN Secretariat and UNDP, generated clear ideas on how to optimize the interaction between UNIDO Headquarters and its field representatives. It also triggered an intense discussion on the best ways to delegate increased authority to the field as mandated by the Business Plan.

I then moved on to tackle the thorny issue of reshaping the organizational structure of UNIDO. In a series of bulletins issued in February, I put into effect a new structure and specifically ensured:

  • first, full alignment of the new structure with the guidelines established in the Business Plan, by creating three divisions and a significantly reduced Office of the Director-General;
  • second, an effective management team through appointments of all staff at Managing Director and Director level;
  • third, assignment of all staff to new organizational units, with only a few areas of programme support services left for further review;
  • fourth, finalization of terms of reference for new organizational units with emphasis on clear lines of responsibility and accountability, and concrete performance targets; and
  • fifth, the establishment and strengthening of the Office of Internal Oversight.

I issued in March an instruction which lifted the emergency measures introduced in January. This new administrative instruction was applied for a limited period of time which expired last week. It continued to ensure the strong involvement of my Office and myself in authorizing expenditures both under the regular and operational budgets and under technical cooperation programmes.

This was replaced last week by a completely new financial authorization system based on simplification of procedures, delegation of authority to middle management levels as mandated in the Business Plan, empowerment of staff, and strong accountability mechanisms. Likewise, I issued last week precise instructions concerning decentralization and delegation of authority to UNIDO's field offices. And I have cut down the tremendous number of existing Director- General's Bulletins from 250 to just five, and the number of existing Committees from 110 to again just five.

I have also introduced some finetuning adjustments to the organizational structure of UNIDO. In these adjustments, I have ensured a unified management of the Office of the Director-General. The Director of my Office will henceforth coordinate the activities of four small units: the Executive Office, the Office of Internal Oversight, the Governing Bodies Secretariat, and the Legal Office. The second area in which changes have been introduced is the Division for Sectoral Support and Environmental Sustainability which now has five Branches: Cleaner Production and Environmental Management, Montreal Protocol, Kyoto Protocol, Industrial Energy-Efficiency, and Agro-Industries and Sectoral Support.

Finally, on the management side, I have created an Executive Board which is composed of my three Managing Directors and the Director of my Office and which meets twice a week. And I will have in the future a new Board of Directors which, in addition to the Executive Board members, will encompass all Branch and Bureau Directors and which will meet twice a month to ensure the Organization's smooth management.

It cannot come as a surprise that the budgetary, administrative, organizational and in particular staff adjustments have taken their toll in terms of our technical cooperation delivery in these first months of 1998. Figures at the end of April were down by approximately 20 per cent compared to the same period last year. All sources of funds showed declining implementation. In view of the importance of Montreal Protocol activities in this context, I have taken action to redeploy a significant number of staff from the Division of Investment Promotion and Institutional Capacity-Building to the Division of Sectoral Support and Environmental Sustainability. I wish to thank all Directors and in particular the Managing Directors, and all staff involved for their understanding.

There has also been the impact, however, of the traditionally lower implementation under regular budget technical cooperation funds in the first year of each biennium. Furthermore, I have deliberately held back implementation under the regular budget to improve the cash flow and above all, to ensure that funds will be available in the future to finance UNIDO's new integrated packages of services.

Mr. President,
Distinguished Representatives,
The important phase of administrative reform is now coming to an end. While it is fading out, I have consciously built up the momentum for the programmatic transformation of UNIDO.

Following up on UNIDO's global UCD meeting in January, I launched an in- depth programmatic discussion on the orientation and substantive contents of key UNIDO programmes and services. This has constituted the second phase of my agenda to transform UNIDO. Everyone needs to know what UNIDO stands for, a corporate identity needs to be developed. UNIDO must become a synonym for effective support to industrial development. The ‘inward-looking' period of UNIDO reform must give way to an ‘outward-looking' genuine transformation. Our recipients and donors must know what UNIDO can do for them.

To start with, I established five cross-organizational teams, led by staff from my Office, with a view to elaborating new organization-wide policies and strategies in key programme support areas. These areas were:

  • Programme Quality Services;
  • Evaluation;
  • Funds Mobilization;
  • Management Information Systems; and
  • Research Activities

The teams worked on these tasks until the end of April. I am in the process of analyzing their substantive, structural and procedural recommendations and will soon act upon them. It was precisely because I attach great importance to the issues studied by these teams, that I wanted to make sure that my decisions were taken on a well-informed and assessed basis. Specifically, I wish to inform Member States that I will create independent units for Evaluation, Programme Quality, and Funds Mobilization which will be coordinated by my Office.

Let me also mention that, on the important issue of the integration of women in industrial development, I will ensure that this is reflected in all relevant programmes of UNIDO. In addition to this mainstreaming approach, I will appoint a focal point at Headquarters to address women in development issues.

In March I launched an open discussion of UNIDO's programme areas with a special retreat for all senior staff. My intention, from the very beginning, was to make sure that this programmatic transformation was driven by staff themselves in a fully participatory process and would result in enhanced impact of our services. You will certainly agree, from your own experience, that certain things, in particular of an administrative nature, can be done, and sometimes must be done, by fiat. But there is no way to impose a new vision, new priorities and new and better services to an organization the size of UNIDO. This has to be a bottom- up process. And I hasten to add that it has been a gratifying experience for me to see that our committed and competent staff have accepted the challenge to transform our programmes and improve our performance. In this context, the system of performance indicators which we are developing will play an important role and will guide us in assessing the effectiveness and impact of our activities.

Mr. President,
Allow me to complete the review of events. After the UNIDO programmatic retreat, in March 1998 I convened a meeting with key investment financing experts, to explore new opportunities and better define our role in the area of investment promotion. At the end of March, I concluded with Mr. Ricupero a Memorandum of Understanding between UNIDO and UNCTAD in which the complementary roles of the two organizations in the field of investment promotion, and the related area of small and medium enterprise development have been spelled out. I consider this to be a landmark agreement in the entire UN system. It marks a new spirit of cooperation. It signals the need and the political will to join forces for the benefit of our recipient countries. Member States will receive a briefing on this agreement during this Board.

The most exciting and most important phase of programmatic transformation was launched in April and is still ongoing. Through a series of follow-up meetings to the programmatic retreat, I have engaged the entire Organization in defining a set of integrated packages of services as called for in the Business Plan and recommended earlier in the Danish assessment of UNIDO. An important element in this exercise has been the Forum on Industrial Development in early May which brought together high-level representatives from Member States, eminent external experts and UNIDO staff. This was the first time ever that such an intense dialogue has taken place. I would like to take this opportunity to thank the distinguished Ambassadors of The Netherlands, South Africa and the United Kingdom for chairing important panels during this Forum.

I will share with Member States some preliminary information on these integrated packages of services later during this Board, and I invite you to actively participate in a substantive discussion with the Secretariat. Our proposals need to be further elaborated and I intend to have them fully worked out towards the end of July this year. These integrated UNIDO products will translate the Business Plan into concrete action. They constitute the point of convergence between the administrative reform and the programmatic transformation of UNIDO. They will respond to priority demands from recipient countries and can be meaningfully promoted vis-à-vis the donor community. This would be a radical departure from the situation prevailing at present in which UNIDO activities are fragmented among a huge number of mostly small projects with reduced impact. It is in this context that I have started an exercise to streamline our portfolio of projects and to eliminate those that have been ongoing for excessively long periods, with only negligible budgets left for implementation. This exercise has already resulted in the operational completion of 15 per cent of all ongoing projects and will complete another 18 per cent by the end of 1998. I will also subject all ongoing projects which are not in line with the Business Plan, to a special review and will ensure their swift completion.

In defining new integrated service packages I will definitely build upon what already exists in UNIDO. It is not the lack of relevant expertise which constrains UNIDO but the lack of its integration into comprehensive, mutually reinforcing packages of services. Development problems are multi-dimensional, and so will be UNIDO's response.

Mr. President,
Defining integrated services is one thing; actually implementing them is another. For the new integrated service packages to be applied, a new corporate working culture needs to be created within UNIDO. Team operations have to be induced, fully supported and rewarded. I will simply not allow a continuation of staff working primarily in a vertical manner, in splendid isolation from each other - and with ‘fire walls' surrounding the various specialized Branches so as to avoid interference by other colleagues. I know that I am exaggerating to some extent. Indeed, there has been cooperation going on in a number of successful programmes in UNIDO. But not sufficiently so. The prevailing working culture has been vertical. In the future it must become horizontal. Each integrated package of services will draw on expertise from various parts of the Organization. The country-level application of these integrated service packages will be coordinated, with more authority than before, by the Regional Bureaux of UNIDO. I consider this to be a significantly new management culture, and I will devote all my energy to making this new management culture work.

Cooperation with other UN organizations, the Bretton Woods Institutions, bilateral agencies, and the private sector is a must in this context. With a broad mandate and lack of clear focus in its activities, UNIDO programmes in the past were overlapping with those of other actors which has, at times, given rise to justified criticism. With the new focussed mandate under the Business Plan, this situation has changed. Overlap has been and will be further reduced. But this has one obvious implication: UNIDO needs to build strategic alliances with other actors so that its own support programmes and those of other actors are interlinked in order to achieve synergies and maximize joint impact. I have started this process with the UNIDO-UNCTAD agreement, and I will build similar alliances in the future with other organizations, the private sector and research institutions.

Mr. President,
Distinguished Representatives,
My first five months at UNIDO have been both challenging and rewarding. I am convinced that this Organization has an important mandate to fulfill and that it commands unique capacities and expertise to accomplish its mission. This mission, of course, is to promote sustainable industrial development in the developing countries and countries with economies in transition. And when I talk about sustainable industrial development, I mean a development pattern which is based on a competitive economy, on employment creation, and on environmental sustainability - the so-called three E's.

The world economy is undergoing truly revolutionary changes. One significant change is related to the phenomenon of globalization which in itself is inextricably linked to worldwide flows of capital and the new opportunities offered by information technology in liberalized markets. The result is a fierce competition among various production locations around the globe.

The second fundamental element of change is related to clean industry which I consider to be nothing less than the next industrial revolution. There is a premium on the early adoption of clean production technologies. Pressures are mounting worldwide, not the least through new environmental standards, international conventions and voluntary agreements. Meeting the challenge of clean industry will clearly become a question also of economic survival.

UNIDO is well positioned to assist its Member Countries in meeting these challenges through:

  • advising them on appropriate industrial policies and strategies;
  • creating the institutional capacities required for their effective implementation;
  • promoting industrial investments;
  • creating and enforcing industrial quality and environmental standards; promoting the transfer and application of clean technologies; and
  • complying with the mandates under international environmental conventions.

The measures I have taken so far have had the one ultimate purpose to better equip UNIDO to meet the high expectations held by you, our Member States. I have done this at a juncture when the entire UN system is experiencing an exciting new wave of change. The reforms launched by the Secretary-General last year have created a great and welcomed momentum. There is a renewed sense of unity of purpose, of shared values, of a common agenda and of combined strength. This is precisely what I also see evolving now within UNIDO.

In conclusion, the transformation of UNIDO requires:

  • first, a vision on the part of UNIDO of the desirable path of industrial development at the turn of the millennium;
  • second, a clear sense of unity and direction;
  • third, emphasis on cross-organizational cooperation to maximize impact;
  • fourth, a working culture and related simplified and transparent procedures that empower and encourage staff to assume responsibility;
  • fifth, a sense of continuous improvement and innovation; and
  • finally, an atmosphere of transparency and dialogue with our Member States.

Mr. President,
Africa is the developing region where the transformed UNIDO and our new services will be first put to a test. In the second half of the year, I will give priority to traveling to African countries, to listening to the problems of African Governments and private sector representatives, to learning what they expect from UNIDO, and to offering our support. The economic marginalization of African countries must not be allowed to continue. Levels of unemployment and poverty must be reduced. Africa has always been the largest recipient region for UNIDO. I shall set ambitious targets to further raise the level of our support to Africa, and to all least developed countries, as called for in the Business Plan.

Evidence so far shows that in 1996-1997, of all the UNIDO projects for Africa submitted to donors, only about one quarter have received funding whereas the funding ratios for projects in other regions have been significantly higher. While this may be due to many reasons, also related to the conditions prevailing in recipient countries, I call upon the donor community to equip UNIDO with sufficient resources to deliver its services, and to do so in particular in Africa.

Mr. President,
The Business Plan has been the guideline and point of reference for me in all actions I have taken since I took office. The conditions under which I was requested to implement the Business Plan have been very difficult , not the least because of prevailing financial constraints. I am proud to announce that I have been able, within only five months, to ensure that the Business Plan has been almost fully implemented.

Thank you, Mr. President.