COUNTRY PROGRAMMING FRAMEWORK

FOR INCLUSIVE AND SUSTAINABLE INDUSTRIAL DEVELOPMENT

2016 - 2020

This Country Programming Framework (CP) is designed to enhance UNIDO’s support to the Government of El Salvador (GOES) in the creation of a road-map towards Inclusive and Sustainable Industrial Development (ISID) as stated in the Lima Declaration adopted on the 2 December 2013 during the 15 th session of the UNIDO General Conference. In doing this, UNIDO has aligned the El Salvador government’s priorities in accordance with the United Nations Development Assistance Framework 2016-2020 (UNDAF), building on the achievements of previous developed projects. Taking into consideration that industrialization is a long-term endeavor which involves many stakeholders, efforts will be made to strengthen synergies and to minimize duplication of work by collaborating with development cooperation partners, state and non-state actors, and the private sector in the country. Given that the framework is based on established national priorities, particularly the Productive Promotion, Diversification and Transformation Policy (PFDTP), the CP will be a useful guide for UNIDO’s interventions in El Salvador over the upcoming years.

The CP builds on the UN reform programme in El Salvador, Delivering as One. The programme seeks to achieve greater linkages and better communication between the UN agencies in the country to streamline the technical cooperation assistance as well as to promote the Government leading position in development.

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LIST OF ABBREVIATIONS

ADA Austrian Development Agency

ALFA Salvadorian Association of Pharmaceutical Laboratories

ASI Salvadorian Industrial Association

ASIPLASTIC Salvadorian Association of Plastic Industries

BANDESAL Development Bank of El Salvador

CAFTA-DR Central America-Dominican Republic Free Trade Agreement

CAMARASAL Chamber of Commerce and Industry of El Salvador

CAMTEX Chamber of Textile and Apparel Industry and Free Trade Zones of El Salvador

CDMYPE Micro and Small Enterprises Development Centre

CNC National Quality Council of El Salvador

CNE National Energy Council of El Salvador

COEXPORT Corporation for Exporters of El Salvador

CONAMYPE National Commission for SMEs of El Salvador

CP Country Programming Framework/ Country Programme

CTA Chief Technical Advisor

DICOPP Productive Policies Coordination Department of Ministry of Economy of El Salvador

EFR/RPF/LAC UNIDO LAC Division of the Regional Programmes and Field Representation Department

EU European Union

FDTP Productive Promotion, Diversification and Transformation Policy of El Salvador

GDP Gross Domestic Product

GEF Global Environment Facility

GOES Government of El Salvador

INJUVE National Youth Institute of El Salvador

INQUIFAR Salvadorian Association of Chemical-pharmaceutical Industries

ISID Inclusive and Sustainable Industrial Development

ITPO UNIDO Investment and Technology Promotion Office

KMP Knowledge Management Platform

KOICA Korea International Cooperation Agency

LAC Latin American and Caribbean

MAG Ministry of Agriculture and Livestock of El Salvador

MCREEE Mesoamerican Centre for Renewable Energy and Energy Efficiency

MdeH Ministry of Finance of El Salvador

MDGs Millennium Development Goals

MEAs Multilateral Environment Agreements

MINEC Ministry of Economy of El Salvador

MIP Multiannual Indicative Programme

MTPF UNIDO Medium-Term Programme Framework, 2016-2019

MTPS Ministry of Labor and Social Prevision of El Salvador

MVA Manufacturing Value Added

OFID OPEC Fund for International Development

PA UNIDO Preparatory Assistance

PPS/PRS UNIDO Policy, Research and Statistics Department

PROESA Export Promotion Agency of El Salvador

PTC/AGR/RJH UNIDO Rural Entrepreneurship, Job Creation and Human Security Division of Agro-Business Development Dept.

PTC/ENE/CPN UNIDO Climate Policy and Networks Division of Energy Department

PTC/ENV/IRE UNIDO Industrial Resource Efficiency Division of Environment Department

PTC/TII/BCI UNIDO Cluster and Innovation Division of Trade, Investment and Innovation Department

PTC/TII/STF UNIDO Standards and Trade Facilitation Division of Trade, Investment and Innovation Department

ROMEX UNIDO Regional Office in Mexico

RREE Ministry of Foreign Affairs of El Salvador

SCT Vice-ministry of Science & Technology - Ministry of Education of El Salvador

SG-SICA General Secretariat of the Central American Integration System

SME Small and Medium Size Enterprises

STPP Presidency Technical Secretariat of El Salvador

SWOT Strength, Weaknesses, Opportunities and Threats

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UN United Nations

UNCT United Nations Country Team

UNDAF United Nations Development Assistance Framework

UNIDO United Nations Industrial Development Organization

TABLE OF CONTENTS

Executive summary ....................................................................................................................................................4

1.0 Country situation analysis ...............................................................................................................................5

1.1 The National Context ..................................................................................................................................5

1.2 Challenges to be addressed .................................................................................................................... 10

1.3 Alignment with the Sustainable Development Goals ............................................................................... 14

2.0 UN Coordination Framework ....................................................................................................................... 14

3.0 Past Cooperation and Lessons Learned ..................................................................................................... 15

4.0 Country Programme Components ............................................................................................................... 16

5.0 Management framework .............................................................................................................................. 21

5.1 Responsibility and accountability: Internal division of labor in the preparation process ......................... 21

5.2 Programme implementation..................................................................................................................... 22

5.3 Coordination ............................................................................................................................................ 22

5.4 Monitoring and Evaluation ....................................................................................................................... 24

5.5 Risks and mitigation measures ................................................................................................................ 24

6.0. Indicative budget and Fund mobilization Strategy ....................................................................................... 25

6.1 Resource mobilization strategy ............................................................................................................... 25

ANNEX I. RESULTS FRAMEWORK FOR THE COUNTRY PROGRAMME .......................................................... 26

ANNEX II. Total budget breakdown per year of CP. Detailed budget breakdown and work plan to ensure an efficient CP Coordination, Monitoring and Evaluation (Outcome 3). ....................................................................... 28

Timeline of activities for implementation of Country Programme for El Salvador (2016-2020) ........................... 29

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Executive summary

On September 2014 the Director of Productive Policies Coordination of the Ministry of Economy (DICOPP-MINEC) of El Salvador visited the UNIDO HQ’s to present El Salvador’s Productive Promotion, Diversification and Transformation Policy (FTDP). During his visit, potential UNIDO technical assistance for the policies’ effective implementation was discussed. Subsequently, various UNIDO technical branches prepared, under the overall coordination of the UNIDO Latin-American and Caribbean (LAC) Division, a general technical cooperation proposal which was submitted to El Salvador’s authorities for their analysis. Several video-conferences with national stakeholders have been held in order to discuss specific thematic issues such as; industrial policy assessment, sector strategic prioritization, investment promotion methodologies and tools.

On February 2015 the Director General received an official request from El Salvador Government (GOES) asking for UNIDO’s technical assistance on the implementation of the FTDP policy. Since then, several exchanges with the parties involved have denoted a favourable scenario for the engagement of UNIDO’s services.

The Permanent Mission Representative (PMR) of El Salvador met the UNIDO Director General (DG) on 26 August 2015 to express the GOES request for initiating a Country Programme (CP) for El Salvador and kindly requested a UNIDO’s Preparatory Assistance (PA) in this sense. The DG expressed UNIDO supports to undertake the PA, which include support for an official mission of key GOES officials from El Salvador to Vienna by beginning of 2016. This mission took place on 11-14 January with the participation of six officials representing the Ministry of Economy (MINEC), the Export Promotion Agency (PROESA), the National Commission for SMEs (CONAMYPE) and the Ministry of Foreign Affairs (RREE). Likewise, a UNIDO technical staff mission to El Salvador took place on 25-29 April to meet with involved Government counterparts and UN system/ UNIDO partners and collect information required from national counterparts for fine-tuning the interventions in the country. Numerous representatives from the public and private sector (Vice-Ministry of science and Technology; RREE; PMR to Vienna UN Organizations; MINEC; CONAMYPE; PROESA; CAMTEX; INQUIFAR; ASIPLASTIC; ASI) participated during the meetings.

As result, interventions to be performed under the CP where redefined more precisely and priority sectors selection narrowed to three specific sectors: a) textile and apparel, b) pharmaceutics and natural cosmetics, and c) plastics.

UNIDO will support El Salvador’s efforts to foster productivity transformation and Inclusive and Sustainable Industrial Development (ISID) in the identified priority sectors – through the formulation of a Country Programme Framework (CP) as requested by the GOES. The CP will contribute to the effective implementation of the FTDP policy as well as the expected outcomes in the signed UNDAF 2016-2020. UNIDO has committed to develop initiatives in the UNDAF area of cooperation Decent work and livelihood. The UNDAF process is produced and implemented in the framework of the "United in action" (Delivering as One - DaO), which was adopted from the year 2014, becoming El Salvador one of the countries at the level of the Latin American region in the approach on its own initiative. The programme creates better coordination at country level and makes the work of the United Nations more efficient and aligned to the national priorities defined by the Government.1 The CP will focus to increase share of industrial value added; increase income from value addition; create additional jobs; reduce resources consumption and pollution generation; improve the competitive position of priority sectors and support SMEs for value chain integration and insertion into new markets. The CP will focus on two main components (outcomes) with an estimated amount of a total of EUR 12,653,809:

Component 1: FDTP policy implementation enhanced fostering improved performance in selected industrial value chains.

Component 2: Approaches to efficient use of resources and cleaner industrial production introduced. The CP will mainly strengthen the institutional capacities of the MINEC as the institution coordinating the national activities for the implementation of the FTDP. Furthermore, the CP will directly benefit SMEs of the selected productive sectors as well as other stakeholders linked through related value chains. Likewise it will address specific issues and constraints faced by young workers, female workers and entrepreneurs, with the aim of granting them better access to the labor market and enhanced support for business activities. Specifically, the first component of the CP will integrate UNIDO technical assistance with

1 https://undg.org/home/regional-teams/latin-america-the-caribbean/delivering-as-one-doa-standard-operating-procedures-

sops

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remedial actions at three levels (macro-policy, meso-institutional and micro-enterprise) to maximize industrial competitiveness with a special focus on priority products, sub-sectors and value chains with high employment and export potential. The second component of the CP will foster the environmental sustainability of the country industrial strategy by applying the UNIDO Efficient Use of Resources and Cleaner Production approach and improved through regional networking.

1.0 Country situation analysis

1.1 The National Context

Table I. Basic key Indicators BASIC KEY INDICATORS

Population desegregated

by gender and age, rural

and urban.

Total: 6,126,583 (2015 est.)*

Male population: 3,028,504 (47.5%)* Female Population 3,353,899 (52.5%)*

Urban population: 4,287,823 (66.7%)* Rural population: 2,094,579 (33.3%)*

By age** 0-14 years: 27.31% (male 860,122/female 816,855) 15-24 years: 20.71% (male 638,989/female 632,741) 25-54 years: 38.1% (male 1,077,378/female 1,262,585) 55-64 years: 6.8% (male 186,570/female 230,839) 65 years and over: 7.09% (male 192,713/female 242,558) (2015 est.)

GDP per Capita (US$) $4,219.4 (2015)*

Income group Lower middle income*

Economic growth in % 2.5% (2015)*

Origin of GDP (%): Agriculture: 11.3% Industry: 26.8% Services: 61.9% (2015 est.)*

Main natural resources Hydro-Electric Power, geothermal power, petroleum (gasoline/ oil), arable land, mineral mining**

Main production Agriculture: coffee, sugar, corn, rice, beans, oilseed, cotton, sorghum; beef, dairy products**

Industry: food processing, beverages, petroleum, chemicals, fertilizer, textiles, furniture, light metals**

Competitiveness index 3.87 (Rank 95th)

Trade Exports: $4.489 billion *** Top exports: Knit T-shirts ($803M), Electrical Capacitors ($295M), Knit Sweaters ($252M), Knit Socks and Hosiery ($240M) and Coffee ($239M)

Imports: $9.213 billion *** Top imports: Refined Petroleum ($1.66B), Light Rubberized Knitted Fabric ($373M), Packaged Medicaments ($241M), Petroleum Gas ($214M) and Broadcasting Equipment ($154M) (2015 est.)

Main trading partners: Exports: United States ($2.54B), Honduras ($771M), Guatemala ($748M), Nicaragua ($326M) and Costa Rica ($241M).***

Imports: United States ($4.06B), Guatemala ($1.01B), Mexico ($770M), China ($728M) and Honduras ($549M).***

Employment Rate

desegregated by sector,

gender and age

Labor force: 2,749,893 (2015 est.)*

Agriculture: 21% Industry: 21.1% Services: 57.9% (as of 2013)*

Labor force Male: 58.27% * Labor force Female: 41.73 % (as of 2013)*

By age 0-19 years: 2.71% (male 860,122/female 816,855) 20-34 years: 59.0% (male 638,989/female 632,741) 35-49 years: 32.87% (male 1,077,378/female 1,262,585) 50 years and over: 5.42% (male 192,713/female 242,558) (as of 2011)****

MDG indicators

Proportion of households living in poverty: 40.7% (as of 2012) Number of people living on less than 1.25 dollars per day: 5.5% (as of 2012) Prevalence of underweight boys and girls under-five years of age: 8.6% (as of 2008) Net coverage rate in elementary education: 93.1% (as of 2012) Literacy rate among the population between ages 15 and 24: 97.1% (as of 2012) Ratio of girls to boys in higher education: 113% (as of 2012)

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*World Development Indicators, World DataBank, The Worldbank http://databank.worldbank.org/ **Central Intelligence Agency CIA https://www.cia.gov ***The Observatory of Economic Complexity OEC http://atlas.media.mit.edu/ ****Observatorio Laboral y Económico http://observatoriolaboral.ormusa.org/ ***** CEPAL Statistics Division http://interwp.cepal.org/

El Salvador is the smallest and the most densely populated country in Central America and it has the fourth largest economy in the region. With the global recession however, the Salvadorian economy experienced a GDP contraction of 3.1% in 2009, and economic growth has remained low since, registering a 2% growth in 2011; a 1.6% in 2012; a 1.9% in 2013 and a 2.1% in 2014. In the last decade, remittances have increased steadily in the country, having reached an all-time high of $3.32 billion in 2006. Remittances accounted for 16.2% of the country’s GDP in 2013. El Salvador’s economy is dominated by the service sector, which accounts for 62% of GDP. The manufacturing sector accounts for 27% (dominated by the “maquila” industry, which is the offshore assembly for re-export), while generating employment for 21% of the workforce, and a relatively minor contributor to the overall GDP, agriculture accounts for about 11% of the country’s GDP employing about 21% of the population.

Figure 1: Annual per capita GDP growth rate, Central America, 2000-20122

The economy has been officially dollarized since 2001. El Salvador’s most important export category remains “maquila” products, which account for 22.6 percent of all exports, and which have traditionally been composed of products with low value-added that are not technologically intensive. Thus, in 2013, the low technology productions accounted for almost 58% of the total country production3. 2 Megan Rounseville, Mateo Salazar, and Kinnon Scott, Shared Prosperity and Opportunities in El Salvador in “Shared Prosperity and Poverty Eradication in Latin America and the Caribbean”, June 2015. 3 Source: Productive Promotion, Diversification and Transformation Policy (FDTP) of El Salvador

Share of women in national or local public institutions: 27.4%(as of 2012)*****

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More than 70% of country total exports are concentrated in only three destinations (USA, Guatemala and Honduras), while the imports are dominated by the USA representing 41% of market share. The imports of goods and services represented around 61% of the GDP of that year, while the exports of goods and services reached 41%, which represented a breach of 20% between the debits and income in the commercial relations with the rest of the world4.

Table II. Sectoral diversification in products for El Salvador's exports5 Sector Average share of

sector in country's exports 2009-2013

Share of top 3 detailed products in sector's exports

Sector's leading exported product

2009 2013

Clothing 36.2 % 54.9 % 50.4 % T-shirts, singlets and other vests, of cotton, knitted

Processed food 13.9 % 35.6 % 41.3 % Raw sugar, cane

Fresh food 7.1 % 87.1 % 81.7 % Coffee, not roasted, not decaffeinated

Chemicals 7.1 % 51.3 % 38.4 % Medicaments

Miscellaneous manufacturing

6.3 % 43.5 % 53.9 % Carboys, bottles, flasks and similar articles of plastics

Textiles 5.3 % 34.5 % 30.3 % Narrow woven fabrics

The share of tradable (exports whose prices are set on the international market), in GDP has declined since 1990, likely as a consequence of low productivity of Salvadoran firms operating in this sector. El Salvador’s share of tradable as a percent of GDP has declined from 45 to 40 percent over this period and has consistently been 5 to 10 percentage points below the average for Middle Income Countries, and 10 to 15 percentage points below the Lower-Income Country average. Economic performance of the tradable sector in El Salvador is heavily affected by changes in international commodity prices. As well, the country's fragile domestic manufacturing base, combined with an increase in the cost of oil imports, contribute to a persistent structural trade deficit. Among others, it is expected that the competition with other Central American economies that produce similar goods (such as garments) might increase, particularly, since the advantage of low labour cost is being offset by its small productive capacity and difficult security situation6.

4 Source: Productive Promotion, Diversification and Transformation Policy (FDTP) of El Salvador 5 Source: International Trade Centre (2015) 6 Economist Intelligence Unit, Country Report, 2016.

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Figure 2: GDP per capita, USD7

$ 4,219.4 (2015)

Figure 3: GDP growth, %8

On the other hand, the large cost of crime and violence has been found to be a major factor in raising the cost of goods and limiting El Salvador’s ability to compete on world markets9. Table III. International development indicators (Table drawn up by UNIDO based on the identified sources) Index El Salvador Guatemala Honduras Nicaragua Costa

Rica Panama

Human Development Index (2015)

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116 128 131 125 69 60

Ease of Doing Business Ranking (2015)

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86 81 110 125 58 69

Global Competitiveness Index Ranking (2014-2015)

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84 78 100 99 51 48

Three main factors have been identified as major limitations for the economic and social development of the country13:

• the insufficient productivity (low innovation and products/market diversification; low access to technology and machinery, high costs of production in energy, transport and logistics;

• the low competitive capacity of the national exports and • high propensity to import goods.

Among others, extreme poverty is quite sensitive to economic growth. Thus, although economic growth in the country in the past decade was the lowest in Central America, it still drove a reduction in extreme poverty. A 1

7 Source: The Global Competitiveness Report 2014 – 2015 and World Bank (2015) 8 Source: The Global Competitiveness Report 2014 – 2015 and World Bank (2015) 9 Megan Rounseville, Mateo Salazar, and Kinnon Scott, Shared Prosperity and Opportunities in El Salvador in “Shared Prosperity and Poverty Eradication in Latin America and the Caribbean”, June 2015 10 Source: Human Development Report 2015 11 Source: World Bank (2015), 12 Source: The Global Competitiveness Report, WEF 2014 – 2015 13 Source: Productive Promotion, Diversification and Transformation Policy (FDTP) of El Salvador

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percent change in GDP was associated with a 2.2 percent change in extreme poverty. Low economic growth path also restricts the generation of employment within the productive sector. Several economic and sociocultural factors currently affect the job market characterized by14:

• low salaries and productivity in general, • women exclusion from most productive activities, • high unemployment of youth sector (mostly informally employed), • most of jobs are related to trade and services sector diminishing the proportion employed in

productive activities and increasing the sub-employment. The unemployment rate in 2012 was 13% among the extreme poor and 9 % among all poor. Nationwide, unemployment rates have been falling slightly, although the rate is still 6%. In addition, underemployment is a large and growing problem. According to a recent study (UNDP 2013), 46 percent of the labor force in 2012 earned less than the minimum wage or worked fewer than 40 hours a week, a share that has been rising since 2008. These trends in underemployment, coupled with the high unemployment levels among the poor, highlight the precariousness of employment in El Salvador and the continued vulnerability of much of the working population. Despite a number of challenges associated with low productivity and unemployment, El Salvador has a good potential for economic development fueled with the structural changes facilitated by the GOES and opportunities provided by regional and global markets. In particular, El Salvador is located in geographic proximity to major export markets, maintains relatively good infrastructure and distribution channels and over the last decade it has reached out to global markets as a signatory to the regional free trade agreement (FTA) with the United States, six FTAs with Chile, Mexico, Panama, Dominican Republic, Colombia and Taiwan as well as the Association Agreement between Central America and the EU. El Salvador is also part of the Tratado General de Integración Centroamericana (Central America General Treaty). On the other hand, energy resources efficient use strategies are strongly linked to the ISID implementation and are one of the relevant targets for the FTDP policy. El Salvador is Central America’s largest producer of geothermal energy and more than 60% of the energy is generated from renewable sources; however it has still a relevant dependence on oil imports for energy generation. The energy sources mix for the electricity generation15 in 2012 was hydro-electricity: 35,7%, geothermal: 24,4%, biomass: 3,1%, thermo-electricity and imports: 36,8%. The Energy National Policy focusses on several strategic goals16:

• Diversification of the energy mix and promotion of renewable energy. • Strengthening the institutional framework of the energy sector and user protection • Promotion of a new culture of efficiency and energy savings • expansion of coverage and preferential rates • Innovation and technological development • Regional energy integration

14 Source: Productive Promotion, Diversification and Transformation Policy (FDTP) of El Salvador 15 Source: Renewable Energy and Energy Efficiency Partnership (REEEP) clean energy information portal.

http://www.reegle.info/countries/el-salvador-energy-profile/SV 16 Source: national Council of Energy. Country report of El Salvador. Training and Dialogue Program on Energy Policy,

IEEJ, Tokyo 2012. Available in http://eneken.ieej.or.jp/data/4472.pdf

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1.2 Challenges to be addressed

The following analysis intends to summarize the general strengths, weaknesses, opportunities, and threats (SWOT) linked to the industrial sector in El Salvador:

Table IV. SWOT analysis

Strengths Weaknesses

Commitment of local authorities and strong Government support for sustainable and inclusive industrial development of El Salvador

Geographic proximity to major export markets Demographic bonus Free trade agreements, good infrastructure and

distribution channels

Export orientation Diversified ecosystems enabling a broad range of

natural bio-products Manufacturing of diversified textile and garment

goods & quick adaptability to fast changing fashion trends

Lowered economic growth and high unemployment

rate

Low performance and lack of competitiveness of

majority of industries

Limited access to modern technologies & equipment

and low productive performance

Scarcity of qualified national expertise and

productivity constrained by a low-skilled workforce

Low access to technology and machinery, high costs

of production in energy, transport and logistics

Insufficiency in the national institutional support and expertise capacity

Small domestic market Dependence on imports of input materials Lack of ability/flexibility to include women in

productive activities

Opportunities Threats

Free trade agreements, including the regional free

trade agreement (FTA) with the United States of

America, six FTAs with Chile, Mexico, Panama,

Dominican Republic, Colombia and Taiwan, as well as

the Tratado General de Integración Centroamericana

(Central America General Treaty) and the Association

Agreement between Central America and the EU

Strong potential to become a major supplier of higher

value added garment products, bio-cosmetics, plastic

products in the regional markets

Persistent structural trade deficit

Vulnerability to external shocks

Small domestic market

Low savings and investment

Difficult security situation (elevated levels of crime

and violence)

High unemployment, especially in the youth sector

Poverty and inequality remains high

High levels of migration and remittances

Given the country´s economic climate, the FTDP's main goal is therefore to 'contribute significantly to the elevation of the quality of human resources and their capacity to be absorbed in quality employments.' Likewise the FTDP

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aims to 'create opportunities to enrich the human capital and to generate more and better jobs.' Further, this policy seeks to 'incorporate technology and knowledge into the production in order to deliver high quality goods and services that are recognized world-wide and which can be release in the internal and external markets.' Equally important is to 'ensure the diversification of the productive base and the geographic destinies of the products, in order to foster a diversified economy with high added value in the domestic and external market, as a means of granting strategic support to the productive sector and which will be conducive to the renovation of the production capacities of the enterprises.' Overall sixteen priority sectors have been identified and divided into two groups. The first group includes the sectors which have shown to have greater comparative advantages in the international market as well as in their respective productive linkages and labor productivity. This group includes the textile and apparel industry, the chemical and pharmaceutical industry, the plastics industry, the food and beverages industry, the ICT industry as well as the creative industries. These sectors have been identifies as being in a "transformation" stage. The second group includes sectors which have a high potential for transformation in the long term. These sectors have been identified as being in the "promotion" and "diversification" stages. Below, Table V and VI present a characterization of selected sectors to be targeted by a "productive transformation" programme and a "promotion and diversification" programme. Table V shows that the total exports in the paper and cardboard and the chemicals and pharmaceuticals sectors have shown a small growth of 2-4% in the last 3 years. The textile and apparel and the plastics industries, on the other hand, have grown 14 -16% in the same period. Nonetheless the paper and cardboard and the plastics sectors have lower trade balances figures than the remaining. In the textiles and apparel sectors there is a high potential of further increasing their added value. These sectors also present the highest figures for employment generation (72%) and registered SMEs (50%) among all four sectors. In this sense, the chemicals & pharmaceuticals sector follows representing 15% and 28% respectively. Table VI indicates that the footwear sector is the only sector with a total growth in exports having increased an 8% from 2012. Other sectors meanwhile have shown a downward trend. The agro-industry is the only sector showing a positive trade balance among exports and imports in the same period. The crafts and the food and beverage sectors show the highest added value. The latter also presents the highest figures for employment generation (81%) and registered SMEs (76%) among all four sectors, followed by the footwear production sector which accounts for 12% and 13% respectively.

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Table V. Characterization of selected sectors to be targeted by a “productive transformation” programme.

2012 2013 2014 Micro Small Medium Large Total Exports Imports Total

Paper & cardboard

Toilet paper

Cardboard boxes

Waterproof cardboard

boxes

Raw material paper

Napkins

Books

Paper bags

Labels of paper or

paperboard

79.44% $273.27 $286.20 $278.89 13 4 5 5 27 2,167 $278.89 $333.00 -$54.11

Plastics

Plastic bags

Disposable plastic items

Preforms for beverage

containers

Plastic containers

PVC compounds

Plastic wastes

Plastic labels

Plastic plates, sheets,

metalized films

Printed polyethylene

Polyethylene films

71.08% $220.48 $235.29 $253.03 27 19 9 15 70 6,237 $253.03 $540.75 -$287.72

Chemicals & pharma

Medicine for human use

Gel and powder detergents

Fertilizers

Parenteral solutions

Paints

Polyester paints

Inks for printing

71.91% $251.93 $256.44 $262.89 70 23 24 21 138 9,155 $262.89 $603.13 -$340.24

Textil & apparel

Cotton towels

Fabrics of polyester-rayon

Knit fabrics of synthetic

fiber

T-shirts for adult or child

Yarns 100% cotton

Dyed synthetic fabrics

Dyed cotton fabrics

Raw fabrics of synthetic

fiber

Raw cotton fabrics

Dyed polyester fabrics

40.68% $130.50 $143.02 $152.50 2200 50 34 33 2317 44,682 $152.50 $776.82 -$624.32

Sector productive units

(Economic census 2005. Enterprises filtered by

clasification DICOPP)

Employment

generated by

the sector

(Economy

Directorate

2012)

Trade balance US$ millions

(Customs 2014)

SectorsTop 10 Products

(Mean value 2009-2014)

% of Top 10

products in

the sector

(2014)

Sector total exports

US$ millions

(Customs 2012-2014)

Source: Data provided by DICOPP- MINEC (2015)

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Table VI. Characterization of selected sectors to be targeted by a “promotion and diversification” programme.

2012 2013 2014 Micro Small Medium Large Total Exports Imports Total

Agro-industry

Natural coffee

Raw sugar cane

Cooked and frozen tuna

loins

Raw sugar (gross)

Cornstarch

Canned tuna

Sweets without cocoa

Refined sugar

Cane molasses

69.43% $848.88 $812.72 $633.58 17 8 5 5 35 1,508 $633.58 $416.00 $217.58

Food & Beverage

Extruded snacks

Isotonic beverages

Salty snacks not extruded

Biscuits

Fruit flavored drinks

Apple juice

Fruit tee

Canned soft drinks

Beer

51.45% $401.38 $420.69 $408.12 672 78 29 25 804 20,098 $408.12 $510.98 -$102.86

Crafts

Wooden packaging for

bottles

Wooden furniture

Box cases for jewelry

Furniture for stores

Chairs/ hammocks

Ceramic tiles

15.46% $33.88 $25.73 $28.31 86 1 1 0 88 244 $28.31 $76.00 -$47.69

Footwear

Natural leather footwear

Plastics boots

Plastic footwear

Rubber soles

Casual and sport footwear

Shoes with metal tip

95.90% $23.42 $23.25 $25.31 191 17 1 3 212 2,954 $25.31 $129.00 -$103.69

Sectors

% of Top 10

products in the

sector (2014)

Sector productive units

(Economic census 2005. Enterprises filtered by

clasification DICOPP)

Trade balance US$ millions

(Customs 2014)Top 10 Products

(Mean value 2009-2014)

Employment

generated by

the sector

(Economy

Directorate

2012)

Sector total exports

US$ millions

(Customs 2012-2014)

Source: Data provided by DICOPP- MINEC (2015)

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1.3 Alignment with the Sustainable Development Goals

In response to these national priorities the CP should contribute to a higher stage in E l Salvador’s industrial development in line with the SDG-9 which acknowledges that industry and industrialization are the main drivers of sustained economic growth, environmental sustainability and shared prosperity. UNIDO will support El Salvador’s efforts to foster productivity transformation and Inclusive and Sustainable Industrial Development (ISID) in the identified priority sectors – through the formulation of a Country Programme Framework (CP) as requested by the GOES. The CP will contribute to the effective implementation of the FTDP policy as well as the expected outcomes in the signed UNDAF 2016-2020. Concerning the energy issues, UNIDO could facilitate the establishment of a Mesoamerican Centre for Renewable Energy and Energy Efficiency (MCREEE) in El Salvador, as part of the Global Network of Regional Sustainable Energy Centres Programme17. This initiative could contribute the country and the region to achieve the SDG-7 related to “ensure access to affordable, reliable, sustainable and modern energy for all”.

2.0 UN Coordination Framework

The UN Coordination Framework in El Salvador is conveyed in the United Nations Development Assistance Framework for development (UNDAF) signed by the GOES and the UN in May 2015. The cycle of cooperation for the period 2016 - 2020 is the result of a broad participatory and inclusive process developed in coordination with the RREE and several UN agencies. The interventions of different agencies, residents and non-residents, were realized from their comparative advantages and based on complementarity, to avoid dispersion and duplication. This particular UNDAF process is produced and implemented in the framework of the focus of work "United in action" (Delivering as One - DaO), which was adopted from the year 2014, becoming El Salvador in one of the countries at the level of the Latin American region in the approach on its own initiative. The programme creates better coordination at country level and makes the work of the United Nations more efficient and aligned to the national priorities defined by the Government. The United Nations Country Team (UNCT) is in charge of overall UNDAF implementation. They work closely with the national counterparts through the National Steering Committee (CDN in its Spanish acronym) and the National Technical Committee (CTN in its Spanish acronym). The main problem identified during the formulation process was the existence of “people who are excluded and limited in the exercise of human rights and entitlement to a decent life”. In this regard, UNDAF supports the country in its development of strategies focusing on the improvement of quality of life and economic performance on a sustainable basis. Therefore, five areas of cooperation were defined: Goods and basic services; Decent work and livelihood; Consensus, democratic governability and public policies; Resiliency; and Save environment and coexistence. UNIDO has committed to develop initiatives in the area of cooperation Decent work and livelihood, where the current CP initiatives are closely related. UNIDO will support the Government’s goal to raise productivity in the selected manufacturing sectors, expand the private sector, and improve industrial productivity, while safeguarding the environment and respecting human rights. Further, UNIDO will support the implementation of initiatives that support and

17 http://www.unido.org/what-we-do/environment/clean-energy-access-for-productive-use/climate-policies-and-

networks/global-network-of-regional-sustainable-energy-centres.html

15

promote gender equality, in particularly the inclusion of women in productive activities at community and national level. As expected outcomes of the intervention, the population, particularly the youth, will be provided with decent work with sustainable livelihood contributing to the productive and inclusive growth and resiliency to disasters, environmental degradation and negative effects of climatic change will be boosted.

3.0 Past Cooperation and Lessons Learned

UNIDO has collaborated and supported the El Salvadorian government’s efforts to ensure the country’s industrial development through many years. To this end, UNIDO has participated in several technical assistance projects in El Salvador such as:

• “Urban and Productive Integrated Sustainable Settlements El Salvador”, a Joint Programme (JP) that was developed by UNDP, UNHABITAT and UNIDO in the framework of the UNDP-Spain MDG Achievement Fund under the thematic window “Development and the Private Sector”. The Programme addressed comprehensively the needs of housing and housing improvements for low-income. UNIDO promoted the development of the value chain for the industry of low-cost housing and create jobs and business opportunities for low-income actors involved in the program, contributing to the achievement of the MDGs.

• “Life cycle analysis of chemicals substances in El Salvador” through which national capacities in

chemicals management were strengthened, via the establishment of a National Committee, awareness raising, database on management of selected priority substances and training of trainers.

More recently, UNIDO provided assistance to the El Salvadorian government in carrying out the project entitled “Innovative Chemical Solutions-Environmentally Sound Management of Chemicals and Chemical wastes”. El Salvador became part of the project in July 2015 along with other five countries around the world. Likewise, El Salvador is involved in the ongoing regional project “Sustainable Industrial Parks development in Latin American countries”. The objective of the proposal is to enhance intra-regional cooperation and technical expertise in the planning, development and management of sustainable industrial parks. The country has recognized the need to foster UNIDO's cooperation to develop positive impacts in the areas of environmental sustainability, industrial development and South - South cooperation. Therefore the GOES is encouraging appropriate solutions to honor the current outstanding contributions to the organization, showing their good will for building a fruitful technical cooperation.

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4.0 Country Programme Components The CP will focus to

• increase share of industrial value added; • increase income from value addition; • create additional jobs, promoting the inclusion of youth and women in productive activities; • reduce resources consumption and pollution generation; • improve the competitive position of priority sectors and • support SMEs for value chain integration and insertion into new markets.

The Country Programme will focus on two main components (outcomes) with an estimated amount of a total of EUR 12,653,809:

Component 1: FDTP policy implementation enhanced fostering improved performance in selected industrial value chains.

Component 2: Approaches to efficient use of resources and cleaner industrial production introduced.

Figure 4. El Salvador Country Programme outcomes (components) and outputs structure.

The CP will mainly strengthen the institutional capacities of the MINEC as the institution coordinating the national activities for the implementation of the FTDP. Furthermore, the CP will directly benefit SMEs of the selected productive sectors as well as other stakeholders linked through related value chains. Likewise it will address specific issues and constraints faced by young workers, female workers and entrepreneurs in El Salvador, with the aim of granting them better access to the labor market and enhanced support for business activities.

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Table VII. Country Programme outcomes and potential outputs, main responsible parts as preliminary agreed among El Salvador Government and UNIDO.

CP Area Outcomes

(components)

Potential Outputs Responsible

UNIDO

Branch/Unit

Responsible El

Salvador’s Sector/

Institution

I. Inclusive

Economic

Development

1. FDTP policy

implementation

enhanced fostering

improved

performance in

selected industrial

value chains.

1.1 (On the Macro –

policy- level) Design

and setting up of policy

instruments (fiscal,

financial, technological,

etc.) facilitated.

PPS/PRS

PTC/TII/BCI

EFR/RPF/LAC

Presidency Technical and

Planning Secretariat (STPP),

Ministry of Economy (MINEC),

National Export Promotion

Agency (PROESA),

National Commission for SMEs

(CONAMYPE),

Ministry of Foreign Affairs

(RREE),

Ministry of Agriculture and

Livestock (MAG),

Vice-ministry of Science &

Technology - Ministry of

Education (VMCT),

Ministry of Finance (MH),

Development Bank

(BANDESAL),

Ministry of Labor and Social

Prevision (MTPS),

National Quality Council (CNC),

National Energy Council (CNE),

Corporation Exporters

(COEXPORT),

Chamber of Commerce and

Industry (CAMARASAL),

National Youth Institute

(INJUVE),

Salvadorian Industrial

Association (ASI)

Sectoral industrial associations

(ASIPLASTIC, CAMTEX,

INQUIFAR, ALFA)

1.2 (On the Meso–

institutional-

level)Coordination of

value chain actors

improved, innovation

and conformity

assessments services

provision capacities

enhanced.

PTC/AGR/RJH

PTC/TII/STF

1.3 (On the Micro –

enterprise- level) Small

and Medium

Enterprises (SMEs)

increase their

competitiveness in local

regional and

international markets.

PTC/TII/CBI

PTC/TII/STF

II. Environmental

sustainability

2. Approaches to

efficient use of

resources and

cleaner industrial

production

introduced.

2.1 Establishment of a

Mesoamerican Centre

for Renewable Energy

and Energy Efficiency

(MCREEE).

PTC/ENE/CPN CNE, STPP

2.2 Sustainable

Industrial Parks (SIP)

Development in Latin

American countries.

EFR/RPF/LACP

TC/ENV/IRE

MINEC

18

The first component of the CP (outcome 1) will integrate UNIDO technical assistance with remedial actions at three levels (macro-policy, meso-institutional and micro-enterprise) to maximize industrial competitiveness with a special focus on priority products, sub-sectors and value chains with high employment and export potential. At the macro-policy level, it will be necessary to very rapidly assess the status of manufacturing as a whole as well as selected sectors and related value chains, where one of the tools to be used is the “Industrial Competitiveness Intelligence System” (ICIS) to monitor the development of productive sectors, at world, regional and national level; to identify role models regarding industrial development; to monitor the impact of competitiveness policies at macro-economic and sectoral level; and to establish export opportunities and competitiveness gaps of the priority sectors. Other UNIDO tools include EQUIP18 (Enhancing the Quality of Industrial Policies), which allows to benchmark sectoral performance along economic, social and environmental parameters. Additional technological and managerial gap analysis tools available in the applied and country experience literature will also be drawn upon. Regarding mapping and evaluating of existing instruments, the main task will be to identify all policy instruments that are applicable to manufacturing and the selected sectors with the view of understanding their effectiveness, what work and what doesn’t and for which reasons. Instruments that have been successful in the past should in principle remain in place and at best be adapted to new circumstances. New instruments should be introduced to address uncovered areas or emerging issues. A major focus will be to ensure the coherence of instruments across sectors and the economy as a whole. This may require acting not only on industrial policy instruments but also on other macro or microeconomic policies. Based on UNIDO methodologies19, the creation of a specialized unit in the Ministry of Economy for analyzing sectoral data and developing and monitoring sectoral policies for the selected value chains will be also supported. This unit will perform technological benchmarking and strategic positioning of selected priority manufacturing sectors to establish export opportunities and competitiveness gaps of most promising sub-sectors/niches/products within the priority sectors. The unit also contributes to produce a demand-driven tailored action plan for improvement of the competitive position of selected products/ niches/ value chains within textile/ apparel, pharmaceutical/ cosmetics and plastics/ packaging priority sectors. To facilitate access to the necessary financial resources to support the formulated action plans, it will be facilitated the establishment of a public-private trust fund for the selected value chains, managed by a multi-stakeholder committee to promote investment in pilot processing plants, access to equipment, technology transfer, training, knowledge dissemination, market information services as well as research and development. At the meso-institutional level, interventions will focus on supporting the institutionalization and management of chain-specific platforms that include all private chain actors and innovation-promoting agents and providing technical and market foresight information to be diffused to platform members for sensitization and to develop strategies of diversification and transformation. The setting up of three chain-specific technological innovation centres and building up of their technical, managerial and business planning capacities to provide services to the productive sector on matters of productivity increase, quality compliance, link to markets and finance will be supported. These centres will develop and implement sectoral training programs on different matters of technology use, standards compliance, strategic diagnosis and modernization techniques, export promotion approaches and methodologies, value addition, marketing and business administration. It will be also promoted partnerships between innovation centres, chain actors and international centres of excellence with the aim of providing technology exchange and technical capacity strengthening programmes (e.g. through south-south cooperation). This will include the organization of training/study tours to international centres of excellence and buyer platforms promoting market development, new products and technological innovation.. For example, in the plastics sector it will

18 https://institute.unido.org/equip-enhancing-the-quality-of-industrial-policies-toolbox 19 https://www.unido.org/fileadmin/user_media/Publications/Research_and_statistics/Branch_publications/Research_and_P

olicy/Files/Brochures/Strategic%20industrial%20intelligence%20and%20governance.pdf

19

be promoted the implementation of demonstrative experiences in selected companies through the employment of proven process optimization mechanisms and the development of new products though south-south cooperation with UNIDO partners international centres specialized in the plastics sector, like the International Centre for Advancement of Manufacturing Technology (ICAMT)20, in India, stablished as part of national programme21 to assist 100 SMEs of plastic clusters for building capacity, enhancing competiveness, improving delivery mechanisms and upgrading manpower skills; or the TÜBİTAK Bursa Test and Analysis Laboratory (BUTAL)22, in Turkey, which advanced testing and analytical facilities where used for a UNIDO regional training on latest plastic recycling technologies23. Additionally through the UNIDO Investment and Technology Promotion Offices (ITPO) Network24 will be promoted also the partnership among the local innovation centres created and recognized worldwide institutions and companies related to the selected sectors. Besides, the quality infrastructure will be consolidated for the provision of effective conformity assessment services (i.e. testing, inspection, certification and calibration), through (i) training and capacity building of assessorand auditors, (ii) strengthening the technical competence and accreditation of laboratories, and (iii) the development and/or adoption of relevant standards for selected priority sectors. This will include also the design and implementation of a quality label to be issued by the innovation centres to compliant companies. At the micro-enterprise level, interventions will aim to identify and select a pilot group of enterprises in each of the identified priority sectors willing to participate in the programme. Jointly with trained national expertise and in collaboration with CONAMYPE, it will be conducted a thorough enterprise diagnosis in selected groups of SMEs producing the identified priority products and assist in the formulation of enterprise upgrading and modernization plans to improve the enterprises performance, competitiveness and positioning in the market. Jointly with the trained national expertise and CDMYPE, coach pilot beneficiary enterprises of the priority industrial sectors on the implementation of comprehensive enterprise upgrading and modernization activities with a focus on productivity, competitiveness, value chain development, quality and industrial performance of beneficiary enterprises. It will be supported also the technological upgrading through the transfer of new and enhanced technology fit to local conditions. For example, in the textile sector, technologies for increasing the value added by making complex tissues and synthetic fibres, fostering productivity and export under the CAFTA framework, will be explored. It will also be encouraged the innovation capacity of the industry through the development of technologies of synthetic fibres of last generation (Digitex) and elaboration of organic textiles; the insertion of technologies like Digital Programmed Jetting of Fluids for multifunctional protective textiles, and recycled textiles. The development of marketing strategies to access new markets (domestic and export sales) with new and diversified products will also be supported. The second component of the CP (outcome 2) will foster the environmental sustainability of the country industrial strategy by applying the UNIDO Efficient Use of Resources and Cleaner Production approach25 and improved through regional networking26. Two main initiatives have been initially identified for this component as indicated in Table VII. The first one is related to the creation of a Mesoamerican Centre for Renewable Energy and Energy Efficiency (MCREEE) that has been announced27 on 29 February 2016 as a strategic partnership by the

20 https://www.unido.org/fileadmin/user_media_upgrade/Resources/Evaluation/FINAL_Evaluation_report_ICAMT.pdf 21 https://www.polymerupdate.com/general/special-features/articles/lekhraj/lekhrajghai-15042014-000001.pdf 22 http://butal.tubitak.gov.tr/en/kurumsal/about-us 23 http://www.bmdergi.org/en/unido-recycling-technologies-in-plastics-industry-programme-completed/ 24 https://isid.unido.org/itpo.html 25 http://www.unido.org/what-we-do/environment/resource-efficient-and-low-carbon-industrial-production/industrial-

resource-efficiency.html 26 http://www.unido.org/fileadmin/user_media_upgrade/What_we_do/Topics/Resource-efficient__low-

carbon_production/leaflet_sans.pdf

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General Secretariat of the Central American Integration System (SG-SICA) and UNIDO. This was based on a decision taken by the Council of Energy Ministers of SICA on 8 December 2015, asking the General Secretariat to initiate preparations for a regional centre with the mandate to promote sustainable energy markets, industries and innovation in the Central American region. Together SG-SICA and UNIDO, with financial support of the Austrian Development Agency (ADA), will execute a consultative preparatory process to assess the added value, feasibility and best technical and institutional design for such a centre. The process will include the development of a needs assessment, consultative workshops, as well as the development of a project document on the centre’s first operational phase. In case the center turns out to be feasible, it could offer the following services to national governments, local stakeholders and international partners not only for El Salvador but for the entire Mesoamerican region:

• Bridging the gap between global initiatives and local execution • Serving as institutional hubs for SE4All • Coordinating and ensuring coherence of donor and national activities in the sector • Coordinating regional RE&EE programs, projects and activities • Mobilizing grants for programmes and projects • Supporting national governments in developing, executing and monitoring policies, laws and

standards • Formulating documents for international and regional negotiation processes • Providing reliable RE&EE investment and market data • Promoting investment in sustainable energy • Enhancing market opportunities for local energy companies • Calling for proposals for projects and programmes • Coordinating regional training, knowledge and applied research networks • Implementing regional awareness-raising campaigns • Facilitating technology transfer and promoting south-south and north-south cooperation

The centre will become part of the Global Network of Regional Sustainable Energy Centers28, a South-South multi-stakeholder partnership, coordinated by UNIDO in partnership with various regional organizations which are already working in other parts of the world, including in Africa, the Pacific and the Caribbean regions. The second initiative under the second component of the CP is a regional project that supports the establishment of a cooperation platform for Sustainable Industrial Parks development in eight LAC countries (Argentina, Bolivia, Chile, Costa Rica, El Salvador, Guatemala, Panama and Paraguay). The objective of the proposal is to enhance intra-regional cooperation and technical expertise in the planning, development and management of sustainable industrial parks by: a) establishing and consolidating national and regional Sustainable IP development and cooperation strategies; b) strengthening national capacity in Sustainable IPs methodology, management and policies, and resource efficient and cleaner production (RECP) best practices; and c) developing Sustainable IPs technical guidelines to enable future replication. The project first phase is financially supported by the UNIDO LAC Trust Fund. A launch workshop has been organized in April 2016 in Vienna to discuss the each country’s technical needs and potential intra-regional cooperation, as well as to identify national coordination platforms for the planning and management of Sustainable IPs. Furthermore, it presents an opportunity for policy-makers and technical experts from the region to discuss and exchange ideas, knowledge and expertise. A technical workshop on November 2016 is also planned to review progress on the implementation of each technical component. Besides, potential donors and financing mechanisms for the second phase will be identified. An action plan identifying South-

27 http://www.unido.org/news/press/unido-supports-creation-of-mesoamerican-centre-for-renewable-energy-and-energy-

efficiency.html 28 http://www.unido.org/what-we-do/environment/clean-energy-access-for-productive-use/climate-policies-and-

networks/global-network-of-regional-sustainable-energy-centres.html

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South cooperation opportunities and triangular partnerships, as well as potential complementarities among different countries will be formulated. It will be created an intra-regional Knowledge Management Platform (KMP) to capture and disseminate the results obtained during the project implementation. The KMP will be linked to the already existing UNIDO RECP net Knowledge Management System (KMS)29.

Table VIII. Country Programme areas and alignment with national, UNDAF and UNIDO priorities.

CP Priority area

Alignment with relevant national sector

priorities

Alignment with relevant

UNDAF priorities

Alignment with Other

national/regional/ international frameworks

and commitments – SDGs

30

Alignment with UNIDO’s priorities -

ISID (Source: UNIDO MTPF

2016 – 2019)

I. Inclusive

Economic

Development

Production Promotion Policy: support the business sector, integrate the activities of the public sector, the private sector and academia. International Services Policy: creation of incentives to explore new trends in services trade and investment, and the promotion of activities with export potential. Foreign Investment Policy: creation of legal instruments that promote competitiveness. Policy on Protection, Promotion and Development of Micro and Small Businesses: stimulation of Micro and Small businesses to improve their competitive capabilities for participation in the national and international markets. Policy for the Creation of a Salvadorian Quality Control System: enhancing business competitiveness, and promoting quality in the activities of production of goods and services through sustainable innovation. Policy on Industrial Export Processing Zones (EPZs) and Trade: promotion of foreign investment and job creation in productive sectors, especially those with a high technological component. Foreign Investment Policy: promotion of foreign investment in order to contribute to economic and social development of the country, increasing productivity of the country.

Area: Decent work and livelihood Outcome: Population has decent work with sustainable livelihood contributing to the productive and inclusive growth.

SDG1, targets 1.4 and 1b SDG8, targets 8.2, 8.3, 8.5 and 8.6 SDG9, targets 9.1, 9.2, 9.3, 9.4 and 9.5 SDG17, targets 17.1, 17.6 and 17.11

C1. Creating shared prosperity C2 Advancing economic competitiveness. C4.2 Industrial policy advice, research and statistics

II. Environmental

sustainability

Energy policy: promotion of energy efficiency and renewable energy for energy matrix diversification.

Area: Resiliency Outcome: Population is resilient to disasters, environmental degradation and negative effects of climatic change.

SDG7, targets 7.1, 7.2 and 7b SDG11, target 11a SDG12, targets 12.5 and 12.6 SDG17, target 17.7

C3. Safeguarding the environment

In line with above CP areas, two specific thematic outcomes (programmes) will be further discussed considering several identified priority sectors among all stakeholders.

5.0 Management framework

5.1 Responsibility and accountability: Internal division of labor in the preparation process

The CP is formulated jointly with all actors from UNIDO and relevant national external stakeholders.

29 http://www.recpnet.org/ 30 See approved at United Nations 69 Summit for the adoption of the post-2015 development agenda: https://sustainabledevelopment.un.org/?menu=1300

22

The Latin America and the Caribbean Division (EFR/RPF/LAC) plays the role of main coordinator, responsible for the formulation of the CP document and it’s submission for approval by all the parties involved in close coordination with the relevant units of Technical Cooperation. The CP must rely on the analysis of other regional and country reports prepared by other UN agencies and other institutions.

5.2 Programme implementation

The projects that support the CP will be mainly implemented under the national execution modality. National institutions and actors involved in the CP will take the main responsibility for the results, to which UNIDO will contribute. The projects will be implemented by several national and local institutions. Likewise, at the request of the Government, UNIDO will support the implementation of specific projects and/or activities. By agreement between UNIDO and the Government other implementation modalities may be applied as indicated in the Guidelines for the Conclusion and Administration of Implementation Arrangements with UNIDO Partner Organizations31.

5.3 Coordination

A Steering Committee (SC) will be created for the overall coordination of the CP.

This Committee shall meet once a year, having among its functions:

Provide strategic guidance and oversight to the implementation of the CP

Review the progress and challenges of the implementation, and make decisions on the measures necessary to achieve the expected results

Analyse the relevant alignment with national priorities and make the necessary adjustments

Review the availability of resources, agree on actions for the mobilization of financial resources, and meet the financial performance

The CP SC will be co-chaired by RREE, MINEC and UNIDO. MRREE will act as UNIDO political counterpart, while MINEC will be the technical counterpart. The Integrated System Committee for Promoting Entrepreneurial Production (Comité del Sistema Integral de Fomento de la Producción Empresarial) as a relevant existent coordination mechanism in the country will also act as national articulator for the CP implementation. Sub-sectoral and Thematic Committees will be created to coordinate, monitor and assess interventions in each selected priority sector. These sub-sectoral committees will be subordinated to the CP SC. UNIDO shall be represented through of Latin America and the Caribbean Bureau, or the Regional Office in Mexico (ROMEX), or by the existing representation in the field. To ensure a more efficient coordination, the CP will be directly coordinated at the field by a National Country Programme Coordinator or Chief Technical Advisor (CTA) that will respond to the UNIDO CP Team. For this purpose a UNIDO CP Office will be supported in El Salvador in agreement with the GOES and for the duration of the CP initially agreed (2016-2020) but it could be subsequently extended upon agreement of all stakeholders. The CTA will participate in the project steering committees that will be created for each initiative/project under the CP to ensure strategic coherence within the CP and also represents UNIDO at the

31 Guidelines for the Conclusion and Administration of Implementation Arrangements with UNIDO Partner Organizations UNIDO/DGAI.20/ Rev.of 15 March 2013

23

UN Country Team for monitoring/ assess UNDAF actions and encourage synergies with other UN initiatives/ projects within the DaO framework.

Figure 5. Interrelation among Country Programme overall management and component 1. (Illustration)

24

5.4 Monitoring and Evaluation

The RREE and MINEC, in unison with UNIDO, will lead the review process in the periods established for the CP cycle and it shall boost the assessments as required.

At the end of each year, a progress report shall be prepared by the CPC in order to show the achievements of the CP in line with the proposed aims.

A mandatory mid-term evaluation should be performed at the end of 2017. The program's achievements and their corresponding objectives will be reviewed and necessary recommendations for better implementation of the CP will be formulated.

A final independent evaluation will be conducted to identify achievements and its impact on economic development of the country, areas of improvement and lessons learned to increase efficiency, effectiveness, impact and sustainability of subsequent CPs.

5.5 Risks and mitigation measures

Table IX. Risks and mitigation measures

5.6 The legal Context:

The Government of the Republic of El Salvador agrees to apply to the present Country Programming Framework document, mutatis mutandis, under the provisions of the Standard Basic Assistance Agreement between the United Nations Development Programme and the Government, signed on 21 March 1975 and entered into force on 23 June 1975.

Possible risks in the implementation the CP

Risk definition Mitigation measures Responsible

Complex coordination mechanism of CP

Ensuring a clear definition of the roles of the actors involved and creates a schedule for conducting periodic contacts (meetings, conference calls, etc.) for the coordination and monitoring of the Steering Committee.

EFR/RPF/LAC, RREE, MINEC, El Salvador Permanent Mission in Vienna

Little interest of donors \ development institutions to provide funding to the CP

To agree a detailed action plan for the Fund mobilization Strategy including the attractive diffusion of the CP among potential donors.

EFR/RPF/LAC, RREE, MINEC, El Salvador Permanent Mission in Vienna

Changing national priorities

To establish a close dialogue between UNIDO, RREE, MINEC, and Salvadorian counterparts for continuous updating of CP.

EFR/RPF/LAC, RREE, MINEC, El Salvador Permanent Mission in Vienna

25

6.0. Indicative budget and Fund mobilization Strategy

6.1. Indicative budget

Table X. Indicative budget (EUR)

Components Outputs Resources

Needed Funds

mobilised Resources to be

mobilized

Outcome 1

Output 1.1 1,797,297.00 1,797,297.00

Output 1.2 4,180,180.00 4,180,180.00

Output 1.3 2,792,793.00 2,792,793.00

Subtotal 8,770,270.00 0.00 8,770,270.009

Outcome 2

Output 2.1* 2,702,700.00 554,000.00 2,148,700.00

Output 2.2* 69,150.00 69,150.00 0.00

subtotal 2,771,850.00 623,150.00 2,148,700.00

Outcome 3. CP Coordination, M & E

135,000.00 135,000.00

Support costs € 990,070 € 81,016 € 909,054

Total CP € 12,653,809 € 704,214 € 11,949,595

*Regional projects

See also Annex 2 on total budget breakdown for each year, as well as detailed budget breakdown and work plan to ensure an efficient CP Coordination, Monitoring and Evaluation (Outcome 3).

6.1 Resource mobilization strategy

The Government of El Salvador is committed to make all necessary efforts, in close cooperation with UNIDO, to raise the necessary funds for the implementation of the CP. As part of the strategy for resource mobilization, several funding sources will be explored including traditional donor countries of UNIDO as well as multilateral and development finance entities. The UNDAF approved for the country for the period 2016 - 2020, estimates a total amount of USD 412 million as programmatic resources that needs to be mobilized by all UN participating agencies. In the case of UNIDO, estimated funds of EUR 8.8 million for the component 1 of CP has been included as part of the total figures to mobilize. Presentations to potential donors shall be held both in the country and in their respective capitals. Other actions will be developed in the UNIDO headquarters in Vienna, Austria. It is expected also that limited funds from UNIDO shall be available for coordinating, fund mobilization management, and other activities related to the monitoring and evaluation of CP.

26

ANNEX I. RESULTS FRAMEWORK FOR THE COUNTRY PROGRAMME

Country Programme Hierarchy Indicators Means of verification Risks

Impact: Foster productive transformation and inclusive and sustainable industrial development

Purpose: Support the effective implementation of El Salvador’s ”Promotion, Diversification and Productive Transformation Policy” (FTDP for its abbreviation in Spanish) as well as the expected outcomes in the UNDAF 2016-2020

Outcome 1: FDTP policy implementation enhanced fostering improved performance in selected industrial value chains

- Increase in revenues in each priority sector identified - Increase in exports in each priority sector identified - Increase in industrial value added in each priority sector

identified - New jobs created in the selected industrial value chains

- International and national expert reports

Output 1.1: (On the Macro-policy level) Design and setting up of policy instruments (fiscal, financial, technological, etc.) enhanced.

- Industrial status assessment and industrial policy analysis

- Strategic positioning report available - Policy instruments approved and in operation - Policy unit operational - Agreed tailored action plan for improvement of the

performance of priority sectors - Value chain development fund feasibility study

completed

- International and national expert reports

- Training reports - Reports on policy instruments - Sectoral policy analysis documents - Strategic positioning report

- Risk of limited availability of needed funds - Limited capacity for coordination between

different actors involved.

Output 1.2: (On the Meso-institutional level) Coordination of value chain actors improved, innovation and conformity assessment services provision capacities enhanced.

- Value chain committees effectively foster innovations in the priority sectors

- Innovation centers provide effective services to chain actors

- Quality and innovation label established - Number of new demand-driven services provided to

local priority industrial sectors - Number of innovative projects/products/technologies

promoted

- International and national expert reports

- Training reports

- Risk of limited availability of needed funds - Limited capacity for Lack of coordination

between different actors involved.

Output 1.3: (On the Micro-enterprise level) Small and Medium Enterprises increase their competitiveness in local regional and international markets

- Integration in foreign markets (including EU) extended - Improved economic performance of beneficiary

enterprises, e.g. reduced factor costs, (manufacturing) value added, customer satisfaction, etc.

- Increase in turnover by beneficiary enterprises - Increase in quality and quantity of goods and services

produced by the selected beneficiary enterprises

- Beneficiary enterprise performance reports/financial reporting

- International and national expert reports

- Training reports - Project reports

- Risk of limited availability of needed funds for the implementation of modernization plans/export promotion activities, etc. In such case expected outputs will not be fully achieved or will be subject to delays;

- Low risk of an insufficient number of local companies persuaded to opt into the current programme or that participating companies drop out for reasons beyond the programme's control;

- Individual companies do not actively collaborate with the programme throughout its different stages.

Outcome 2: Approaches to efficient use of resources and cleaner industrial production introduced

- New strategies on renewable energy and RECP developed and adopted

- National capacities on efficient use of resources and

- International and national expert reports

27

cleaner industrial production improved

Output 2.1: Establishment of a Mesoamerican Centre for Renewable Energy and Energy Efficiency (MCREEE).

- Analysis for the establishment of the regional centre conducted

- Supported SICA Member States formulation of regional programmes and projects on sustainable energy

- Developed regional capacities - Improved regional knowledge management and

exchange, technology innovation, policy and legislation, - Promoted regional investment and business

- Needs assessment study on feasibility and best technical and institutional design for such a centre.

- Consultative workshops, - Business plan of centre’s first

operational phase.

- Limited capacity for coordination between different actors involved.

- Regional cooperation willingness remains favourable among participant countries.

Output 2.2: Sustainable Industrial Parks (EIP) Development in Latin American countries.

- Number of companies in EIPs implementing RECP options and technology

- Increased RECP technical capacity at national and regional level

- Monitor productivity and reductions in energy, materials and water use, air emissions, waste water and waste as result of RECP application.

- Number of national and regional project proposals (prepared/ submitted to donors for funding and implementation).

- Regional EIP Coordination Committees established.

- Baseline survey, - Final evaluation, - Data provided by the participating

Industrial parks and companies.

- Regional cooperation willingness in Industrial Parks planning and management and their integration into regional value chains remain favourable among participant countries.

- Insufficient resources due to poor interest of donors\ development institutions to provide funding for 2nd phase.

Coordination, Monitoring & Evaluation

Output 3.1 CP coordination – UNIDO CP Office stablished to ensure local CP coordination and fully recognized by the government, the UNCT and other relevant stakeholders in the country.

– High level CP Steering Committee stablished, as well as subordinated Sub-sectoral and Thematic Committees to coordinate, monitor and assess interventions in each selected priority sector.

– Quarterly technical consultations between project working teams

– Fund mobilization strategy developed, including donors/stakeholders meetings to promote the CP and workshops for developing new initiatives.

- Systematic reports of CP implementation prepared by the CPC, including reports on synergies among different training workshops, courses and complementary actions among different projects.

- CP Steering Committee meetings reports.

- Reports on UNCT meetings and UNDAF monitoring and evaluation activities.

- Reports on actions performed for CP resources mobilization.

- Insufficient resources to support the local coordination.

- Limited capacity for coordination between different actors involved.

- Insufficient commitment of different national stakeholders due to diverse interests.

- Poor willingness to cooperate among particular project managers and teams.

- Insufficient resources due to poor interest of donors\ development institutions to provide funding.

Output 3.2 Monitoring schedule – Timely baseline data collection – Timely review meetings of CP Steering Committee,

based on analysis of targets and other monitoring data – Regular monitoring visits to ongoing projects

- Systematic reports of CP implementation prepared by the CPC.

- Individual ongoing projects progress implementation reports.

- Institutional reports and diffusion media communications of involved actors (enterprises, research & development institutions, communities).

- Insufficient resources due to poor interest of donors\ development institutions to provide funding.

- Migration of local project staff to other sectors.

- Limited capacity for coordination between different actors involved.

Output 3.3 Evaluation plan - 3 thematic evaluations (one per selected priority sector) on progress of impacts on ISID gender and social issues

- Thematic evaluations reports of each project outcome.

- Limited capacity for coordination between different actors involved.

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in local communities. - Consistent and timely midterm (end of 2018) and

independent (2020) evaluations

- Midterm and independent evaluations reports.

- Delays in decision-making.

ANNEX II. Total budget breakdown per year of CP. Detailed budget breakdown and work plan to ensure an efficient CP Coordination, Monitoring and Evaluation (Outcome 3).

Total budget breakdown of CP per year.

CP 2016 - 2020 Total (EUR) 2016 2017 2018 2019 2020

OUTCOME 1 8,770,270

1,385,135 3,000,000 3,000,000 1,385,135

OUTCOME 2 2,771,847 771,847 1,000,000 1,000,000 OUTCOME 3

(CP coordination, M & E) 135,000

23,000 45,000 38,500 28,500

Total excluding support costs 11,677,117 771,847 3,022,500 4,045,000 3,045,000 1,407,635

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Timeline of activities for implementation of Country Programme for El Salvador (2016-2020)

Outputs

/Activities Description

2017 2018 2019 2020

6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7

Output 3.1 CP coordination

Activity

3.1.1

Set up the CP

Coordination Office and

organize quarterly

technical consultations

between project working

teams and prepare CP

progress reports.

Activity

3.1.2

Support the creation and

regular operation of High

level CP Steering

Committee and

subordinated Sub-

sectoral and Thematic

Committees.

Activity

3.1.3

Organize donors/

stakeholders meetings to

promote the CP and

workshops for

developing new

initiatives.

Output 3.2 Monitoring 2017 2018 2019 2020

Activity

3.2.1

Prepare reports on

baseline data collection

and meetings of CP

Steering Committee,

analysis of targets and

other monitoring data.

Activity

3.2.2

Monitoring visits to

ongoing projects and

technical consultations

Output 3.3 Evaluation 2017 2018 2019 2020

Activity

3.3.1

Thematic evaluations

(one per selected priority

sector) on progress of

impacts on ISID, gender

and social issues in local

communities.

Activity

3.3.2

Midterm (end of 2017)

and independent (2020)

evaluations