Poverty reduction through productive activities

The international community is committed to achieving the Millenium Development Goals (MDGs) by 2015, and, in particular, to halving the proportion of the world’s poor whose income is less than one dollar a day. The reduction of poverty through productive activities supports the efforts of developing countries in addressing this challenge. It also addresses the closely related MDG of promoting gender equality and empowering women as effective ways to combat poverty, hunger and disease.

As the primary driver of economic growth and employment creation, the private sector has a central role in poverty reduction and the achievement of the MDGs. Private sector led industrial development plays a significant role in bringing about the much needed structural changes that can set the economies of poor countries on a path of sustained economic growth. Industry provides a seedbed for entrepreneurship, promotes business investment, fosters technological upgrading and dynamism, improves human skills and creates skilled jobs, and through intersectoral linkages establishes the foundation for both agriculture and services to expand. All these factors contribute to sustained productivity improvements that can ensure pro-poor outcomes and contribute to increased living standards in poor countries.

Governments have a strong interest and a key role in regulating and facilitating the development of the private sector. At the same time, governments play a key role in ensuring that economic growth provides opportunities for the poor to engage in productive activities. In this context, the public sector must promote a policy and institutional environment that enables the private sector to flourish and become an effective driver of sustainable and inclusive growth.

To increase the impact of the development of the private sector on the reduction of poverty, UNIDO will support the efforts of developing countries to improve the business environment and lay the policy and institutional foundations for the development of a vibrant private sector, it will promote domestic entrepreneurship and in particular development of the entrepreneurial skills of disadvantaged groups, it will link domestic enterprises to international investment and technology flows, and it will facilitate access to resources and support services that small and medium enterprises (SMEs) require to become more competitive. Innovation, entrepreneurship and competition are important sources of productivity growth that, with appropriate policy and incentive structures, can bring about pro-poor market outcomes in the form of more sustainable jobs and incomes as well as affordable goods and services.

In developing countries, local SMEs are responsible for most of the economic activities that support productivity enhancement and poverty reduction. This is particularly the case with the agriculture-based economies in Africa and the LDCs, where the development of agro-based enterprises contributes to poverty reduction while at the same time enhancing productivity. In this context, building up and strengthening productive capacities through development of SMEs in competitive sectors takes a central role. The provision of affordable energy for productive use and income generation as well as the promotion of sustainable production in poor communities are essential elements of any sustainable economic development.