To: Technical Cooperation Division, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry
Business strengthening of Asia Industry infrastructure in 2016
Investigation on design support
of automobile industry system
in South Africa
<Summary>
Feb. 1, 2017
GENDAI Advanced Studies Research Organization
Table of Contents
Introduction・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 1
General Overview
(1) The present condition of the automobile industry・・・・・・・・・・・・・・・・・・・・・・・・・ 2
(2) Framework of proposal・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8
(3) Particular proposals・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 9
(4) Policy priority・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 10
(5) Validation of the policy scenarios using CGE Model analysis・・・・・・・・・・・・・・ 11
Investigation Results
Ⅰ. Present condition of automobile industry・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 16
Ⅱ. Legal consistency of automobile industry policy
(1) Details of APDP system design and their challenge・・・・・・・・・・・・・・・・・・・・・・・ 18
(2) Details of the proposals made by the previous research・・・・・・・・・・・・・・・・・・・ 20
(3) Verification of consistency with WTO rules・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 23
Table of Contents(continued)
Ⅲ. Analysis of impacts from introducing automobile industry policy
(1) Overview of policy simulation analysis・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 26
(2) Analysis of economic ripple effect of automobile industry in South Africa・・・
29
(3) Simulation analysis of policy assessment of current APDP scheme・・・・・・・・ 31
(4) Simulation analysis of policies of additional or alternative support
measures for PI and VAA policies・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 35
(5) Simulation analysis of policies of additional or alternative support
measures for AIS policy・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 38
(6) Simulation analysis of human resource development and promotion
measures to encourage use of alternative domestic products・・・・・・・・・・・・・ 40
(7) Simulation analysis of effects of automobile industry policy towards
post APDP・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 42
Ⅳ. Proposal
(1) Basic ideas of proposal・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 47
(2) Framework of proposal・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・
48
(3) Particular proposals・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 49
Introduction
■ Since 2012,South Africa’s real GDP growth rate has been at a low level of 1-2% and the
unemployment rate is
staying at a high level of 20% because of the depression of export of mineral resources that is the
driving force of the country’s economy.
■ To escape from such circumstances, the economic structure must be restructured from the one
depending on resources and external factors to the one focusing on the manufacturing industry
which has big impacts on job creation and is independent of the external factors.
The automobile industry which accounts for 7.2% of GDP and incorporates significantly broad
component and parts-supply industries could be the key factor for the economical and social
development of South Africa.
■ In light of the awareness of these issues, the “FY2015 Asia Industrial infrastructure
improvement,etc.:South Africa Automobile Industry System Design Support Research”
organized the issues for reviewing research of automobile industry in South Africa from 2020
and made several proposals regarding directions of future policy.
■ The “FY2016 Asia Industrial infrastructure improvement,etc.:South Africa Automobile Industry
System Design Support Research” reviewed from [1] legal viewpoint of whether they were legally
consistent with the WTO rules and [2] viewpoint of a quantitative analysis of how implementation
of a support system would cause advantageous and disadvantageous effects to provide more
1
specific proposals for the automobile policy in South Africa from 2020.
General Overview
ーThe present condition of the automobile industry in South Africaー
（１） The Present condition of the automobile industry
■The automobile policies in S.A. (MIDP & APDP) have contributed to the increase
in automobile production and export, and the automobile industry has helped the
development of the economy of South Africa.
■ However, judging from the present condition, the industry now faces the serious
problems outlined below.
①Sluggish domestic market and high import vehicle rate(about 55%) constrain
the quantitative expansion of domestic sales of S.A made vehicles
(refer to p3）
② Competitive position of South Africa in the global automobile industry is
relatively declining, and the ability to grasp the future global market is
threatened(p4,5)
③ Although the current automobile policy (APDP) contributes to the increase of
the assembly production volume, since it is not the policy linked with the
improvement of the local content rate, the employment creation effect is
smaller than other industries(p6)
２
General Overview
ーStructural change of vehicle production and sales in South Africaー
■In recent years, the volume of vehicle production and export has been increasing
steadily. On the other hand, the domestic sales declined consecutively in 2014 and
2015, hovering around 600 thousand units.
■Furthermore, automobile import expanded after the financial crisis, which in turn
dampened the domestic market. The S.A made car sales is now below 300 thousand
units, far less than the peak of 410 thousand units in 2006.
■ Vehicle production/domestic sale/export/import/S.A made vehicle sale in South Africa
10 thousand units
80.0
70.0
Domestic sales
60.0
Production
50.0
Import
40.0
30.0
S.A made car sales
20.0
10.0
Export
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.0
Source）NAAMSA, JAMA
３
General Overview
ーComparison with competing automobile emerging countries(1/2)ー
■The newly competing countries including Thailand and Mexico have been
strengthening their presence in global automobile industries since the late 2000s
by boosting their automobile production and sales.
■On the other hand, the global presence of S.A. auto industry lags behind that
of competing countries, reflecting its slow growth in production and sales.
■ Vehicle production of South Africa and its competitors
10 thousands units
450.0
10 thousands units
400.0
India
400.0
Mexico
350.0
■ Vehicle domestic sales of South Africa and its competitors
India
350.0
300.0
300.0
Brazil
250.0
200.0
Thailand
200.0
150.0
Turkey
150.0
250.0
100.0
South
Africa
50.0
0.0
Brazil
Thailand
Mexico
100.0
Turkey
50.0
South
Africa
Source）OICA、JAMA
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
19 94
19 95
19 96
19 97
19 98
19 99
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
20 08
20 09
20 10
20 11
20 12
20 13
20 14
20 15
0.0
Source）OICA、JAMA
4
General Overview
ーComparison with competing automobile emerging countries(2/2)ー
■ The automobile export value of S.A. also falls far behind from that of Mexico and
Thailand. The latter two countries have developed their auto industry by boosting export.
■The export value of components in S.A. is in a similar situation to that of
automobiles. While competing countries that have succeeded in developing strong
components industry are enjoying surplus in the components trade, S.A. suffers
a deficit in the component trade, reflecting its weak supporting industry.
■ Vehicle export/import value of South Africa and
its competitors(2015)
■ Export/Import value of automobile components of South Africa
and its competitors（2015）
unit：million dollar
unit：million dollar
60,000
45,000
40,000
50,000
35,000
40,000
30,000
25,000
30,000
20,000
20,000
15,000
10,000
10,000
5,000
0
0
export import export import export import export import export import
South Africa
Source）Global Trade Atlas
Thailand
India
Mexico
Brazil
export import export import export import export import export import
South Africa
Source）Global Trade Atlas
Thailand
India
Mexico
Brazil
5
General Overview
ーEconomic ripple effect of the South African automobile industry(1/2)ー
■Judging from the current situation, the automobile industry in S.A. has a considerably
positive effect in boosting the real GDP and total domestic output, while being
disappointing in job creation.
⇒The export-driven S.A. automobile industry with underdeveloped supporting industry
lacks close industrial linkage inside. The revision of current automobile policies is
required to cultivate the full potential of huge job creation power of the auto
industry , which by its nature nurtures strong supporting industry.
6
General Overview
ーEconomic ripple effect of the South African automobile industry(2/2)ー
■Comparison of Economic Ripple Effect among Industries in South Africa
Thousand employee
Job creation
30.0
20.0
10.0
0.0
-10.0
-20.0
changes in Base value
0.70%
Total output
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
-0.10%
Changes in Base value
0.25%
Real GDP
0.20%
0.15%
0.10%
0.05%
0.00%
-0.05%
-0.10%
7
General Overview
ーRelationship between the recommendations items of 2015FY and 2016FYー
（２）Framework of proposal
■We make more specific policy recommendations focus on securing quantitative of
domestically produced vehicles, reinforcement of competitiveness, and expanded
job creation effect in this 2016FY proposal.
【2015FY proposal】
【2016FY proposal】
(A)Correlation of increase in domestic production and expanding domestic market
○ ① Securing economy of sale to promote domestic sales
② Introducing sales incentive policy
(A)Securing quantitative size to expanded domestic sales of domestically produced vehicles ① Re-examination of CBU import credits
② Protection and development of particular models/segments
(B)Introducing protection policy for domestic models
○ ① Presenting the explicit policy
○ ② Providing precise measures for targeted models
（B)Development of the automobile component industry by raising local content ratio（Expansion of employment)
① Determination of strategic tariff rates imposed on components
② Creation of a production incentive scheme to promote local procurement
③ Expantion of the AIS scheme
(C)Worki
Workinngg on developing suppliers
○ ① Improving local content ratio
○ ② Improving investment environment to attract foreign-affiliated companies
(D)Securing and expanding export markets
① Expanding export strategy
○ ② Improving the quality of export models
③ Forming Sub-Sahara economic block
（E)Developing human resources
① Establishing labor-management cooperation
○ ② Creating framework for human resource development
（C)Improvement of competitiveness by facilitating transfer of skil s and technologies
① Development of investment environment to encourage entry of foreign-affiliated companies
② Strenthening initiatives for local component makera to transfer technologies and develop human resources
③ Support for development of next-generation technologies
8
General Overview
ーParticular recommendations for next automobile industry policy ー
（３）Particular proposals
(A)Securing quantitative size to expanded
domestic sales of domestically produced
vehicles
①
・
・
⇒
Re-examination of CBU import credits
Abolish the measures that allow the sale of redundant credis to automakers do not produce automobiles in S.A
Phase out CBU import credits in the medium to long term
Allocate the increased amount of tariff revenue to subsidies for domestic automakers
② Protection and development of particular models/segments
・ Provide various production incentives for particular models/segments
・ Prospective candidate in S.A: segmentB, PU, SUV
① Determination of strategic tariff rates imposed on components
・ Re-examine parts import credits in stages
・ Set the tariff rate of CKD,components based on the situation of localization
（B)Development of the automobile
component industry by raising local
content rate(Expantion of employment)
② Creation of a production incentive scheme to promote local procurement
・ Grant incentives domestic automakers and component makers in conjunction local content ratio
・ Allocate more incentives to component makers
③ Expantion of the AIS scheme
・ Provide additional incentives to domestic component makers
・ Create measures to promote the entry of new component makers
① Development of investment environment to encourage entry of foreign-affiliated companies
・ Development various infrastructures with its focus on SEZ
（C)Improvement of competitiveness by
facilitating transfer of skills and
technologies
② Strenthening initiatives for local component makera to transfer technologies and develop human resources
・ Refer to bilateral scheme of human resource development and technical cooperation
(Japan-Asean countries, Japan-Mexico RTA etc)
③ Support for development of next-generation technologies
・ Enhance the EV development support program
・ Support the development materials industries essential for evolution of automobile indutry
9
General Overview
ーItems to be tackled in the short term and in the medium to long termー
（４）Policy priority
Goal of Ｐｏｓｔ APDP
Expantion of Employment and Improvement of Competitivenessby Growth in the Automotive Industry
through collective and selective policies for meaningful localization
Policies to be implemented to achieve Goal
OEM
Assistance
Short
term
・Prohibition of Reselling Import Duty
Credit
・Providing Incentives for particular
segments/models
Supplier
Assistance
・Expanding the AIS scheme
・Categorizing CKD, components and
setting the tariff rate in strategic terms
for improvement of localization
・Providing Incentives to OEMs and suppliers associated with Local Content level
Medium
term
Long
Term
・Phasing out of CBU Import Duty Credit
・Re-examining of Components Import
Duty Credit and the tariff rate
・Providing better vocational education environment tied up with existing
organizations(AIDC, ASCCI, etc)
・Providing assistance measures for next –generation technoligies（EEV, materials）
Investment Condition
Improvement
・Developing businees investment for
attraction of foreign companies
ｰ Reinforcement of Incentives for
investment in SEZs
ｰ Stabilizing power suuplies
・Human Resource Development and
Tecnology Transfer by bilateral schemes
with advanced countries(RTA ,etc)
・Activating effective RTAs with major
automotive markets
10
General Overview
ーIt is effective to distribute tariff income as subsidy(1/2)ー
（５）Validation of the policy scenarios using CGE Model analysis
■The APDP has been effective because it boosted GDP by 0.19% and created 10,000
new jobs through the whole industry.
■However, the cost and benefit of the policy (minus 7.66 billion rand) has been
disappointing in spite of to the government’s financial support.
■In order to improve the cost-benefit performance and job creation effect of current
APDP, the new policy should make use of import duties on CBU or CKD, without giving
up tariff revenues as the current APDP do, as financial resources for incentives
distributed to local assemblers and suppliers (Scenario C).
■In case of difficulty of raising enough money from the increase in tariff rates (Scenario
D, the new policy should include the human resources development and import
substituting measures (Scenario E) to improve the productivity of local suppliers,
in order to get the equal (Scenario D) or more (Scenario E) funding than that would be
gained by the tariff rate increase.
11
General Overview
ーIt is effective to distribute tariff income as subsidy(2/2)ー
〇 Analysis results
Notes 1) In scenario A, the tariff rate on CBUs is 15% (when imported by local assemblers) and 20% (when imported by import traders). The tariff
rates on CKDs and other component parts are 0% and 12% respectively.
Notes 2) In scenario B, the import tariffs on CBUs, CKDs, other components and parts are 15%, 0% and 12% respectively.
Notes 3) In scenario C, the import tariffs on CBUs, CKDs, other components and parts are 25%, 5% and 15% respectively.
Notes 4) In scenario D, the import tariffs on CBUs, CKDs, other components and parts are 30%, 10% and 20% respectively.
Notes5) In scenarioⅣ, Tariff rate and subsidy rate are the same as the scenarioC, but next two points were added: the productivity of
component manufacturers improve to the same level as that of local assembly manufacturers, more import
vehicles and components are replaced to domestically produced vehicles and domestic components, respectively.
※CBUs import tariff rate on 15% in the scenarios above is the CBUs tariff rate under SA-EU FTA, 25% is MFN tariff rate, 30% is actual tariff rate
(after subsidies) of 5% plus MFN 25% tariff rate.
12
General Overview
ーProportional allocation according to the local content rate has a large employment effectー
■We performed simulation analysis to find the preferable allocating method of incremental amount of
tariff revenue gained by raising tariff rates of CBUs and CKDs, as subsidies for local assemblers and
components makers. We formed 2 scenarios, which are (1) allocating the tariff gain evenly based
on production volume, or (2) allocating proportionally according to local contents rates. As the
result, we found that the latter result in better benefit (equivalent variation) and has a stronger
job creation effect on the industry overall.
〇 Analysis results
Billion Rand
3.4
3.2
3.0
2.8
Subsidy allocation Scenario X
1000 employees
7.5
Benefit
(Equivalent variation)
(left-scale)
Job creation
across all industry
(right-scale)
7.0
Billion Rand
9.0
8.5
6.5
6.5
8.0
6.0
7.5
Subsidy allocation Scenario Y
Benefit
(Equivalent variation)
(left-scale)
1000 employees
7.6
8.0
7.5
Job creation
across all industry
(right-scale)
7.0
6.5
6.1
6.0
5.4
3.0
2.6
2.7
2.4
equal allocation
allocation in proportion to local
content ratio
5.5
7.0
5.0
6.5
4.5
6.0
7.8
7.4
5.5
5.0
4.5
equal allocation
allocation in proportion to local
content ratio
Note) Subsidy allocation scenario X: Allocating incremental amount of tariff revenue as subsidies when the tariffs are raised to 25%
(CBU), 5%(CKD) and 15%( other components)
Subsidy allocation scenario Y: Allocating incremental amount of tariff revenue as subsidies when the tariffs are raised to 30% (CBU),
10%(CKD) and 20% (other components)
13
General Overview
ーThe greater allocation to manufacturers that achieve high local content ratio is economically effective(1/2)ー
■We performed simulation analysis for local assemblers with local contents
rate of lower than 40% and for those with that of 40% or more, based on
each scenario below, and evaluated the improvement of their production volume,
local production rates and number of employers using actual data obtained from
local sources.
■In both scenarios, local assemblers with higher local content had bigger
improvement. From those findings, to boost policy effectiveness, we
recommend that local assembler with higher local contents rate should be
given higher subsidies.
14
General Overview
ーThe greater allocation to manufacturers that achieve high local content ratio is economically effective(2/2)ー
■ Changes in two types of local assembly manufacturers by automobile industry policy
toward post-APDP
Local content ratio
60.0%
OEM group that local content
reaches more than 40%
55.0%
31.0 (1000 employee)
50.0%
24.8 (1000 employee)
45.0%
28.7(1000 employee)
40.0%
Scenario Ⅱ
35.0%
OEM group that local
content does not reach 40%
30.0%
7.4 (1000 employee)
Scenario Ⅰ
6.2 (1000 employee)
6.7 (1000 employee)
25.0%
20.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Production units (1000)
Scenario 1; Tariff rate of CBU is 25%, CKD 5%, others components 15%. Subsidies are allocated proportionally according to local
contents rates.Scenario 2; Tariff and subsidy rate are set at the same level of those of ⅢｰC. We added 2 factors to this scenario 2, (1)
productivity of supplier will be improved to the same level of local assemblers and (2) shift from imported cars and components toward
domestic cars and cts will be promoted.
Notes) Circles represent the number of employees
15
Investigation Results
Ⅰ. Present condition of automobile industry
■ The vehicle production volume of South Africa in 2015 was 610,000 units, up 8.7% from the previous year and the
export volume dramatically increased to 349,000 units, up 26.0% from the previous year with the help of weak rand.
■ However, the domestic sales volume decreased by 4.1% from the previous year to 618,000 units and the import
volume also decreased by 5.4% from the previous year to 336,000 units both lower than the previous year for two
years in a row.
■ The domestic market still remains at a low growth level because of the slumping economy, increase of the price
hike of imported vehicles caused by weak rand and the decline of the consumers’ sentiment due to the higher interest
rate. And the S.A made vehicle sales is now below 300,000 units, far less than peak of 410,000 units in 2006.
■ Figure 1 Vehicle production/domestic sale/export/import/S.A made vehicle sale in South Africa
Ten thousands
80.0
70.0
60.0
production
50.0
domestic sale
40.0
export
30.0
import
20.0
S.A made car sales
10.0
1980
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
0.0
Source) NAAMSA
16
Ⅰ. Present condition of automobile industry
■ On the other hand, with respect to the South Africa's position in the global automobile industry, Thailand, Mexico
and other emerging competitors have strengthened the cluster of their automobile industry and widen the gap
with South Africa. South Africa's position in the increasingly competitive global automobile industry does not promise
any optimistic outlook at all.
⇒ The key is to whether the automobile industry can be developed to obtain improved cost competitiveness and
technological capabilities to react to changes in the competitive environment in the future.
■ Figure 2 Vehicle production of South Africa and its
competitors
■ Figure 4 Vehicle export and import of South Africa and its
competitors (2015)
Million dollar
Ten thousands
60,000
450.0
400.0
50,000
350.0
South Africa
300.0
Thailand
250.0
India
200.0
150.0
100.0
40,000
30,000
Mexico
20,000
Brazil
10,000
Turkey
50.0
0
export import export import export import export import export import
0.0
South Africa
Source) OICA, JAMA, etc.
Year
Year
■ Figure 3 Vehicle domestic sales of South Africa and
its competitors
Ten thousands
India
Mexico
Brazil
■ Figure 5 Vehicle parts import and export of South Africa and its
competitors (2015)
Million dollar
400.0
45,000
350.0
40,000
35,000
300.0
South Africa
30,000
Thailand
25,000
200.0
India
20,000
150.0
Mexico
15,000
100.0
Brazil
10,000
250.0
Turkey
50.0
5,000
0
0.0
export import export import export import export import export import
South Africa
Source) OICA, JAMA, etc.
Thailand
Source) Global Trade Atlas
Year
Source) Global Trade Atlas
Thailand
India
Mexico
Brazil
17
Ⅱ. Legal consistency of automobile Industry policy
(1) Details of APDP system design and their challenges
■ APDP is implemented from 2013 focusing on the development of domestic vehicle production replacing the MIDP
implemented from 1995 to 2012 that focused on promoting export. The outline is described below.
○ Import duty
・ Maintained the MFN tariff rate reduction policy after shifting to market liberalization in 1995.
CBUs are 25% (bound rates 50%) and CKDs are 20% (bound rates 30%). Most raw materials and production machinery
including tooling that are difficult to procure domestically are 0%. For component parts, items difficult to procure are 0%
(lowest tariff rate) or low tariff rate of 5 to 10% where items with no competitiveness are subject to bound rates (maximum tariff
rate) for protection.
○ VAA: Volume Assembly Allowance
・ Provides credits to reduce import tariff of essential components so as to support production.
・ Duty rebate incentive by taking into account whole sale price vehicle for the companies that produce minimum 10,000 units
per year.
・ VAA credits are also applicable to reduce CBU import tariffs. Import of components for export purpose under the “re-export
tax exemption” program will also be applied .
○ PI: Production Incentive
・ PI benefit focuses on value addition within the operations to support production.
・ Duty rebate of components/CBU import tariff depending on value addition which is calculated using formula “FOB-Sourcing
cost (import cost of components) - Raw material”.
・ In addition, particular materials (sourced within SACU region or less competitive) that are chosen by the government are
calculated as “supplier value addition” and qualified for incentive. Unnecessary amount can be sold to other firms in cash.
○ AIS: Automotive Investment System
・ Provides financial help through cash grant depending on the investment value of the business to strengthen and develop
R&D, job creation and supply chain.
・ Qualifying criteria: Minimum production of 50,000 per year for automobile maker and more than R 10 million sales for
components company.
18
Ⅱ. Legal consistency of automobile industry policy
■ However, no satisfactory development has been observed to date with respect to the following four targets established for the
period from 2013 to 2020 in the APDP: (i) expansion of the automobile production volume to 1.2 million units by 2020; (ii)
improvement of local content rates; (iii) improvement of trade balance with respect to automobile trading; and (iv) job creation.
■ The previous research indicated items described below as main issues that cause these factors.
○ Import duty
・ CBU tariff rates are lower than those of competitors and not at the level that can protect the domestic market adequately.
・ South Africa has smaller difference among tariff rates imposed on CBUs, CKDs and components as compared with its
competitors, failing to establish the tariff rates that intend to develop the domestic industry.
○ VAA: Volume Assembly Allowance
・ Not only components but CBU can be used to refund import tariffs in which it limits the expansion of vehicle sales of
domestic makers.
・ The requirement of the incentive is simply “production volume” and it is a production support measure without promoting
domestic procurement.
○ PI: Production Incentive
・ The offset of the import tariffs imposed on CBUs has made it easier to import vehicles and constrained domestic makers
from expanding their sales of domestically produced vehicles. In addition, the system that allows selling of redundant PI
credits to other companies is promoting this tendency.
・ Since the incentive requirement is based on “value addition” in a production process of an automobile maker, it does not
directly
contribute to the local content rates of component makers.
・ SVA addition of designated materials, especially vulnerable materials drive up the value of incentives.
○ AIS: Automotive Investment System
・ The apportioning of the cash incentive is more favorable for automobile makers and is insufficient for component makers.
・ Conditions to enter the market is severe for component makers and new entry is difficult.
19
Ⅱ. Legal consistency of automobile industry policy
(2) Details of the proposals made by the previous research
■ In light of the recognition of those challenges with successful and unsuccessful examples of
other automobile emerging countries, the Previous Research made the following proposals:
Details of the proposals
Details of the policy
(i) Secure quantitative size that leads to expanded
domestic sales of domestically made vehicles
・
Modify the production incentives so that they will
lead to expanded domestic sales of domestically made vehicles.
・
(A)
Implement policies that can correlate
In particular, rectify the measures that allow the sale of redundant
import tariff credits to makers not engaged in domestic production and utilize
expanded production of domestically made vehicles with
the redundancy for employment/research and development subsidies or corporate
their domestic sales expansion
income tax relief.
(ii) Introduce timely sales promotion policies
・
Introduce preferential tax treatment for targeted domestic models
・
Boost new demands by linking these policies
that are expected to expand sales.
with macroeconomic policies that aim to transform the
lower-income class into the middle class.
(i) Clarify the policy to develop domestic makers
・
Clearly present the policy to treat domestic makers favorably,
including high tariff rates and differentiation of the domestic tax system.
(ii) Strategically designate the targeted models to be
fostered nationally and provide detailed policy assistance
(B)
Introduce protection and development policy
・
In order to support domestic models that suit the characteristics
of the South African market and are expected to sell higher
for targeted domestic models to support domestic makers
volumes, set higher tariff rates, give preferential treatments for
domestic taxes and provide incentives for production and investment.
・
However, in light of the current situation of the automobile
production in South Africa where export accounts for a
significant portion, the government should specify the strategic
models by taking into account the characteristics of the target
market (for domestic sales or export) and review the details of the assistance that are
appropriate for each of the strategic models.
20
Ⅱ. Legal consistency of automobile Industry policy
(continued)
Details of the proposals
Details of the policy
(i) Implement continuous efforts to improve local procurement rates
by public-priv ate cooperation
・
Examine the cost penalty of components, identify
the components to be fostered nationally and the components
whose local procurement should be promoted, and set detailed tariff rates.
・
(C)
Work on the development of the automobile
component industry and attract
・
Persistently continue the ASCCI, which was commenced in 2013,
in 2017 and thereafter.
foreign-affiliated companies that lead
the development from the mid-
Provide incentives equally for automobile makers and component
makers on the condition that they will improve local procurement rates.
(ii) Improve environment to attract foreign-affiliated companies that lead
and long-term perspectives
the development of the industry
・
In order for emerging countries to enhance the competitiveness of
their automobile industry, foreign-affiliated automobile makers
and component makers will be the key players.
・
It is necessary to rev iew the details and methods of the attraction that
would compare favorably with competitors.
(i) Strategically expand export markets
・
In order to secure economies of scale for domestic production,
it is essential to develop export markets through the creation of an FTA
or economic block (however, as liberalization is a double-edged sword,
it is necessary to set tariff rates that take into account competitiveness against other countries).
・
Enhance South Africa’s position as a base for logistics and processing in terms of
export promotion.
(ii) Improve the quality of export models for developed countries
(D)
Strategically promote the creation of regional
・
In response to tougher competition in major export markets in the developed countries and
economic blocks and the execution of regional accords
tightened environmental and safety regulations, introduce assistance measures including the
to secure and dev elop export markets
provision of incentives for the production of technically advanced vehicles that
address these trends, such as eco-cars.
(iii) Create the Sub-Saharan regional economic block and develop regional vehicle models
・
Work on the creation of the regional economic block with a view to the development of
countries in the medium and long term.
・
Implement policy measures to promote the dev elopment and the launch of the vehicle
models Africa that are exclusive to Africa and meet the demands of the Sub-Saharan region
in conjunction with the models for South
21
Ⅱ. Legal consistency of automobile industry policy
(continued)
Details of the proposals
Details of the policy
(i) Establish labor-management cooperation
・ It is necessary to improve the framework of labor relation at the high level of the government,
labor and management.
(E)
Establish environment where the government,
labor and management can cooperate with one another
in developing human resource that will support
the development of the automobile industry
(ii) Creating the scheme for human resource development
・ Improve the quality of labor by implementing policies that combine the BEE policy
with human resource development.
・ Establish the system that incorporates human resource development into
investment incentives and accelerates technology transfer from countries
with the advanced automobile industry.
22
Ⅱ. Legal consistency of automobile industry policy
(3) Verification of consistency with WTO rules
■ To review the feasibility of details of the proposal, consistency with WTO rules and current APDP was
examined. First, relevant WTO rules are described below.
Provision
General Most-FavouredNation Treatment
GATT Article1
Schedules of Concessions
GATT Article2
GATT Article28
National Treatment on
Internal Taxation and
Regulation
GATT Article3
Paragraph2
ＧＡＴＴ
Paragraph4
Paragraph5
Paragraph8(b)
General Elimination of
Quantitative Restrictions
General Exceptions
Agreement on Susidies and Countervailing
Measures(SCM Agreement)
Trade-Related Investment Measures
GATT Article11
GATT Article20
Paragraph1(b),
ArticleⅢ
TRIMｓ
Agreement
Details of provision
・ WTO Member shall provide the most-favoured-nation treatment to similar products
of other Members with respect to custom duties, importation/exportation regulation,
internal taxes, and internal regulations for imported products.
・ Obligate Members to apply tariff rates that are no higher than their bound rates.
There are no problems in terms WTO rules in rising effective tariff rates within the scope of
their bound rates or rising tariff rates at will for non-bound items.
・ However, to increase or withdraw bound rates, it is required to negotiate and obtain
agreement with Member that directly negotiated the bound rate or with the principle
supplying country. In addition, it is required to have consultation with the principle supplying
country of relevant product that has a substantial interest in modification of the bound rate.
・ Members shall grant national treatment to other Menbers.
・ Imposing internal tax.etc. at a level higher than products of national origin to imported
products that are similar to, directly compete with, or can be replaced with products of
national origin is prohibited.
・ The imported products shall be accorded treatment no less favorable than that accorded
to like products of national origin in respect of all regulations.
・ No party shall establish or maintain quantitative regulation which requires directly or indirectly
any specified of any product which is the subject of the regulation to be supplied from
domestic sources.
・ Payment of subsides exclisively to domestic producers is allowed as exception of the
national treatment.
・ Not only quantitative restrictions to import and export but a permission system for import
and export that functions as quantitative restrictions are generally prohibited.
・ Exceptions where a violation to GATT is justifiable are stipulated. Examples of general
exceptions likely associated with automobile industry policy options include "measures
necessary to protect human, animal or plant life or health(item(b))" and "measures relating
to the conservation of exhaustible natural resources(item(g)).
・ Subsides granted based on prioritizing domestic products ahead of imported products are
prohibited as Red-light subsides.
・ Subsides that do not apply to Red-light subsides but "specificity" and adversely affects
other countries are advised to be abolished or to correct the adverase effect as Yellow-light
subsides.
・ Investment measures related to trade that violate Articles 3 and 11 of GATT are listed as
prohibited items. Local content requirements and trade balancing requirements are recognized
as "investment measures that have a strong trade-distorting effect" and are therefore
prohibited.
23
Ⅱ. Legal consistency of automobile industry policy
■ The consistency with WTO rules described above were verified by organizing APDP and details of previous
research proposals (A) to (E) in two main categories: “Activities of domestic producers” and “Government policy
(granting of incentive, change in tariff rate, and RTA)”.
Granting of incentive
Reduction of
import tariff
rates
General domestic
production of
OEMs/suppliers
Reduction of
internal
indirect taxes
Reduction of
income tax
and
corporate
income tax
Granting of
subsidies to
corporations
Granting of
subsidies to
purchasers
Change in tariff
rate
RTA
A
VAA/PI
Activities of domestic producers and consumers
Production of
specified model
(Domestic models
only)
A
B
Sales of specified
model
(Both domestic and
imported)
B
Local procurement
ratio
C
AIS
Capital investment
B
Employment / R&D
A
E
No condition
B
C
D
24
Ⅱ. Legal consistency of automobile industry policy
○ Verification results of APDP and details of previous research proposals
APDP
VAA/PI
AIS
Granting of incentive
to domestic product in
general/specific models
Granting of incentive
to domestic sale of specific
models
2015FY
proposals
Granting of incentive
based on local content rates
Granting of incentive
for capital investment/
employment/R&D
Modification of tariff rate
Regional Trade Agreement
・ It is highly that they are considered as measures for reduction of internal taxes, not customs duties, under the WTO rules.
Since it will be viewed that automobile manufacturers and component manufacturers that do not conduct domestic production
will be in a less advantageous position and it is highly that the measure will be deemed violating of Article3 of GATT.
・ In addition, to companies that can not make use of duty credits, VAA and PI have the effect of restricting imports and may
possibly in violation of Article11 of GATT.
・ Resale of redundant credit of PI may violate Article13 of GATT that require non -discriminatory application of quantity limitation.
・ AIS does not violate TRIMs agreement since it is not applicable as export subsides or local content requirement.
・ It confirms to Article3 of GATT if granting of incentives is in form of reduction of internal direct tax(corporate income tax,
income tax,etc.) or subsides.
・ Reduction of internal indirect tax(commodity tax,etc.) only to domestically produced products may violate Article3 of GATT.
However, reduction of internal indirect tax to sales of specific model without distinction of domestic vehicle and imported
vehicle will not be in violation of Article3 of GATT.
・ Reduction of internal indirect tax(commodity tax,etc.) only to domestically produced products may violate Article3 of GATT.
However, reduction of internal indirect tax to sales of specific model without distinction of domestic vehicle and imported
vehicle will not be in violation of Article3 of GATT.
・ When products that are no longer in scope of incentives are classfied as "like product"or"competitive product" of products
in scope, its measure may be recognized as violating Article3 of GATT for discriminary measure. Therefore, it is necessary to
categorize products with HS code of tariff.
・ Article2 of TRIMs Agreement, Paragraph2 and 4 of Article3 of GATT, and Article3 of Subsidies Agreement from the standpoint
that domestic components are handled with advantages compared to imported components.
・ However, the possibility not to be viewed as violation will increase if the local content rates are not explicitly specified as a
forced requrement and by incorporating a system that promotes local procurement and grants incentive later according to the
achieved local content rates.
・ It does not violate TRIMs Agreement. And it will be not in violation of SCM Agreement if it is not viewed as measure that
has trade-distoring effect.
・ There is no legal problem if it is within the range of bound rates.
・ When concluding the Regional Trade Agreement, The tariff rate must be lower than weighted average of tariff rates of
countries within the region prior to concluding the agreement and as domestic trade requirements, "substantially lebetalizing all
trades" are required be Article 24 of GATT.
25
Ⅲ. Analysis of impacts from introducing automobile industry policy
(1) Overview of policy simulation analysis
■ Each policy is evaluated by analyzing the cost-effectiveness of when APDP and the details of previous
proposals are conducted.
・ By considering the “cost” generated by conducting certain policy as “government revenue” and the “effect” as
“equivalent valuation”, the policy can be evaluated as “desirable policy” if the equivalent valuation is higher
than the amount of revenue reduction. Furthermore, it is evaluated by the production activity index of the
automobile industry’s production and import & export, real GDP, volume, etc..
■ As simulation analysis steps, (i) the SAM (Statistical Accounting Matrix) of 2011 of South Africa was extended
to be SAM for evaluating automobile industry policy → (ii) the developing country CGE (Computable General
Equilibrium) model developed by the International Regional Development Research Center of Reitaku University
was modified for South Africa specification → (iii) policy simulation using South Africa CGE model was
performed.
Flow chart of research and analysis
<STEP3>
Reitaku Univ,'s 2011 SAM model is
consisted of 45×45 dimentions
①16 industry sectors
②16 product types
③5 production factors
（2 labor types and 3 capital
types）
④4 institutions types
(2 household types,
1 company, 1 government)
⑤4 other factors
（saving/investment, direct
tax, indirect tax,foreign
sectors)
・ 16 industry sectors
＜STEP 1>
■Break up transportation
machine sector into 4 segments;
①Domestic-focused vehicle
manufacturing
②Export-focused vehicle
manufacturing
③Auto parts manufacturing
④Other transportation machine
manufacturing:
to create SAM suitable for
automobile industry and use it as
a database for OGE model.
・ Automotive related
statistics data collected by
B&M Analyst (S.A)
・Utilize 2005 SＵＴ whose
industry segmentation is more
detailed.
＜STEP2＞
■Modify the Reitaku Univ.'s
"CGE model for developing
countries" for the use of
S.A.study.
・Estimate an elasticity of
substitution of
①labor and capital
②domestic goods and import
goods
③domestic goods and export
goods,
in S.A.
・ Carry out estimation
through a nonliner system
estimation method , utilize
macroeconomic statistic
time-series data in S.A and
SUT as a database.
■Instrument variables and
parameters for each policy
simulation
①Tariff rate of each product
②Subsidy rate of each industry
③Indirect tax rate of each
industry
④Income tax rate for hosehold
and company
⑤Savings rate of the government
⑥Efficient parameter of
production function in each
industry
⑦Elasticity of substitution of
domestic goods and import
goods
⑧Elasticity of substitution of
domestic goods and export
goods
⑨Capital supply from overseas
⑩International price of import
and export goods
・ Instrument variables and
parameters from ①to⑥
above can be obtained by
calibration from 2011 SAM
Simulation
by CGE
model
■Outputs from each policy
simulation
・ＧＤＰ
・Equivalent variation
・Government revenue
・Aside from those above,
endogenous variable of CGE
model
①Production volume of each
industry
②Domestic supply of each industry
③Volume of exports and imports of
each industry
④Labor and capital demand in each
industry
⑤Household wage rate, return of
investment
⑥Number of unemployed people
⑦Family income
⑧Exchage rate
etc.
26
Ⅲ. Analysis of impacts from introducing automobile industry policy
○Overview of CGE Model
■The reason why we employ a computable general equilibrium (CGE) model instead of a macro- econometric model as an analysis tool
for the policy evaluation is that a macro-economic model is effective for analyzing quantitatively to examine (1) economic effect of
investment expansion in public and private sectors, (2) impact of financial policies including exchange policy and (3) the economic
outlook for a specific country. On the other hand, a CGC model is the most appropriate model to analyze fiscal policies including tax and
subsidy reform. It is suitable for a quantitative analysis of the economic ripple effect caused by tax reform on economic agents (such as
industry, government, family and company) and on production factors (labor, capital) as well as savings, investment and overseas
operations. In addition, developing a macro-econometric model, which is based on probability theory, requires a time-series data-set
composed of various economic statistics data gained through statistical surveys. However, a CGE model is easily developed using social
accounting matrix (SAM) for any specific time.
■ CGE model (computable general equilibrium model) expresses general equilibrium structure of the economy based on the price
mechanism (with the increase of demand, the price increases, and with the increase of price, the demand decreases)
・ Expresses (i) how economic units such as family finance and corporate make actions within the given economy and (ii) how
equilibrium of each activity is achieved in the market (family finance aims for the maximum effectiveness within the given budget and a
corporate aims for the maximum profit within the given technology).
■CGE model is a major quantitative analysis model used for establishing and evaluating economic policies to understand which industry
in the relevant economy system and people in which income bracket will receive what level of effect when certain policy is conducted.
・ This model is used in a wide range of fields by the Cabinet Office and others in the Japanese government as well. For example, it was
used in the field of international trade to analyze effects of TPP before its negotiation, financial policy to analyze effects of increase in
consumption tax and commodity tax, macro economy issues to analyze effects of introduction of environment tax, and for industry
policies to analyze the effects of liberalization of electric power industry.
・ In addition, this is widely used as a tool for policy analysis in developing countries, where time-series data is not available.
27
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Overview Diagram of Policy Simulation with CGE Model
Production Incentive
(Tarrif reduction)
Domestic price of
imported cars
Relative price of
domestic cars compared to
imported cars
Exchange rate
Import
volume
Export
volume
Production volume of
・Agriculture, Mining
industry
・Manufatcuing
industry( excluding auto)
・Some part of
construction, teriary
industry
Volume of imported
cars
Domestic
consumption of
automobiles
Tariff revenue of the
government
Domestic Supply
of domestic cars
Export volume
of domestic
cars
Capital value of other
industries
Labor quantity of
labor in other industries
Goverment
revenue
（ C ost）
Production volume of
domestic cars
Capital value of
auto industry
Labor quantity of
labor in auto industry
Government
spending
Capital value of public
service sector
Labor quantity of
service sector
Production volume
of public service
sector
・Direct tax
・Wage rate
・ Returns to capital
・Indirect tax
Number of
unemployed
・Family income
・Corporate income
Eecnomic welfare of family
（Equivalent variation:
effectiveness ）
28
Ⅲ. Analysis of impacts from introducing automobile industry policy
(2) Analysis of economic ripple effect of automobile industry in South Africa
■ Before evaluating the automobile policy of South Africa, the economic ripple effect of the current automobile
industry was evaluated comparing with other industries. Simulation was conducted using CGE models of 16
industries under an assumption that fixed amount of subsidies are allocated to each industry.
〇 Analysis results
(i) Job creation effect: Transportation equipment is at 12th in 16 industries. Food items had the largest job creation
effect
(ii) Cost/benefit: Transportation equipment is at 11th in 16 industries and in negative. Food items had the largest
positive
(iii) Real GDP: Transportation equipment is at 5th in 16 industries. Food items is at the top.
(iv) Total production volume: Transportation equipment is at 5th in 16 industries. Basic metal and general machinery
are at the top
⇒Although the real GDP and total production volume are at a high level, the job creation is low.
This is because since the growth of automobile industry of South Africa was led by export and the domestic
component industry is undeveloped, the automobile industry does not have a close industry linkage in the
country as that of automobile advanced countries.
⇒ In order to widely open the potential of the automobile industry that essentially can expect job creation effect in
a broad base of comprehensive industries, the current automobile industry policies need to be reviewed and
appropriate industry support measures need to be provided to local automobile makers and component
makers.
29
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Figure 6 Comparison of economic ripple effect among industries in South Africa
Thousand employee
Job creation
30.0
Changes in Base value
0.25%
Real GDP
0.20%
0.15%
20.0
0.10%
10.0
0.05%
0.0
0.00%
-10.0
-0.05%
-0.10%
-20.0
Rand Billion
20.0
Equivalent Variation
changes in Base value
0.70%
Total output
0.60%
0.50%
15.0
0.40%
10.0
0.30%
0.20%
5.0
0.10%
0.0
0.00%
-0.10%
-5.0
Rand Billion
10.0
Differnce(=Benfit -Cost)
5.0
0.0
-5.0
-10.0
-15.0
-20.0
30
Ⅲ. Analysis of impacts from introducing automobile industry policy
(3) Simulation analysis of policy assessment of current APDP scheme
■ Conduct simulation analysis using CGE model “without” implementation of each APDP program
to evaluate APDP policies and evaluate by comparing the amount of change from the “present
situation” (reference value).
・ The benchmark year is 2011 since the database used in this research is of the latest version currently available, which is of 2011.
Therefore, for the “without” policy setting, the import tariff was set back to the level of 2011. For AIS, it was estimated that the amount
paid in 2014 was also paid in 2011.
■ Figure 7 CGE model setting value for “without” policy simulation
Setting Tariff
Numerical value inserted into CGE model
Present situation ( Base value of SAM 2011)
If the PI and VAA were not conducted
If the AIS were not conducted
If the APDP scheme were not conducted
Other
components
CKD imported by importes by
CBU imported CBU imported
component
compmenet
by OEMs
by Non-OEMs manufacturers
manufacturers
Setting Subsidy rate
OEMs
Auto
Component
Manufacturers
5%
5%
0%
12%
1.0%
0.6%
26%
26%
21%
21%
1.0%
0.6%
5%
5%
0%
12%
0.2%
0.2%
26%
26%
21%
21%
0.2%
0.2%
31
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results
■ The cost of APDP scheme is significantly higher than the benefit (about 7.66 billion Rand higher)
indicating that the policy is not being effective as a government fiscal measure.
■ However, from the viewpoint of economic indicators and automobile-related indicators, GDP increased
for 0.11%, the total production volume increased for 0.19%, and created employment for over
10,000 people in the whole industry, which can be evaluated that certain result was obtained.
■ For the ratio of domestic component in the domestic component supply, PI and VAA practically
decreased the tariff rate in which the rate decreased for 1.2%. However, AIS had an increase effect of
0.1% increase.
■ Figure 8 Results of cost and benefit effect of each policy simulation
Cost-Benefit Analysis
Changes in Simulation results of
each Scenario to to the Present
stituation (Base value)
Major economic and automobile-related indicators
Cost(=A)
(A decrease in
Real
Benefit(=B)
Government
(Equivalent
Revenue)
Variation)
Difference
(Rand billion) (Rand billion)
(=B-A)
Real GDP
(%)
Ratio of
Job creation
Domestic domestically
across all
Domestic production of produced
industry
production of Component components to
OEMs
Total output (thousand
Manfaturers compoenets
supplied
(%)
employee)
(%)
(%)
If the PI and VAA were not
conducted
13.79
6.02
-7.78
0.10%
0.17%
9.5
6.00%
0.33%
-1.2%
If the AIS were not conducted
0.49
0.58
0.09
0.01%
0.03%
1.0
1.23%
0.68%
0.1%
If the APDP scheme were not
conducted
14.25
6.59
-7.66
0.11%
0.19%
10.6
7.10%
0.97%
-1.1%
32
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results (continued)
■ When the local assembly manufacturers and component manufacturers where separated in two
groups by the local content rates, (Local assembly manufacturers were categorized by the local content
rates of 40% based on the information obtained in the local survey. Manufactures that are less than 40% on the
business model are manufactures that focus on export with export ratio of 80%.) it was clarified that local
assembly manufacturers and component manufacturers with low local content rates have
advantages with PI and VAA.
・ For example, “without PI and VAA policy”, the increase in production volume of local assembly manufacturers that
are less than 40% is 8.63%, which is almost double increase compared to the 4.78% increase of the local
assembly manufacturers with 40% or more. Even for the domestic supply volume and export volume, the
amount of change of manufacturers with low local content rates is larger than that of manufacturers with high local
content rates. This result is the same with component manufacturers.
・ As a result, although PI and VAA decrease the ratio of domestic components in domestic component supply for
1%, the effect of 6 to 8% increase of the domestic automobile market is observed since the price of imported
components and imported vehicles will also be reduced.
33
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Figure 9 Simulation results of each policy under “without” policy condition of each group
Domestic production volume
Changes in Simulation results of
each Scenario to to the Present
stituation (Base value)
Domestic output delivered to home market
OEM
Parts suppliers
OEM
Parts suppliers
Local content ratio
Local content ratio
Local content ratio
Local content ratio
less than 40%
more than 40%
low
high
less than 40%
more than 40%
low
high
If the PI and VAA were not
conducted
8.63%
4.78%
0.97%
0.03%
6.61%
3.88%
-0.18%
-0.29%
If the AIS were not conducted
1.33%
1.18%
0.77%
0.64%
0.82%
0.87%
0.49%
0.50%
If the APDP scheme were not
conducted
9.75%
5.87%
1.67%
0.65%
7.35%
4.69%
0.28%
0.20%
Exports
Changes in Simulation results of
each Scenario to to the Present
stituation (Base value)
Imports
OEM
Parts suppliers
OEM
Parts suppliers
Local content ratio
Local content ratio
Local content ratio
Local content ratio
less than 40%
more than 40%
low
high
less than 40%
more than 40%
low
high
15.96%
10.21%
3.63%
1.42%
13.84%
12.14%
4.20%
4.65%
If the AIS were not conducted
3.14%
3.07%
1.38%
1.26%
0.23%
0.31%
0.26%
0.30%
If the APDP scheme were not
conducted
18.52%
12.93%
4.93%
2.63%
14.03%
12.40%
4.41%
4.92%
If the PI and VAA were not
conducted
Domestically produced parts ratio
Domestic automotive market
Parts suppliers
Changes in Simulation results of
each Scenario to to the Present
stituation (Base value)
Local content ratio
Private demand
(Household)
low
high
-1.02%
-1.23%
6.56%
If the AIS were not conducted
0.05%
0.05%
If the APDP scheme were not
conducted
-0.97%
-1.18%
If the PI and VAA were not
conducted
Corporate
demand and
Investment
demand
Labor Demand
OEM
Parts suppliers
Local content ratio
Local content ratio
less than 40%
more than 40%
low
high
8.48%
8.75%
4.84%
1.00%
0.05%
0.72%
0.65%
1.29%
1.17%
0.80%
0.65%
7.22%
9.05%
9.84%
5.93%
1.69%
0.67%
34
Ⅲ. Analysis of impacts from introducing automobile industry policy
(4) Simulation analysis of policies of additional or alternative support measures for PI and VAA
policies
■ To re-examine to obtain policies that provide larger cost effectiveness, financial resources
necessary for the incentive policy were secured in the automobile industry, created a scenario of
how to divide the incentive as subsidies, and simulation analysis of additional/alternative supporting
measures was conducted.
■ Figure 10 Setting of additional or alternative support measures for PI and VAA policies
Setting Tariff
CBU imported by
OEMs
CBU imported by
Non-OEMs
CKD imported by
component
manufacturers
5%
5%
0%
12%
1.0%
0.6%
Scenario I-A
5%
25%
0%
12%
1.5%
0.6%
Scenario I-B
5%
25%
0%
12%
3.9%
0.6%
Scenario I-C
15%
25%
0%
12%
1.0%
0.6%
Scenario I-C1,C2
15%
25%
0%
12%
5.4%
0.6%
Scenario I-D
15%
15%
0%
12%
1.0%
0.6%
Scenario I-D1,D2
15%
15%
0%
12%
4.3%
0.6%
シナリオ I-D3
15%
15%
0%
12%
1.0%
5.2%
Scenario I-E
25%
25%
5%
15%
1.0%
0.6%
Scenario I-E1,E2,E3
25%
25%
5%
15%
7.8%
4.8%
Scenario I-F
30%
30%
10%
20%
1.0%
0.6%
Scenario I-F1,F2,F3
30%
30%
10%
20%
8.8%
8.1%
Present situation ( Base value of
SAM 2011)
Additonal
or
alternative
policy
measures
on PI and
VAA
Setting Subsidy rate
Other components
importes by
compmenet
manufacturers
Auto Component
Manufacturers
OEMs
Note) For scenarios I-C to F, subsidies of 1 are evenly allocated, 2 are allocated in proportion to the local content rate, and 3 are allocated
inversely proportional to the local content rate.
35
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results
■ Benefit exceeds the cost in all scenarios.
・ This is because the government revenue does not decrease even when the government uses the tariff revenue
gained from setting the MFN tariff rate back to the level of 25% for subsidies but allocation of subsidies will
make the automobile industry to grow, the whole economy to revitalize, and increase the equivalent valuation
by drastically re-examining the production incentive of PI and VAA.
■ However, just returning the tariff rate back to the former level as shown in scenario (I-D, E and F)
will lower the GDP and total production volume and increase the unemployment rate. On the other
hand, the scenario that returns the tariff revenue back to the automobile industry as subsidy (I-A
and B) pushes up the GDP, increases the production volume of local assembly manufacturers
and component manufacturers, and creates employment in all industries.
■ In terms of job creation effect, scenarios that allocated subsidies in proportion to the local content
ratio (I-C2, D2, E2 and F2) had a larger effect than scenarios with even allocation (I-C1, D1, E1 and
F1). In addition, the effect increases with increase in tariff rate.
⇒ For South Africa to develop the automobile industry as the country’s key industry, securing of financial
resources necessary for the incentive policy inside the automobile industry is required rather than
the fiscal measure that uses waiver or revenues and part of tax income for the incentive policy of the
automobile industry.
⇒ It is more effective to use those financial resources for allocating subsidies to local assembly
manufacturers and component manufacturers in proportion to local content rates.
36
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Figure 11 Simulation results of each policy under “without” policy condition of each group
Cost-Benefit Analysis
Cost(=A)
(A decrease in
Real
Government
Revenue)
(Rand billion)
Benefit(=B)
(Equivalent
Variation)
(Rand billion)
Difference
(=B-A)
Real GDP
(%)
Total output
(%)
Job creation
across all
industry
(thousand
employee)
Scenario I-A
-2.26
-0.09
2.17
-0.01%
-0.01%
1.0
-0.03%
-0.06%
0.0%
Scenario I-B
-1.23
1.19
2.42
0.02%
0.06%
3.1
3.53%
0.97%
0.0%
Scenario I-C
-3.89
-0.95
2.94
-0.02%
-0.04%
-0.5
-1.38%
-0.44%
0.0%
Scenario I-C1
-1.96
1.22
3.17
0.02%
0.08%
3.0
5.45%
1.47%
0.0%
Scenario I-C2
-1.97
1.29
3.26
0.02%
0.08%
3.2
5.36%
1.47%
0.0%
Scenario I-D
-2.77
-0.86
1.92
-0.02%
-0.03%
-1.0
-1.01%
-0.33%
0.0%
Scenario I-D1
-1.36
0.86
2.22
0.02%
0.06%
2.0
3.84%
1.07%
0.0%
Scenario I-D2
-1.37
1.01
2.38
0.02%
0.06%
2.5
3.75%
1.09%
0.0%
Scenario I-D3
-0.82
1.21
2.03
0.01%
0.04%
2.6
0.61%
4.11%
0.6%
Scenario I-E
-7.40
-2.81
4.59
-0.05%
-0.09%
-4.0
-3.02%
-0.55%
0.3%
Scenario I-E1
-2.62
2.67
5.29
0.04%
0.18%
5.4
9.06%
6.83%
0.9%
Scenario I-E2
-2.63
3.01
5.64
0.04%
0.18%
6.5
8.87%
6.64%
1.0%
Scenario I-E3
-2.56
2.26
4.81
0.04%
0.18%
4.0
9.52%
7.16%
0.8%
-11.14
-4.57
6.57
-0.08%
-0.14%
-6.9
-4.71%
-0.59%
0.7%
Scenario I-F1
-4.37
3.01
7.38
0.04%
0.23%
6.1
10.17%
11.26%
1.8%
Scenario I-F2
-4.32
3.50
7.82
0.04%
0.23%
7.6
10.14%
10.98%
1.8%
Scenario I-F3
-4.26
2.54
6.80
0.03%
0.24%
4.4
10.76%
12.08%
1.7%
Changes in Base value
Additonal
or
alternative
policy
measures
on PI and
VAA
Major economic and automobile-related indicators
Scenario I-F
Ratio of
Domestic
domestically
Domestic
production of
produced
production of Component components to
OEMs
Manfaturers
compoenets
(%)
(%)
supplied
37
Ⅲ. Analysis of impacts from introducing automobile industry policy
(5) Simulation analysis of policies for additional or alternative support measures for AIS
policy
■ The benefit is exceeding the cost with the current AIS policy. Therefore, simulation analysis was
conducted to understand the level of effectiveness by wider application of AIS policy.
■ Figure 12 Setting of additional or alternative support measures for AIS policy
Setting subsidy rate
OEMs
Numerical value inserted into CGE
model
Present situation ( Base value of
SAM 2011)
Scenario II-A
Additonal
or
Scenario II-B
alternative
policy
Scenario II-C1
measures
on AIS
Scenario II-C2
Scenario II-C3
OEMs
Component Manufacturers
Group with a less Group with a 40%
Component
than 40% local
or more local
Manufacturers
content ratio
content ratio
Group with a
lower local
content ratio
Group with a
higher local
content ratio
1.0%
0.6%
1.0%
1.0%
0.6%
0.6%
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
1.8%
1.8%
1.8%
1.8%
1.8%
1.8%
2.6%
2.6%
2.6%
2.6%
2.6%
2.6%
2.6%
2.6%
2.2%
2.8%
2.2%
2.8%
2.6%
2.6%
3.1%
2.4%
3.1%
2.4%
Note) For scenarios II-C, subsidies of 1 are evenly allocated, 2 are allocated in proportion to the local content rate, and 3 are allocated
inversely proportional to the local content rate.
38
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results
■ As the cash grants increase, the costs increase; however, benefits that worth the increased costs are not obtained.
Job creation effect of the industry as a whole that worth the increased cash grant is not obtained either (II-A, B and
C1).
⇒ The effect is limited as long as the cash grant amount is evenly allocated irrelevant to the local content rate.
■ However, when cash grants are allocated in proportion to local content rates (II-C2), the cost & benefit and job
creation is more effective compared to even allocation (II-C1) or inversely proportional to the local content rate (IIC3).
⇒ If there is any limitation of financial resources for cash grants, the most effective method is to allocate subsidies to
local manufactures and component makers in proportion to the local content rates.
■ Figure 13 Analysis results of additional or alternative support measures for AIS policy
Cost-Benefit Analysis
Benefit(=B)
(Equivalent
Variation)
(Rand billion)
Difference
(=B-A)
Real GDP
(%)
Total output
(%)
Job creation
across all
industry
(thousand
employee)
Scenario II-A
0.16
0.17
0.01
0.00%
0.01%
0.3
0.14%
0.37%
0.1%
Scenario II-B
0.83
0.93
0.10
0.02%
0.04%
1.6
1.55%
1.47%
0.2%
Scenario II-C1
1.51
1.69
0.18
0.03%
0.08%
2.8
3.02%
2.61%
0.3%
Scenario II-C2
1.52
1.79
0.26
0.03%
0.08%
3.1
3.01%
2.58%
0.3%
Scenario II-C3
Changes in Base value
Additonal
or
alternative
policy
measures
on AIS
Major economic and automobile-related indicators
Cost(=A)
(A decrease in
Real
Government
Revenue)
(Rand billion)
Ratio of
Domestic
domestically
Domestic
production of
produced
production of Component components to
OEMs
Manfaturers
compoenets
(%)
(%)
supplied
1.53
1.62
0.08
0.03%
0.08%
2.6
3.09%
2.72%
0.3%
"If AIS were not conducted" +
"Scenario II-A"
0.65
0.75
0.10
0.01%
0.03%
1.3
1.38%
0.96%
0.1%
"Scenario II-B"- "Scenario II-A"
0.67
0.76
0.09
0.01%
0.03%
1.3
1.41%
1.10%
0.1%
"Scenario II-C1"- "Scenario II-B"
0.68
0.77
0.08
0.01%
0.04%
1.3
1.47%
1.14%
0.1%
39
Ⅲ. Analysis of impacts from introducing automobile industry policy
(6) Simulation analysis of human resource development and promotion measures to ecourage
use of alternative domestic products
■ In this section, we simulate a case where the government initiates measures to develop human resources and
encourage use of alternative domestic products. The used scenario is scenario I-D (the setting where the increased tariff
revenue rate by setting the tariff rate at 15% is provided to the government revenue).
The setting is on the assumption that the government revenue is then provided for education expenses for human
development to build up the automobile industry and for public services including R&D for quality improvement
of domestic products. Three scenarios described below were analyzed.
Scenario I-D3: Allocate increased tariff revenue to component manufacturers
Scenario I-D4: I-D plus assumption that the productivity of component manufacturers improves to the same level as that of local assembly
manufacturers
Scenario I-D5: I-D4 plus assumption that imported products are replaced to domestic products
■ Figure 14 Results of cost-benefit analysis of human resource development measures and measures to stimulate the domestic
market
Cost-Benefit Analysis
Changes in Base value
Personnel
Scenario I-D
training policy
and Promotion of
Scenario I-D3
replacement
demand for
Scenario I-D4
domestic
products
Scenario I-D5
Major economic and automobile-related indicators
Cost(=A)
(A decrease in
Real
Benefit(=B)
Government
(Equivalent
Revenue)
Variation) Difference
(Rand billion) (Rand billion)
(=B-A)
Real GDP
(%)
Ratio of
Job creation
Domestic
domestically
across all
Domestic production of
produced
industry production of Component components to
Total output (thousand
OEMs
Manfaturers compoenets
(%)
employee)
(%)
(%)
supplied
-2.77
-0.86
1.92
-0.02%
-0.03%
-1.0
-1.01%
-0.33%
0.0%
-0.82
1.21
2.03
0.01%
0.04%
2.6
0.61%
4.11%
0.6%
-4.07
0.63
4.70
0.11%
0.14%
3.2
0.60%
4.03%
0.6%
-4.09
1.17
5.25
0.12%
0.20%
3.9
3.10%
7.17%
1.6%
40
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results
■ Cost has significantly decreased for both scenarios of I-D4 and D5 compared to I-D in
which the difference of the amount of benefit minus cost is double or more.
・ The government revenue increases not only by increase in tariff rate but also by increase in
indirect tax and direct tax by revitalization of the whole economy.
■ Increase in GDP, total production volume , and job creation of I-D4 exceeds that of I-D3.
・ The labor demand decreases by improvement of productivity of component manufacturers
where the labor flows to other industries and pushes up the total production volume.
■ The increase rate of production volumes of local assembly manufacturers and component
manufacturers, and the ratio of domestic component in the domestic are at the same level
with I-D3 and I-D4 .
⇒ If the productivity of component manufacturers improves to the same level as the
productivity of local assembly manufacturers, an equivalent effect can be obtained as
the effect of increasing the tariff revenue to 15% and allocating the subsidies to component
manufacturers.
⇒ In addition, similar to I-D5, larger effect can be obtained if the government promotes
switching the use of imported products to domestic products.
41
Ⅲ. Analysis of impacts from introducing automobile industry policy
(7) Simulation analysis of effects of automobile industry policy toward post-APDP
■ Based on additional or alternative support measures and simulation results of PI, VAA, and AIS
policies, scenarios described below were set to conduct simulation analysis toward post-APDP.
■ Figure 15 Setting of automobile industry policy toward post-APDP
Setting Tariff
CBU imported CBU imported
by OEMs
by Non-OEMs
Present situation ( Base value of SAM
2011)
Scenario III-A
Automotive
Scenario III-B
policy for
post-APDP
Scenario III-C
Scenario III-D
Setting Subsidy rate
CKD imported by Other components
component
importes by compmenet
manufacturers
manufacturers
OEMs
Auto
Component
Manufacturers
5%
5%
0%
12%
1.0%
0.6%
15%
25%
0%
12%
7.2%
2.4%
15%
15%
0%
12%
6.1%
2.4%
25%
25%
5%
15%
10.4%
7.4%
30%
30%
10%
20%
11.4%
10.7%
Scenario III-A: I-C + II-B
Scenario III-B: I-D2
Scenario III-C: I-E2 + II-C2
Scenario III-D: I-F2 + II-C2
*Although not included in the figure above, Scenario IV was set
Scenario IV: Tariff rate and subsidy rate are the same as the Scenario III-C, but next two points were added: the
productivity of component manufacturers improve to the same level as that of local assembly manufacturers,
more import vehicles and components are replaced to domestically produced vehicles and domestic
components, respectively.
42
Ⅲ. Analysis of impacts from introducing automobile industry policy
〇 Analysis results
■ Benefit exceeds the cost in all scenarios. However, scenario III-A or B may be selected for the mean time
taking into account that business models of local assembly manufacturers and component manufacturers are built with
the present APDP system and by considering the feasibility of the policy.
⇒ However, when one of them is selected, although the production volume of local assembly manufacturers and
component manufacturers as well as employment of the whole industry will increase, the ratio of domestic
components in the domestic component supply rate will increase only slightly because the current system of
import duty of parts will remain.
■ On the other hand, drastic re-examination of APDP such as returning the import tariff of CBU, CKD and other
components to the original level as demonstrated in scenarios III-C and D will be necessary if the South African
government aims to grow the automobile industry as the key industry from a medium- and long-term
viewpoint.
⇒ If one of them is selected, double or higher cost benefit effect compared to that of scenarios III-A and B can be
obtained with further advantages in GDP increase, increase in production volume of local assembly
manufacturers and component manufacturers, increase in domestic component ratio, and in job creation.
■ In addition, all indices of scenario IV have significantly exceeded all other scenarios.
⇒ Active measures to promote replacement of imported products, enhancement of supporting industries and
human development for productivity improvement of the automobile industry are necessary for South Africa to
obtain benefit from the policies equivalent to the benefit obtained by restoring the tariff revenue increased by higher
import tariff to the automobile industry since the upper limitation of import tariff practically exists at present for CBU,
CKD and other parts because of arrangements such as regional economy agreement between South Africa and EU.
43
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Figure 16 Results of simulation of the post-APDP automobile industry policy
Cost-Benefit Analysis
Changes in Base value
Major economic and automobile-related indicators
Cost(=A)
(A decrease in
Real
Benefit(=B)
Government (Equivalent
Revenue)
Variation) Difference
(Rand billion) (Rand billion) (=B-A)
Real GDP
(%)
Job creation
across all Domestic
industry production of
Total output (thousand
OEMs
(%)
employee)
(%)
Domestic
production of
Component
Manfaturers
(%)
Ratio of
domestically
produced
components to
compoenets
supplied
Scenario III-A
-1.09
2.25
3.34
0.04%
0.13%
4.8
7.17%
3.03%
0.2%
Scenario III-B
Automotive
policy for
post-APDP Scenario III-C
-0.50
1.97
2.47
0.04%
0.10%
4.1
5.48%
2.62%
0.2%
-0.84
4.97
5.81
0.07%
0.27%
9.7
12.79%
9.89%
1.3%
Scenario III-D
-2.40
5.53
7.93
0.07%
0.33%
10.8
14.26%
14.69%
2.2%
Scenario IV
-1.06
8.37
9.43
0.23%
0.68%
16.0
23.13%
26.83%
5.1%
44
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Finally, simulation analysis based on performance values of local assembly manufacturers with
local content rate of less than 40% and local content rates of 40% or more obtained from local
information of how the production unit, ratio of domestic production, and number of employees
changed in each scenario indicates that the changed value was large with local assembly
manufacturer with local content rate of 40% or more in each scenario.
■ Figure 17 Changes in two types of local assembly manufacturers by automobile industry policy
toward post-APDP
Local content ratio
60.0%
OEMs group with a 40% or more local
content ratio
55.0%
50.0%
31.0 (1000 employee)
24.8 (1000 employee)
45.0%
28.7(1000 employee)
40.0%
Scenario IV
35.0%
OEMs group with a less than
40% local content ratio
30.0%
7.4 (1000 employee)
Scenario III-C
6.7 (1000 employee)
6.2 (1000 employee)
25.0%
20.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Production units (1000)
Note) Circle indicates the number of employees
45
Ⅲ. Analysis of impacts from introducing automobile industry policy
■ Scenario setting list
Setting Tariff
Numerical value inserted into CGE
model
Present situation(Base value of
SAM2011)
Scenario I-A
Scenario I-B
Scenario I-C
Scenario I-C1
Scenario I-C2
Scenario I-D
Scenario I-D1
Scenario I-D2
Scenario I-D3
Scenario I-D4
Scenario I-D5
Additional Scenario I-E
Scenario I-E1
or
alternativ Scenario I-E2
policy
Scenario I-E3
measures Scenario I-F
on APDP Scenario I-F1
programes Scenario I-F2
Scenario I-F3
Scenario II-A
Scenario II-B
Scenario II-C1
Scenario II-C2
Scenario II-C3
Scenario Ⅲ-A
Scenario Ⅲ-B
Scenario Ⅲ-C
Scenario Ⅲ-D
Scenario Ⅳ
OEMs
Local Content ratio
less
more than
than40%
40%
5.0%
20.4%
20.4%
22.7%
22.7%
22.7%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
25.0%
25.0%
25.0%
25.0%
30.0%
30.0%
30.0%
30.0%
5.0%
5.0%
5.0%
5.0%
5.0%
22.7%
15.0%
25.0%
30.0%
25.0%
5.0%
5.0%
5.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
15.0%
25.0%
25.0%
25.0%
25.0%
30.0%
30.0%
30.0%
30.0%
5.0%
5.0%
5.0%
5.0%
5.0%
15.0%
15.0%
25.0%
30.0%
25.0%
Setting subsidy rate
Component
Manufacturers
Local Content ratio
low
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
9.2%
9.2%
9.2%
9.2%
14.2%
14.2%
14.2%
14.2%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
9.2%
14.2%
9.2%
high
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
9.2%
9.2%
9.2%
9.2%
14.2%
14.2%
14.2%
14.2%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
5.1%
9.2%
14.2%
9.2%
OEMs
Local Content ratio
less
less
than40%
than40%
1.0%
2.5%
4.9%
1.0%
6.5%
6.0%
1.0%
4.3%
3.4%
1.0%
1.0%
1.0%
1.0%
7.8%
5.9%
10.1%
1.0%
8.8%
6.6%
11.4%
1.0%
1.8%
2.6%
2.2%
3.1%
6.8%
4.2%
7.1%
7.8%
7.1%
1.0%
1.0%
3.4%
1.0%
5.0%
5.2%
1.0%
4.3%
4.7%
1.0%
1.0%
1.0%
1.0%
7.8%
8.6%
6.8%
1.0%
8.8%
9.8%
7.7%
1.0%
1.8%
2.6%
2.8%
2.4%
6.0%
5.5%
10.4%
11.6%
10.4%
Other setting
Component
Manufacturers
Local Content ratio
low
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
3.9%
0.6%
0.6%
0.6%
4.8%
3.6%
6.2%
0.6%
8.1%
6.0%
10.6%
1.0%
1.8%
2.6%
2.2%
3.1%
1.8%
1.8%
5.2%
7.6%
5.2%
high
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
5.8%
0.6%
0.6%
0.6%
4.8%
5.3%
4.2%
0.6%
8.1%
9.1%
7.0%
1.0%
1.8%
2.6%
2.8%
2.4%
1.8%
1.8%
7.5%
11.3%
7.5%
To
facilitate
substitutio
Prodivtivit
n of
y increase
imports
×
×
×
×
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×
×
×
×
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○
×
×
×
×
×
×
×
×
×
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○
×
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×
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×
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×
×
×
×
×
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×
○
46
Ⅳ. Proposal
(1) Basic ideas of proposals
■ According to the simulation analysis of CGE model described above, the certain economic ripple effect
is recognized with APDP, which is the current policy of the South Africa’s automobile industry such as
increase of GDP by 0.11% and creation of employment for more than 10,000 people. However, in terms
of the ability to increase the real income of the entire nation, it is difficult say that the APDP is the
optimum scheme that deserves active fiscal measures by the government, including the waiver of
tariff revenues and fiscal spending.
■ In addition, with respect to the situation of the South Africa’s automobile industry, it does not promise
any optimistic outlook at all viewing the domestic market at a low level of 600,000 units because
of the economic stagnation in the country and abroad as well as examining the position in the global
automobile industry by rapid development of emerging competitors such as Thailand and Mexico.
■ By taking into account these situations, the South African government should generate the policy
design that encourages further development of automobile industry in three areas:
securing quantitative of domestically produced vehicles, reinforcement of competitiveness
and expanded job creation effect while continue to provide incentives that secure minimum
production level attained by introducing APDP.
47
Ⅳ. Proposal
（２）Framework of proposal
■We make more specific policy recommendations focus on securing quantitative of
domestically produced vehicles, reinforcement of competitiveness, and expanded
job creation effect in this 2016FY proposal.
【2015FY proposal】
【2016FY proposal】
(A)Correlation of increase in domestic production and expanding domestic market
○ ① Securing economy of sale to promote domestic sales
② Introducing sales incentive policy
(A)Securing quantitative size to expanded domestic sales of domestically produced vehicles ① Re-examination of CBU import credits
② Protection and development of particular models/segments
(B)Introducing protection policy for domestic models
○ ① Presenting the explicit policy
○ ② Providing precise measures for targeted models
（B)Development of the automobile component industry by raising local content ratio（Expansion of employment)
① Determination of strategic tariff rates imposed on components
② Creation of a production incentive scheme to promote local procurement
③ Expantion of the AIS scheme
(C)Worki
Workinngg on developing suppliers
○ ① Improving local content ratio
○ ② Improving investment environment to attract foreign-affiliated companies
(D)Securing and expanding export markets
① Expanding export strategy
○ ② Improving the quality of export models
③ Forming Sub-Sahara economic block
（C)Improvement of competitiveness by facilitating transfer of skil s and technologies
① Development of investment environment to encourage entry of foreign-affiliated companies
② Strenthening initiatives for local component makera to transfer technologies and develop human resources
③ Support for development of next-generation technologies
（E)Developing human resources
① Establishing labor-management cooperation
○ ② Creating framework for human resource development
48
Ⅳ. Proposal
（３）Particular proposals
(A)Securing quantitative size to expanded
domestic sales of domestically produced
vehicles
①
・
・
⇒
Re-examination of CBU import credits
Abolish the measures that allow the sale of redundant credis to automakers do not produce automobiles in S.A
Phase out CBU import credits in the medium to long term
Allocate the increased amount of tariff revenue to subsidies for domestic automakers
② Protection and development of particular models/segments
・ Provide various production incentives for particular models/segments
・ Prospective candidate in S.A: segmentB, PU, SUV
① Determination of strategic tariff rates imposed on components
・ Re-examine parts import credits in stages
・ Set the tariff rate of CKD,components based on the situation of localization
（B)Development of the automobile
component industry by raising local
content rate(Expantion of employment)
② Creation of a production incentive scheme to promote local procurement
・ Grant incentives domestic automakers and component makers in conjunction local content ratio
・ Allocate more incentives to component makers
③ Expantion of the AIS scheme
・ Provide additional incentives to domestic component makers
・ Create measures to promote the entry of new component makers
① Development of investment environment to encourage entry of foreign-affiliated companies
・ Development various infrastructures with its focus on SEZ
（C)Improvement of competitiveness by
facilitating transfer of skills and
technologies
② Strenthening initiatives for local component makera to transfer technologies and develop human resources
・ Refer to bilateral scheme of human resource development and technical cooperation
(Japan-Asean countries, Japan-Mexico RTA etc)
③ Support for development of next-generation technologies
・ Enhance the EV development support program
・ Support the development materials industries essential for evolution of automobile indutry
49
Ⅳ. Proposal
(A) Securing quantitative size that leads to expanded domestic sales of domestically produced
vehicles
①Re-examination of CBU import credits
[Issues]
・ In the automobile industry in South Africa, imports account for 55% of the domestic sales where 57% of the domestically produced
vehicles are exported. This shows a distorted structure that does not directly correlate increase in domestic production with
increase in domestic sales.
・ Various models have flown in the domestic market causing it to be fragmented and domestically produced models cannot
create economies of scale.
⇒ Mainly because of the extension of CBU tariff-free import credits resulting from production incentives of the PI and the VAA. The real
tariff rate is estimated to be approximately 5% (MFN import tariff rate is 25%) because of the said production incentives, making
its market almost completely open.
[Proposal]
・ Re-examine policies connected to production and CBU import credit in stages
1st stage: The abolition of the measures that allow the sale of redundant import tariff credits to automobile makers that do
not produce automobiles in South Africa. Allocate tariff revenue obtained by this measure to subsidies for
domestic automobile makers (subsidies for employment and R&D, reduction of corporate tax, etc.).
2nd stage: For the medium- and long-term plan, phase out the CBU tariff-free import credits and allocate the increased amount
of tariff revenue to subsidies for domestic automobile makers.
○ Reason
・ In the simulation analysis of CGE model, the GDP, total production volume, and production volume of domestic automobile
makers and component makers exceeded the current level and created employment in the 1st stage. Further advantages can be
obtained in the 2nd stage (refer to p. 22 and 23).
・ There is a possibility that conflict with Articles III, VI, and VIII of the GATT will be indicated with the current policy (refer to p. 11).
・ It was separated in stages since there is a risk that the abolition at this point with respect to domestic automobile makers as well may
conversely shrink the domestic market in South Africa. Domestic automobile makers import low price models that cannot be
manufactured by the costly production system in South Africa and offer them to entry users of new vehicles. If the tariff rates even of
MFN import tariff rate increase due to abolition, import vehicles will be expensive and may inhibit entry users to appear.
⇒ It is desirable to examine abolition in stages while observing situations of reduction of the production cost for domestically
produced vehicles.
50
Ⅳ. Proposal
(A) Securing quantitative size that leads to expanded domestic sales of domestically produced
vehicles
②Protection and development of particular models/segments
[Issues]
・ Competitors such as Thailand and India have designated certain models to be fostered nationally and supported production
and sales of particular models by introducing high tariff rates and preferential treatments on domestic taxes, expanded their
domestic markets, and created economies of scale for domestically produced models. However, there is no specific
development measures for domestically produced models similar to those of competitors in South Africa.
[Proposal]
・ Designate several models/segments for development support taking into account the characteristics and needs of the market.
⇒ According to the target market (domestic market, developed country’s market or emerging country’s market including African
region), clarify the strategic development model/segment taking into account the sales record and competitiveness in
relevant market, and provide various production incentives such as reduction or exemption of corporate income taxes,
tariffs on imported machinery and equipment as well as subsidies for R&D/employment to several strategic models.
・ In light of the current South African market, the model/segment that is likely to be regarded as the one with robust sales record and
competitiveness is the PU, which belongs to the most popular B segment (sub-compact vehicles) and has both domestic sales
records and export records, and the SUV, which has been expanding domestic sales volume in recent years with a high growth
potential in the global market.
○ Reason
・ In a sense, the South African market is an advanced market that has already offered various models ranging from premium
models to entry models and users have diversified tastes as well. It is difficult to implement policies that offer preferential
treatment for a specified model in this type of market.
・ Supporting the preferential treatment of domestically produced models will not violate Article III of GATT according to WTO rule if it is
provided in the form of internal direct taxes or subsidies. However, there is a possibility to be viewed as violation of Article III of
GATT if equivalent preferential tax treatment is provided only for domestically produced vehicle and not for imported vehicles
when it is provided in the form of internal direct taxes such as commodity tax (refer to p. 11).
⇒ To examine preferential treatment by tax, approaches with policies such as treatment with tariff rate by segmentation of HS
code items are necessary.
51
Ⅳ. Proposal
(B) Development of the automobile component industry by raising local content rates
①Determination of strategic tariff rates imposed on components
[Issues]
・ When an emerging country seeks to promote its automobile industry, it adopts a policy to promote domestic automobile
production by imposing high tariff rates on CBUs and low tariff rates on CKDs and components.
・ For South Africa, however, the MFN tariff rates are 25% for CBU and 20% for CKD in which the difference in tariff rates is only
5%. Moreover, no strategic viewpoint to promote domestically made vehicles can be found in its import tariff rates as both
CBUs and CKDs can be imported with almost no duty due to the production incentives under the VAA and the PI.
[Proposal]
・ Re-examine tariff-free import credits of VAA and PI in stages
⇒ In light of the current situation where the automobile component industry is underdeveloped and South Africa has no choice but
to import many components because of quality and cost issues, it should maintain tariff-free import credits for components for
the time being. However, we believe that, in the long run, it is appropriate to raise local content rates through the development of
the automobile component industry and to gradually reduce tariff-free import credits for components in the medium- and
long-term.
・ Examine the development condition of the automobile industry, and continuously conduct reviews for suitable CKD
qualification requirement and tariff level of CKD and component parts.
⇒ With an eye on medium- to long-term development of the automobile component industry, upon identifying in detail the situations of
localization of its domestic automobile component industry, examine the characteristics of components with assistance from
automobile makers and automobile component makers while considering cost penalty to categorize them into the following groups:
(i) components the localization of which has already been or can soon be achieved; (ii) components the localization of
which requires substantial time to be achieved; (iii) components the localization of which is difficult; and (iv) components
the development of which should be prioritized.
○ Reason
・ There is a possibility that conflict with Articles III, VI, and VIII of the GATT will be indicated with the current policy (refer to p. 11).
Differentiation of domestic components and imported components using difference in tariff rates is the method in line with
WTO rule (setting of tariff rate within the scope of bound rates is permitted).
52
Ⅳ. Proposal
(B) Development of the automobile component industry by raising local content rates
②Creation of a production incentive scheme to promote local procurement
[Issues]
・ A scheme to promote local procurement is not built in the scheme of PI and VAA.
⇒ Possible to import components tariff-free with production incentives of VAA and PI. Since the VAA’s incentive is based on
production volume, approaches for local procurement is not considered. Since the production incentives of PI is based on
value addition in a production process of automobile makers, it does not directly contribute to the local content rates of
component makers.
[Proposal]
・ Grant incentives to domestic automobile makers and component makers in conjunction with local content rates.
・ For granting of incentives, allocate more incentives to domestic component maker than the present level.
○ Reason
・ Improvement of local content rates of components is considered as a pillar of the policy since it contributes to enhancement of
employment.
・ As the simulation analysis by the CGE model shows, the provision incentives in proportion to the local content rates has
greater job creation effects (refer to p. 22,23 and 42).
・ Under the TRIMs Agreement, local content requirements are recognized as “investment measures that have a strong tradedistorting effect” and are therefore prohibited by WTO rule (refer to p. 11).
⇒ When designing systems to improve local content rates, do not explicitly specify the local content as the target to achieve but
incorporate a system that promotes local procurement and grants incentive later according to the achieved local content rates
is necessary.
53
Ⅳ. Proposal
(B) Development of the automobile component industry by raising local content rates
③Expansion of the AIS scheme
[Issues]
・ Current amount supplied as incentive is not enough to cover cost for expensive tooling, etc.
・ Standard requirements such as production volume and sales value are strict in the current scheme and it is difficult for
new investors to enter.
[Proposal]
・ In addition to the current incentives for tooling, provide additional incentives to local component makers.
・ With respect to newly entering component makers, create a scheme that promotes those component makers to enter
the market with supporting measures, including the provision of preferential tax treatment and basic services. Similar to
Thailand, one idea is to handle investment for vehicle assembly and component production as one project.
○ Reason
・ The incentive program for investments in the AIS is appreciated by local component makers in which enhancement of the
program is an important starting point for the development of the component and parts-supply industries.
・ Although the AIS scheme is an investment item and is a policy subject to TRIMs agreement according to the WTO rule, it is
not applicable as export subsidies or local content requirement, thus, it does not violate the TRIMs agreement (refer to p. 11).
・ According to results of the simulation analysis of CGE model, the AIS scheme that provides cash grants to new investments
is more advantageous when the incentive is granted in proportion to the local content rates (refer to p. 25).
54
Ⅳ. Proposal
(C) Improvement of competitiveness by facilitating transfer of skills and technologies
①Development of business and investment environments that encourages market entry of foreign-affiliated
companies
[Issues]
・ The central government and local governments of competitors including Thailand, Mexico, and India compete with each
other to attract foreign automobile makers and component makers where they have strengthened the cluster of their
automobile industry and improving their competitiveness.
・ However, policies for development of automobile business and investment environments other than APDP are
insufficient and falling behind of competitors in South Africa.
[Proposal]
・ After the APDP, without limiting the policy within the framework of APDP, but, recognize the attraction of foreign companies as
a breakthrough to promote the industry, and develop business and investment environments that enables it to rank with
global competitors in attracting companies (e.g. development of various infrastructures, such as logistics, electricity, water
and information), with its focus on SEZ.
○ Reason
・ Development of the automobile component industry described above cannot be achieved over night but requires long-term
continuous efforts that will be implemented step by step.
・ However, on the other hand, as global sourcing has been accelerating since 2000, it is important for emerging countries to
attract as many foreign-affiliated automobile makers and Tier 1 foreign-affiliated automobile component makers as
possible in order to strengthen the competitiveness of the automobile industry.
55
Ⅳ. Proposal
(C) Improvement of competitiveness by facilitating transfer of skills and technologies
②Strengthening initiatives for local component makers (mainly foreign-affiliated companies) to transfer
technologies and develop human resources
[Issues]
・Thailand, Mexico and other competitors not only attract foreign automobile makers and component makers but provide
schemes and incentives that encourage technology transfer to and human development of local component makers to
improve their competitiveness.
・ Although South Africa has also started similar schemes, they are not sufficient in terms of quality and quantity.
[Proposal]
・ Enhance the initiative/partnership of the current ASCCI, SAABC, and province level, and increase the effectiveness by using the
“Management consultant system for small and medium sized companies” and “Rotation expert program” created by
the Japanese government in early 2000s for ASEAN countries in collaboration with the automobile industry.
・ EPA of Japan with Mexico, Malaysia, and the Philippines is characterized by not only the liberalization of trade in goods
and service but its broad scope of business and technical cooperation ranging from development of business
environments,
investment cooperation, development of small and medium enterprises to technical cooperation.
⇒ It is one of the promising choices for South Africa to consider executing an EPA with Japan in light of the regional
industry promotion.
○ Reason
・ In the simulation analysis by CGE model as well, the scenario in which the government expenses are used for expenses
of wide range of education and R&D for the development of component and parts-supply industries of the automobile
industry to promote productivity improvement and replacement of imported products to domestically produced
products created the largest ripple effect to the economy and automobile industry (refer to p. 26, 27, 29 and 30).
56
Ⅳ. Proposal
(C) Improvement of competitiveness by facilitating transfer of skills and technologies
③Support for development of next-generation technologies
[Issues]
・ Thailand, Indonesia and other competitors are shifting to strengthen fuel consumption standards and emission gas
regulations corresponding to growing interest in enhancing regulations for the environment and safety in a global scale as well
as to deal with their serious air pollution and traffic issues in which their focus of development in automobile industry is
shifting to support development and production of eco-friendly cars.
・ On the other hand, the emission gas regulation of South Africa is still at the level of Euro2 and is falling behind of
competitors.
[Proposal]
・ Further enhance the EV development support program that is currently being implemented as part of AIS scheme to
correspond to EEV technology and advanced safety technology.
・ Focus on the development of material industries including support to processing technology to use the potential of platinum,
aluminum, steel and other materials South Africa obtains in light of material development essential for the development of
automobile technologies.
○ Reason
・ Supporting development of next-generation vehicles is essential for exploring not only of the advanced countries but also
in a global scale and for upgrading the environment and safety levels of the domestically sold vehicles amid the global
current to strengthen environment and safety regulations,
・ It can be estimated that emerging countries are making efforts to implement automobile industry policy options while
guaranteeing consistency with the exceptional provision of GATT Article XX (g) where it is at the phase where South
Africa also needs to examine measures to support the next-generation vehicles.
*GATT Article XX provides for exceptions that may be justifiable even when a measure does not comply with the provision of
Article XX. One of the exceptions is (g) measures relating to the conservation of exhaustible natural resources in which
measures promoting limitation of emission gas and low fuel consumption to automobile industry apply to this exception.
57
（様式２）
二次利用未承諾リスト
報告書の題名：Business strengthening of
Asia Industry Infrastructure in 2016
Investigation on design support of
automobile industry system in South
Africa
委託事業名：Business strengthening of
Asia Industry Infrastructure in 2016
Investigation on design support of
automobile industry system in South
Africa
受注事業者名：GENDAI Advanced Studies
Research Organization
頁
図表番号
7 no number
12 no number
13 no number
15 no number
28 no number
30 Figure 6
31 Figure 7
32 Figure 8
34 Figure 9
35 Figure 10
37 Figure 11
38 Figure 12
39 Figure 13
40 Figure 14
42 Figure 15
44 Figure 16
タイトル
Comparison of Economic Ripple Effect among
Industries in South Africa
Analysis results
Analysis results
Changes in two types of local assembly
manufacturers by automobile industry policy
toward post-APDP
Overview Diagram of Policy Simulation with
CGE Model
Comparison of economic ripple effect among
industries in South Africa
CGE model setting value for“without”
policy simulation
Results of cost and benefit effect of
each policy simulation
Simulation results of each policy under
“without”policy condition of each group
Setting of additional or alternative support
measures for PI and VAA policies
Simulation results of each policy under
“without”policy condition of each group
Setting of additional or alternative support
measures for AIS policy
Analysis results of additional or alternative
support measures for AIS policy
Results of cost-benefit analysis of human
resource development measures and measures
to stimulate the domestic market
Setting of automobile industry policy toward
post-APDP
Results of simulation of the post-APDP
automobile industry policy
（様式２）
45 Figure 17
Changes in two types of local assembly
manufacturers by automobile industry policy
toward post-APDP