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South-South Economic Cooperation: Exploring the IBSA Initiative Paranjoy Guha Thakurta, Director, School of Convergence, on behalf of Consumer Unity & Trust Society (CUTS) - International, India Pretoria, South Africa, June 28, 2006
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South-South Economic Cooperation: Exploring the IBSA Initiative

Dec 30, 2015

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South-South Economic Cooperation: Exploring the IBSA Initiative. Paranjoy Guha Thakurta, Director, School of Convergence, on behalf of Consumer Unity & Trust Society (CUTS) - International, India Pretoria, South Africa, June 28, 2006. Importance of South-South Cooperation: IBSA Initiative. - PowerPoint PPT Presentation
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Page 1: South-South Economic Cooperation: Exploring the IBSA Initiative

South-South Economic Cooperation: Exploring the IBSA Initiative

Paranjoy Guha Thakurta,

Director, School of Convergence, on behalf of Consumer Unity & Trust Society (CUTS) - International, India

Pretoria, South Africa, June 28, 2006

Page 2: South-South Economic Cooperation: Exploring the IBSA Initiative

Importance of South-South Cooperation: IBSA Initiative

Despite growing share of world trade, countries of the South depend on the North

Tariffs coming down Cooperation at the WTO IBSA perceived as political not

economic initiative Intra-IBSA trade negligible

Page 3: South-South Economic Cooperation: Exploring the IBSA Initiative

IBSA Initiative: Challenges

BRICS: the future of the world economy Not three countries, but three regions South Africa as hub to Africa Brazil as springboard to Latin America India as gateway to SAARC/South Asia

Page 4: South-South Economic Cooperation: Exploring the IBSA Initiative

IBSA Initiative: Challenges

Customs duties Issuance of visas Harmonization of standards, trade and

investment procedures Lack of awareness Information gaps

Page 5: South-South Economic Cooperation: Exploring the IBSA Initiative

Logistical Hurdles

Air travel expensive Freight costs prohibitively high Imbalances in flow of trade Imbalances in composition of trade Need for bilateral customs cooperation

agreements before PTAs or FTAs

Page 6: South-South Economic Cooperation: Exploring the IBSA Initiative

Similarities and Differences

Low levels of investment Investment relations ad hoc – Use of tax

havens Pharmaceuticals Automobiles and ancillaries Alcohol Ethanol Mining

Page 7: South-South Economic Cooperation: Exploring the IBSA Initiative

Similarities and Differences

Bureaucratic procedures Small and medium enterprises

disadvantaged Cultural differences, language barriers Competing economies: leather and

agricultural products Non-tariff barriers

Page 8: South-South Economic Cooperation: Exploring the IBSA Initiative

The Way Forward

Alleviation of poverty and hunger Biotechnology Environmental management Information technology Technological cooperation – the case of

aerospace

Page 9: South-South Economic Cooperation: Exploring the IBSA Initiative

Global Aerospace Scenario…

The world over, the aerospace industry is: A strategic asset A generator of wealth A driver of technological and economic

development Important source of employment Poised to expand by 25 % over the next

two decades

Page 10: South-South Economic Cooperation: Exploring the IBSA Initiative

Global Aerospace Scenario...

20,000 airlines expected to be operational by 2020

Matched only by the space industry in terms of technological complexity

A dynamic propeller of industrial innovation

The US has the highest market share

Page 11: South-South Economic Cooperation: Exploring the IBSA Initiative

Global Aerospace Scenario...

Has seen a process of rationalisation and consolidation

This has triggered stiff global competition among ‘first-tier’ players

Growing competition among ‘second tier’ contractors has exerted pressures on the supply chain

Page 12: South-South Economic Cooperation: Exploring the IBSA Initiative

Global Aerospace Scenario...

Globalization of the supply chain has allowed system integrators to develop an extensive pool of sub-contractors across the world

Page 13: South-South Economic Cooperation: Exploring the IBSA Initiative

The Aerospace Industry...

Is divided between first tier and second tier suppliers

First-tier contractors: – Are a few big companies that provide

wholly packaged systems to both commercial and military markets

– Are using cutting edge technology– Maintaining, upgrading and repairing

equipment throughout its lifespan

Page 14: South-South Economic Cooperation: Exploring the IBSA Initiative

First tier contractors...

– Are fully-fledged business integrators, marketing, selling and delivering aircraft on a large scale

– Are also system integrators, presiding over manufacturing contracts and management of supply chains

Page 15: South-South Economic Cooperation: Exploring the IBSA Initiative

Second tier contractors...

– Are firms in states that possess limited but significant aerospace capabilities

– Examples include:• Sweden • Canada • Australia• Brazil• India• South Africa

Page 16: South-South Economic Cooperation: Exploring the IBSA Initiative

Second tier contractors...

– Operations range from advanced system integration to medium and low levels of system integration

– Companies operating in this segment are required to meet strict certification conditions

Page 17: South-South Economic Cooperation: Exploring the IBSA Initiative

Prospects for IBSA Strategic Cooperation

Currently very little aerospace collaboration between IBSA countries

General agreement among governments on the need for cooperation

Page 18: South-South Economic Cooperation: Exploring the IBSA Initiative

Potential for Cooperation

Three areas of cooperation can be identified:– Expansion of aerospace supply chains,

premised on commercial opportunities offered by the diverse aerospace capabilities of the IBSA countries

– Second, collaboration around aerospace systems in support of strategic defence needs

Page 19: South-South Economic Cooperation: Exploring the IBSA Initiative

Potential for Cooperation

– Third, collaboration around small and micro satellites. Brazil and India have strong competencies in in this sector while South Africa has a small but reputed small and micro satellite industry with full-fledged ground support infrastructure

Page 20: South-South Economic Cooperation: Exploring the IBSA Initiative

Developing Technological Capabilities

Sufficient scope for technical cooperation among the IBSA countries in aircraft and aircraft components production

South African aerospace industry could exploit its competitive niche areas to integrate its manufacturers into Brazilian and Indian aircraft production sectors

Page 21: South-South Economic Cooperation: Exploring the IBSA Initiative

Developing Technological Capabilities

IBSA nations have the necessary infrastructure to develop a vibrant aerospace sector

Sufficient scope for cultivating complementary niches

Page 22: South-South Economic Cooperation: Exploring the IBSA Initiative

Role of Governments

Governments must play a central role in developing the aerospace sector by addressing concerns relating to:

• Import tariffs • Manufacturing and investment incentives• Transaction costs

Page 23: South-South Economic Cooperation: Exploring the IBSA Initiative

Role of Governments

– By providing subsidies for collaborative investment and manufacturing programmes, governments of IBSA countries could enable local firms to add value to aircraft production and compete effective with high-cost manufacturers based in Europe and the US

Page 24: South-South Economic Cooperation: Exploring the IBSA Initiative

Role of Governments

Governments can further:– Support the development of defence and

space projects by nationalization of segments of the productive chain

– Act as intermediaries between respective national firms and foreign governments

Page 25: South-South Economic Cooperation: Exploring the IBSA Initiative

Value Addition and Cooperation

– The value-addition and cooperation instruments that are likely to yield optimal benefits inlcude:

• Boosting research & development • Encouraging shared research • Joint marketing arrangements• Facilitating technological exchanges

Page 26: South-South Economic Cooperation: Exploring the IBSA Initiative

Challenges and Threats

Important challenges to cooperation in the aerospace sector:– Corruption allegations against Denel made by the

Indian government; this has significant implications for Indo-South African bilateral relations

– Extent of willingness and capability of the IBSA countries to develop common collaborative areas of interest in an already congested global aviation market

Page 27: South-South Economic Cooperation: Exploring the IBSA Initiative

Challenges and Threats

– Both South African and Brazilian defence industries have been facing problems of over-capacity against a backdrop of declining defence expenditure

– Reductions in: • Transaction costs • Shipping costs • Delivery times

Page 28: South-South Economic Cooperation: Exploring the IBSA Initiative

Challenges and Threats

– Removing the perception in Brazil that it would stand to gain little by cooperating with South Africa and India in aeronautics as its own industry is quite advanced and globally integrated

– India has to change Brazil’s perception that its aerospace markets are difficult to penetrate due to bureaucratic hurdles

– Removing doubts about the potential benefits of transnationalization of productive chains (as opposed to bringing world-class suppliers to operate in the national markets) in creating employment

Page 29: South-South Economic Cooperation: Exploring the IBSA Initiative

Aerospace can provide the starting point for a substantive economic dialogue among the IBSA nations

Page 30: South-South Economic Cooperation: Exploring the IBSA Initiative

Thank You