TUE 2:00 PM Parallel - Industrial Policy

Full Report:
Sustaining Industrial Growth in Africa: A Reflection on South Africa’s Automotive Industry Support Model, by Martin Kaggwa, Jasper Steyn, and Anastassios Pouris

Martin Kaggwa presented a paper indicating that, although South Africa does not have an indigenous automotive brand, the industry employs 100,000 people. As background, he mentioned that South Africa’s economy operated largely in isolation from the rest of the world up to 1994. Soon after that, the economy opened, and car parts could be imported and finished cars exported. Despite the re-integration, the automotive industry has experienced deteriorating trade deficits since 1995. The opening of the automotive industry had been expected to be an opportunity, but it turned out to be a challenge. A selective industrial policy was put in place to promote the industry. A system dynamics model was developed to explain this apparent contradiction and argue the benefits of the selected policy, which involve a rebate of twenty percent of investments undertaken in new and unused productive assets.

Foreign Direct Investment and Spillovers in Seed Sector Development, by Sebastian Derwisch and Birgit Kopainsky.

This paper discussed a framework to assess the role of foreign direct investment and intellectual property rights for seed sector development in developing countries.

After this presentation there were a few questions:
Q: Can you get a different picture if you blend local with developed seeds, because, from experience, there is usually resentment by local people toward new or foreign seeds? However, if you blend what you produce with the local variety of seeds, you may receive more acceptance. A: The speaker replied that it was a good suggestion to try.
Q: Most of the developed seeds cannot be replanted, which means that farmers have to return and buy new seeds each time. This information is not always fully provided to farmers. Could this produce a feedback loop in the model?
A: The farmers are provided with this information
Q: Are the crops hybridized or pollinated?
A: It depends on the type of investment.

Other comments touched on the fact that Africa does not have a fully institutionalized system for protection of intellectual property rights, such as Europe has. As a result, some prefer to have their work registered in Europe even if it is developed in Africa.

Modeling the Cyclical Nature of Aggregate Airline Industry Profits, by Kawika Pierson

The paper tried to explain the causes of cycles in profits in the airline industry, since they are a major cause of instability in the economic system. The cycles are often ignored out of the system dynamics area. He discussed several dynamics that combine to cause the cycles and prescribed policies that can help remove them from the industry earnings.

He was asked, “ Did you try to model different companies?” and he replied that the data is aggregated because all airline companies face the same problem.

The session was closed at 3:00PM.

Deogratias Kibira