We would like to share with you the results of a survey on possible export and investment opportunities for Korean companies in the auto parts sector, which will be one of the five focus areas of the 2nd Korea-Tunisia-Africa Business Forum (May this year). We look forward to the active participation of Korean auto parts companies.
When our exporters are looking for a market for their automobiles or auto parts in Africa, Tunisia can be a good option. While Tunisia itself is not a large market, it is worth noting its potential as a base for the huge African market.
For example, exports to Libya can be made through the Zarzis Trade Port and the Gabes Special Economic Zone, both of which are adjacent to Libya, and exports to other African countries can be made through the Port of Rades, Tunisia’s largest port. In particular, the Port of Rades offers preferential treatment for exports that transit through Tunisia, including the issuance of temporary permits.
In addition, as Tunisia is a member of the African Continental Free Trade Agreement (AfCFTA) and the Common Market for Eastern and Southern Africa (COMESA), you can also explore the possibility of transit exports to Africa through Tunisia.
Tunisia is a well-developed market for Korean automobile exports, with Hyundai Motor ranking first and Kia Motors second in terms of domestic vehicle sales. Therefore, we believe that there is a high potential to develop export markets for various specialty vehicles utilizing the high recognition of Korean automobiles. For example, our company, Clark, is already exporting forklifts to Tunisia.
In particular, given the overall poor medical facilities in Africa, we believe that the demand for specialized vehicles (4-5-seater mini ambulances) required for emergency transportation of severe trauma patients such as generalized paralysis is likely to increase.
Tunisia does not currently have a high percentage of electric vehicles, but it is expected that interest and preference for eco-friendly vehicles will increase in the future. In particular, the government is increasing benefits for the electric vehicle industry by reducing tariffs on electric vehicle charging equipment to 10% and VAT to 7% (Tunisian Finance Law of 2023). It is expected that our related companies may be able to export electric vehicle charging equipment to Tunisia.
Tunisia is also known as a major producer of auto parts on the African continent. Given these advantages, we can utilize Tunisia as a forward base for exporting our products.
The advantages of Tunisia as an investment destination for the automotive industry are that it has excellent labor and energy cost savings, ② it is developing as an innovation and R&D pursuit industry, ranking first in North Africa in the 2020 Global Innovation Index, and ③ investment incentives are well established.
The cost of engineer labor, electricity, and gas is 1/2 the cost of neighboring Morocco. In particular, it is necessary to actively utilize Tunisia’s low-cost and highly efficient labor force as an alternative to the labor shortage problem caused by high labor costs and a declining population in Korea.
Major innovation and R&D initiatives include CMT (Mechatronic Cluster), Electric Mobility, Connected Mobility, Computerized Communication Usage and E-Mobility, Electric Cables, Smart Antennas, and Innovative Cables for Autonomous Electric Vehicles.
③ For projects related to value-added, competitiveness, regional development, employment creation, and sustainable development, bonuses of up to 1 million dinars (worth 400 million won) are provided, and for national priority projects, incentives of up to 1/3 of the investment cost are provided.
Yura Corporation is an automotive parts company that produces wiring harnesses, which are automotive wiring systems, and started production in Tunisia in November 2007, supplying all of its products to Hyundai and Kia plants in the Czech Republic and Slovakia, employing 2,000 people as of December 2022, and planning to build a third plant in early 2023.
This is a good example of utilizing the export duty exemption clause by entering Tunisia, which has signed an FTA with Europe.
If we build an R&D center in Tunisia, we will be able to take advantage of Tunisia’s highly efficient and low-cost human resources, and we will be able to develop specialized services for the African region based on this center.
In addition, we can also consider building vehicle assembly plants in Tunisia. The advantages of Tunisia as a production center have already been confirmed by the success of Euracorp. I think it would be possible for Korean companies to pursue joint ventures with Tunisian automotive giants.