WEDF 2012 Parallel: session III-2
How to promote services sector exports and innovation
The moderator of the session, Ms Desi Anwar of Metro TV, Indonesia, noted that services were the fastest growing economic sector, particularly in developing countries. Services now dominate the world economy, representing more than 50% of GDP, even in the poorest countries. In the past 10 years, trade in services has grown faster than trade in goods, with an increased participation by developing countries. Services’ share in global trade volumes increased from 14% in 1990 to 21%, far lower than the share of services in the economy, indicating further growth potential. Services drive employment and economic growth in most economies and offer opportunities for low-skilled and entry-level labour, women and youth. Services also strengthen a country’s competitiveness in other areas through improved logistics, power supply and communications. Additionally, services contribute to quality of life through improved medical services, education or leisure opportunities.
The main conclusions of the session were that public awareness and knowledge about the service industry does not reflect its significance in terms of growth and employment generation. Diagnosing export problems of the service sector is easier, but delivering solutions is more complex. In trade in services, clients demand agile solutions. The panel agreed that national trade promotion organizations (TPOs) and other trade support institutions (TSIs) have a vital role to play in raising the profile of the industry, forging business coalitions and promoting services abroad by positioning and branding the industry. They also observed that the service industry depends greatly on human resources: attracting talent is a key issue in moving up the value chain, and the talent pool has to grow in order to for a country to scale up. Infrastructure and the business environment are also of critical importance to boost the industry.
Mr Prijastono Purwanto, Vice President, Service Planning and Development, Garuda Indonesia, provided an airline’s perspective on promotion of service innovation and exports. He said that Garuda is exposed to the international scene by operating in 12 foreign countries and also as a member of various airline partnerships. It is also an active supporter of trade fairs and other market promotion initiatives in Indonesia. He added that Garuda seeks to match best practices in the aviation sector in order to comply with international regulations and has developed a business model based on efficiency. While competition in the airline business is intense, infrastructure-related problems and other business environment issues represent the biggest challenge for Garuda in growing and promoting its service abroad.
Mr Janaka Ratanyake, Chairman of the Sri Lanka Export Development Board, said that the services sector as a whole accounts for US$ 34 billion in his country, which represents 58% of GDP (up from 36% in 1950), and services exports are growing very fast. The Government’s vision is to turn Sri Lanka into an hub of information and communications technologies (ICTs), taking the dividends to every citizen, village and business and transforming the way government works. He said that Sri Lanka’s strength in the services sectors stems from a high literacy rate (91%), a highly educated, English-speaking workforce, sophisticated technical skills, a niche in finance and accounting outsourcing, as well as attractive incentives for investors such as a 15-year tax holiday. Unfortunately, despite these advantages, the country has poor international visibility as an ICT destination, relatively high costs of infrastructure and lack of capital for technology.
David Gomez, Export Manager, Caribbean Export, shared experiences from the Caribbean in promoting services innovation and export. Tourism has traditionally been the most important sub-sector within the service industry, but now Caribbean Export is pursuing a more diversified approach and is trying to identify sectors with a critical mass of enterprises to market abroad. There needs to be a shift in policy dialogue to make services a priority, he added. Services outside tourism have received very little attention and resources. There is a need for public-private sector dialogue to establish the business environment for services trade to flourish. The aim is to build the institutional capacity of TPOs and business support organizations across the region to promote services exports.
Mr Imtiaz Ilahi, Managing Director, GraphicPeople, Bangladesh, said key factors in the services sector are people (language, culture, competence), processes and tools. Labour conditions tend to be a primary indicator of an offshore location’s maturity, whether it is pioneering, emerging, established or saturated. Technological innovation does not guarantee business success. Diagnosing export problems is easy - delivering solutions is more complex. Common challenges relate to the talent pool, costs, infrastructure, country risk, and the business and living environment. TPOs can help in facilitating market access, skill development and Infrastructure. Talent and human capital are key to moving up the value chain.
Mr Shintaro Hamanaka, Economist, Office of Regional Economic Integration, Asian Development Bank (ADB), said that the ADB has the dual role of promoting economic development and economic cooperation. He discussed the implications of regional integration, particularly in the context of ASEAN. He noted that goods are very different from services in the context of regional integration: with goods there are Rules of Origin to avoid trade deflection, however, in services trade deflection may happen. Foreign direct investment (FDI) in services is very diverse. In transportation and logistics there is a strong concentration of FDI from Japan in Singapore, while the finance sector is less concentrated. Regarding policy implications, he said that if services and investment are liberalized within a region, restrictions on FDI should be minimized: ASEAN countries should be competing in liberalizing services in order to attract FDI from third countries.