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WEDF 2014 session report - Parallel session VI: Trade in services: The next frontier

  • WEDF 2014 session report - Parallel session VI

    Speakers:

    • Mr. Dayo Ogunyemi, CEO, 234 Media, Kenya
    • Mr. Marcos Amadeo, Director General, Ministry of Economic Development, City of Buenos Aires, Argentina
    • Ms. Sondang Anggraini, Adviser, Office of the Minister for Trade Diplomacy, Ministry of Trade, Indonesia
    • Ms. Sandra Uwera, COMESA Business Council Coordinator, COMESA Secretariat
    • Moderator: Mr. Shawn Donnan, World Trade Editor, Financial Times

    Overview

    Services account for close to half of world exports when the full value of services inputs is accounted for in the final output of goods. To be truly competitive, including in manufacturing and agriculture, countries must have an efficient services sector. The panel explored the growing ‘servicification’ of trade, business opportunities for developing country SMEs, especially in modern cultural and creative industries, and best practices in services export promotion.

    Conclusions

    • The services sector has become the dominant economic sector and a driver of economic growth, providing the jobs of the future, generating export earnings and attracting foreign direct investment and know-how, including through business process innovation. Knowledge-intensive business services are the fastest growing component of world trade today, with services outsourcing delivering big export growth opportunities for developing countries.
    • Services inputs also provide critical value-added to all sectors of the economy, enabling other exporting industries.
    • For these reasons, Aid for Trade needs to focus more on services. Services industries are constrained by inefficient and overly burdensome regulatory regimes in many developing countries. More policy focus is needed on education, intellectual property protection, digital infrastructure, partnerships for innovation, quality standards and connectivity with the rest of the world.
    • Attracting services trade opportunities requires a different tool kit from that required to promote trade in goods. Technical assistance and sharing of best practices is needed to help strengthen trade promotion organisations.
    • Services providers need to organize themselves in business advocacy groupings and engage in public/private dialogue so that governments increase their policy focus on services.

    Takeaways

    • Public support should focus on soft skills, digital infrastructure and facilitating partnerships, especially given the rapid, unpredictable nature of technology changes.
    • The COMESA Business Council proposed the establishment of a regional professional services working group, in response to calls from participants to support standards certification for services providers. The Caribbean Network of Services Coalitions pledged to share their experience.
    • Panellists committed to exploring ways to deepen the sharing of global experiences taking place at WEDF, including facilitating private sector mentorship and exchange programmes to support SMEs in the creative industries sector in Africa.
    • There is a role for ITC and other organizations to collect and disseminate good practices among SMEs and across different regions.

    Speakers' key messages 

    • Mr. Amadeo  
      In 2008, the City of Buenos Aires decided to develop a hub of services excellence like Hong Kong, Seoul, London or Singapore. The strategy involved creation of services districts dedicated to design, audiovisual, animation, special effects and other creative industries. The city provided co-location facilities, hub platforms and promotional events such as hackathons and open data days.
    • Mr. Ogunyemi 
      The real economic contribution of Nollywood was not well understood until recently, when the Nigerian GDP measurement was re-based, revealing the importance of the non-oil economy and showing that the country’s film industry accounted for as much as 1.6% of GDP (and services as a whole for over 64%). The industry, which grew without public support, produces 1,500 to 2,000 films a year, all digital. To keep up with technological change and combat piracy, businesses have to move from printing and distributing films on DVD to licensing online content.
    • Ms. Anggraini  
      Public awareness of services increased hugely after 2010, when the sector reached 55% of GDP and the contribution of services to competitiveness in manufacturing became more apparent. The forthcoming five-year national development plan by the incoming government is expected to include, for the first time, a specific focus on services. Indonesia’s Ministry of Trade now has a dedicated unit on trade in services and participates in the Indonesian Services Dialogue between business, government and academia. Indonesia initiated a high level public-private dialogue on services at regional level when it chaired APEC in 2013.
    • Ms. Uwera  
      The COMESA Business Council emphasizes services, including working groups on banking, insurance and tourism. It is working to form a regional Coalition of Services Industries. The business community sees services as a key contributor to the growth of the manufacturing sector in Africa. Upgrading and compliance with quality standards are the key ingredients of success in services. Kenya has diversified away from agri-business to ICT; Rwanda is developing business tourism; a new Seychelles-Zambia tourism twinning programme represents a huge opportunity for restaurants. At the same time, there are continuing challenges in moving to services. The private sector is not included in either the COMESA or the EAC negotiations, and more must be done to assist with regional standards harmonization and compliance, and to strengthen public-private dialogue at both the national and the regional level.

    Discussion 

    A representative of the Rwanda Development Board highlighted Rwanda’s success in tourism and in ICT. In tourism, Rwanda identified the high-end gorilla trekking niche as the basis for growth in the sector. Rwanda is now looking to other sectors, including creative industries, health care, financial services, BPO and logistics. The common denominator in developing services: “It’s all about skills”.

    Discussion focused on the trend to virtual services and how these trends are changing the business model for modern services. Services discussed included software-as-a-service – services accessed through the cloud rather than on the user’s computer, and the Internet of Things – the interconnection of uniquely identifiable embedded computing devices within the internet infrastructure. For film, the big opportunities are video-on-demand and the digital broadcast market, as Africa switches over to digital television. For television, this will entail a shift from broadcasters with a monopoly on transmission to more open access for the delivery of creative content. For Africa to take full advantage of these trends, it needs digital payment systems, faster and cheaper data flows, and access to cheaper devices. This could take another three to seven years.

    In responding to questions from the audience, panelists also focused on how services add value to goods, improving customer satisfaction and expanding the market. The cost of services standards certification was recognized as a potential constraint for SMEs, but also as an opportunity to upgrade services offerings, increase returns and attract new partnership and funding opportunities.

    Discussion ended on how to prepare for disruptive technologies. The best way is to give the private sector the power to anticipate and adapt to changes in technology, by letting the market decide. For instance, the open approach to regulating e-payments in East Africa led to widespread innovation that was not possible in the more heavily regulated West African context. Businesses have to invest in research and development and innovate to anticipate the needs of increasingly demanding consumers. Public authorities need to let the companies innovate and move fast to similarly adapt and innovate public services to business needs.

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