Transcript Imperatives for the Development of Service Industries in St Vincent

Imperatives for the Development
of Service Industries in St Vincent
and the Grenadines
Ramesh Chaitoo
[email protected]
[email protected]
Trade in Services Matters for countries’
competitiveness
• Cost and quality of services is a major
determinant of how much countries can benefit
from globalization
• Firms need efficient and reliable services to
compete in the world economy – transport,
telecoms, accounting, education, etc.
• Effectively integrating services markets is
complex because it involves regulatory reform
and cooperation wide
WTO 2010 Report on Services Trade Statistics
• Between 2000 and 2008, world Exports of commercial services
rose by 13% on average per year, led by growing exports of Other
Commercial Services (15%) and transportation (13%).
• Between 2000 and 2008, world Imports of commercial services
rose by 12% annually.
• In the first half of 2010, world exports of commercial services
increased by 11 per cent compared to the same period of 2009.
Asia, in particular developing Asia, is leading the recovery process,
recording 26 per cent average growth year-on-year.
• Over January-June 2010, China' exports of total commercial
services expanded by 41%, followed by Taiwan (33 %), and Hong
Kong (28%). Exports from India, the Republic of Korea and the
Philippines rose each by a robust 18%. Within the region Japan
lagged behind (7 per cent).
World Exports of Commercial Services by Region 2008
World Exports of Commercial Services by Region,
2008
World Imports of Commercial Services by Region - 2008
World Imports of Commercial Services by Region, 2008
Structure of World exports of commercial
services
1995
Transport
26%
2009
Travel
34%
Other commercial
services
40%
Source: WTO estimates
Transport
24%
Travel
25%
Other commercial
services
51%
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Average annual growth of World Other
Commercial Services exports, 2000-2007
19%
Computer and information services
Insurance services
17%
Financial services
17%
Other business services
15%
Construction
14%
12%
Royalties and licence fees
9%
Personal, cultural and recreational
services
0.0
5.0
10.0
15.0
20.0
25.0
Percentage
Note: communications services not available
Source: WTO estimates.
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Trends to Note – New services
• In the period 2000-2008, the value of Africa's
Travel/Tourism exports almost tripled and, starting in
2005, it exceeded the region's receipts from
exports of agricultural products.
• In 2008, over 44 million international tourists visited
African countries, up by 7 per cent since 2000.
• Mauritius Board of Investment indicated that more
than 10,000 foreign patients visited Mauritius in 2010
for health/medical care of some kind.
• Health-related tourism is well developed in Tunisia.
The country’s exports of this type of service increased
by 26 per cent on average per year over 2000-8.
Determinants of Success in Services
Fundamentals
Domestic
Policies
Targeted
policies
•
•
•
•
Infrastructure
Entrepreneurial and human skills
Institutions and
Endowments
• Policies affecting trade, investment,
and labor mobility in services
• Special Economic Zones
• Incentives in general
• Export promotion policies
Human capital and services exports
Electronic infrastructure and service exports
KEY MESSAGES
1. Services performance critically depends on
human capital, the quality of telecom network,
and institutions for cross-border services
2. Success in manufacturing does not seem to be
a pre-condition for success in services
3. Importance of factors that are particularly
relevant to services
4. Importance of complementarities among
services and among “modes” of supply
Essential Ingredients for Developing States
To develop a competitive services sector in a
developing economy it is critical to have:
1. Clear & consistent policy framework for services
or targeted sectors
2. Access to affordable finance in local economy
3. Investment in people - skilled workforce &
standards
4. Strategic partnerships to fit into global value
chains
5. Efficient telecoms/ICT infrastructure
6. Performance driven incentives for firms
7. Public-Private sector partnerships
1.
Policy framework for services
• Vision is key to setting goals and developing particular
services industries. Develop regulatory regimes.
• Except for the island states, most ACP states are not
focused on growing service industries. Investment mainly in
natural resouce extraction, manufacturing and agriculture.
Few policy initiatives for services. In the Caribbean tourism,
offshore finance, ICT and entertainment flaggged; but only
tourism has legally based, predictable incentives.
• SVG needs to promote and develop service sectors that
can become export-oriented.
• Decide where you want to fit in the global value chain of
any service sector and exploit linkages between sectors
(clusters).
Note:
• Mauritius has made significant progress from
sugar to textiles, then tourism, finance and now
growing in ICT.
• Kenya ICT & business process outsourcing (BPO)
industry grew in a policy vacuum; now it is
significant.
• Malaysia developed professional services with
Public-private sector partnerships.
• Barbados has been successful in developing the
offshore financial services sector; and
professional services benefit as a result.
New level of collaboration needed
• Services development and regulation depend on
many ministries and agencies
• Collaboration is critical; Get rid of silo mentality in
ministries & agencies.
• Think of clusters of industries.
• Need policy coherence across government
agencies – don’t tax technologies that increase
labour productivity & efficiency
• Appreciate the link between services &
manufacturing & agriculture.
Total of Duties, Taxes & Charges Imposed on Selected
Inputs to Creative Industries in CARICOM
2. Access to affordable finance
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Services firms mainly SMEs - very difficult to get debt
financing from banks or raise capital. Equity financing not
feasible. Very high interest rate spreads.
Assets of services firms are ideas not physical collateral need innovative approaches to financing. But venture capital
markets in ACP economies almost non-existent.
India, Malaysia, Singapore’s Exim Banks have special
window for services providers (Export Services Facilities;
Working capital finance; Will finance services providers
based on contracts; Export Overseas Guarantee Facility –
through commercial banks)
Nigerian government set up $200 million Creative and
Entertainment Industry Stimulation loans scheme in 2007.
3. Investment in People & Standards
• People most critical factor in successful services activity.
• Need to invest in training & constant skills upgrading. Many
firms in ACP say unavailability of technical staff affects
growth and competitiveness
• Critical shortage of higher skills in ICT sector in recent
years - inadequate training facilities.
• Education system must be in synch with needs of industry
but in ACP states academic curricula are often outdated.
• Quality service standards are also key to competitiveness
in global economy.
4. Partnerships to fit into global value
chains
•
Developing economies must trade to create wealth.
Services activities now being disaggregated around the
globe and may involve various countries.
•
Have to decide where to link into global value chains - ICT,
animation, BPO, finance, audio-visual, design, energy, etc.
•
Trade agreements help but business must seek & foster
commercial linkages.
•
Create strategic linkages with international firms to supply
overseas markets based on use of local skills. Local
content alone is not enough.
5. Efficient ICT
Information & Communications Technology critical to
competitiveness of SMEs and services exports:
1. ICTs increase labour productivity & efficiency - incentivize don’t
tax them
2. Need world class telecoms networks - cost & quality
3. E-commerce - to reach distant markets
4. Broadband Internet is key
6. Performance driven incentives for firms
Except for Tourism and offshore finance, very few
incentives for services firms in developing countries.
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•
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Need fiscal and other incentives to help services firms grow
and attain scale; (Mainly manufacturing incentives now).
Many inputs to services industries are still taxed because
services were not thought to add significant value in terms of
exports.
Rethink bricks & mortar approach to industrial policy.
Reward firms that upgrade staff training & skills.
Reward firms that innovate
Develop performance-driven incentives for services firms that
export.
7. Public-Private sector partnerships
•Since most services firms are SMEs, size is major
limiting factor. Private firms cannot do it alone.
•In lumpy investments it is critical for the State to play a
role in supporting the development of local sub-sectors:
•Need to invest in infrastructural sectors to build basic
capacity - and for design, R & D.
Summary of approach
Policy
framework
Finance
and
Incentives
Infrastructure
Investment in
people and
standards
So, to recap ….
To develop competitive services sectors in developing
economies it is critical to have:
1. Clear & consistent policy framework for services or
targeted sectors
2. Access to affordable finance in local economy
3. Investment in people - skilled workforce & standards
4. Strategic partnerships to fit into global value chains
5. Efficient telecoms/ICT infrastructure
6. Performance driven incentives for firms
7. Public-Private sector partnerships
THANK YOU
RAMESH CHAITOO
[email protected]
[email protected]
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