Transcript Document
Thinking aloud about a services trade roadmap for Pakistan Pierre Sauvé World Trade Institute University of Bern [email protected] Key trends • Services trade offers enormous potential for welfare gains and economies everywhere are becoming more servicecentric • Yet, there has been limited negotiating traction so far, especially in the WTO (alongside far-reaching unilateral liberalization and deeper, if uneven, PTA commitments) • The political economy of novelty…even after 25 years, we are still in discovery mode and the Uruguay Round is not yet finished in services • Novelty breads precaution, especially in a world where many stakeholders seek the protection of regulatory sovereignty On the rise: Services to GDP ratios 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 73.4 64.6 43.1 44.5 45.8 1990 49.6 46.4 53.6 2008 Low income Lower middle income Middle income High income Source: World Bank, World Development Indicators INTERNATIONAL TRADE IS NO LONGER EXCLUSIVELY ABOUT GOODS CROSSING BORDERS 1600 25% 21% 1400 20% 1200 1000 16% 15% 800 10% 600 400 5% 200 1980=100 0% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0 Goods Other Commercial Services Share Total Services/Goods Source: World Bank, World Development Indicators 70 STRI by p.c. income 60 IND 50 PHL IDN MYS 40 CHN EGY TUN THA SAU 30 JOR LKA TZA FRA MAR VENMEX RUS 20 KEN 10 PAK KHM SEN GHA NGA MNG BRA ZAF PER UKR COL PRT KOR CZE ARG LTU POL ITA GRC ESP NZL TTO BELDNK CAN AUT DEU JPN GBR SWE FIN AUS NLD IRL USA CHL 0 ECU HUN 0 10000 20000 30000 GDP per capita, 2007 Note: GDP per capita, PPP (constant 2005 international USD) Source: Gootiiz and Mattoo (2009) 40000 Services Trade Restrictiveness by Sector and Region SAPTA STRI: Overall 38.25 Sri Lanka 26.68 Pakistan 42.06 Nepal 69.34 India 33.83 Bangladesh 0 10 20 30 40 50 60 70 80 STRI of Pakistan by Mode of Supply 55 Mode 4 26.68 Mode 3 38.54 Mode 1 28.3 Overall 0 10 20 30 40 50 60 STRI: Cross-country differences STRI/Country Pakistan India China USA EU Mode 1 38.54 70.75 39.22 14.14 34.17 Mode 3 26.68 69.34 37.27 19.78 26.18 Mode 4 55.00 70.00 75.00 70.00 60.00 Overall 28.30 65.70 36.60 17.70 26.10 Banking 50.00 50.00 32.50 21.30 2.69 Insurance 46.7 45.00 38.30 21.70 13.46 0 50.00 50.00 0 3.57 Mobile telecoms 25.00 50.00 50.00 0 3.57 Retail distribution 0 75.00 25.00 0 7.14 Transportation 25.30 62.40 19.30 7.9 37.10 Air 50.00 65.00 67.50 22.50 32.50 Maritime 35.00 42.50 15.00 25.00 15.00 Maritime aux. 50.00 0 25.00 0 0 0 100.00 0 0 75.00 Rail 100.00 100.00 0 0 50.00 Accounting 27.50 90.00 45.00 52.50 40.00 Legal services 61.70 85.80 80.00 55.00 41.09 Fixed telecoms Road Learning from others • The overriding importance of human capital – Attracting a leading foreign university – Paying attention to vocational skills • The central importance of attracting FDI – MNE R&D centers in India and China – Costa Rica and supply linkages to Intel • Three ongoing experiments in services reform – China – Colombia – Mauritius China • • • • • China 2.0 – the quest for a new growth model A controlled experiment: the Shanghai Free Trade Zone Other zones are being contemplated Internationalization of the renmibi a key parameter Central role of physical infrastructure and education/training • No recourse to financial/fiscal incentives but relaxation of existing competition and entry restrictions Colombia • Incubation of IT-related start-ups at the municipal level in the city of Medellin through the provision of free office space and high speed internet connections, no corporate taxes for 5 years for incubated start-ups who export beyond agreed threshholds • Goal: help insert Colombian start-ups in regional supply chains in various services – IT, BPO, KPO, audiovisual/animation; smartphone applications • Parallel work on language training (english) and quality certification of services Mauritius • Promotion of IT and education services via a cyber city and the attraction of a leading Indian engineering faculty • Active use of fiscal incentives and infrastructural support to attract FDI and foreign talent • Building a cyber campus in Port Louis • Working with India on diaspora investment • Making Mauritius an IT education hub in Southern Africa but also offering scope for insertion in IT-related value chains in three languages (English, French and Hindi) • Significant growth in IT and business services exports Challenges in Pakistan • Fighting the stigma: adverse investment climate perceptions and important hurdles for skilled worker movement beyond the Gulf region – need to focus on Mode 1 exports and Mode 3 imports • Identifying growth bottlenecks and deciding which combination of unilateral reform and external liberalization forms the optimal response • As in most other countries, service firms in Pakistan are mostly SMEs , which face particular difficulties in access to finance and show a weaker propensity to export – hence an active role for government to promote trade and FDI, grow a venture capital market and/or designate support programs tailored to SME needs in services (weak collateral, intangible assets) • No need to reinvent wheels: updating, reassessing and/or implementing your TRTA-I produced 2007 National Roadmap for Services Needed: a proper trade formulation architecture • Two key elements: – A whole of government approach vested in the PM’s office since there is no Ministry of Services able to coordinate inter-agency work and overcome the vertical resistance of specific ministries or regulatory agencies – link wetween domestic and external liberalization – A proper set of consultative mechanisms to seek regular input from the private sector and other key stakeholders (industry associations, academia, consumer groups; need for diversity and representativeness) – Think of nurturing a Pakistani Coalition of Service Industries – you need a horizontal voice for the sector – Take the consultation process on the road, not centralized in Islamabad Benchmark your regulatory regime • Performing a trade-related regulatory audit to better understand the source of lingering protection and its underlying political economy rationale • Asking the World Bank to run their newly launched Services Competitiveness Toolkit in Pakistan to properly identify sources of export competitiveness in services ([email protected]) Key questions to address in conducting a regulatory audit What is the policy objective pursued by the relevant regulatory measure? Is the policy objective pursued by the specific measure still consistent with overall government policy? How transparent is the regulatory measure and the process to adopt and amend it? Are private sector stakeholders, domestic and foreign, consulted prior to the enactment or reform of new policy measures? When was the policy measure, law or regulation enacted? When was the measure last invoked? Is it periodically reviewed? Is the government satisfied that the policy objective is being achieved and has it developed a framework to assess the effectiveness of its regulatory regime? Can the policy measure be achieved in a manner that might lessen its restrictive impact on trade and investment? 17 Identfying priority sectors • Islamic finance, with training (learning from Malaysia) • Construction and engineering: key role for procurement liberalization in your PTAs, joining the WTO GPA or embedding procurement disciplines in TISA? • IT-related services (including in medical, legal and other high value KPO services – key importance of language skills and quality certification) Key need to strengthen trade and investment support institutions • SMEDA • TDAP • Investment promotion also holds a central role • Competition policy activism in service industries – promote new entry where feasible and supply pro-competitive regulatory regimes What to make of Pakistan’s participation in TISA • Adapting to a novel negotiating architecture • Rule-making advances: in what areas? • Market access priorities: are they clearly defined and aligned to Pakistan’s key growth bottlenecks? • What domestic reforms in services need to command priority attention? • Trading more in the hood: what can be done to promote closer trade ties with your neighbours? Thank you! [email protected]