services trade competitiveness analysis (second session)
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Services Trade
Competitiveness
Analysis
Sebastián SAEZ
Senior Trade Economist
Daria Taglioni
Senior Trade Economist
SERVICES TRADE COMPETITIVENESS
Why it matters?
What we are doing?
How we are doing it?
WHAT IS TRADE IN SERVICES?
3
Presence of supplier Other criteria Mode
Service supplier is not
present in the territory of
Member.
Service supplied in territory of one Member from the territory of
any other Member.
CROSS-BORDER
SUPPLY
Service supplied to a consumer of Member outside his territory,
in the territory of any other Member.
CONSUMPTION
ABROAD
Service supplier is
present in the territory of
Member.
Service supplied in territory of one Member, through commercial
presence of supplier of other Member.
COMMERCIAL
PRESENCE
Service supplied in territory of Member and supplier from other
Member is present in the form of a natural person.
MOVEMENT
OF
NATURAL
PERSON
SERVICES TRADE COMPETITIVENESS
4
WHY IT
MATTERS
Services play a strategic role in developing countries’
competitiveness – Positive correlation with GDP per capita
– Next stage of countries export diversification, sophistication and value addition
– Strategic input to many manufacturing processes
Governments want to improve their understanding of size, scope
and potential of services exports as well as the obstacles that need
to be removed to unlock the competitiveness of their countries’
services sector.
The questions they ask include: – How can we assess domestic vs. trade performance of services sector and their
importance?
– How can we assess the role of services as inputs in the traded sector of an
economy?
– What are the determinants of services trade performance?
– What is the relative importance of these determinants for different services?
– How do policies influence the efficiency of these determinants and of services
exports?
– What are the main policy constraints for trade in services growth and development?
SERVICES TRADE COMPETITIVENESS
7
WHAT ARE WE
DOING?
A framework for analysis covering three dimensions:
– Outcomes: scope and coverage of services export sector
– Potential for services exports: tradability, and services content
of downstream goods exports
– Enabling factors and obstacles
HOW / WHERE
ARE WE DOING
IT?
Gathering new data (trade in value added; bilateral flows, and firm
level)
Value added and bilateral data will be made available online by end
of FY13.
Focus on determinants: policies as well as supply-side factors (HK,
Infrastructure, others)
Pilot countries: Malaysia (full analysis), Cambodia and Kazakhstan
(partial analysis), Ghana (spillovers to the manufacturing sector)
SERVICES COMPETITIVENESS ANALYSIS
A three-dimensions analysis:
Outcomes: services and scope of the export sector
Potential for services export: tradability and services
content of exported goods
Enabling factors and obstacles
Note: This analysis depends on availability and access to data
DIMENSION 1:
SERVICES TRADE OUTCOMES ANALYSIS
– Size of trade
• Aggregate data ( compare indicators to highly developed
countries and peer countries)
• Firm level data analysis to assess characteristics of trading firms(*)
– Scope of trade
• Diversification
• Export survival and growth
• Sophistication and value addition
(*) Note: This analysis depends on availability and access to data
DIMENSION 2: POTENTIAL FOR SERVICES EXPORT
Services content of exported goods and services
Assessing tradability(*)
Potential vs. actual outcomes in export performance
Services complementarity with goods
Note(*): This analysis depends on availability and access to data
DRIVERS OF SERVICES GROWTH
• Human capital
• Infrastructure
• Access to technology
Economic Fundamentals
• Policies affecting trade, investment, and labor mobility in services
• Competition environment • Licenses and ‘behind the border’regulations
Policy Ecosystem
• Export promotion policies • Fiscal and other incentives
Active Promotion Policies
DIMENSION 3: TRADE DIAGNOSTICS
Trade diagnostic
– Foreign barriers: Market access
– Domestic barriers: services institutions
– Domestic barriers: Business environment for FDI
– Domestic barriers: Labor skills
– Domestic barriers: Trade related infrastructure
Policy Recommendations
Note: This analysis depends on availability and access to data
SERVICES TRADE OUTCOME ANALYSIS: SIZE
AND SCOPE OF THE SERVICES TRADED
SECTOR.
– Trade in services as a percentage of GDP and comparison with
services value added as a percentage of GDP.
– Services exports relative to services value added (measure of
tradability).
– Export growth: compared to goods and to peer countries.
– Measures of revealed comparative advantage (RCA) following
Balassa (1965).
– Measures of evolution of exports and world demand
investigating if specialization observed in a country is moving
into the most dynamic sectors of world demand.
Measuring the size of the sector comparing
with a country’s development level or region
Trade in services as a percentage of GDP and
comparison with services value added as a percentage
of GDP.
Measure of untapped potential
In general based on cross-border transactions
14
Services Valued Added to GDP: LAC, 2010
15
BRA
ARGCHL
URY
PRY
BOL
PERCOLECU
CRI
NIC
GTM
SLVHND
TTO
JAM
DOMMEX
2040
6080
100
Ser
vice
s va
lue
adde
d as
% o
f GD
P 2
010
4 6 8 10 12log GDP per capita 2010
Services Valued Added to GDP: EAPR, 2010
16
MalaysiaThailand
Singapore
Philippines
IndonesiaVietnam
2040
6080
100
Ser
vice
s va
lue
add
ed 2
010
4 6 8 10 12log GDP per capita 2010
Services Valued Added to GDP: SA, 2010
17
IndiaBangladeshPakistan
Nepal
Maldives
Sri Lanka
2040
6080
100
Ser
vice
s, e
tc.,
valu
e a
dde
d (%
of G
DP
) 20
10
4 6 8 10 12log GDP per capita 2010
ANOTHER ANGLE: COUNTRIES AND
REGIONS
18
DOES COMPOSITION MATTERS?
19
SERVICES TRADE TO GDP: LAC, 2010
20
BRAARG
CHLURYPRY
BOLPER
COL
ECU
VEN
CRI
NIC
GTMSLV
HND
TTO
JAM
DOM
MEX
020
4060
Tra
de in
Ser
vice
s as
% o
f GD
P 2
010
6 8 10 12log GDP per capita 2010
SERVICES TRADE TO GDP: EAR, 2010
21
SERVICES TRADE TO GDP: SA, 2010
22
Bangladesh
India
Maldives
PakistanSri Lanka
050
100
150
200
Tra
de in
ser
vice
s (%
of G
DP
) 20
10
4 6 8 10 12log GDP per capita 2010
SERVICES COMPOSITION AND GDP:2010
23
a. Transport services exports are
below expectations
b. Tourism services perform above
expectations
c. Other commercial services
exports lower than expected
Malaysia
Japan
Indonesia
Cambodia United States
Germany
Singapore
France
India
0.2
.4
.6
.8
Tra
nsp
ort E
xp
orts (%
S
ervices E
xpo
rts) 20
09
6 7 8 9 10 11log GDP per capita 2009
Malaysia
Japan
Indonesia
Cambodia
United States
Germany
Singapore
France
India
0.2
.4
.6
.8
1
Tra
vel E
xp
orts (%
S
ervices E
xpo
rts) 20
09
6 7 8 9 10 11log GDP per capita 2009
Malaysia
Japan
Indonesia
Cambodia
United StatesGermany
Singapore
France
India
0.2
.4
.6
.8
1
Othe
r S
ervic
es E
xp
orts (%
S
ervices E
xpo
rts) 2
00
9
6 7 8 9 10 11log GDP per capita 2009
COMPOSITION AND GROWTH: MEXICO
WORLD EXPORTS MEXICO’S EXPORTS
24
COMPOSITION AND GROWTH:
BRAZIL’S EXPORTS GROWTH
MEXICO’S EXPORTS GROWTH
25
COMPOSITION ANOTHER ANGLE: MALAYSIA
26
MEASURES OF EVOLUTION OF EXPORTS AND
WORLD DEMAND
27
DOES THIS DATA TELL US THE WHOLE
STORY: NO, MODES OF SUPPLY
28
Malaysian Investment in Services Is Increasing Distribution and Financial Services Main Malaysian FDI Destinations
0
5,000
10,000
15,000
20,000
25,000
RM
millio
n
2008 2009 2010 2011
47%
41%
37%
32%
7%
20%
28%
13%
25%
18% 18%
35%
16%18%
13%
17%
3% 3%4%
2%
2008 2009 2010 2011
Distribution ICT Financial Other services Construction
ANOTHER ANGLE TRADE ON VALUE ADDED
BASIS
29
Gross exports
Intermediate inputs
Upstream costs of intermediate inputs
Value added of intermediate inputs
Foreign value added of imported
intermediate inputs
Domestic value added of intermediate inputs (IDVA)
Direct value added of exports
(DVAE)
Total value added of exports =
DVAE+IDVA
OTHER COMMERCIAL SERVICES
30
a. Malaysia in the Asia region b. Malaysia globally
7%
2%
6%
5%
6%
14%
4%
4%
2%
21%
4%
5%
4%
11%
3%
6%
8%
9%
21%
6%
8%
5%
33%
6%
11%
8%
13%
6%
5%
12%
11%
27%
11%
9%
11%
29%
12%
13%
9%
0% 5% 10% 15% 20% 25% 30% 35%
Cambodia
Indonesia
Lao PDR
Malaysia
Philippines
Singapore
Thailand
Vietnam
China
Hong Kong
Up-Middle Income Asia
Low-Middle Income Asia
Low Income Asia
Service Exports/Total Exports SXs-VA/Total Exports
Gross Value
5%
4%
5%
5%
11%
3%
7%
7%
8%
9%
22%
3%
4%
8%
5%
10%
8%
17%
6%
13%
12%
14%
11%
38%
6%
8%
12%
9%
13%
14%
26%
17%
18%
16%
24%
23%
32%
19%
19%
0% 10% 20% 30% 40% 50%
Malaysia
LIC
LMIC
MHI
HI
Mexico
Brazil
Argentina
New Zealand
Australia
India
Japan
Korea, Rep of
Service Exports/Total Exports SXs-VA/Total Exports
Gross Value
SERVICE EXPORTS CONTRIBUTION TO TOTAL
EXPORTS 2007, VALUE-ADDED MEASURES
31
SERVICES TRADE OUTCOME ANALYSIS: SIZE AND
SCOPE OF THE SERVICES TRADED SECTOR.
Firm level measures of exports and imports of services, for those countries where this information is available.
Firm level measures from census and balance sheet data. These measures will include, for those countries where this information is available: – share of firms exporting, exports over domestic sales distribution,
size, TFP, value added, skill and earnings, inputs per worker, average wage, and average R&D investment of exporting vs. non-exporting firms, share of firms exporting. Comparison of these statistics for manufacturing vs. services exporters will allow inferring indirectly some aspects of the performance of the service sector compared to the manufacturing sector, for which a wider and more complete set of statistical information is available.
SCOPE OF THE SERVICES SECTOR
Conditional on data availability, the scope of the services sector can be quantified by looking separately at three dimensions: a) Diversification: services and markets;
b) Survival and growth; and
c) Sophistication and value addition.
The first two dimensions will allow us to assess the changes in services trade composition and to what extent they are similar to world services trade evolution.
The third dimension, will allow us to assess whether the composition of services is consistent with the level of development of the country.
INDICATORS
Export structure: Composition of country’s imports and exports
(across goods and services and within services) using sectoral data.
Export diversification using firm level data: measures of
concentration of exports; Gini coefficients, Pareto distribution of
firms.
– Diversification across modes of supply (including Herfindahl index).
Indicators of export survival and growth will include:
– Firm level survival rates for exports using firm-level data (if available)
– Growth decomposition of firm export growth. Comparisons with manufacturing.
Indicators of sophistication and value addition will include:
– Analysis on the sophistication of service exports
– Firm level measures of services export sophistication, including (weighted)
averages, medians and standard deviations of value added, sales and
employment, wage comparisons for firms in business services and in personal
services with firms in manufacturing. Detail for subsectors of services and
personal services.
EXPORT DIVERSIFICATION: MALAYSIA
35
EXPORT DIVERSIFICATION: TURKEY
36
EXPORT DIVERSIFICATION: INDIA
37
MARKERT DIVERSIFICATION LIMITED DATA
AVAILIBILITY: MALAYSIA MIRROR DATA
Export: Top 10 share in total exports is 42% Imports: Top 10 Share in total imports is 23%
USA 22%
Japan 20%
Australia 16%
Germany 9%
Netherland 9%
Great Britain
7%
Greece 6%
France 6%
Canada 3%
Finland 2%
Top 10 Trading Partners: 2007
Singapore 23%
Japan 21%
USA 12%
Australia 10%
Hong Kong 9%
Great Britain 7%
Netherland 6%
Germany 5%
Greece 5%
France 2%
Top 10 Trading Partners: 2007
Source: World Bank database on bilateral services flows
SOPHISTICATION: WHAT IS IT?
Aim moving up the value chain through modern services that are embedded inherently with higher productivity levels.
Measure of the sophistication of exports of manufactures and now also services (see Mishra et al 2011, based on the measure developed in Hausmann, Hwang and Rodrik, 2007, for goods alone).
This measure can be thought of as representing the “quality” of a country’s export basket.
Intuitively, the measure captures whether any given country’s export basket consists primarily of services typically exported by high-income economies (and viewed as relatively sophisticated) or by low-income economies.
Not a value judgement with regard to more “traditional” services such as tourism, transportation, or others.
39
SOPHISTICATION: 2010
East Asia (Y axis log)
South Asia (note Y axis scale are different)
40
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Bangladesh India Maldives Nepal Pakistan Sri Lanka
SOPHISTICATION: LAC 2010
41
BRA
ARGCHL
URY
PRY
BOL PERCOL
ECUVEN
CRI
NIC
GTM
SLV
HND
JAM
DOMMEX
8.5
99.
510
Ser
vice
s S
ophi
stic
atio
n 20
09
6 8 10 12log GDP per capita 2009
SOPHISTICATION: EAPR, 2010
42
Malaysia
Japan
Indonesia
Cambodia
United StatesGermany
Singapore
France
India
8.5
99.5
10
Sop
his
ticari
on
Ind
ex
200
9
6 7 8 9 10 11log GDP per capita 2009
SOPHISTICATION: SOUTH ASIA, 2010
43
BGD
IND
NPL PAK
LKA
MDV
8.5
99.5
10
log s
erv
ice e
xport
so
phis
ticatio
n 2
009
6 7 8 9 10 11log GDP per capita 2009
DETERMINANTS OF
SERVICES
PERFORMANCE:
DIAGNOSTICS
44
DRIVERS OF SERVICES GROWTH
• Human capital
• Infrastructure
• Access to technology
Economic Fundamentals
• Policies affecting trade, investment, and labor mobility in services
• Competition environment • Licenses and ‘behind the border’regulations
Policy Ecosystem
• Export promotion policies • Fiscal and other incentives
Active Promotion Policies
Fundamentals
Relatively given in the short-term can be improved over time
46
Human Capital and Cross-Border Services
47
Malaysia: Knowledge Intensive Sectors
0%
10%
20%
30%
40%
50%
60%
70%
80%
The “knowledge intensity” of a sector is defined by the
share of its workforce attaining tertiary education.
According to the 2008 Labor Force Survey, the
industries with high knowledge intensity tended to be
services.
How to identify Skills Gap?
10
14
18
22
23
24
25
28
30
37
46
48
0 10 20 30 40 50
Teamworking
Social
Adaptability
Leadership
Time management
Numerical
Problem solving
Technical/professional
Creativity/innovation
Communication
English language
Information technology
Percent of firms
reporting skill as a
constraint
Electronic Infrastructure: Important but….
50
Policies:
investment,
migration, and
regulations
51
How restrictive are policies? STRI and Tariff
Equivalent
52
MalaysiaThailand
United States of America
ItalyFrance
Germany
Vietnam
United Kingdom
Japan
India
China
Philippines
Cambodia
Nepal
Mongolia
020
40
60
80
Tra
de
Ba
rrie
r
4 6 8 10 12log GDP per capita 2008
Policies: Restrictiveness and Regulatory
Governance
All Countries in the Sample
Developing Countries
53
Regulatory Indicators
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
1996 2000 2003 2005 2007 2009
MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES
0
0.5
1
1.5
2
2.5
1996 2000 2003 2005 2007 2009
MALAYSIA KOREA, Rep. of SINGAPORE
NETHERLANDS UNITED STATES
54
THE ROLE OF
pro-active POLICIES
Government policies in specific sectors
Targeted policies to support exports But
Aim at creating enabling business environment with better infrastructure, more streamlined regulatory framework, and incentives
Weaken broad resistance to reform by focusing on a sector that can easily win support from business community (e.g., IC services)
Provides demonstration effect to motivate more significant reforms by showing the benefits to investors of a more transparent and predictable regulatory environment
It is hard to establish a
causal link
There are examples of
pro-active policies that did
not work as well Pro-
active policies pose risks
and must be carefully
designed
The role of private sector
Cooperation by firms through an industry association can favorably influence policy at home and its image abroad
India’s association for software services (NASSCOM) gave Indian IT companies unified voice, played role in policy-making process, built brand image of India as premier global sourcing destination, and started assessment and certification process
The Business Processing Association of the Philippines (BPAP) developed a blueprint to help bolster competitiveness of Filipino BPO firms, played role in industry policy-making (data protection Act), and produced a scorecard to assess readiness and develop working capacities
Basic Data sources
World Development Indicators
International Monetary Fund
Knowledge Assessment Methodology
World Bank Governance Indicators
Country information:
– National Accounts Statistics
– Employment Statistics
– Balance of Payments
– FDI
International Trade Department Statistics – Trade on Value-Added basis
– Bilateral Trade Flows
Sectoral data available for Financial sector, IT and IT related services, transport data. Less so for other sectors.
58
Thanks!
59
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