dihel 3a
TRANSCRIPT
Professional Services in Eastern and Southern Africa
5 June 2013Addis Ababa, Ethiopia
Professional Services in Eastern and Southern Africa
Filling information gaps
Collect and analyze data on:- Professionals- Prices/ wages - Trade flows- Trade barriers - Regulatory measures- Education requirements- Immigration rules
Addressing knowledge gaps
- Provide impact on performance indicators- Provide information on regulatory impact assessments- Propose guidance on trade and regulatory reforms, including good practice- Facilitate networking and information exchanges, especially South-South exchanges
Addressing political economy
constraints
- Translate knowledge into policy choices- Identify interests and preferences of various actors- Facilitate direct engagement of stakeholders - Provide platform for national and regional dialogues
Challenge: integrating professional markets while achieving regulatory objectives efficiently
Filling information gaps
• Business surveys - Users and providers of professional services in COMESA (more than 2200 firms)
• Self-assessment and diagnostics:• Regulatory frameworks - Regulatory surveys sent to
professional associations • Trade policies – Surveys sent to Ministries of Trade and
Ministries of EAC in East Africa
Providers’ survey sample, by sector and firm size
Micro (1-4 employees)
Small (5-19)
Medium (20-99)
Large (100+) Total % sample % available
universe
Accounting 91 150 52 3 296 25% 18%
Architecture 102 115 40 13 270 23% 16%
Engineering 78 141 78 21 318 27% 64%
Legal 92 167 34 5 298 25% 2%
Total 363 573 204 42 1,182 100% 100%
% sample 31% 48% 17% 4% 100%
% available universe 10% 69% 15% 6% 100%
Users’ survey sample, by industry and firm size
Micro (1-4
employees)
Small (5-19)
Medium (20-99)
Large (100+) Total %
sample
% available universe
AgriBusiness 40 68 44 11 163 15% 26%
Construction 18 62 50 13 143 13% 6%
Manufacturing 33 77 47 15 172 16% 10%
Mining 4 13 17 4 38 3% 1%
Services 147 262 137 38 584 53% 57%
Total 242 482 295 81 1100 100% 100%
% sample 22% 44% 27% 7% 100%
% available universe 21% 58% 15% 5% 100%
Availability of professionals varies across countries and sectors
Differences in endowments suggest that potential for regional services trade is significant
Mauritius
South Africa
Zambia
NigeriaKenya
Ghana
Tanzania
Uganda
Malawi
Rwanda
Burundi
ZambiaBenin
Congo
Burkina Faso Mali
Ethiopia0
20
40
60
80
100
120
Number of professionals per 100,000 inhabitants
LawyersAccountants
How much do professionals earn?
Mean Min. Median Max.
Market exchange rate:
Manager 1,096 52 800 11,864
Senior 727 43 516 6,356
Junior 415 36 286 4,449
Purchasing power parity:
Manager 1,595 76 1,295 11,268
Senior 1,063 64 815 6,521
Junior 608 46 439 4,345
-
500
1,000
1,500
Average monthly salary of senior professionalsMarket exchange ratePurchasing power parity
(USD)
Professional services contribute to export diversification in Africa
23%
17%
11% 11%
Legal (298) Accounting (296) Architecture (268) Engineering (317)
Proportion of exporting firms
(source: World Bank survey, 2012 ; sample size in parentheses)
Average across sectors: 16%
Preferred modes of supply or circumventing barriers?
Top export destinations of African professional services firms – strong regional dimension
Sub-Saharan Africa
Europe
MENA
North/South America
Russia/India/China
Other Asia
Australia/N.Zealand
47%
16%
13%
10%
8%
5%
1%
Main export destinations, by region
South Africa
Uganda
Rwanda
Kenya
Tanzania
Zimbabwe
Zambia
Botswana
Mozambique
Namibia
Malawi
Congo, DR
Seychelles
Rest of SSA
15%
12%
11%
10%
8%
4%
4%
4%
4%
3%
3%
3%
3%
15%
Main export destinations in Sub-Saharan Africa
Exporting vs non-exporting professional firms
Non-exporters Exporters Whole sample
Years operating 10.9 13.6 11.3
Number of employees 13.9 19.7 14.8
Some foreign ownership 22% 34% 24%
Main client – multinationals/large firms*
26% 39% 28%
Main clients – micro/small firms* 40% 25% 37%
Firms with foreign employee(s) 11% 23% 13%
Average salary partners/managers (USD) 1,049 1,330 1,096
Average salary senior professionals (USD) 703 841 727
Average salary junior professionals (USD) 401 483 415
Average labor productivity 16,398 17,804 16,621
* percentages taken across the total answers provided by respondents for a question asking them to select up to three main types of client
Foreign ownership and employment of foreign professionals
Djibouti
Egypt
Malawi
Burundi
Eritre
aKenya
Zimbabwe
Comoros
Uganda
Rwanda
Madagasca
r
Mauriti
us
Zambia
Swazil
and
South Su
dan
Ethiopia
Congo, DR
Sudan
Seyc
helles
COMESA
0%20%40%60%80%
100%Foreign ownership, by country
No foreign ownership 1-24% 25-49% over 50%
Zimbabwe
South Su
dan
Congo, DR
Mauriti
us
Swazil
andSu
dan
Seyc
helles
Zambia
Djibouti
Rwanda
Burundi
Uganda
Comoros
Malawi
Madagasca
r
EthiopiaKenya
Egypt
Eritre
a0%10%20%30%40%50%60%
Proportion of firms with foreign employee(s)
Liberalizing services trade would facilitate access…
• Not permitted since commercial presence required to perform most accounting and auditing activities
Mode 1(cross-border delivery)
• Foreign ownership restrictions: ownership by non-locally licensed professionals not allowed
• Restrictions on activities that can be performed by foreign accounting professionals
Mode 3(commercial presence)
• Discretionary limits (labor market tests & econ. needs tests) for foreign-licensed accountants
Mode 4(presence of natural
persons)
Typical explicit barriers to trade in accounting services
Obstacles to integration - Barriers to trade
Mali
Cote d'Iv
oire
Ethiopia
Kenya
Seneg
al
Zimbab
we
Botswana
Namibia
Burundi
Ghana
Mad
agas
car
South
Africa
Tanza
nia
Zambia
Camero
on
Mala
wi
Nigeria
Uganda
Moza
mbique
Mau
ritius
Leso
tho
Rwanda
DRC0
50
100
Accounting & auditing services
Mode 1Mode 3Mode 4
Ethiopia
Kenya M
ali
Namibia
South
Africa
Cote d'Iv
oire
Zimbab
we
Tanza
nia
Mau
ritius
DRC
Camero
on
Botswana
Leso
tho
Ghana
Zambia
Mala
wi
Uganda
Burundi
Nigeria
Rwanda
Mad
agas
car
Moza
mbique
Seneg
al0
50
100Legal services
Mode 1
Mode 3
Mode 4
…but must be complemented by reform to improve the efficiency of domestic regulation to enhance competition
Entry Regulation
University degree and practical
training required
Bar exam requirement and
Continuing education obligation
Compulsory membership in the
professional bar
Scope of exclusive rights: 9 out of 10
Conduct Regulation
Price regulation : Binding minimum
and maximum prices
Advertising is prohibited
Restrictions on type of
corporation
Absence of quality control
instruments
Typical regulation of legal services
•An agenda for regional cooperation
Restrictions that hurt professional services providers in Africa
0%
5%
10%
15%
20%
25%
Proportion of professional services firms citing each category of foreign regulation as the most constraining
Non-exportersExporters
High usage of Accounting services
COMESA Ethiopia
Usage of professional services increases with size
Productivity of user higher than productivity of non-users in COMESA
Productivity of user higher than productivity of non-users in COMESA in Kenya
Econometric Specification
i
irsrsi
iablesBilateralcontrolsPartner
controlsFirmgulationsForeigngulationsDomesticX
var
ReRe
54
3,2,1
• Firm level controls firm size, age; proportion of foreign and high-skilled workers; firm’s scope; cost and ownership structure
• Partner country’s control: total population, GDP per capita, quality of institutions, electronic infrastructure and higher education
• Bilateral variables: distance; shared colonial history; common language
Impact of Regulations
How much do Regulations Matter?• Domestic regulations that matter:
– Price and fee regulation or advertising prohibition critically reduce the export probability of domestic firms: 10% increase in perception of a constraint being severe decrease the odds ratio of the probability to export by 0.3%
– Administrative requirements for starting up
• Foreign regulations that are critical: non-transparent public procurement processes in foreign markets and limits on foreign investments have a strong negative impact on a firm’s decision to export- Limits on investment- Transparency in public procurement: 10% increase in perception of a
constraint being severe decrease the odds ratio of the probability to export by 0.4%
- Administrative requirements for starting up
How much do Regulations Matter?(contd.)
• Cross border regulations do not seem to hinder participation in exports – – confirms the findings of business surveys which show that
a large proportion of African firms prefer exports of professional services via mode 1,
– broadly in agreement with findings which show that technological advances have made it possible to trade certain services unobstructed by regulatory impediments
• Remaining puzzle: regulations restricting multidisciplinary activities do not hinder participation in exports?
Information on trade and regulatory experiences, RIAs, good practices
• EU Single Market experience• Mobility for engineers in Europe: EU engineerING card• Recognition of professional qualifications in the EU: Federation of
European Accountants• OECD principles on key market-oriented and trade-and-investment-
friendly regulation: joint World Bank – OECD work on regulatory patterns • APEC-OECD Integrated Checklist on Regulatory Reform• ASEAN Mutual Recognition Arrangement frameworks on accountancy and
engineering services• West Africa experience
• Formal/informal networking and information exchanges between national, regional and international stakeholders • Pan African Federation of Accountants Conference: trade issues discussed
by professional associations
National reform and regional cooperation could better integrate the market for professional services
National level reforms could include:• Relaxing entry requirements, e.g. by narrowing the scope of exclusive
tasks• Eliminating restrictions on competition, e.g. price regulation; advertising
prohibitions• Reduce costs of access to & improve quality of education
And at the regional level:• Removing trade barriers, e.g. allowing commercial presence, movement
of natural persons• Increased regulatory cooperation, e.g. mutual recognition of
professional qualifications; development of appropriate regional standards
• Creation of regional education and training hubs
Addressing political economy constraints
• Workshop on Legal Services Liberalization and Reform in Eastern and Southern Africa:• Champions of the legal profession and representatives of bar
associations in Africa• What are the economic opportunities generated by reform and
regional integration and the cost of maintaining the status quo?• Proposal on instrument to facilitate the movement of legal
professionals on the continent, including the development of a regional license, to be adopted by countries wishing to reform the legal sector
• Support to implement the Mutual Recognition Agreements (MRAs) in accounting and architectural services in East Africa • Detailed benchmarking of academic and professional qualifications• Technical assistance activities
Next Steps: Regional and Sectoral Expansion
• Professional Services Knowledge Platform• Extend to Central and Western Africa • Support the Accelerated Economic Integration Initiative – Malawi,
Mauritius, Mozambique, Seychelles and Zambia
• Platform to support Coordinated Infrastructure and Transport and Logistics Policy Reform • Trade Facilitation and Border Performance • Regulatory Reforms
Thank you!
Antoine Coste [email protected] Dihel [email protected]
Arti Grover [email protected]
Reports and policy notes available at http://www.worldbank.org/afr/trade