Role of Services in Economic Development

Geneva, July 2012

 Main points

• Services and trade in services matter for

economic development, employment and
competitiveness
– Concrete examples for Africa
• Coordinated regulatory reform and
liberalization of services
– The role of Services Knowledge Platforms
– World Bank database on Services Trade
Restrictiveness Indices
 Services matter for growth

Source: World Bank, 2010

 Services matter for employment
Shares of employment in agriculture, manufacturing and services

Source: ILO Global Employment Trends

 Trade in services plays key role

• Increased tradability of services and global value chains

• Exports of services can drive diversification
– Potential 18 million new jobs in developing countries from
offshoring of services (each job generates a further 3 jobs)
– Exports of services from land-locked LDCs have been growing
faster that exports of goods
for countries such as Rwanda and Ethiopia services account for
more than half of total exports
• Access to cost-effective services affects competitiveness
– Imports of services and FDI can lead to greater competition,
lower prices, higher quality and more variety
 Access to professional services matter for
productivity
• Higher labor productivity (sales/employees) is associated with greater usage of professional services in all East African countries, especially for small firms

Productivity of Users and of Non-Users of Professional

Services – Average across firms in East Africa
 Productivity of users vs. non-users of
professional services – Ethiopia’s example

Source: World Bank Survey of Users of Accounting, Legal, Engineering and IT Services in
Ethiopia, 2011.
 Professional services in Eastern and Southern
Africa
• World Bank research - one step towards facilitating more informed choices as East
African governments develop a strategy for coordinated reform and liberalization of
professional services
• Collection of extensive information - hitherto missing - on market conditions, policies
and regulatory regimes in accountancy, engineering, and legal services in East Africa
• Key findings:
– national markets for professional services in East Africa remain underdeveloped
– regional market is fragmented by restrictive policies and regulatory heterogeneity
• Policy recommendations:
– For professional services to make a meaningful contribution to growth in East Africa
policy action is required in four areas: domestic regulatory practices, trade policy,
international labor mobility, and education
– Improving and expanding professional services will require both national reform
and international cooperation
– Regulatory issues must be addressed to allow for effective competition in an
integrated regional market

http://www.worldbank.org/afr/trade
 Summing up: Services and trade in services
matter
• For growth and competitiveness
– Many services are inputs into production and trade -
economy-wide impacts from improvements in services
– Lowering costs for firms requires better and cheaper services
• For employment
– Services largest contributor to job creation
– High employment rates for women
• For poverty reduction
– Poverty reduction more strongly correlated with growth of
services than with growth of manufacturing
• Coordinated reform and liberalization of
services
 Professional services knowledge platform
Challenge: integrating markets (expanding trade) while achieving regulatory objectives efficiently
Availability of professionals in Africa
 Regulation of legal services

Entry Regulation Conduct Regulation

Explicit barriers to trade in accounting services

World Bank Services policy database :http://iresearch.worldbank.org/servicestrade/

 How will the knowledge platform work?

• Mechanism that brings together regulatory expertise,

trade policy makers, the private sectors, think tanks,
universities and regional bodies
• Analytical work and advisory services disseminated
through:
– Online platform with transparent, easily searchable
databases, and social networks
– Face-to-face interactions between practitioners,
policymakers, think tanks, regional secretariats
 Thank you!
Nora Dihel
Africa Region - Poverty Reduction and Economic
Management Unit
ndihel@worldbank.org