Understanding Services at the Heart of a Competitive Economy - An ABAC Initiative

Transcription

1 2011/SOM3/GOS/024 Agenda Item: VI. 1 Understanding Services at the Heart of a Competitive Economy - An ABAC Initiative Purpose: Information Submitted by: ABAC 46 th Group on Services Meeting San Francisco, United States 16 September 2011

2 Understanding Services at the heart of a competitive economy An ABAC Initiative Lima August 2011 Champions: ABAC Hong Kong, China and ABAC Philippines Context Services liberalisation remains a core ABAC objective, given the critical important of services in all APEC economies Importance understated, and often subordinated to manufacturing and trade in goods ABAC hong Kong, China, and ABAC Philippines agreed to champion a report addressing these concerns, and making recommendations Study commissioned, i with draft received in past week Plan to circulate a revised report to members, including recommendations to go to APEC Leaders in due course 1

3 Structure of Study 1. Importance of services 2. Contribution of Services to Trade and Investment 3. Why importance is not properly recognised 4. Characteristics of Services trade 5. Distinctive barriers to Services trade 6. Measuring the Barriers 7. Capacity building for services competitiveness 8. How to facilitate services trade 9. Recommendations Importance of Services: Value-added as % of GDP 2

4 Global Growth in Services Exports Billions US$ 4,000 3,500 3,000 2,500 2,000 1,500 1, Services Exports (US$ B) Foreign investment: proxy for services exports World FDI World merchandise trade World services trade World GDP Data source: WTO for FDI data, UNCTAD for trade and GDP data, New Economic Challenge 3

5 Why are services not properly recognised? Data, and traditional ways of measuring trade Services from foreign affiliates not counted as exports Embedded services: after sales, training, logistics and other customer services, etc Embodied services: the smiley face Manufacturing and services: the Smiley Face Added Value R&D/Innovation Centre High Value-Added Product and Service Centre Global Logistics Center Standardisation Innovation R&D Design Higher Added-value and Lower Replacement Value Creation Brand Marketing Logistics Manufacture Assembly Value-added process 4

6 Distinctive characteristics of Services Trade Tariffs don t work Depends on domestic regulations and licences Regulations come from many parts of Government Need people to deliver And often need a permanent local presence The Four Modes of delivery are key Modes of delivery Mode 1: Cross border supply Mode 2: Consumption abroad Mode 3: Commercial presence Mode 4 Movement of natural persons But most services companies are multimodal : they need all 4 modes at the same time, in different combinations 5

7 Distinctive Barriers to Services Trade Restriction can arise either because of regulations or because of the absence of them, Or different standards, or absence of transparency Frequent complaints: Nationality or residency requirements Licencing/ qualification requirements Restricted eligibility ibilit for Expat staff restrictions contracts Advertising Membership restrictions of professional Visa restrictions bodies FDI and ownership Restrictions on restrictions incorporation Commercial presence requirements Local staff restrictions Restrictions on using firm name GATS does not tackle these barriers Instead, it focuses on 4 basic principles: Transparency Most-favoured nation treatment Market Access National Treatment 6

8 Illustrating with Case Insights Telecoms liberalisation in PNG Introduction of foreign competition into the mobile sector in 2007 led to a 7-fold rise in subscribers effectively achieving universal coverage. Charges fell by 11% at peak times for domestic calls, and 51% in off-peak. Telecoms has proven to be a key enabling service in an economy in which difficult terrain hinders social and business interaction Rate of response to medical emergencies is higher Mobile banking initiatives are under way Market pricing information is more readily available Illustrating with Case Insights Business Process Outsourcing (BPO) in the Philippines Telecoms liberalisation since 2004 has transformed BPO in the Philippines, lifting exports from 1.7% of GDP in 2004 to 4.5% in 2009, and lifting revenue to US$7.2bn. This makes the Philippines the world s third largest exporter of BPO services in the world behind India and Canada, accounting for 17% of all BPO trade. The industry is growing at a rate of 20% a year. Foreign companies (many headed by Filipino nationals) have played a major role in this growth, accounting for more than half of the 515 IT_BPO firms operating in BPO now generates 500,000 jobs, mainly high skill and high-value adding. 7

9 Illustrating with Case Insights Retail Services in China In the five years from China joining the WTO in 2001, a total 1,027 foreign retail firms were allowed to set up in China 187 in retail and the rest in wholesale. In a 2005 study of 27 cities, foreign companies accounted for 23% of stores in big outlets, but only 6% of total stores. They accounted for 5% of retail sales, but played a part in lifting retail sales from RMB185 per capita in 1979 to RMB9120 in A recent Beijing study shows that foreign retailers have brought significant benefits to consumers more choice, lower prices, more attentive services and higher product quality. They have also seeded the growth of Bar Code technology, Point of Sale Management, Electronic Data Interchange, and use of GPS. Foreign retailers have also generated huge openings for local procurement. 40 of the world s top 50 retail groups now purchase in China retail goods worth US$1.5 trillion a year. APEC contribution: focus on Capacity-building Human Capital, Education and Vocational Training Transparent and efficient regulations Regulatory coherence ICT, Telecoms, Quality digital infrastructure Quality of institutions Interagency coordination in Governments 8

10 ABAC Recommendations APEC to commit to a dedicated services initiative on regional services trade and investment liberalization and facilitation. APEC to use the TPP process to ensure coherent treatment of services trade and investment. Prioritise regulatory reform APEC to push for improved data-gathering in services trade and investment Next Steps Finalise draft, drawing on today s discussion Circulate draft to members for feedback Formulate detailed recommendations Agree action plan and advocacy strategy in Hawaii at ABAC4 Feed into GOS/MAG early in