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Services sector needs a close look

Services sector needs a close look

Strange though it may seem, one of the key determinants of Bangladesh economy-- the services sector is a grey area where information and data are rather chaotic in the absence of any methodical attempt to put on record the scope and operation of the service providers in a vast array of activities.

 Ranging from communications to transport, finance, education, tourism and environmental services, services sector has become the backbone of the global economy and the most dynamic component of international trade. Recent technological advances have made it easier to supply services across borders, thereby opening new opportunities for national economies and individuals. While increasingly traded in their own right, services also serve as crucial inputs into the production of goods. In value-added terms, services account for about 50 per cent of world trade.

Services related trade policies are also an important determinant of foreign direct investment, participation in global value chains, productivity and exports of manufactured products. Policies in relation to services trade also contribute to a wide range of national objectives, including the achievement of Sustainable Development Goals.

Trade in services can help economies achieve more rapid growth, enhance domestic firms' competitiveness, and promote inclusiveness in terms of skills, gender and the location of economic activity. Compared to trade in goods, trade in services promotes a more efficient allocation of resources and greater economies of scale, according to experts. It can lead to an increase in the variety of services available to consumers and producers, and it can set in motion processes by which the more productive services firms can expand and grow. Beyond these usual sources of gains, some services sectors have special or unique features that may amplify how an economy can benefit from trade in services. For example, transport, telecommunications, finance, and water and electricity distribution, generally known as infrastructural or producer services, play critical roles in the functioning of the entire economy. Other services areas have an outsized impact on factors of production, like labour.

Empirical evidence shows that increased openness in a number of economies and in sectors such as financial services, telecommunications, electricity distribution, transport and healthcare have led to a variety of positive outcomes - better quality services at a lower cost, greater efficiency, and faster GDP growth rates.

The highly significant role played by the services sector makes it crucially imperative to take stock of the players in the services arena-- not just what their contribution is to the economy, but more importantly, the problems and bottlenecks faced by them. In the absence of authentic information, planning at the policymakers' level is often fraught with serious difficulties. The problem also poses itself as an embarrassing one for the negotiators while negotiating with trading partners, especially when it comes to making requests or offers in the services sector.

Attempts were made occasionally to take stock of the operational aspects of the service providers, but to no worthwhile outcome. Sometime ago a move was taken by the ministry of commerce to identify the country's service operators having potentials for export in order to gain preferential market access to the developed countries under the services waiver scheme of the WTO (World Trade Organisation). The job involved collection of detailed data on services-related information, potentials of export, current and likely destinations of export, mode of supply of services and so on. There has not yet been any move forward in this regard. Not to speak of other services, there is no credible data on the country's information technology (IT) sub-sector.

So long, Bangladesh like many LDCs has concentrated on merchandise exports and signed RTAs (regional trade agreements) with partner countries where the main thrust has remained on preferential exchange of goods. Currently, Bangladesh is a signatory to the services agreement under SAFTA (South Asian Free trade agreement), and is going to sign another services agreement under BIMSTEC (Bay of Bengal Initiative for Multisectoral Trade and Economic Cooperation). Services negotiation under SAFTA has been going on for sometime, but there has not been any headway for the simple reason that there is very little information as to the actual number of service operators in various fields, their modes of operation, potentials for export, difficulties and threats being faced and above everything else, whether one or more sectors would be harmed and to what extent, if service providers from contracting countries are allowed to operate in the country. It is because of this communication gap that chances of causing undesirable damage to the country's service sector should warrant serious attention from the concerned authorities. Needless to say, one of the reasons for not being forthcoming in attracting investment in the services sector is the lack of concrete information about domestic service providers who may be harmed by large-scale investment in one or the other services field.

This being the reality, it is crucially important that the government must have a comprehensive account of the services sector of the country. Asking the chambers and trade associations to send filled-in questionnaire may not at all be adequate. This is a serious research area and dedicated researchers should engage themselves to find out an exhaustive picture with elaborate data and information on the services being currently provided by innumerable agencies in a large variety of areas.

It need not be mentioned that in the absence of factual data, services sector is one of the neglected areas and despite its being not organised, its contribution to the GDP is the highest. To facilitate the sector, it is of utmost importance for the government to know where it actually stands with its strengths and weaknesses


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