The Financial Express

Computing real data on service export

| Updated: October 22, 2017 03:49:21

Computing real data on service export

Trade in services or service trade is still a confusing concept in many countries including Bangladesh.  Unlike merchandise trade where visible products and commodities are exchanged among the trading partners in the form of export and import, trade in services generally comprises transaction of non-tangible products which are termed as services.  The Export Promotion Bureau (EPB) has recently started compiling and releasing the monthly export data of services from the country. While data of service export is not unique in Bangladesh, the move, taken by the EPB, needs to be reviewed for several reasons.
The move may be considered as an important step in the sense that the government recognises the importance of service trade. Not that the policy- makers are unaware of service trade and had never given attention to this critical sector. But, move to release the data on service export highlighted the long-term impact of the sector in the country's trade and economy.
Bangladesh Bank, the central bank of the country, regularly estimates and compiles data of service export and import as a part of preparing and updating the Balance of Payment (BoP) statistics. The latest statistics showed that earnings from service export, mentioned as 'receipts' in the BoP table, stood at $504.8 million in the first two months (July-August) of the current fiscal year (FY17) while the amount was $587.7 million in the same period of last fiscal year. But, the EPB data, released to the media, showed that service export earnings stood at $497 million in the first two months of FY17. Thus, there is a clear mismatch between the statistics of two national agencies.
The mismatch of data or statistics is also not a new thing. Earlier, there was a large mismatch on the data of merchandise exports earnings in the country. While the EPB used to compile export data on pre-shipment basis from the National Board of Revenue (NBR) and the customs cell, while the central bank collects it on post-shipment basis from the banks. Thus, there was a big discrepancy on export data furnished by the two agencies. The issue was, however, resolved around 10 years back as two agencies decided to reconcile export data. Nevertheless, there is still some discrepancy on merchandise export data.
Again, there was an under-reporting problem of the foreign direct investment (FDI) in the country's BoP. The FDI data, compiled by the now-defunct Board of Investment (BoI) didn't tally with the central bank data. A decade ago, there was a debate between the head of a leading think-tank and the then chief of the BoI regarding authenticity of FDI data. The debate later turned into a serious dispute which rolled on to the High Court. But, ultimately, there was a positive outcome as the government finally decided to have FDI data calculated by a single agency. The central bank had asked for estimating FDI data by conducting half-monthly survey and synchronise the data with other related statistics to finalise its incorporation in the BoP.
The current mismatch on service export data is unwanted as the EPB doesn't have any tool to calculate it. It is actually collecting data from the central bank. According to a newspaper report, the EPB compiled export statistics of sub-sectors including maintenance and repair services, transportation, travel, construction services, insurance services, financial services, charges for use of intellectual property, telecommunications, computer and information services, computer services, other business services, entertainment, cultural and recreational services and government services. One possible explanation of mismatch is that the EPB already includes export data of computer service in its regular export statistics. It is, however, the EPB's responsibility to clarify the mismatch.
Moreover, there should be also some explanatory notes from the central bank so that everyone can understand the real trend of service trade. Unlike merchandise trade, services are supplied by four types of modes. According to the General Agreement of Trade in Services (GATS) of the World Trade Organisation (WTO), these are cross-border supply (Mode-1), consumption abroad (Mode-2), commercial presence (Mode-3) and movement of natural persons (Mode-4). 
But the BoP statistics generally capture 'trade in commercial services' supplied by Mode-1 and 2, and to some extent Mode-4. Foreign Affiliates Trade in Services (FATS) statistics usually 'measure the commercial presence abroad of service suppliers through affiliates in foreign markets' or supplied under Mode-3. FATS is closely related to FDI.   
Thus, there is a large vacuum in the country on real scenario of the service trade, especially its export. Moreover, there is a large deficit in service trade as import (BoP termed it 'payments') of services is quite higher. During the first two months of the current fiscal year, service import stood at $1060 million which was $937.4 million in the same period of FY16. Thus, deficit in services trade stood at $555.7 million which was $349.7 million in July-August period of FY16. It is interesting to note that deficit in merchandise trade was lower, $525 million, in the period under review. 
Thus, serious attention is needed to track and review the overall service trade statistics and also to improve the estimation method with clarity. Only addition of service export to that of merchandise to inflate the overall export earnings will be misleading.
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