Facilitating growth of the service sector

The service sector in Bangladesh registered a steady growth of 6.5 per cent in the fiscal year 2016-17, up from 6.25 per cent in 2015-16. However, industrial output growth dipped to 10.5 per cent last fiscal from 11.09 per cent of the previous year.

The World Bank (WB), in its latest report, said the service sector is projected to grow at a steady rate of 6.0 per cent in the current fiscal year. Despite cutting down the growth forecast, the global lender said Bangladesh's economic growth remains resilient.

According to the estimates of the Bangladesh Bureau of Statistics (BBS), small industries grew faster than large and medium industries in the fiscal year that ended in June this year, indicating a slowdown in export growth.

Of the service sector, wholesale, retail trade, real estate, hotel, restaurant and transport sectors performed well. However, financial sector registered slowdown in growth. As a result of higher gross domestic product (GDP) growth, the per capita income rose to $1,602 in fiscal 2016-17, up 9.35 per cent year-on-year.

The service sector, also called tertiary sector, is the third of the  three sectors. The other two are the primary sector, which covers areas such as farming, mining and fishing; and the secondary sector which covers manufacturing and processing.

The service sector provides a service, not an actual product that could be held in one's hand. Activities in the service sector include retail, banks, hotels, real estate, education, health, social work, computer services, recreation, media, communications, electricity, gas and water supply.

The service sector is, in fact, an important part of a country's economy. In India, there has been a huge growth in service sector businesses which made up 55 per cent of India's GDP in 2006-2007. Computer software businesses in India are increasing at a rate of 35 per cent per year.

In the process of global economic integration, competitiveness plays a vital role in the success of international trade. In addition, the competitive environment of domestic markets facilitates higher economic growth and can help in reducing poverty. Competition in the services sector can, therefore, play a fundamental role in ensuring the competitiveness of an economy.

 Over the past few decades, Bangladesh has transformed itself from a controlled economy to a market-oriented economy through a wide range of policy reforms which include reforms in trade policy, industrial policy, monetary and fiscal policy, exchange rate policy, and promotion of foreign direct investment.

Trade liberalisation has gone through one of the major policy reforms in Bangladesh. During the course of overall trade liberalisation, liberalisation of service sectors (especially telecom and financial sectors) received much importance. Service sector's employment has also shown a rising tendency but its contribution to total employment is much lower than its contribution to country's GDP. During the late 1990s and early 2000s, when liberalisation of some service sectors like telecommunication and financial intermediaries was one of the major policy reforms, employment share of service sector grew substantially reaching 34.6 per cent.

At present, using information and communication technology (ICT), banks have vastly reduced the number of people they need to employ, and lowered the cost of providing bank service. For example, an automated teller machine is able to provide basic banking services 24 hours a day, seven days a week, in many different places.

In the current fiscal year, Bangladesh is likely to attain higher than 7.0 per cent annual growth through increased productivity growth and higher participation of females in the labour force. Despite the increase in the number of women joining the labour force, the number of working women is still much lower than their male counterparts: in 2013, only 33.5 per cent women worked in productive sectors.

The WB has projected that the agricultural sector would register higher growth this fiscal year as farmers responded to the relatively good prices of rice, vegetables and livestock. Industrial growth may edge down due to softer export growth and weaker domestic demand associated with remittances.

What Bangladesh and other Least Developed Countries (LDCs) need at this hour is to ensure affordable and productive use of adequate electricity for economic transformation which is crucial to achieving the Sustainable Development Goals (SDGs). The latest edition of a United Nations (UN) report regarding trade and development noted that the purpose of electricity access should not only be to meet basic domestic needs as lighting, but also to use it for productive purposes. It was found that around 53 per cent of enterprises in Bangladesh identify lack of consistent access to energy as a major constraint.

Some services have been identified in Bangladesh that could potentially compete at the global level. As the fifth most populous Asian country, it has a large domestic market and a swelling workforce. Between 2000 and 2014, exports of commercial services from Bangladesh surged from $300 million to $1.6 billion per year. Services, including digital ones, now account for half of GDP and two-fifths of the employments.

In order to enhance the service sector activities, there is a need for boosting the ICT capacity and expand services in the areas of health, tourism, accounting, engineering, and to increase coordination across government ministries. Overseas experts or exchange programmes can help local institutions to overcome the shortage of local experts in the medical and other potential fields.

All said and done, the paramount need of the hour is that government officials, corporate leaders, and civil society representatives should forge a unique partnership and exchange ideas and insights for steady growth of the service sector.

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