ITC’s success stories of LDC services exports underscore importance of services

10 July 2013
ITC News
Success stories of least developed countries' participation in global services exports pointed to broad lessons for policymakers at the Fourth Global Review of Aid for Trade Trade in Geneva on 9 July

The potential for least developed countries (LDCs) to increase their participation in global services exports is often underestimated but success stories presented at the Services and Global Value Chains session of the Fourth Global Review of Aid for Trade in Geneva pointed to some broad lessons for policymakers.

‘The notion that services sector exports are too sophisticated for LDCs is misguided. Contrary to popular belief, all LDCs export commercial services and nearly one quarter of LDCs are net exporters of services,’ said Jane Drake-Brockman, Senior Adviser at the International Trade Centre (ITC).

Although tourism is usually cited, LDCs as a group achieve export earnings in a wide variety of categories. Nonetheless, services account for only 10% of LDC exports – half the global average – and are often neglected within development policy discussions.

‘Potential exporters can learn from the success stories in some of the poorest of LDCs which are benefitting from ITC’s contribution to activating, supporting and delivering technical assistance in the context of Aid for Trade in Services,’ she said, referring to the ITC’s technical paper, LDC Services Exports - Trends and Success Stories, that was prepared for the session.

Panellist Stephen N. Karingi, Director of Regional Integration Infrastructure and Trade at the United Nations Economic Commission for Africa, said he was encouraged by the stories. He suggested that the potential gains for LDCs from services could assist efforts in Africa to build closer economic and trading links within and between regions on the continent.

‘As we deepen our African trade and integration, these are stories that would give hope to LDCs that they may gain from integration,’ Karingi told the gathering.

Growth in services is closely associated with GDP growth, employment generation and poverty reduction. In addition, the development of a country’s services sector brings with it the benefits of skill-intensive activities that are highly value-added. Panellists also highlighted the spillover effect that competitiveness in the services sector has on the competitiveness of other exports.

Importance of national policies

To enhance competitiveness in services, LDCs in particular require focused assistance to determine which enabling infrastructure to provide, or which regulatory settings might be considered best practice. But participants at the session emphasized the importance of a national policy.

François Kanimba, Rwanda’s Minister for Trade and Industry, noted that a small, landlocked country such as his could not expect agricultural production to provide long-term growth.

‘Among the key drivers, the service sector is actually at the forefront,’ Kanimba said, adding that Rwanda has undertaken reforms to boost services industries, to liberalize tourism, communications and financial services and has ensured strong regulations as well as a solid legal framework. Investments in broadband infrastructure and country-wide fibre optic linkages were also paying off in terms of an increase in call centres and business processing outsourcing companies (BPOs), he said.

‘By 2020, our vision of Rwanda is as a regional trade and communications hub,’ Kanimba said, adding that this would take advantage of Rwanda’s location in the heart of Africa and of its bilingual culture spanning the English-speaking African bloc and Francophone Africa.

Diversifying exports

The benefits of diversifying into services exports were well-illustrated by panellists from Bangladesh and Uganda.
Even more than the dollar value, perhaps the most important outcome of Bangladesh’s growing information and communications technology (ICT) sector was the social impact of growing ICT exports, said Fahim Mashroor, President of the Bangladesh Association of Software and Information Services (BASIS) and Chief Executive Officer (CEO) of BDJobs, Bangladesh’s biggest jobs website. ICT is a sector that, unlike manufacturing, can absorb young graduates, he said, highlighting the relevance of positively channeling ‘youth power’ in a country where most of the population is under the age of 25.

ITC’s programme to strengthen the export competitiveness of SMEs in Bangladesh and four African countries was funded by the Netherlands’ Centre for the Promotion of Imports from Developing Countries.

In explaining the factors driving Uganda’s tertiary education export success, one of the stories documented by ITC, Florence Kata, Chief Executive of the Uganda Export Promotion Board, singled out the national policy to privatize education, in addition to the liberalization of services trade s and the active promotion and support of the government.

‘I would wish to see Aid for Trade in services being applied bottom up, with flexibility, country-by-country analysis and private sector stakeholder ownership,’ Kata said. ‘This would be very critical in terms of aid to come.’

Senegal has also seen growth in ICT services exports, such as call centre tele-services as well as emerging higher value-added activities oriented towards other French-speaking markets.

‘It will continue to be important to support African SMEs, which lack the means to conduct market surveys or keep up with international quality standards,’ said Abdoulaye Ndiaye, Director General of Agir et Promouvoir.

‘Aid for Trade in services is extremely important and continues to be necessary’ said Rwanda’s Kanimba in his closing remarks. ‘The private sector is driving investment in the services sector.’