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    Business-related Services

     

     
     
    © International Trade Centre, International Trade Forum - Issue 1/2001 

    The global market for business services is estimated at US$ 3 trillion for 2001, or approximately 10% of global gross domestic product. Exports of business services for 2001 are projected (based on International Monetary Fund (IMF) balance of payments data) to be US$ 734 billion, or 24% of total global production.

    Since 1990, growth in the export of business services from developing economies has been 50% higher than that from developed market economies: 10.5% versus 6.9% average annual growth. Developing countries already account for approximately one-quarter of global exports of business services, and their share is expected to continue to grow.

    Achievements and opportunities 

    Without exception, all LDCs are already exporting business and professional services. Bangladesh, Haiti, Madagascar and Nepal have substantial back office operations supplied to foreign clients. Nepal and some other LDCs have public and private organizations supplying labour under contract internationally. Consulting firms in LDCs work successfully for donor agencies, and there are specific success stories: a Ugandan engineering firm won an international contract for regional hydropower management in open competition against major international engineering firms.

    Little prominence 

    The level of business service exports from LDCs is probably higher than official statistics record because of the difficulties of collecting accurate data. In addition, business services are rarely given prominence by LDC governments, either in the allocation of public-sector finance and resources or in export promotion. For example, none of the LDCs provide examples of business service expertise on their web sites, and only Ethiopia offers a local Consultants Directory on its investment web site.

    Constraints 

    In business services, professional associations fulfil an important function by setting standards, enforcing a code of conduct, and providing ongoing education. In most LDCs, such associations do not exist. Exceptions include a management consultants association in Bangladesh; accountancy associations (affiliated with IFAC) in Haiti, Malawi and Zambia; and engineering associations in Bangladesh and Nepal. However, the focus tends to be on domestic regulatory matters rather than on supporting export initiatives by members through mutual recognition agreements with sister associations in export markets.

    Lack of profile 

    Service exporters in LDCs report that they are constrained by a lack of profile. Their own governments are generally unaware of their capabilities, national web sites make no mention of world-class service exports, and international donor agencies consistently overlook the expertise that they have to offer.

    When large projects and speciality work are consistently awarded to foreign firms, often because of 'tied aid', it is extremely difficult for local professionals (who have often been trained and licensed in those foreign countries before returning home) to maintain their specialized expertise.

    Cost of doing business 

    The cost of doing business is very high for LDC business service firms. Cable TV is now available in many LDCs, but cable modem access has not yet been made available. Often national development planning focuses on transport infrastructure, forgetting the importance of telecommunications and Internet access for business services exports.

    Other associated costs include high import duties on computer and office equipment. Until local ASPs (application service providers) are developed in LDCs, business service firms will have to continue to bear the high costs of continuous upgrades in computer equipment and software.

    Travel restrictions 

    Another major constraint relates to temporary business travel for conferences and other venues, where the exporters can meet potential international clients and demonstrate their competence. Often host countries require that the business person present a letter of invitation or provide financial statements from their bank or tax authority.

    What can governments do? 

    The most critical step that LDC governments can take is to raise awareness of existing LDC business and professional service capabilities, for both potential customers and potential foreign investors. Business service capabilities need to be highlighted on all national web sites (whether managed by the government or hosted by others) under descriptions of the economy, trade promotion and investment attraction.

    Business service firms should also be registered in appropriate online directories and e-marketplaces. To help local businesses, government agencies should promote domestic capabilities to foreign-owned firms in export processing or free trade zones as well as offshore operations. Special incentives could be linked to the use of local business service firms. The government might also provide incentives for start-ups of new business service firms whether funded locally or through foreign direct investment.

    Networking 

    Additional promotion is needed through networks of contacts. Some LDCs, such as Uganda, have post-secondary institutions where a number of regional business and political leaders have been trained. These students may form an excellent referral network.

    Funding needs and incentives 

    Development funding needs to target relevant human resource development. This includes skills training to supply personnel to business service firms, and also export training that is relevant to these firms.

    An efficient and responsive communications industry is essential for most business services. International experience has indicated that this is best achieved through liberalization of the industry. Attention should also be given to fast-tracking high-speed broadband access to the Internet. Both wireless and cable modem Internet access can be cost-efficient alternatives to trying to extend wired capacity.

    Most LDCs offer tax incentives or import duty concessions for new industries. Where appropriate, LDCs might consider similar incentives for business service firms (for example, to reduce the cost of hardware imports).

    For more information, see ITC's books, Back Office Operations and Business Guide to the General Agreement on Trade in Services (to order, see page 39). For technical assistance from ITC, contact Doreen Conrad, Head, ITC Trade In Services Unit, at conrad@intracen.org 

    Examples of exportable LDC business services expertise 



    Exportable service Potential exporting LDCs Potential importing LDCs


      1. Business support services   Djibouti, Ethiopia, Madagascar,
    Mozambique, Nepal
      All other LDCs


      2. Consultation services on creating back office operations   Bangladesh, Madagascar,
    Uganda
      Djibouti, Mauritania, Mozambique, Nepal,
    UR Tanzania


      3. Services incidental to agriculture (e.g. soil testing)   Ethiopia, Malawi   Mozambique


      4. Services incidental to hydropower production   Bhutan, Cambodia, Uganda, Zambia   Benin, Burkina Faso, Guinea, Nepal


      5. Services incidental to mining
    (e.g. mining operations expertise, gem valuation)
      Ethiopia, Guinea, Mauritania,
    UR Tanzania, Uganda, Zambia
      Burkina Faso, Cambodia, Malawi, Mali,
    Mozambique


      6. Services incidental to oil and gas (e.g. field services)   Benin, Mauritania, UR Tanzania   Madagascar, Mozambique


      7. Services incidental to commodity processing
    (e.g. production management, industrial design, packaging)
      Bangladesh   Guinea, Malawi, Mozambique


      8. Consultation services on free trade zones
    and offshore operations
      Djibouti, Vanuatu   The Gambia, Mozambique


      9. Consultation services on creating export processing zones   Bangladesh   Malawi


      10. Consultation services on privatization   Ethiopia, Mozambique, Uganda   Burkina Faso, Madagascar


      11. Convention planning and support services   Ethiopia, Tanzania   Djibouti, The Gambia, Zambia


      12. Consultation services on eco-tourism development   The Gambia, Malawi, Uganda   Benin, Ethiopia, Madagascar, Mali, Mauritania


      13. Consultation services on developing port
    and trans-shipment services
      Djibouti   The Gambia


      14. Consultation on developing security services   Bangladesh, Guinea, Nepal, Zambia   Mauritania


      15. Consultation services on strengthening health-care
    systems
      UR Tanzania, Uganda   Burkina Faso, Malawi


      16. Consultation services on environmental health hazards
    (e.g. bilharzia)
      Uganda   Bangladesh, Burkina Faso, Ethiopia, Malawi


      17. Consultation services on AIDs education and prevention   Uganda   Benin, Burkina Faso, Cambodia, Ethiopia, Haiti,
    Malawi, UR Tanzania, Zambia


      18. Consulting engineering services on rebuilding
    an economy quickly in 'leapfrog' fashion
      Cambodia, Ethiopia   Mozambique


      19. Consultation services on establishing professional
    associations
      Bangladesh, Haiti, Malawi, Nepal,
    Zambia
      All other LDCs


      20. Consultation services on establishing an association
    of service exporters
      Uganda   All other LDCs


     


     


    Source: ITC