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    Why Services Matter for Development: A Path to Growth


    © International Trade Centre, International Trade Forum - Issue 2/2005

    Photo: photos.com, Adina Murch (globe)

    Services are the fastest-growing component of international trade.

    In recent years, technology advances have had a tremendous impact on the sector as many services can now be marketed and delivered online. However, the service sector is diverse and fragmented and, therefore, difficult to reach.

    Promoting trade in services offers developing countries the opportunity to diversify trade and potentially contributes to job creation and economic development. For some countries - particularly small, landlocked countries and island economies with limited opportunities for agricultural or industrial diversification - the service sector represents one of the few development options.

    Untapped potential

    Yet, the sector is often overlooked as a development opportunity. This is mainly due to the fact that trade statistics are often flawed and understated, and that many exporters do not even realize they are exporting. Thus, the export strategies of many developing countries focus on goods and overlook the opportunities provided by services. Sectors with potential include professional services, back-office operations and tourism. South-South trade, often less competitive than exporting to developed countries, can also hold potential.

    To promote exports, it is necessary to improve national service export readiness. This includes providing affordable access to telecommunications, maintaining high educational standards and building the country's credibility as a provider of high-quality services. National branding to improve the country's image and "bundling" related services as a package can also help.

    Economic and social benefits

    Two noteworthy features of service industries are the many small and medium-sized firms involved and the fact that, worldwide, they employ more women than any other sector. Unlike goods, services are easier for small-scale businesses to export. They generally do not need large physical infrastructure in order to trade. At the same time, promoting the sector furthers the role of women in the development process.

    The service sector has grown in importance in developing countries in recent years, and as a result, ITC has devoted an increasing amount of resources to it. The initial focus of ITC's assistance was to build awareness of service sector capacity and the opportunities for export.

    Associated with this is the need to build capacity within governments and trade support institutions to enable them to support service exports. ITC is also working to mainstream awareness of the potential of services in its programmes through initiatives such as this issue of Trade Forum and the 2005 Executive Forum, which will debate the theme: "Exports of Services: Hype or High Potential?" 

    Peter Walters is Director of ITC's Division of Product and Market Development.