Exporting services

The quest for growth outside the oil sector, to help avoid the Dutch Disease, is thankfully one of the very few things on which the Government and Opposition are in agreement. Very sadly, however, the Opposition has been emphasising primarily the redistributive function thrust of governmental policies – with an obvious populist eye on the electorate. But while the Government’s assistance programmes to the populace, especially the neediest sections, are positive, it is clear that they see these as ultimately a zero-sum activity: meaning that they would be redistributing only a pie of fixed size, and not answering the question “How do we increase the size of the pie?”
While budgets precipitate debates on development but are technically focused on a single year, the PPP Government has signalled, through the implementation of its manifesto blueprint, a quest for longer-term development. This perspective is illustrated by its stress on infrastructure – roads, bridges, new agricultural lands etc, and the gas-to-shore project, which are the precursors to a more diversified productive economy. However, we suggest that the Government take another look at an area it had opened up a decade ago: Information and Communication Technology for Development (ICT4D).
At that time, the concerns were about the costs associated with the initiative (fibre optic cable, OLPF etc) and its domestic impact (improving e-governance, competing with private sector providers etc). But its potential to alter the structural foundations of our economy by opening up the export of services was neglected. Some still seem stuck in nineteenth century economic dogma that saw “development” as a transition from agricultural to industrial production, with manufacturing being the prime ‘engine of growth’. Only physical products are suitable for export, and services are confined only to the domestic market, in this view.
But towards the end of the 20th century, developments in ICT effectuated a revolution in delivering services across borders. As a platform for growth and development, the phenomenon was encapsulated as the “3Ts” – technology, transportability, and tradability. “Outsourcing” of services became a catchword as billions of dollars flowed from the developed countries into the ICT-savvy developing nations. Trade in services is becoming increasingly more viable, with many businesses now dividing their operations across the world.
The rapid growth of China and India, which have been driven along two different political ideologies, has rekindled the debate on the drivers of growth and development. China’s growth is led by traditional manufacturing, while India’s growth focuses heavily on services – representing the two different paths towards rapid development. And India has not been alone in exploiting the new opportunity: In the last decade, services have grown as a share of the world trade, accounting in 2020 for 22.1%, and service exports in developing countries have skyrocketed.
It is very unlikely that we can match the economies of scale to compete with behemoths like China in industrial exports, but with our comparative advantage of English as our first language and a populace that still has a collective drive for education, we can certainly carve out a niche in the ICT service exports. These exports have primarily been in such areas as information technology, business-related transcribing medical records, data services, call centres, education, entertainment production services, etc.
These services differ significantly from the traditional services which demand face-to-face interaction, but we will not be in a position to exploit this new driver of growth unless we have both the human and infrastructural resources in place to be capable of offering the service. Deregulation of the communications sector and the offering of 20,000 scholarships by the PPP Government address those concerns. The World Bank studies have shown that exports’ “quality” in services is positively associated with growth performance; even 1% involvement generated significant growth. For countries like ours, where businesses are stuck in a “trader mentality”, ICT-based exports would also ensure that traditional service activities gain in productivity from the 3Ts. Additionally, a host of new service activities would emerge as a result of unbundling and technological innovation.
The Opposition should push ICT, not just handouts.