“Harnessing Services for Sustainable Development: Opportunities and Challenges for Jordan ”

1. “Harnessing Services for Sustainable Development:Opportunities and Challenges for Jordan” 21-22 September 2010 Amman ------------------------ Offah Obale, obale@southcentre.org

2. Outline Introduction Services in the global economy Nature of Services: Scope & coverage What is a service, some differences from goods, role and kinds of services, trends in the global services trade Services in Developing Countries – Areas of interest Features, key areas for development (UA, case of water) Services trade and developing countries (outsourcing, tourism) Role of Regulation Services liberalization and development Pros and Cons, South-South Potential Way Forward: Considerations for future planning

3. Background: kinds of services? -key role in infrastructure, competitiveness, trade facilitation, employment, GDP -key role in poverty reduction (MDGs) -Regulation important tool for harnessing benefits and development

4. Modes of Supply Mode 1: Only Service Moves Mode 2: Consumer goes to where service is

5. Modes of Supply Mode 3: service provider sets up commercial presence Mode 4: Service provider Moves

6. Why is it important for Governments to know about services? • Importance of a conceptual understanding for governments: • national level • data and statistical collection • national policy making to determine areas of strategic importance, and areas of potential trade interest • foreign exchange – balance of payments • regional and multilateral level • classification purposes for trade negotiations • understand implications of modal and sectoral commitments

7. Services Trade: Its Growing Importance • World service exports in 2007 • 3.3 trillion USD, 18.1 % growth • 70 % of GDP in developed countries • Developing countries’ share in world services export stands at 25.4 %

8. Services Trade: Its Growing Importance • However DC trade in services heavily concentrated on few countries and regions -Top five exporters 50% all DC services exports (China, India, China- Hong Kong SAR, Singapore, Republic of Korea) - Services exports per region: Asia 75 % per cent of DC exports Latin America 13 % of DC exports Africa 10 % of DC exports Concentrated on sectors -Travel and transport: 2/3 of DC services exports -Business, information and communication, financial and insurance services: 1/3 of DC services exports Tourism

9. Services Trade: Its Growing Importance • South – South services trade is continuously growing • 45 % of DC services exports directed to other DCs • 11 % of world services trade • Strong bias towards intra-regional exports • Share of South – South services trade per region • Africa 57 % • Latin America 71 % • Asia 94 %

10. Services & Poverty Reduction • Services …. •…cover a broad range of activities; • …have a key role to play in: •building infrastructure & competitiveness; •facilitating trade; •reducing poverty (basic services) & promoting gender equality; offering employment;

11. Services & Poverty Reduction • Services are key for achieving the MDGs: •Achieving universal primary education (MDG 2) •Reducing child mortality (MDG 4) •Improving maternal health (MDG 5) •Promoting gender equality and women empowerment (MDG 3) •Eradicating extreme poverty (MDG 1) •Developing a global partnership for development (MDG 8)

12. Tools for Poverty Reduction • Liberalizing services trade can also help: •Exporting through Mode 4, outsourcing, & in tourism sector •Importing to make services more efficient & increase choice •However: size of benefits are far from clear& they are country/context specific

13. Tools for Poverty Reduction : Mode 4 Exports • Remittances: •are a major stable source of capital inflows •improve ability to finance development objectives (lower school drop out, better health outcomes) • Employment opportunities: •decent work for youth & gender empowerment: • Challenges: •how to ensure brain gain instead of brain drain •how to overcome reluctance in receiving countries •how to channel remittances into productive capacities? • GATS potential?

14. Tools for Poverty Reduction: Tourism Services • Among top five export revenue generator for 75 countries • Benefits from: •employment, foreign exchange earnings, taxation, multiplier & spillover effects • Challenge: •benefits depend on: degree of integration of domestic sector tourism, global business practices, access to distribution networks, degree of leakage, vulnerability to external shocks

15. Tools for Poverty Reduction: Universal Access • UA to services: •significant, strong and manifested relationship with poverty reduction, inequalities based on wealth & location; • important infrastructural & social function. e.g., water, education, health, financial, telecom • UA policies: •are diverse & include: public & private provision & many options in-between (publicly-funded, private services provision, USOs, subsidies, microfinance, community-based & other innovative options •no one size fits all –need for policy space & flexibility

16. Tools for Poverty Reduction: Universal Access: the Case of Water • 1.1 billion people lack access to water; •millions of women spend up to 4 hours a day collecting water; •loss of 443 million school days each year caused by water-related illnesses; •almost 50 per cent of all people in DCs are suffering at any given time from a health problem caused by water/sanitation deficits; •Implications for human/economic development & MDGs.

17. Tools for Poverty Reduction: GATS & Universal Access • Concerns voiced •that liberalization may negatively affect access/equity; therefore careful pacing & sequencing of liberalization & regulation; •building appropriate institutional & regulatory frameworks, ensuring that certain preconditions are in place before opening services markets • GATS potential? •limited commitments, Art I carve out, subsidies, UA language in WPDR negotiations

18. The Importance of Regulation • Role of regulation widely accepted (market failures: externalities, information asymmetry, imperfect competition etc.) also social & ethical considerations • UA: variety of policy options • FS: numerous FS policies: prudential (viability & stability of financial system), competition & social policy (UA & microfinance) • Regulatory reform: •proper pacing, sequencing & content of reform; need for best policy mix for particular situation; requiring regulatory flexibility

19. International Trade Negotiations Multilateral • GATS •Market access & rule making track •limited progress on development priorities (Modes 2 & 4), S&D, special priority for LDCs • Instead focus on: •binding existing level of openness, national, treatment & domestic regulation

20. International Trade Negotiations Multilateral: Domestic Regulation • Art. VI:4 mandate: to develop any “necessary” disciplines for measures relating to QR, QP, LR, LP, TS •with a view to ensuring that measures… do not constitute unnecessary barriers to trade in services… • Challenge for DCs: to strike a balance between •preserving domestic policy flexibility & right to regulate; •specific & clear disciplines to underpin their MA opportunities (e.g., Mode 4)

21. Way Forward • Proper content, pacing & sequencing of reform (including appropriate regulatory and institutional framework) are crucial for reaping development benefits from the services sector & its liberalisation • There is no one-size fits all solutions • Need for flexibility & policy space in international trade agreements & negotiations • Need for a multi stakeholder approach involving the private sector and civil society • Need for services assessments to make informed choices in services trade negotiations • Need for commercially meaningful commitments in sectors of priority interest to developing countries and modes 4 and 1 to deliver on DDA • .

22. The end Thank you