Is Thailand taking advantage of globalization of services?

1. Is Thailand taking advantage of globalization of services? Service Exports: A Toolkit for Assessing Export Performance & GrowthInternational Trade DepartmentPREM, The World BankNovember, 2011

2. SAMPLE • WDI, World Bank and BOP, IMF. 2011. • Primarily focused on comparing Thailand's performance in service exports with Cambodia, Malaysia, China and India • Questions: - To what degree also bring goods analysis as a focal comparator? ……

3. CONTENTS • How important are services to growth in Thailand? • Service Export performance:- Export Growth- Tradability- Productivity- Modernity- Specialization • Service Export Sophistication • Service Export Sophistication and Economic Growth

4. starting the discussion SERVICES AND GROWTH

5. Thailand has a relatively low share of services given its stage of development

6. Contribution to Growth of service has declined

7. Declined by around 7 percent

8. Countries with higher service output growth grew faster

9. Service exports growthtradabilityproductivity modernityspecialization SERVICE EXPORT PERFORMANCE

10. Growth in Goods and service Exports

11. Growth in Service Exports

12. Comparative Advantage, Thailand

13. Share of services in total exports declined

14. TRADABILITY – service exports/service value added (%)

15. Service Productivity, in constant 2000 US$ (NOTE: Labor force)

16. EVOLUTION OF SERVICE EXPORTS • Changing nature From Traditional to Modern

17. Share of Traditional vs. Modern in 1990 and 2009

18. Service export sophistication

19. Measure of Services Export Sophistication • Inspired by Hausmann, Hwang and Rodrik (2007), What you export matter: “Goods EXPY” a proxy for the sophistication of goods or the production frontier in a country. A country with a high level of self-discovery latch on to “higher productivity goods”, not simply the goods that are determined by their endowments. • We wanted a measure capturing countries discoveryprocessin terms of services as well as the changing nature of services: “Service EXPY” • Not only have countries become more sophisticated in the type of services they export, but some services themselves have become more sophisticated.

20. Service PRODY • PRODY is a proxy for the expected income/productivity level associated with a particular service category. • Construct PRODYs for each service category, for each year of analysis (PRODYs are the same for all countries). • The sum of the GDP of countries exporting this service, weighted by their revealed comparative advantage.

21. Service EXPY • EXPY is a proxy for the income/productivity level to be expected from a particular service export basket. • Construct EXPYs for each country, for each year of analysis. • The sum of a country’s PRODYs, weighted by their share in the country’s service export basket.

22. Difference Service EXPY and Goods EXPY • Goods EXPY uses static PRODYs, i.e. PRODYs from one period of time. A change in Goods EXPY is hence a change in the country’s export basket. • Service EXPY uses dynamic PRODYs. A change in Service EXPY is either due to changes in the export basket of the country or a change in the expected income/productivity level of a particular service. • Two reasons: • The two aspects we want to capture • The high aggregation of service exports in the data

23. Reasons for being cautious when using service export data • The high level of aggregation • A less straightforward recording system than for goods: • Within services • Between goods and services • AREAS OF FUTURE EXPLORATION

24. Global PRODYs by category

25. PRODY growth rates

26. Service Export Sophistication

27. Service EXPY as expected given GDP per capita in 1993

28. General shift upwards and relative decline for thailand, 2007

29. Data and specification • 3 year panel 1990-2007 • Fixed Effect & Generalized Method of Moment • Number of countries Specification

30. Dynamic service EXPY and growth: 3 year panel, fixed effect and System GMM, 1990-2007(dependent variable – GDP per capita growth) Note: All equations include period dummies. Fixed effects include dummies for countries. GMM is the Blundell-Bond System-GMM estimator using lagged growth rates and levels as instruments. The GMM estimation also uses log population as additional instruments. * Significant at 10% level ** Significant at 5% level *** Significant at 1% level. Robust t-statistics are in parentheses.

31. Dynamic service EXPY and growth: 3 year panel data regressions, 1990-2007(Controlling for Size of Service sector and Goods export sophistication)(dependent variable – GDP per capita growth) Note: All equations include period dummies. Fixed effects include dummies for countries. GMM is the Blundell-Bond System-GMM estimator using lagged growth rates and levels as instruments. The GMM estimation also uses log population as additional instruments. * Significant at 10% level ** Significant at 5% level *** Significant at 1% level. Robust t-statistics are in parentheses.

32. Dynamic service EXPY and growth: 3 year panel data regressions, 1999-2007(Controlling for Size of Service sector and Goods export sophistication)(dependent variable – GDP per capita growth)

33. Dynamic service EXPY and growth: 3 year panel data regressions(sample: countries with per capita income below us$ 10,000)(dependent variable – GDP per capita growth)

34. Looking beyond…. FUTURE OF SERVICES TRADE

35. 1. NASSCOM/McKinsey type data within country, example

36. 2. Mapping for Results

37. 3. Benchmarking performance Service Exports Sophistication with determinants – Matrix method

38. 4. Internet Focus • Value of consumer and producer surplus in Thailand • What are the start ups emerging in • What is the VC and start up environment