Learning event, Addis AbabaJune 5-6, 2013Trade and Regulation of Servicesin Africa
• Services matter for growth, employment and povertyreduction• Exports of services can drive diversification• Imports of services and FDI can lead to more competition,lower prices, higher quality and greater variety– Access to competitive services matters for competitiveness!Why services and trade in services in Africa?
…. Traditional exports undermined by lack ofaccess to services along the whole value chainLack of financelimits access toseeds andfertilisersTransportcartels resultin high costsLogistics andcustomsbrokerage arepoor qualityand expensiveDistribution servicesare not linking poorproducers to poorconsumersFarmers typically receive less than20% of consumer priceHigh costprofessionalservices constrainsproductivityCommunicationsare key in linkingbuyers to sellers
Competitive services matter forreturns to infrastructure investments• Inefficiencies in port of Dar equivalent to a 22%tax on container imports and 37% on energy• Need to link infrastructure and regulatoryreforms of services– Eg road building and removing transport cartels
But low profile in Africa for services trade• How can we raise awareness about the services tradepotential of African countries?– In clients/in the Bank/in other development agencies• What are the main lessons that Africa could derivefrom successful services exporters?• How can we mainstream trade in services into ourcountry programs• Need for better indicators!
A complex process• Heterogeneity of services sectors• Multiple modes of supply• Nature of services barriersOpening up to trade in services
Source: Stern et al (2012)Scope of services covered in the GeneralAgreement on Trade in Services (GATS)1. Business service2. Communicationservices3. Construction services4. Distribution services5. Educational services6. Environmentalservices7. Financial services8. Health-related and social services9.Tourism and travel-related services10. Recreational, cultural, andsporting services11. Transport services12. Other services not elsewhereincluded
A synthetic view of modes of supplySource: Manual on Trade in Services Statistics, 2012
Entry/Establishment OperationsNon-discriminatory Licensingprocedures Safety, quality,environmental standardsprudential measures inbankingDiscriminatory NationalityorresidencyrequirementsLimitations on operationsapplicabletoforeignersSource: Stern et al (2012)Explicit services barriers
Market failures Services sectors Policy action at the national levelMonopoly/OligopolyNetwork services:telecommunications; transport(terminals and infrastructure),environmental services (sewage)and energy services (distributionnetworks)Developing procompetitiveRegulation to protect consumerinterests where competitive marketstructures do not existAsymmetricinformationIntermediation and knowledgebased services: financial services,professional services, etc.Strengthening domestic regulationto remedy market failure in aneconomically efficient manner.Externalities Transport, tourism, etc.Social objectives:Universal serviceTransport, telecommunications,financial, education, healthDevising economically efficientmeans of achieving socialobjectives in competitive markets.Source: Mattoo and Sauve (2003)Regulation and services
• Increased competitiveness and efficiency of the domesticmarket provided by services liberalization• Direct gains to consumers and user industries, but alsoindirect impact on the overall competitiveness of economies• Risks and potential costs given the need to regulate manyservices sectorsBenefits and risks
• What are the economic opportunities generated by reformand regional integration and the cost of maintaining the statusquo?• What triggered regulatory changes in reforming countries?Why were some industries reformed earlier and more deeplythan others? Why did politicians commit their capital to pushforward the reform?• What can we learn from the experience of countries andregions that have successfully engaged in reform andcooperation?Political economy of services reforms