Opportunities in Service Exports: Small States in Transition - From Vulnerability To Competitiveness
Opportunities in Service Exports: Small States in Transition - From Vulnerability To Competitiveness
Opportunities in Service Exports: Small States in Transition - From Vulnerability To Competitiveness
All of the Small States participating in this conference have the majority of their gross domestic
production from service industries, and many get over half of their foreign exchange earnings from
service exports (see Table 1). Of particular importance is the category of “other services” exports
as its business and professional services component is the fastest growth area of international
trade, fuelled by the global trend towards outsourcing. Because many services are human skill
intensive and can be traded at a distance using the Internet, opportunities abound for service firms
in Small States.
The loss of revenues from traditional commodity and manufacturing exports is forcing many of your
economies to rethink economic development strategies. For example, Mauritius has adopted an
industrial restructuring strategy to move away from textiles to offshore/back office services. This
approach represents a sectoral shift in focus, and therefore significant retraining. At the same
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time, Mauritius has been exporting its expertise in the sugar industry to Mozambique and
Zimbabwe, along with technical assistance from the Mauritius Sugar Industry Research Institute.
The key to leveraging services exports is to ensure local multiplier effects. For example, if six
nurses go to the U.K. for two years to work, your country may gain some remittance income but it
loses the services of those skilled professionals. But if those same nurses set up a medical triage
call centre in your country with foreign customers, they generate foreign exchange and create jobs
not only for themselves but for others – as has happened in the Philippines, for example.
What is the particular challenge for Small States? The small domestic market means that there
may be only limited domestic demand for services, especially specialty (or higher value added)
services. So specialty service firms will need sales to foreigners in order to survive and thrive.
Those foreigners can be foreign firms that have established in your market, or they can be
foreigners abroad who purchase services at a distance. This means that your economies are
much more dependent on traded services than are larger economies.
So ... how can you stimulate and support increased services exporting activity? What are some
examples of success?
The first key is awareness – knowing what services already exist and which of them are already
being exported. We have found that there are at least 40 different services already being exported
from each of the developing countries we’ve studied. Do you know what is being exported already
from your country? Annex A has a list of questions you can ask yourself to help identify the wide
range of current exporters.
Ironically many service firms are not even aware that they are exporting when they sell to
foreigners in their own markets. Think for a minute of the office of a foreign company – or UNDP
for that matter – in your own economy. Now think of the range of services it purchases from local
firms – what about accounting services, legal services, postal services, telecommunication
services, financial services, office cleaning services, security services ... and the list goes on. All of
these services are being exported because they are being sold to foreigners.
An excellent example of how to raise awareness is Nigeria’s “Export Digest,” which is a weekly
export-oriented television programme created by Koinonia Ventures Ltd. The programme now has
25 percent of its air time dedicated to profiling national service sector success stories. As a result,
Koinonia is now an advisor to the Nigerian government and the Commonwealth Council on issues
related to the export of services.
There are four general ways that services can be exported, and all of these are being used in
Small States. Here are some examples:
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broadcast on a major Canadian TV business programme, offering even more profile
and credibility to Uganda as a source for back office operations.
Corporate customers – whether visitors or investors – will pay for the convenience
of one-stop service. The Service Group in the Bahamas is an excellent example,
offering administrative support services, printing services, accounting and consulting
services, and incorporation and company management services.
To be successful, a service exporter must have a niche offering – something that differentiates the
firm from others in its industry. Architects Pacific, founded in Fiji in 1971, is an example of an
exporting firm that has turned its expertise in tropical architecture into commercial opportunities
from Vancouver to Sydney and Auckland.
Because services cannot be inspected before purchase, customers depend on referrals and
endorsements when selecting their service provider. So another key to successful services trade
promotion is creating credibility in regional and global markets for their service firms.
Unfortunately, most national websites still do not feature service exporting expertise. One notable
exception is Cyprus, where the website for the Ministry of Commerce, Industry and Tourism has a
section on the export of services, featuring professional services and the various initiatives of this
Service Promotion Division.
Since promoting services is different than promoting goods, trade promotion agencies need to
develop specific initiatives to target and include services. As a starting point, services need to
become a stated part of the national export promotion strategy – as the Bulgarian Trade Promotion
Agency has been successful in doing. In recent months, Romania has been successful in getting
over 180 of its service exporters visible online by making online registration (on the ITC website) a
prerequisite for getting trade promotion assistance. Trade promotion offices can also actively
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support service exporters by sponsoring training, as the Ghana Export Promotion Council has
done.
Trade promotion agencies also need to design initiatives that work for different service sectors.
For example, Malaysia’s MATRADE has been very successful in creating sector specific services
trade missions. By taking groups of Malaysian doctors to Cambodia and Brunei, Malaysia is
winning medical referrals away from its neighbour, Singapore. This same strategy is also being
used by Malaysia in promoting construction expertise in Kazakhstan, Sri Lanka, Cambodia,
Lebanon, and at the Islamic Development Bank. Part of Malaysia’s success in promoting services
stems from the creation of the National Professional Services Export Council (NAPSEC) to provide
regular private sector feedback.
Since tourism is an important industry in many of your markets, you can think about how to create
offerings for business travellers as business tourism is two-to-three times more lucrative than
leisure tourism. If your country hosts conferences or conventions, you can also think about how to
profile national service providers and provide networking opportunities for them to meet potential
foreign partners or customers as Bulgaria is doing. There are also opportunities to develop
specific offering for the business visitor – varying from one-hour to full-day excursions.
Because customers want referrals, an important part of services trade promotion is helping to
develop referral networks. For example, expatriates abroad can be excellent market entry
contacts. Similarly, foreign students who have studied at your universities are often eager to help
national firms enter their markets.
Online national business directories can help give service firms the profile they need in order to
market their services abroad. The “Doing Business in the South Pacific” website
(www.southpacificbusiness.com ) is one example. Professional service firms can also gain
credibility through their association with other international firms. For example, the membership of
Kiddie and Associates of Papua New Guinea in Moores Rowland International (MRI), an
association of independent accounting practices, creates a credibility internationally that the firm
might not have on its own.
Not all service industries have such handy international registries, but all major service industries
have national and international industry associations. Often the easiest way for a service firm from
your country to start exporting is in partnership with, or as a subcontractor to, a service firm in a
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foreign market. You can encourage such linkages through joint initiatives between industry
associations in your country and their sister associations abroad. Ghana’s Institute of Freight
Forwarders is a member of the International Federation of Freight Forwarders Associations
(FIATA) and has launched a successful initiative to get their members listed in the worldwide
directory, FreightNet (www.freightnet.com). Similarly, national engineering associations who are
members of international FIDIC provide an umbrella under which their members can network.
Service industry associations themselves can play an important role. Most service industry
associations have not focused on export promotion and are often unaware that their members are
exporting. Since associations form an important conduit for lobbying government on services trade
issues, it is critical that they become active players. In Malaysia, Tanzania and Kenya, regional
service associations for professionals have been established and the Nigerian Marketing
Association completely shifted its focus to export marketing after attending an ITC workshop on
service export opportunities.
But it is not enough to have service firms exporting and trade promotion agencies targeting service
exporters. There is also the matter of the ongoing services trade liberalisation negotiations. Many
developing country negotiators know little about what will make a difference for their service
exporters – indeed, they may be unaware of the wide range of services already being exported.
There needs to be a focal point in the private sector that can bring these issues forward. The
formation of the Uganda Service Exporters Association (USEA) is an excellent success story in this
regard. Supported by the Uganda Export Promotion Board, USEA not only assists other
associations to address the service export needs of their members, but it serves as the formal
representative of private sector interests on Uganda’s services trade negotiating team.
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Annex A
What Services Are Being Exported From My Country?
Most countries track and publish tourism statistics, but other types of service exports often go
unnoticed. Here are some questions that you can ask yourself to start identifying all of the different
services that are already being exported. Remember: A service is exported if it is being paid for
by a foreigner, even if that foreigner is in your country.
Professional Services
q Are there architects or engineers who design or renovate new structures abroad, or as part
of internationally-financed projects, or for foreign firms or diplomatic missions in your
country?
q Are there accountants or lawyers who are registered in international directories (e.g.,
www.martindale.com) because they provide services in foreign markets, or who provide
services to foreign firms or international governmental offices in your country?
q Are there specialists in urban planning or facilities management or environmental services
or other technical services who provide services in neighbouring countries or through
internationally-financed projects?
q Are there management consultants who undertake, or are subcontractors on, consultancies
for the United Nations or the World Bank or similar donor agencies?
q Are there agrologists or veterinarians who provide services to foreigners?
Business Services
q What business support services are sold to foreign firms, diplomatic missions, or offices of
international agencies in your country – e.g., office cleaning, building maintenance, printing
and copying, security, temporary staff, advertising, market research, equipment leasing,
equipment repair and maintenance?
q Are there real estate companies providing services to foreigners?
q Does your country supply peacekeeping forces to the United Nations?
q Are there companies doing research and development for foreigners, or lab testing?
q What about expertise related to natural resources – e.g., gem valuation, sugar industry
research, fish stock management?
q Are there printing or publishing services provided to foreigners?
q Do you have convention or conference centres that host events that involve foreigners?
Communication Services
q What is the volume of mail sent abroad, or international telecommunication services?
q Are there national courier services with foreign customers?
Audio-Visual Services
q If films or video tapes are produced in your country by foreign companies, do any local
companies provide equipment rental or other support services?
q Do local companies provide broadcasts that are picked up and paid for by foreign
networks?
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Construction Services
q Do local construction companies provide building or repair services for any foreigners?
q Have local construction companies bid successfully on foreign-financed projects?
q Are local construction firms subcontractors to foreign construction firms?
Distribution Services
q Are there commission agents in your country who are paid by foreign companies?
q Do retailers or wholesalers have foreign customers?
q Do any of your national firms have retail, wholesale, or franchise offices abroad?
Financial Services
q Do any of your national financial institutions have branch offices abroad?
q Do any of your banks provide services to foreign tourists or foreign investors, diplomatic
missions or international agency offices?
q Do any of your insurance firms provide insurance to foreign investors, diplomatic missions
or international agency offices?
q Are there national brokerage or financial management firms that provide services to foreign
investors, diplomatic missions or international agency offices?
Transport Services
q If you have marine ports, do foreign-flag vessels pay for local pilotage services, docking
fees, ship maintenance, or other similar services?
q Do foreign airlines pay for local air traffic control services, landing fees, aircraft fuelling and
maintenance, aircraft cleaning, catering, baggage handling, or check-in services?
q Do local warehouses provide storage services to foreign importers?
q Do local freight forwarders and customs brokers provide services to foreigners?