Magazine article International Trade Forum

Business-Related Services. (Market Profile)

Magazine article International Trade Forum

Business-Related Services. (Market Profile)

Article excerpt

The global market for business services is estimated at US$ 3 trillion for 2001, or approximately 10% of global gross domestic product. Exports of business services for 2001 are projected (based on International Monetary Fund (IMF) balance of payments data) to be US$ 734 billion, or 24% of total global production.

Since 1990, growth in the export of S business services from developing economies has been 50% higher than that from developed market economies: 10.5% versus 6.9% average annual growth. Developing countries already account for approximately one-quarter of global exports of business services, and their share is expected to continue to grow.

Achievements and opportunities

Without exception, all LDCs are already exporting business and professional services. Bangladesh, Haiti, Madagascar and Nepal have substantial back office operations supplied to foreign clients. Nepal and some other LDCs have public and private organizations supplying labour under contract internationally. Consulting firms in LDCs work successfully for donor agencies, and there are specific success stories: a Ugandan engineering firm won an international contract for regional hydropower management in open competition against major international engineering firms.

Little prominence

The level of business service exports from LDCs is probably higher than official statistics record because of the difficulties of collecting accurate data. In addition, business services are rarely given prominence by LDC governments, either in the allocation of public-sector finance and resources or in export promotion. For example, none of the LDCs provide examples of business service expertise on their web sites, and only Ethiopia offers a local Consultants Directory on its investment web site.

Constraints

In business services, professional associations fulfil an important function by setting standards, enforcing a code of conduct, and providing ongoing education. In most LDCs, such associations do not exist. Exceptions include a management consultants association in Bangladesh; accountancy associations (affiliated with IFAC) in Haiti, Malawi and Zambia; and engineering associations in Bangladesh and Nepal. However, the focus tends to be on domestic regulatory matters rather than on supporting export initiatives by members through mutual recognition agreements with sister associations in export markets.

Lack of profile

Service exporters in LDCs report that they are constrained by a lack of profile. Their own governments are generally unaware of their capabilities, national web sites make no mention of world-class service exports, and international donor agencies consistently overlook the expertise that they have to offer.

When large projects and speciality work are consistently awarded to foreign firms, often because of 'tied aid', it is extremely difficult for local professionals (who have often been trained and licensed in those foreign countries before returning home) to maintain their specialized expertise.

Cost of doing business

The cost of doing business is very high for LDC business service firms. Cable TV is now available in many LDCs, but cable modem access has not yet been made available. Often national development planning focuses on transport infrastructure, forgetting the importance of telecommunications and Internet access for business services exports.

Other associated costs include high import duties on computer and office equipment. Until local ASPs (application service providers) are developed in LDCs, business service firms will have to continue to bear the high costs of continuous upgrades in computer equipment and software.

Travel restrictions

Another major constraint relates to temporary business travel for conferences and other venues, where the exporters can meet potential international clients and demonstrate their competence. …

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