Services Trade Development Council (STDC)

Ministry of CommerceGovt. of Pakistan

1

15 May, 2014

Sequence of Presentation• Introduction

• Aims/ objectives of STDC• Work plan/ Road map• Present status of STDC• Trade in services

– Segregating Goods & Services– GATS Mode Of Services – Sectoral shares of World’s GDP 2012– Pakistan’s services exports

• Issues and Challenges• Conclusion• Recommendations 2

Introduction

• Services Trade Development Council (STDC)

& Trade in Services Wing were established under

STPF 2012-15

–Services sector included in Trade Policy document

for the first time

–STDC will be an autonomous, consultative,

advocacy and research think tank with major

participation of private sector 3

CHAIRMAN

MINISTER OF COMMERCE

EX-OFFICIO REPRESENTATION

FEDERAL GOVT

PROVINCIALGOVT,

SELECTIVE REPRESENTATION

PRIVATE STAKEHOLDERS

HEADS OF ORGANIZATIONS

FINANCIAL INSTITUTIONS

ACADEMIA

Proposed Composition of the STD Council

4

Organogram of STDC Secretariat

6

Director General

(BPS 20)

Director

(BPS 19)

Deputy Director

(BPS 18)

Assistant Director

(BPS 17 )

Assistant Director

(BPS 17)

Deputy Director(BPS 18)

vacant

Assistant Director

(BPS 17)

Assistant Director

(BPS 17)

(JS Import & Export)

SO Admn-I SO AP-II

Aims & Objectives of Council • To initiate and lead the service sector reforms aiming at

domestic liberalization and facilitation for enhanced exports

• To provide policy guidelines for harmonizing existing regulatory/legal framework in the services sector

• To support/develop forums for creating awareness on the potential of services and opportunities at the global level

• To finalize/implement periodic development and promotional plans for expansion of services sector

• To oversee coordination among the stake holders for implementation of policy initiatives

• To consider financial proposals for development and expansion of various sectors and sub-sectors

7

Revised STDC Work Plan- 2014Jun Jul Aug Sep Oct Nov Dec

To make STDC fully functional bodyEngaging stakeholders on composition of STDC

Initiate preliminary working on holding First Meeting of Council

Organization of First Council MeetingEngaging donors/stakeholders on development of service sector Plan

Launching awareness programmers: meetings/seminars/workshops

Implementation of the decision of First Meeting of Council

Engaging private sector in development & promotional plans through sect oral Committees

Developing TORs for selected studies under technical assistance programmes

Designing publicity plans to project service sectorCoordination of activities of the identified sectors

8

Previous Plan

Roadmap of Council

GOAL

Initiatives on improving Regulatory framework environment, facilitation and elimination of barriers.

Institutionalizing support and technical assistance

Helping disaggregation of major sector in services sector in Pakistan

Strengthening of key institutions

To develop competitive edge of Pakistan’ service sector to increase export’s potential

To formulate policy for post Doha Round

9

Issues faced by STDC• STDC lacks logistics / accommodation for officers• Non-release of initial funding of Rs. 70 million• Need acquisition of autonomous status• Non-approval of STDC functions/ objectives/ ToRs cause delay

to carry out various activities such as:– Identification of relevant stakeholders from public and private sector– Identification of important services sectors/ areas– Identification of various regulations affecting services sector

• Designing of road map/ work plan for STDC

• Capacity building/ training & skill enhancement• Provision of services data analysis software• Establishing linkages with local, regional and international

bodies involved in services promotion

10

Services are DifferentGoods Services Resulting Implications

Tangible Intangible •Services cannot be inventoried•Services cannot be patented•Services cannot be readily displayed or communicated•Pricing is difficult

Standardized Heterogeneous •Service delivery and customer satisfaction depend on employee actions.•Service quality depends on many uncontrollable factors.•There is no sure knowledge that the service delivered matches what was planned and promoted.

Production Separate from consumption

Similarities in consumption and production

•Customers participate in and affect the transaction.•Customers affect each other.•Employees affect the service outcome•Decentralization may be essential.•Mass production is difficult.

Nonperishable Perishable •It is difficult to synchronize supply & demand with services•Services cannot be returned or resold.

GATS Modes of Services

Modes of Services Definition of “Traded” Service:

World’s Export Share

Pakistan’s Export Data

Cross border Service moves 25 -30%

Consumption abroad

Consumer moves 10-15%

Commercial presence

Supplier moves permanently

55-60%

Presence of natural person

Supplier moves temporarily

Less than 5%

Source: WTO13

Sectoral Shares of World’s GDP 2012

World USA India Brazil UK S. Korea Japan Pakistan0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

63.60%

79.70%

56.90%

67.20%

78.30%

57.50%

71.40%

53.70%

Agri.

Indus.

Serv.

The World Economic Outlook (WEO) database

14

Export of Services from Pakistan Source: SBP (Million US$)

Service Sector 2009-10 2010-11 2011-12 2012-13Jul-

March2013-14

Transportation

1,279 1,648 1,503 1,269

Travel 286 351 369 298Communication Services

246 225 211 508

Construction Services

15 18 24 29

Insurance Services 42 53 88 41Financial Services

89 69 53 56

Computer and Information Services

187 216 248 294

Royalties and License Fees

6 5.6 7 4

Other Business Services

535 780 813 795

Personal, Cultural, and Recreational Services 4 3.4 4 5.7

Government Services, N.I.E.

2,535 2,394 1,710 3,428

Total 5,229 5,767 5,035 6,732 3,722

15

Import of Services by Pakistan Source: SBP (Million US$)

Service Sector 2009-10 2010-11 2011-12 2012-13Jul-

March2013-14

Transportation

3,576 4,071 3,509 3,288

Travel 878 971 1,367 1,232

Communication services

158 175 178 205

Construction services

29 82 62 9

Insurance services

146 147 279 260

Total 6,919 7,707 8,227 8,202 5,75716

Pakistan’s Trade in Services

FY09 FY10 FY11 FY12 FY130

2000

4000

6000

8000

10000

12000

14000

16000

0 0 0 0 0 00

4,1055,229

5,7675,035

6,732

0

7,4876,919

7,707 8,2278,202

Export of Services

Series1

(Amount in Million US$)

Data Source: State Bank of Pakistan 17

Pakistan Exports to Major Countries Country FY11 FY12 % Change % Share in

FY12

U.S.A 2286 1308 -42.8 26U.A.E 430 452 5.1 9U.K. 441 336 -23.8 6.7Singapore 271 242 -10.9 4.8Saudi Arabia 218 221 1.5 4.4Switzerland 53 151 184.3 3Thailand 142 126 -11.1 2.5Germany 148 121 -18.4 2.4France 103 105 2.5 2.1Japan 57 102 79.9 2Denmark 178 83 -53 1.7Hongkong 43 75 74.5 1.5Netherland 57 61 7.5 1.2China 62 60 -3.7 1.2Afghanistan 30 39 27.9 0.8Others 1250 1553 24.2 30.8Total Export of Services 5768 5035 -12.7 100

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Export Performance of Regional Economies

S. No Country 2008 2009 2010 2011 2012

1 China 147.11 129.47 162.16 176.42 191.43

2 India 107.13 92.62 124.04 137.67 141.2

3 Turkey 35.24 34.11 35 38.98 42.78

4 Thailand 33.03 30.15 34.32 41.57 49.51

5 Malaysia 30.32 28.76 31.72 35.85 37.61

6 Indonesia 15.24 13.15 16.76 20.69 23.14

7 Iran 6.92 8.00 6.77 8.28 8.81

8 Pakistan 3.58 4.1 5.22 5.76 5.03

9 Sri Lanka 2.00 1.89 2.47 3.08 3.78

10 Bangladesh 1.99 1.97 2.41 2.42 2.02

Source: ITC

Amount in USD Billion

19

Available Research/ Studies on Services in Pak

Trade Related Technical Assistance (TRTA)

Studies

• Statistical System of Pakistan for Reporting on

International Trade Statistics. (2006)

• Pakistan Services Road Map. (2007)

• Promoting Pakistan’s exports in Professional,

Computer and Transport Related Services 2008

• Assessing Pakistan Export Potential for

Professional Services. (2008) 20

STDC interaction with Trade Missions

• Identified potential sectors/sub-sectors

• Highlighted market specific constraints

• Stressed export of skilled labour/manpower

• Suggested need for enhanced coordination

(NAVTEC, TUSDEC & other stakeholders)

• Proposed for bilateral arrangements to capitalize on

opportunities and removal of NTBs

• Recommended interaction among relevant host

authorities and regional organizations21

Challenges in Services Sector• Supply side constraints • Lack of capacities to supply the expansion

of internal markets • Lack of identification of export opportunities

in key services sectors• Lack of important prerequisites such as

coherent development and services strategies• Lack of physical and technological

infrastructure, knowledge and availability of capital

22

Challenges Contd…

• Market Access Issues Sensitivity of sectors or modes of supply where

Pakistan has interest and potential Mode-1 (cross border movement) in the case of outsourcing Mode-4 (temporary movement of persons) in terms of qualification and

licensing requirements for different skill levels

Business and professional services are sectors where diverse regulations such as lack of recognition of foreign credentials may impede the affected service trade.

23

Challenges Contd…

Interplay with Domestic Services sector and Regulatory Framework• Association of social, environmental and economic factors

with services liberalization• Lack of fast track licenses granted to small services

suppliers• Lack of supportive regulatory and institutional

framework• Interagency coordination• Institutional and administrative capacity building

24

Challenges Contd…

• Human Resources Gap • Lack of knowledge intensive and solid educational

reforms that can enable the creation of a capable and skilful work force.

• The human resources gap is manifested by low literacy rate

• Small number of highly qualified professionals

25

Challenges Contd…

• Financial Services and security • Lack of designing and implementation of specific

macroeconomic, regulatory and supervisory mechanisms

• Lack of financial support mechanisms• Reliability, affordability and safety of

remittance transfers, a key challenge for Pakistan

• Under reporting of remittances in the services area• BPM-5 and BPM-6

26

Challenges Contd…

• Statistics and Data related issues • Need for gathering up-to-date, disaggregated and

quality data on domestic output, consumption and trade in services

• Lack of data limits the use of potential positive approaches to improving services efficiency and quality

• Lack of reliable data required for regulatory assessments; information necessary to weigh the value of negotiation proposals and potential commitments in trade liberalization.

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Opportunities in Services Sector• Facilitation and promotion of services sectors can provide a

series of positive catalysts for a whole economy– Enable sustained economic growth– Generate employment, facilitate diversification– Enhance the supply side capacities of the primary and

manufacturing sectors– Bring investment and trade opportunities

• Related infrastructure – Investing in the development and expansion of technological

infrastructures such as broadband networks– Contribute to lowering the cost of using internet – Communication services for a vast number of people. – Increasing the possibilities for transactions– Leading to the creation of new services and online businesses

28

Opportunities Contd…

• Contribution towards Environment Management – Challenges related to environmental protection– Introduction of new environmental regulations– Climate change mitigation and adaptation creating a

growing demand for environmental goods and services– Creation of new business opportunities in clean

energy generation– Diverse environmental and pollution control services– Low emissions transport systems – Water and sanitation services

29

Opportunities Contd…

• Improvement in Governance – Setting fast track licensing procedures– Providing targeted technical assistance to fulfill

relevant standards– Setting targeted procurement rules that favour

small and medium services providers,– Government can encourage new entrants and

enable their integration into value chains

30

Opportunities Contd…

• Contribution towards Financial Services – Provision of specific Finance and insurance

products to address the middle class services providers

– Remittances can be better channeled for capital accumulation and creation of local business

– Access to credit, expanding services coverage, and creating special savings and credit products needed by the Diaspora

31

Opportunities Contd…

• Opportunities in Tourism Sector– Tourism contribution to global GDP is recorded to

exceed 5 %– Tourism has to promote economic diversification

and to strengthen linkages with related services, food production and manufacturing

– Emerging services such as tourism, ecotourism, medical and health tourism services, traditional and niche hospitality services

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Conclusion • Pakistan has the potential for broadening of its services

exports and outreach to global marketplace.• In STPF 2012-15, there has been a recognition and focus

on export of services, yet the practical actions on part of Ministry of Commerce are not visible.

• Different public/ private entities are involved in services trade promotion on individual basis.

• Four separate bodies are working in Ministry of Commerce for services sector without any coordination among them.

• Lower level of awareness and recognition with the most important player, i.e. private sector.

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Recommendations• Trade and related Policy tools • Regulatory Environment– Detailed mapping of domestic regulations– Regulatory reforms to create enabling

environment

• Public Private Partnership • Linkage to international Markets – Implementation of Services Export Strategy

34

THANK YOU

35

STDC Work Plan- 2014Mar Apr May Jun Jul Aug Sep Oct Nov

Dec

To make STDC fully functional bodyEngaging stakeholders on composition of STDC

Initiate preliminary working on holding First Meeting of Council

Organization of First Council MeetingEngaging donors/stakeholders on development of service sector Plan

Launching awareness programmers: meetings/seminars/workshops

Implementation of the decision of First Meeting of Council

Engaging private sector in development & promotional plans through sect oral Committees

Developing TORs for selected studies under technical assistance programmes

Designing publicity plans to project service sectorCoordination of activities of the identified sectors

36

Back

Classification of Services SectorBPM5

• Transportation • Travel• Construction services

• Insurance services• Financial services • Royalties and license fees• Communication services • Computer and information

services • Other business services

BPM6• Manufacturing services on

physical inputs owned by others

• Transport• Travel• Insurance and pension

services• Financial services• Charges for the use of

intellectual property n.i.e• Telecommunications,

computer, and information • Other business services 37

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