Developing a Competitive Service Sector

Presentation by:
Ms. Doreen Conrad
Chief, Trade in Services Section
International Trade Centre, Geneva

Good afternoon, ladies and gentlemen,

First, I would like to briefly describe our international organization,

the International Trade Centre or ITC. We are an agency of the UN
and are based in Geneva. We deliver technical cooperation
programmes to developing and transition economies to strengthen
their capacity to promote exports. My particular Section deals
exclusively with helping countries to increase exports of services,
and this is usually in the business and professional services sector,
where there is the greatest export potential. The ITC is proud of its
reputation for being very practical and business-oriented, so that
will be the tone of my presentation.

The topic of trade in services is critically important to Greater

Caribbean country economies, where, in just about every country,
services represent more than half of your economies. We know that
trade in services contributes directly to job creation, trade
diversification and development. Yet, many developing countries
have not yet focussed on developing a competitive service sector,
and on developing exports of services. And many exporters of
services are not even aware that they are exporting. For example,
if a company delivers their service online, or delivers their service to
a business visitor to their country, these are exports, (because its
new money coming into the economy), even though the company
never left the country. That’s one of the reasons that service
exports are not statistically captured in most countries and so there
is little awareness about what exports are already taking place. I’m
regularly asked about trade diversification and, in return, I ask what
the country is doing to promote trade in services, an excellent way
to diversify their trade. Plus, this is the fastest growing component
of global trade.

Some top trade officials respond that they are aware of the
importance of services to the national economy, especially given
the visibility of the WTO General Agreement on Trade in Services
negotiations. However, they are sometimes unsure about what it
takes to increase the competitiveness of their service sector, and to
address the very unique needs of a sector that involves the sale of
something intangible…..its like selling a “promise” when companies
try to sell their services, so they must build their credibility.

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I’d like to direct my comments first to the trade promotion
organizations and what strategies can be implemented to build a
more competitive, export-ready service sector; then to those of you
in the business community about some success techniques and best
practices to help you market your services effectively. I will draw on
my experiences and observations in all types of economies around
the world.

I mentioned the growth in trade in services…what is attributing to

the growth? Global demand for business services, and especially
specialized services, is very high as every organization, whether
public or private; for-profit, or non-profit, large and micro-
enterprises have support functions which are critical to their survival
and competitiveness, but are not their core mandate or
competency. I’m talking about accounting, training, market
research, and so on. Growth in the cross-border outsourcing of
these business and professional services, as well as many others,
continue to increase at more than 20% per year.

Technology has made an enormous impact on trade in services.

The move towards e-trade means that an increasing number of
services can be marketed online, and trade more cost-effectively,
making the export opportunities almost limitless. Service firms in
developing economies have a competitive edge, in that, with
equivalent professional qualifications, they can offer a price
advantage as compared with the billing rates of similar firms in
developed market economies, while reaching customers around the
globe with little incremental cost. ICTs also support services which
can be provided to foreign clients from anywhere, thus encouraging
service providers to stay in smaller communities and countries,
rather than migrate to larger places.

Just to underline my point about the unawareness about service

exports, our studies reveal that developing countries are already
exporting on average, 68 different types of services to at least
33 different markets, of which 2/3 are other developing countries.
In fact, as of a couple of years ago, of the top 12 countries in the
world with the highest percent of exports services (as a percentage
of exports), include Anguilla, Montserrat, Antigua & Barbuda, the
Bahamas, Barbados, St. Lucia, St. Vincent & the Grenadines, and
Grenada. So the issue is not whether to export services, or
capacity, but how trade promotion organizations can increase the
volume and profitability of service exports.

Let’s look at the challenges facing trade promotion organizations in

working with the service sector, in particular.

- Most service exporters are very small firms with limited

resources.

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 - Many service enterprises do not realize that they are
exporting and must be educated about what constitutes a
traded service
- Most service exporters have not used government trade
support services and are not known to trade promotion
officials
- Often, trade promotion officers do not have the types of
contacts needed by service exporters to network and establish
credibility in export markets
- Because service opportunities change rapidly, market
information and sectoral studies become outdated quickly.
Instead, service exporters need a sense of the market and a
sense of complaints that could become export opportunities.
(eg. “I wish I could find someone to….”)
- Since service export opportunities need to be acted on quickly
when they appear, contact networks and market intelligence
are typically more useful in identifying target markets, than
are services trade flow data
- Many of the service providers were educated in technically-
oriented and have not learned marketing skills, yet need to
undertake business development, especially in small firms.
- Private sector business associations or chambers have
typically been focussed on regulatory control and domestic
policy advocacy, not on services exporting activities or
services trade policy advocacy.

From an assistance perspective, the service sector is diverse with

over 150 sub-sectors. There are at least four types of services each
of which needs different types of market information and trade
development assistance:

1. Goods-related services, such as packaging, freight forwarding,

customs brokerage, etc. Since these services are traded
much like goods, they are often already included in goods
trade promotion initiatives and can be promoted effectively at
trade shows, for example.
2. Services that have recognized promotional channels, such as
education, tourism and capital projects. These can typically
be promoted effectively through participation in the relevant
trade shows. For capital projects, bid information is available
online.
3. Professional services. Their main barrier to market entry is
recognition of their professional credentials (which, by the
way, is a matter for trade negotiators). Therefore, they often
enter new markets with a partner who is already licensed in
the market. Professional services are typically marketed at
professional conferences or other networking events to
promote “word of mouth” referral.

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 4. “Pure” services, that is not linked to goods and do not require
licensing. These may be marketed via international events
but are more typical promoted through more customized
strategies and include services such as management
consulting, advertising, research, editing, etc.

To then consider these factors and summarize a “best practice

summary” for TPOs, it would be as follows:

→ Ensure top trade officials’ commitment to a specialized trade

development approach for services
- Ensure that trade promotion officers understand the different
types of services and how to match promotion strategies to
them
- Ensure that trade promotion officers can articulate the
differences between services and goods exporters
- Ensure that trade promotion officers working with goods
exporters are familiar enough with services export strategies
that they can help their clients also export related services
- Ensure that top trade officials understand the need to build
national credibility for service exporters

Now, to support a services trade development strategy, countries

need an official services promotion unit with at least one trade
officer dedicated full-time to services trade promotion. Services
needs a different type of trade promotion approach. For example,
rather than taking “pure” service providers to trade shows when
they have nothing to exhibit, the opportunity to give a presentation
and build their profile and credibility would be much more effective.

A services promotion officer or unit needs to coordinate with other

government initiatives targeting service firms. Because of the high
percentage of SMS in the sector, one of the areas of coordination is
with programs designed to assist SME exporters. Another program
area is initiatives focused on women entrepreneurs as the majority
of women business owners are likely to be managing service firms.

One of the challenges in planning for services trade promotion is

that there are typically at least twenty government agencies that
could be involved (ministries such as Industry, Public Works,
Communications, Education, Health, Tourism, Immigration,
Transportation, and so on). Ideally this coordination would be led by
a designated “services champion” with appropriate authority and
resources.

The “services champion” would typically:

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 - monitor government speeches, awards programmes, and
literature to ensure services are included
- ensure trade promotion events are organized for service firms
- collect and report success stories
- develop a database of firms in the sector
- sponsor networking events to promote “clustering” of services
to offer clients one-stop shopping, especially on large projects
- engage the media in creating awareness about the
importance of services
- encourage services industry associations to deliver the export
training that is available
- offer to speak at industry association events or service clubs
and deliver a presentation
- implement strategies to increase service exports from inward
investment by facilitating networking and profiling your
service sector capabilities

Creating awareness is one of the most important things that must

be done, as the country diversifies and expands its focus on
services.

Now, let us turn to those of you who represent private sector

enterprises in the service sector, which are potential exporters and
promoting your business services.

I alluded to the fact earlier, that services are traded in different

ways…four ways according to the WTO. The service can be
delivered from your office, online to a foreign client; the client could
be visiting your country and need services (such as business tourists
needing printing or translation services); or a project office is
temporarily set up abroad for a project; or fourthly, the service
provider actually travels to the export market to deliver the
services. You can see that, through the first two modes, exporters
do not even have to leave the country to export, and that is why
many of them do not realize that they are already exporting.

If a firm is interested in exporting, one of the first things in their

business development strategy might be to initially target those
incoming businesspeople or multinational foreign investors already
in your market who can at least give the firm a referral or letter of
recommendation.

Another thing I notice as I work in various countries, is that many

companies’ promotional materials and marketing approaches are
not world-class, to say the least. This is a problem as they are not
perceived as reliable or professional, and if you cannot articulate
succinctly and effectively what you do, even if you have the best
service in the world, who is going to take a chance and purchase
your services? So it is a very very important consideration before

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going abroad. Another example…your business card is your most
important representation…that and your literature is all that is
working for you when you have left a potential client’s office. Yet,
many business cards do not specify what kind of service is provided.
Many do not even have their country on the card, and many
businesspeople simply forget or run out of business cards at
networking events, which is always astounding. Potential
exporters should think about this phrase: marketing is everything
you do! You never know when someone can refer business to you.
And that’s the way it works in the service sector….you are selling a
promise and need referrals and recommendations because people
do not usually see the service until it is created.

Another success strategy is to consider “bundling” or “clustering”

complementary services, such as architecture, design, engineering
and construction management services for project bidding; or for
foreign investors: corporate real estate, ICT, accounting, legal,
printing, etc., all the services they will need. The search and
sourcing of services is very time-consuming and expensive and this
is a solution for potential clients. This can be facilitated by your
industry associations or chambers, by organizing networking
meetings so the industry becomes familiar with others in it.
Remember that the service sector does not all belong to one
services industry association….they belong to their professional
association (eg. Engineering, or a business chamber, or an SME
group, and so on).

Remember, there are 3 key factors that comprise competitiveness:

1. The ability to meet unmet customer needs

2. Awareness of your competition, why they are succeeding and
the market conditions, and
3. The ability to effectively adapt your service culturally.
Inattention to culture has cost many firms international
business.
The last subject that I wanted to touch on is one that is quite topical
now in the Caribbean, and that is the establishment of services
coalitions, or umbrella organizations and the impact on regional
integration.

We are aware that there are services coalitions in various phases of

establishment in countries which include the well-established one in
Barbados; and others in Guyana, Bahamas, Belize, Jamaica,
Surinam, and Trinidad and Tobago and perhaps others…I know the
Dominican Republic was also interested or in the process already.
The origin of these Coalitions lies in the agreement by CARICOM
Member States in 2001 to form Coalitions to prepare the service
sector to meet the challenges and seize the opportunities of the
emerging environment. National services coalitions can drive the

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effort to promote services as an essential component of the
Region’s exports and they can be a real catalyst at facilitating
market entry and reciprocity within the Region.

We at the ITC have been working with many developing countries

around the world in the establishment of their Coalitions and stand
ready to provide any needed technical advisory services to support
this important initiative.

In conclusion, there is a world of opportunities in trade in services.

With a few key ingredients, such as a fast, affordable
telecommunications framework, government support, a dedicated
trade promotion programme, and a quality, educated workforce,
any country can increase their exports of services and diversify their
trade.

I wish you fruitful networking and exchange of ideas throughout the

Forum.