…Exploring a new development policy priority
By Hilary Mare
SERVICES play a vital role in economic transformation and job creation in poor countries, but the effects are different from those in agriculture or manufacturing. While much of the discussion on economic transformation centres on transforming agriculture and moving into manufacturing, services are an under-explored component of economic transformation strategies.
Essentially, services sectors and the trade thereof are very important to developing countries like Namibia, as they are the fastest growing components of Gross Domestic Product (GDP) and foreign direct investment (FDI). Services form part of almost every activity in an economy. This is particularly true of what are often referred to as producer services such as transport, communications, finance, distribution and business services.
The national variation in the shares of GDP attributable to services, in Namibia is greater than that of the other three components of economic activity combined. According to the Namibian Statistic Agency, in 2015 services contributed more than 59 percent to GDP.
For Namibia at the moment is very difficult to determine the obstacles to cross-border trade in services as per the domestic regulations. This is simply because Namibia does not have a national policy frame on trade in services or a national position on trade in services for that matter. In other words Namibia never negotiated or participated actively in Trade in Services. Namibia has been a member of WTO since 1 January 1995 and has committed and accepted the General Agreement on Trade in Services (GATS) upon its entry into force in 1995.
Namibia has liberalised two service sectors under the GATS which are business services (only services related to scientific and technical consulting services such as off-shore oil and gas exploration) and tourism (hotels and restaurants and travel agencies and tour operator’s services). The tourism sector has been fully liberalised in all four modes of supply (cross border supply, consumption abroad, commercial presence and presence of natural persons). These commitments were made beyond the current Government’s control although they can’t be revised at this juncture.
Essential to note is the notion that trade in services can support economic transformation. Notable examples of successful expansion of trade in services include the development of diversified financial services hubs in Kenya, health and business tourism in Mauritius, information and communication technology services in India, air transport in Ethiopia, and hydropower transmission services in Lesotho.
Donors should focus more on enhancing their knowledge and understanding the relevance of a competitive services sector for the achievement of development goals, specifically through economic transformation and job creation. They can do this by supporting improvements in market intelligence, trade and regulatory data related to services; developing national export strategies in services; building a conducive policy environment in developing countries, including by setting up public-private dialogue and coalitions supporting services reform; and strengthening country capacity to collect data on services.
The lack of quality data is a particular hindrance to policy-making in the area of services. Some data has begun to be available, including through recent support by donors, but further improvements on trade in services should focus on: capturing all the modes of trade in services; tracking south-south trade in services; reconciling firm-level and national-level data; and improving information on applied services policies.
Trade policy is important. Openness leads to higher productivity in services firms, especially in least developed countries (LDCs), especially with appropriate domestic regulation. International negotiations in services can also support services trade in the poorest countries, including by giving preferential access to LDC exports (for example, facilitating market access by reducing the cost of visas and putting in place domestic support mechanisms to assist LDC providers to deal with administrative requirements). However, very few meaningful preferential trade measures have so far been offered in areas of comparative advantage of LDCs such as tourism, travel, construction and mode
Aid for trade for services is generally limited as a share of total aid. Targeting more aid to facilitate trade in services has great potential to be effective.
Namibia has observing status at the SADC trade in services negotiations because she didn’t sign the SADC protocol on trade in service but hoped to sign in August 2016 during the SADC Summit. Namibia is observing the negotiation process by attending the Trade Negotiation Forum (TNF) on Services meetings in order to remain informed of the negotiation process in which the other Member States are engaged. By observing the negotiations it could assist Namibia to build some capacity in preparation for when the country accede to the SADC protocol on trade in services.
Namibia has received requests for liberalisation from eight SADC member states in specific sub-sectors as follows. South Africa (communication, construction, financial, tourism, transport, and health services ); Lesotho (communication, transport services); Swaziland (communication, financial, transport services); Mauritius (communication, financial, tourism, transport services); Seychelles (communication, financial, tourism, transport services); Zambia (communication, financial, tourism services); Botswana (communication, tourism services); and DRC (communication, financial, transport services).
Offers were also received from Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe in four sectors: communication, financial, tourism, and transport services. The Tripartite Free Trade Area and the African Union Commission’s preparations for the commencement of negotiations on trade in services at the Tripartite level as well as under the Continental Free Trade Area are underway and envisaged to start very soon were Namibia is also expected to participate.
Owing to the fact that Namibia has not signed the SADC Protocol on Trade in services due to a lack of information of the potential implications to the national economy by liberalising service sectors and the absent of the national negotiating strategy to inform how to engage in trade in services negotiations both at regional and multilateral levels. To that end, the Ministry of Industrialisation, Trade and SME Development requested UNCTAD for assistance to conduct a situational analysis and regulatory audits in the services sector for Namibia.
The UNCTAD responded positively in November 2015 to provide such assistance to Namibia by undertaking a services policy review, which will form part of the overall trade policy framework that is currently being undertaken. This particular policy will inform Government on how to engage on trade in services negotiations both at regional and multilateral forum. The policy frame work on trade in services will unify the concept of trade in services nationally by uniting regulatory bodies and all the relevant stakeholders to talk to each other.
The Ministry of Industrialisation, Trade and SME Development (MITSMED) in consultation with the Namibia Trade Forum (NTF) constituted a national consultative committee on trade in services. The committee members were drawn from different ministries and regulatory bodies. The committee is currently in the process of finalizing its Terms of References (TORs) that will guide the conduct of its business. It is expected that once MITSMED provides direction (national strategy or policy frame work on trade in 3 services) towards a position that Namibia will take on the matter, it will serve as the consultative forum on trade in services.
It will also be the forum to recommend specific offers and requests to MITSMED for approval and negotiation at SADC, TFTA and CFTA as well as at Multilateral level. For these coordination mechanisms to be effective there is a need for capacity building to the committee members because there is a minimal understanding of trade in services concept amongst the members.
Confidente. Lifting the Lid. Copyright © 2015