Time to prioritise the services sector
INCREASING productive capacity may ultimately assist developing countries and least developed countries in implementing the 2030 Agenda for Sustainable Development and achieving the Sustainable Development Goals regarding poverty reduction, sustainable economic growth, the reduction of inequality, the increasing of exports from developing countries and the doubling of the least developed countries’ share of global exports.
The services sector accounts for more economic activity than any other and for a growing share of gross domestic product, trade and employment. Services also contribute to productive capacity enhancement by providing productive resources in the form of inputs to other sectors and by creating production linkages. With the advent of digitalization in production and logistics processes, industry is set to be transformed.
Developing countries like Namibia that fail to recognize this reality risk being left behind. The persistent services trade deficit in such countries could be reduced by, among other things, increasing domestic services provision capacity and reducing market barriers for their services exports. Furthermore, services could be imported to make up for shortfall in critical services provision within their countries.
Greater efforts should also be made regarding services data collection and the sharing of knowledge among countries, including through South–South cooperation. Many developing countries are at similar or not too distant stages of development and are consequently in a position to share valuable best practices.
So in essence, enhancing the services sector can boost the economy of Namibia and fast-track progress towards meeting global goals on sustainability.
This is so because the services sector is responsible for two thirds of total productivity growth in developing countries.
Services also account for 51% of global employment, are the main source of job creation and of female employment, and the main destination for foreign direct investment, constituting about 50% of the world total.
In trade, though services account for a smaller share than goods in total direct exports, they are important as their exports have grown more than goods’ exports in recent years, especially in developing countries.
In addition, the emergence and spread of new technologies, such as artificial intelligence or blockchain, will have an impact on services.
Therefore there is a greater importance of strengthening linkages between services and other economic sectors. Linkages are apparent in infrastructure services such as telecommunications and information and communications technology, enabling cooperation between different activities and participants in the production process. The longer we take to incorporate new technologies and innovations into production processes is going to mitigate against how well we do in the new economy.
Services are driving profitability in manufacturing and today we cannot separate industrialization from services. If you wish to make good profits in manufacturing, you have to embrace services.