Lecturer: Dr. Truong Thi Kim Chuyen
CONTENT I. Defining and the theorizing services II. National and global stimuli to the growth of
services
III. Service outsourcing: benefits and drawbacks
for all?
IV. Limits to service export growth in the semi-
periphery and periphery
V. Geography of services VI. Variety in the internationalization of
services
ng Vy
ụ
ươ tệ
Group members Thái Th y T ườ Đ B o Khánh ỗ ả Ph m Bình D ng ạ Đoàn Anh Vi Nguy n Th Anh Th ị ễ
ư
11.1/ Defining and the theorizing services
I. Defining and the theorizing services Following Fisher – Clark thesis, services have been
defined:
Comprising what remains after agriculture, mining and manufacturing
are excluded. (1st defined way)
Production and consumption of intangible inputs and outputs. (2nd
defined way)
1st defined way
Differences between manufacturing and
services play important implications
For LDCs and the DCs
For measuring and studying services
Services are categorized into 7 major components
Finance, insurance and real estate
Business services
Transportation and communications
Wholesale and retail trade
Entertainment, hotels and motels
Public services at all government levels
Non-profit services
2nd defined way
• The distinction between tangible manufactured goods and
intangible services is not clear cut
• Many manufactured products have come to be offered not in their own right to consumers, but in terms of their wider service attributes. This has occurred in 2 ways
− The manufactured products can be offered along with closely aligned
service products in a single package
− Instead of buying a manufactured product in a single one-time purchase, a consumer can buy the service which the manufactured product provides as part of a continuing process involving long-term customer contact through service delivery
Service encapsulation
11.2/ National and global stimuli to the growth of services
II. National and global stimuli to the
growth of services
Rising per capita incomes
Growing demand for healthcare and educational services
Increasingly complex division of labor
Growing size and role of the public sector
Increasing international trade in services
Rapid growth in outsourcing service functions
11.3/ SERVICE OUTSOURCING: BENEFITS AND DRAWBACKS FOR ALL?
Deciphering outsourcing terminology
Where
How
Domestically
Abroad
Affiliated company ( Internal )
Unaffiliated company ( External )
Outsourcing/offshoring
Outsourcing √ √ √
Offshoring √ √ √
√ √
Captive outsourcing
√ √
Offshore outsourcing
Outsourcing can be done domestically or abroad, involves work done
externally
Offshoring is always done abroad, the work can be done either internally External outsourcing – where the work is done by unaffiliated companies
( including independent foreign subcontractors, as in offshore outsourcings )
Internai outsourcing – where the work is done by affiliated companies as in
captive outsourcing
While the outsourcing of services is still at a relatively early age, it is seen as representing the leading edge of changes in global production
UNCTAD : Reflect a shift to a new internal division of labour in the
production of services
OECD : The total number of jobs could be affected by international and
domestic outsourcing
Service and manufacturing activities, important differences are expected to fuel an acceleration in service outsourcing
First, There is significant room for growth Second, The rate of increase in the amount of services that has become
tradable
Third, Manufacturing companies have primarily carried out the
outsourcing of goods production
Fourth, Skill levels are typically higher Fifth, Services may be more mobile than outsourced manufacturing
activities
The benefits of service outsourcing for LDCs include the criterion of higher
skill jobs involving better pay, training and transferable skills and associated infrastructure investment that can contribute to further local job growth
The drawback for some LDCs include the possible relocation of outsourced service activities to other more competitive LDC locations unless worker skills and local infrastructure are continuously upgraded
11.4/ LIMITS TO 11.4/ LIMITS TO SERVICE EXPORT SERVICE EXPORT GROWTH IN THE GROWTH IN THE SEMI-PERIPHERY AND SEMI-PERIPHERY AND PERIPHERY PERIPHERY
Semi-periphery and Semi-periphery and periphery periphery The semi-periphery countries are the industrializing,
mostly capitalist countries which are positioned between the periphery and core countries
The periphery countries (sometimes referred to as just the periphery) are those that are less developed than the semi- periphery and core countries.
TECHNOLOGY AND TECHNOLOGY AND INFRASTRUCTURE INFRASTRUCTURE
TECHNOLOGICAL LIMITATIONS:
USE BY COMPUTER
DIGITAL FORM
MADE TO OUTSORCING
TECHNOLOGICAL LIMITATIONS:
Ex: Africa has less than 1 internet host per 1000 inhabitants
LIMITED INFRASTRUCTURE:
LIMITED INFRASTRUCTURE:
EX: LDCs cannot link into telecommunications network in
submarine cables
=> They are limited in their ability to develop competitive
base for services exports
EDUCATION AND TRAINING EDUCATION AND TRAINING
Lack of education and training is a limiting factor in knowledge-intense services.
Special skills are needed for more routine services:
LDCs may not be able to keep pace with the demand for qualified workers, shortages of trained workers => Less attractive as an outsourcing destination
GOVERNMENT AND POLICIES GOVERNMENT AND POLICIES
Competitive regulatory environment is need to encourage
competition among service providers
The regulatory and legal framework in some less
developed countries can place limits on the growth of export services.
=> they need to be concern about poor data security and
intellectual property protection.
WTO’s General Agreement on Trade in services (GATS) covers all internationally traded services. However, it still proceeds extremely slowly to help a greater competition and non-discrimination.
CORPORATE STRATEGIES CORPORATE STRATEGIES
Any assessment of the potential for service outsourcing needs to include analysis of corporate strategies and organizational limitations
Ex: some information that is to be processed can be
confidental. However,this can increase transation cost and limit desirability of outsourcing.
The royal Bank of Scotland in UK are right when deciding
not to outsource certain financial service abroad while LDCs is limited in decision of outsourcing.
11.5/ GEOGRAPHY OF 11.5/ GEOGRAPHY OF SERVICES SERVICES
1. PATTERNS AND TRAJECTORIES INTERNATIONAL TRADE IN SERVICES 2. 3. TRANSNATIONAL INVESTMENT PATTERNS 4. EXPORT PROCESSING ZONES (EPZS) 5. AGGLOMERATION AND NEW BUSINESS SERVICE
CONCENTRATIONS
PATTERNS AND TRAJECTORIES 2006: milestone for service
Low employment in services ?
Economy
Informal
Formal
2006: milestone for service (not include informal economy)
1996 2004 2005 2006 2006
World 35.5 38.9 39.5 4040
Developed Economies and European Union 66.4 71.6 72.4 72.772.7
Central and Eastern Europe (non-EU) and CIS 45.8 49.5 49.8 50.350.3
East Asea 20.7 24.5 25.1 25.825.8
South East Asia and the Pacific 32.7 34.6 34.6 35.235.2
South Asia 25.3 28.2 28.9 29.529.5
Latin America and the Caribbean 56.5 60.6 61.1 61.461.4
Middle East and North Africa 48.6 47.6 47 47.447.4
Sub-Saharan Africa 22.9 26.2 27.9 28.228.2
Changing employment in services as a percentage of total employment Source: ILO (2007:12, table 5)
Employment rate in service Low employment rate in services LDC
Percentage of Workers in the Service Sector Source: U.S. Bureau Labor of Statistics (2008)
The connection between two kinds of economy Informal economy: informal sector, informal employment,
LDC
employment without labour or social protection—both
inside and outside informal enterprises, including both self- employment in small unregistered enterprises and wage employment in unprotected jobs. (D E S A W o r k i n g P a p e r N o . 4 6)
Formal economy: formal sector, formal employment, DC
Informal sector resource for the formal sector.
Reason: informal sector provides a huge range of cheap services for employees in the formal sector reduce the living cost of them reduce the wages reduce the goods price good for formal economy
International trade in services
EURO
ASIA
EXPORT S
IMPORT S
NORTH AMERICA
2005
SOUTH AND CENTRAL AMERICA
AFRICA
MIDDLE EAST
COMMONWEATH OF INDEPENDENT STATES
2/3 world FDI stock
Services Services
TRANSNATIONAL INVESTMENT PATTERNS. FDI
• Physical presence requirement of delivering of non-tradable services • Home market success build and strengthen strategies. • Relaxing regulation of service industries & foreign service • Information & communication technologies low cost location
worldwide.
The largest
EXPORT PROCESSING ZONES (EPZS)
LCDs use subsidies and EPZs attract investment.
Subsidies: variety of service industries.
EPZs: manufacturing (traditional), export-oriented services
Table 1. Regional distribution of EPZs targeting services, 2004
No. of countries with EPZs for services
World 91
Asia and the Pacific 26
Latin America and the Caribbean 26
Africa 20
Central and Eastern Europe 13
6
Source: ILO, www.ilo.org/epz.
European Union and other developed countries
Most EPZs for service industries are located in the LDCs. The kinds of these EPZs have growth rapidly: commercial services, simple data entry, call centres, medical diagnoses, architectural, business, engineering and financial services.
EPZs
Modern communication technologies
Reliable power supplies
Highly skilled work-force.
AGGLOMERATION AND NEW BUSINESS
CONCENTRATIONS
Actor-network theory High value-added services + skilled labor + tacit
information = world’s global cities.
Low value-added services + standardized knownledge
= world’s low wage.
11.6/ Variety in the 11.6/ Variety in the Internationalization of Internationalization of Services Services
Labour- Intensive
Consumer goods industries
What is Buyer- driven commodity chains ?
Keep low cost Forcing Consolidation at all stages in LDCs
Power in hands of a few major retailers. Ex: Wal- Mart
Tighter Control over inputs and standards
X
No
The requirements for rising International Tourism Transportation service Hotels Service Entertainment Service
Benefits
1 Rising Income + Consumption of Service
Tourism receipts (US$ million) ex: In China
Chart 1: Distribution of jobs in tourism industries, 2007 in the US
1 Producing jobs which are often seasonal. not fixed
1 Pollution / environment degradation
3 Degrade traditional lifestyle + heritage
HSBC Viet Nam Citibank Viet Nam
Banks from developed countries strongly develop in China, Korea, Taiwan ( >= 50%) Others : Argentina, Brazil, Colombia, & Venezuela ( higher increase)
United Nations Conference on Trade and Development
Its international standards: Low Less international active A physical presence in a few foreign banking markets
Ex: Banks ( from LDCs) London: 1996- 2002 153- 122 New York: 118 - 90
oLess regulated oLow- or no tax settings for saving oHavens for undeclared income + hot money
5 major specialized offshore banking centers •The Caribbean •Europe •The Middle East •Southeast Asia •The South Pacific
IBOS : in term of BPO to the LDCs in general and to India in particular Low- cost Indian Programmers The necessary skills, speed, & attention The US outsources the conversion of custom- made software programs ( 2/3 )
The large IT + BPO providers & intermediaries include companies in:
The DCs : the US ( CSC, EDS, & IBM) . The LDCs: India ( Infosys Technologies, Tata Consultancy services and Wipro).
Call centers
Computer network support
Legal services
Pros Cons
Accounting & Procurement
Software development
A varied & Flexible Process Technology & infrastructure requirement
Research & Development
Engineering services
More responsible entire project
Network management function
REFERENCES:
www.g77.org
www.worldbank.org/depweb/beyond/beyondco/beg_09.pdf
www.deti.ie/trade/marketaccess/singlemarket/05serv277.pdf
www.ilo.org http://www.worldcat.org/wcpa/servlet/org.oclc.lac.ui.DialABookServl
et?oclcnum=256533624
www.wto.org UNCTAD wikipedia.org/ The Geography of the World Economy
