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Services Trade for Growth: Challenges and Opportunities for Developing Countries

Services Trade for Growth: Challenges and Opportunities for Developing Countries. Iza Lejarraga Trade Policy Linkages and Services Division Trade and Agriculture Directorate. Harnessing Services for Sustainable Development: Opportunities and Challenges for Jordan

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Services Trade for Growth: Challenges and Opportunities for Developing Countries

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  1. Services Trade for Growth:Challenges and Opportunities for Developing Countries Iza Lejarraga Trade Policy Linkages and Services Division Trade and Agriculture Directorate Harnessing Services for Sustainable Development: Opportunities and Challenges for Jordan Jordan Enterprise Development Corporation Amman, 21-22 September, 2010

  2. Overview • Open Services Markets: What are the opportunities? • Liberalizing Services: What are the challenges? • Embedding Services Reform in a Growth Strategy • Measuring & Monitoring Services Reform: STRIs

  3. What are the opportunities?

  4. What are the challenges?

  5. Embedding services reform in growth strategy • Services liberalization is a means to an end: linking it to growth • Economic growth is necessary for development • Services reforms worth pursuing should be linked to growth/societal objective • Getting the largest bang for the buck of regulatory reform • Targeting sectors that have highest impact: binding constraints • Assess where are the binding constraints to growth at any particular time • Liberalize selectively those sectors that relax the binding constraints to growth • If access to capital is not binding the economy, liberalizing financial services won’t yield a significant effect on growth until the binding constraint is relaxed • A framework for prioritization: Growth Diagnostics • Analytical tool to prioritize and rank interventions according to growth impact • Intuitive, accessible, practical: helps dialogue and coordination

  6. What reforms target constraints to entrepreneurship? Problem: Low levels of private investment and entrepreneurship Low return to economic activity High cost of finance Low domestic savings + bad international finance bad local finance Low social returns Low appropriability government failures market failures Low competition information externalities: “self-discovery” coordination externalities poor geography bad infra-structure micro risks: property rights, corruption, taxes macro risks: financial, monetary, fiscal instability High risk High cost low human capital

  7. Measuring Services Reforms: STRIs • What is a Services Trade Restrictiveness Index (STRI)? • A composite indicator of services trade restrictiveness by sector and country • Not a measure of economic performance or commercial attractiveness • How is it developed? • Collects qualitative information on barriers to trade in services • Translates qualitative data into aggregated quantitative scores by sector • Classifies barriers by mode, MA/NT/DR, discriminatory, entry/ongoing operations • How can it be useful? • Helps assess the impact of services trade barriers in the economy • Enables comparison of restrictions across countries at the sectoral level • Facilitates bilateral and multilateral negotiations on trade in services • Catalyzes domestic political bargaining on services regulatory reforms

  8. OECD Method for Constructing STRIs

  9. STRIs in MENA: Where does Jordan stand • STRIs: Selected MENA countries (2007) • Countries: Egypt, Jordan, Lebanon, Morocco • Sectors: financial (banking & insurance), telecoms, transport (air & maritime) • Data: questionnaires and country studies; de jure and de facto (implementation) • Method: aggregate (Anderson & Neary 1994) and modal (Dihel & Shepherd 2007) • Results: No country ranks most open/restrictive across all sectors • Jordan has relatively lower STRIs, except for insurance where it has many restrictions • Lebanon registers highest liberalization in banking (via mode 3; high protection mode 4) • Morocco has liberalized telecoms, banking, air transport (high barriers in maritime) • Egypt’s insurance and telecoms sectors are most liberalized; air most protected

  10. STRIs: Scores for Banking and Insurance Sectors STRI Scores for Banking Sector STRI Scores for Insurance Sector

  11. STRIs: Scores for Telecommunications (Fixed and Mobile) STRI Scores for Fixed Telecoms Sector STRI Scores for Mobile Telecoms Sector

  12. STRIs: Scores for Transport Sectors (Maritime & Air) STRI Scores for Maritime Transport Sector STRI Scores for Air Transport Sector

  13. OECD Trade and Agriculture Thank you for your attention! Contact: iza.lejarraga@oecd.org www.oecd.org

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