The value of service industries is often underrated at a political level according to a new report published by APEC. The report also notes that the definition of service industry has become blurred as service providers become increasingly interconnected with goods sectors in order to remain competitive.
The 2002 report on 'The New Economy in APEC: Innovations, Digital Divide and Policy,' is being presented to Ministers and Leaders from APEC's 21 member economies in Los Cabos, Mexico this week.
Dr. AHN Choong Yong, the Chair of the APEC Economic Committee, said the importance of service industries to regional economies is increasing.
"Service industries account for more than 50 per cent of combined APEC GDP," said Dr. Ahn.
The major driver of the growth in services trade has been information and communications technology.
In the modern economy services such as banking and programming can be delivered to customers anywhere in the world in a matter of seconds.
Technology is truly creating a borderless economy for many services.
However, despite the importance of service industries to regional economies, manufacturing still appears to attract most of the attention when it comes to designing tax, trade and support policies.
"While this disproportionate support away from services has not caused the sector to stagnate, it has undermined the potential contribution of the service sector the regional economy."
Dr. Ahn said one of the most serious deficiencies in evaluating the value of the services sector is the collection of data.
"Because of the diverse ways in which services are 'exported,' often not passing through customs points, figures representing trade in service industries are almost certainly under-estimates," said Dr. Ahn.
For example, an accounting firm setting up an affiliate in a foreign economy would probably be recorded as 'foreign direct investment' rather than as an export and import of accounting services.
We have noted deficiencies in the collection of data relating to the services sector when compared to the manufacturing, agriculture and resources sectors.
"One of the reasons for the inadequacies of data collection is that the traditional boundaries between services and other sectors has become blurred."
Dr. Ahn said that as competition causes businesses become increasingly interconnected, service industries are incorporating goods from other sectors to add value to their own products.
"One of the most obvious examples are service providers such as cellular telephone companies who also give away mobile phone handsets in order to sell a telephone service," said Dr. Ahn.
"These new product-service linkages may necessitate a change in the way statisticians and policymakers calculate productivity in an economy."