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Are services tradable?

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Added 31st July 2017 11:27 AM

The services sector is composed of both formal and informal players, with over 70% operating informally

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The services sector is composed of both formal and informal players, with over 70% operating informally

By Amelia Kyambadde

A service is an intangible transaction between the consumer and the provider.

It is a vital source of income and employment to our economies and in some countries, over two thirds of the workforce is engaged in the service sector.

In Uganda, over the last five years, services have been the leading contributor to the national gross domestic product (GDP) and fastest growing sector. Currently, the services sector contributes 48.7% of GDP with an annual growth rate of 6.5% (UBOS 2016), and is predicted to be at 58% by 2040 (Vision 2040).

The services sector is composed of both formal and informal players, with over 70% operating informally.

These include distribution of retail and wholesale goods, tourism services such as hotels, bars and restaurants, massage and gym, tourist guides, travel agencies and tour operators, financial services such as banking, mobile and telecom banking and insurance, recreation services such as museums and entertainment industry, transport services such as air transport, cargo and marine handling services, car rental services such as UBER, Friendship taxis, health services such as hospitals and social services, computer related services such as internet cafés and business process outsourcing, environmental services such as garbage collection and sewage services, professional services for consultants such as engineers, lawyers, accountants, auditors, doctors, teachers, chefs and others, agribusiness services, communication services such as postal, courier and telecommunication, education services for higher learning, primary, secondary and vocational.

Services are becoming more tradable in their own right and the increase in digital technology is making it easier to export them.

For instance, Uganda has positioned herself as a trade hub for higher learning providing both face to face and online education services.

Uganda has continued to supply quality higher learning education to the African continent and beyond with Ugandan institutions enrolling foreign students from neighbouring countries and beyond.

Uganda’s exports of education related services according to available statistics were $30.2m in 2013 mainly exported to the region (Kenya, South Sudan, Rwanda, Tanzania and Burundi).

The influx of South Sudanese in Uganda recently has seen more of them enrolling for pre-primary and primary education in Ugandan schools. Empirical analysis of the educational sector in Uganda reveals a growing trend of foreign student subscription at kindergarten/primary, secondary and tertiary levels.

Another example is in the health sector where Ugandans are accessing specialised health care services for complex ailments via telemedicine.

In this case, a Ugandan patient does not have to travel long distances within or abroad for health services, but instead, would get treatment at home using telecommunication and information technologies. For instance, on March 3, 2014 a team of doctors based in Kampala led by Dr. John Bwanika administered treatment to patients at Nadunget Health Centre in Karamoja using skype.

Despite the 6.5% growth in the services sector, there are a number of gaps in policy and regulatory frameworks that have rendered service provision suboptimal.

For example, the logistics and distribution services are currently unregulated to better support the sector players, leaving a heavy burden on growth and development of quality and delivery of services in Uganda. Such policy gaps required the Government of Uganda through the Ministry of Trade, Industry and Cooperatives (MTIC) to develop a coherent national policy on services trade which was recently approved by Cabinet for implementation to ensure competitiveness in the services sector.

The policy will positively impact on different sector groups in the following areas:

1- improved quality and quantity of services;

2- enhanced competitiveness of the services industry;

3- regulate market order;

4- Safeguard the legitimate rights and interests of entities in business activities;

5- foster formalisation of businesses;

6- increase the share of services exports;

7- support mutual recognition agreements for professional in the EAC and COMESA regions;

8- stabilise negative changes in GDP by addressing export shocks with services exports,

9- increase household incomes by creating and diversifying employment by the services industry.

In conclusion, in order for the country to benefit from this policy, there is need to review and reform the institutional and regulatory framework, promote domestic capacities, deepen regional integration and mainstream services trade in national planning.

Writer is the Minister of Trade, Industry and Cooperatives

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