CUTS

South and Southeast Asia Forum: The Services Sector, COVID-19, and Digitalization

The fifth regular informal South and South-East Asia Forum meeting of the project “Business & Trade Connexion” – being undertaken with funding support from AustralianAid – took place virtually on a Zoom platform (due to related-COVID19 restrictions) on Friday 21st of January 2022.

 

The meeting started with some introductory remarks by Rashid S. Kaukab, CUTS International Geneva, Executive Director who welcomed the delegates, thanked them for their participation despite their busy schedules, and briefly outlined the main objectives of the meeting. He opened the floor to delegates to share their views on their priorities for the WTO this year. Delegates mentioned food security and agriculture, MC12 organization (format and timing still remain uncertain), COVID19 impacts (including on supply chains) and immediate responses, LDC graduation related issues, effective implementation of SSM, functional dispute settlement mechanism… keeping in mind LLDCs priorities in all domains.

Kyle de Klerk, Fellow, CUTS International Geneva presented a summary of the main findings of the note “The Services Sector, COVID-19, and Digitalization: Implications for Select South & South-East Asian Countries”. First, Kyle provided a brief overview of general trends of services sectors with examples from specific countries. Services contribute an average of 51.4% of GDP, and is the largest sector of SSEA countries covered under the project. Smallest contribution is in Cambodia where it is worth 38.6% of GDP, and largest in Sri Lanka where it contributes 63.3% of GDP. Other than GDP, services are also extremely important source of employment. Most recent data available shows that sector generally contracted in 2020 as a result of COVID-19 containment measures. Sector contracted an average of 3.5% other than in Bangladesh and Vietnam, where it grew by 5.2% and 0.9% respectively. Centrality of tourism for many concerned countries cannot be overstated. Particularly for Sri Lanka, Nepal, Lao, and Cambodia, where tourism contributes an average of around 70% to total services exports. Unfortunately, the tourism sector was decimated by COVID-19. Tourism arrivals in 2020 declined by around 80% and the sector lost half of its value; causing services trade deficits to widen substantially.

Then, he described recent changes to the services economy in light of the impact of COVID-19. COVID19 has accelerated the adoption and proliferation of digital services as physical service supply became impossible due to various lockdown measures and travel restrictions. Within Pakistan, 42% of services businesses reported an at-least partial transition to online platforms, while in Vietnam public E-service provision increased by 10-fold. Overall, it is estimated that COVID-19 has accelerated the digitalisation of services in Asia and the Pacific by around10 years. This growth in digital services has been fuelled by the rise of what has been termed the ‘platform economy’. However, for benefits to occur in this new economy requires that the population has access to and utilises the internet. This requires the provision of physical ICT infrastructure, something which is a major constraint to digital services development for many SS&EA countries. Cambodia and Vietnam are the only countries in this note where more than 60% of the population uses the internet. Average of 25% of population uses the internet for other countries, with clear implications for development of digital services sector. Finally, Kyle highlighted some actions which delegates can take at WTO towards overcoming these constraints and developing their domestic services sectors. First, recently ratified domestic services regulation plurilateral offers opportunity for delegates to examine its future impact, as none of the countries in this forum are signatories. Delegates could study the agreement and evaluate its impact on key services exports for similar economies. They could also monitor how implementing countries integrate agreement into their GATS schedules to ascertain what best practices may be implemented at the domestic level without joining the plurilateral. Second, ongoing E-commerce JSI negotiations could be monitored to forecast what potential impact its ratification by other members may have on domestic services, particularly relating to market access for domestic digital services exports of S&SEA countries.

The floor was then opened for discussion and feedback from participating delegates. Delegates wished a happy and healthy new year to all participants. They thanked Kyle for an elaborative and useful note as well as presentation. It was made clear that tourism sector has been badly impacted by the pandemic with substantial of economic losses. However, some services sectors seem to be recovering better than others. There is hope with the vaccination, that countries will be able to receive more tourists in the months to come. It was also mentioned that at the core of tourism is physical movement, which means that services to actually take place need physical movement. It also depends on external factors: country of origin COVID requirements + travel ease. How international cooperation may support those two factors should be explored at the multilateral level. One of the main challenges mentioned by the delegates wasthe digital divide between rural and urban areas. There is also the challenge presented by big platforms entering national markets’ actors, coupled with lack of modernized communication systems, and difficult access to Internet, which made the rise of national actors against global competitors almost impossible. Governments need to put in place competition and taxation rules to benefit from this digitalization in any case. Some important questions should be resolved: In that platform economy how LLDCs can benefit? How to ensure fair competition by those platforms? Need to have propre regulation and resolve the Issue of trust in e commerce and platforms (consumers rights for instance).

Another issue concerns the personal data consolidation, especially with tracking of COVID cases for instance. Large numbers of data are being collected, but there is uncertainty about how to convert the data and protect it. This could be discussed to analyse the impacts. They could also look at the GDPR experience of the EU.

Delegates also discussed a lack of data and study on the risks and benefits of joining the E-commerce JSI and emphasised the need for deep and comprehensive national studies in this regard. How to move to industry 4.0 taking into account digitalization and COVID, and policy actions to support how trade in services can be more digitalized were topics that were also brought up in the discussions.

In the WTO functioning there is a multilateral work programme on e-commerce, which is not mentioned in the paper by CUTS clearly enough for some participants. There is a need to work at multilateral level to revive the work programme on e-commerce and make it more effective to bridge the digital divide in the current context.

In conclusion, Rashid S. Kaukab thanked the delegates for their participation and positive feedback, and expressed his appreciation at their continued collaboration. He informed participants that the next meeting will probably be organized in early March, and more information will be communicated soon on that regard. In the meanwhile, CUTS Geneva staff will remain in touch with them bilaterally.

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