Everyone knows the vitality of a country’s service sector and its contribution to GDP – in the case of Pakistan, it’s over 58 percent – but what of a service sector’s contribution to the external sector?
Data from the SBP reveals that as of FY14, Pakistan’s service exports formed just over 2 percent of total GDP that year. Compare that now with India, where the service sector not only contributes over 67 percent to GDP, but service exports as of FY13 stood at around 8 percent of GDP. More importantly though, we import more services than we export, and our service trade balance has been consistently running a deficit.
If anything, the above figures paint a far rosier picture for Pakistan’s service trade than is the case. And the reason is the export of “Government goods and services.” This basically refers to the funding Pakistan receives from the US for fighting its war on terror.
Government goods and services have always been the largest contributor to Pakistan’s service exports. This segment has formed between 35 to 50 percent of total service exports over the past nine fiscals and is the only segment other than IT to manage a positive balance. All other segments such as insurance, education, health, construction, transport, etc. remain negative for the most part.
BR Research spoke to an official of the TDAP, who mentioned that law and order is by far the biggest problem in the country. He said that there is immense potential in IT and software to grow, but the lack of development of infrastructure, security, and facilitation on a local level make any such growth near impossible.
The promotion of Pakistan’s services sector was highlighted in Khurram Dastgir’s Strategic Trade Policy Framework (2012-2015). A Services Trade Promotion Council was proposed to be established. But with fiscal ’15 nearing its close, there has been little to no development on this front.
There is some potential for increasing the role of services as final exports. Services are a source of export diversification and a strategic source of competitiveness for Pakistan. They play a salient role as inputs into other export activities and would create employment and synergies. There is no reason that Pakistan’s service trade should maintain this enormous deficit.
Comments
Comments are closed for this article.