Services offer a fast and reliable path to economic development
Live MintFor developing countries around the world, especially the poorest, the economic terrain has seldom been so slippery. Among those seizing the opportunities offered by trade in services, the most striking examples come from the home of the ‘Asian miracle.’ While the textbook manufacturing-led model of economic growth once worked wonders in East Asia, these countries’ circumstances and needs have changed. Over the past decade, our research shows, the share of services grew from 44% of economic activity in China to 53%, and from 44% to 48% in other economies across East Asia. Opening services to competition has fuelled higher labour productivity even in manufacturing and agriculture, where firms can check prices, deliver goods and receive payments much more efficiently. Across all major economies in East Asia and the Pacific, services now contribute more than manufacturing to overall labour-productivity growth, an essential condition for higher wages.
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