dr dirk willem te velde – director set and head of international economic development group, odi...
TRANSCRIPT
Dr Dirk Willem te Velde – Director SET and Head of International Economic Development Group, ODI
28 / 4 / 2015
THE ROLE OF SERVICES IN ECONOMIC TRANSFORMATION
3
SETTING THE CONTEXT
• Supporting Economic Transformation (SET) is an ODI programme funded by UK DFID to support countries in their quest for economic transformation
• Economic transformation (moving resources to high-productivity activities) is essential for improving the quality of growth that is broad-based, resilient against shocks, and increased opportunities for further growth
• Economic transformation is an Africa-led agenda. There seems a lack of discussion on the role of services in economic transformation, yet for Kenya this seems a key area (incl. for Kenya’s Vision 2030).
• We have much to learn from Kenya. At the same time, Kenya can learn from other experiences (e.g. India in the area of ICT):
– How can Kenya consolidate its regional status and develop into a global services hub?
– How can Kenya ensure a maximum contribution from its services sectors for other sectors and employment creation
– What can we learn further from Kenya in terms of the role of services in economic transformation?
KENYA’S EXPORTS OF SERVICES HAS INCREASED FAST:$1.9 BILLION IN 2005; $4.9 BILLION IN 2012
SOURCE: World Bank Indicators
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
1000
2000
3000
4000
5000
6000
Kenya
Nigeria
SOURCE:
“The share of services in total trade rose from 41% in 2006 to 44% in Kenya in 2012; it is 33%
for a country at a similar level of income”
MOVING OUT OF AGRICULTURE INTO CERTAIN SERVICES CAN IMPROVE LABOUR PRODUCTIVITY IN KENYA
$1.9 billion in 2005; $4.9 billion in 2012
Source: Authors using the Africa Sector Database (http://www.rug.nl/research/ggdc/data/africa-sector-database);
0.00
0.00
24.1
548
.31
48.3
152
.39
56.4
856
.48
56.7
957
.09
57.0
963
.47
69.8
569
.85
79.7
889
.71
89.7
192
.74
95.7
695
.76
97.2
798
.78
98.7
899
.39
100.
00
100.
00
0
1
2
3
4
5
6
7
Finance and business services
Other industry
Government services
Distribution services
Manufacturing
Mining
Other non market services
Agriculture
Cumulative share of persons engaged (%)
Re
lati
ve
pro
du
cti
vit
y Labour productivity by sector in Kenya, 2010
(value added per person engaged)
SOURCE:
“Labour productivity in services is more than 3 times higher than in agriculture and 1.5 times than
in industry, but there is significant heterogeneity across
services sectors.”
AND POTENTIAL FOR PREMATURE DEINDUSTRIALISATION?
Source: World Development IndicatorsNote: all countries all years after 1990 included
Share of services in value-added (%)
Share of services in employment (%)
020
4060
80
6 7 8 9 10 11ln of GDP per capita (in 2011 international dollars)
Data after 2005
Data before 2005
20
40
60
80
6 7 8 9 10 11
Share of services in employment (pre/post 2005
(up at low income levels)
Share of services in GDP and employment
(by level of income)
Level of income
= Kenya
KENYA’S FASTEST GROWING SERVICE SECTORS ARE LEAST EMPLOYMENT INTENSIVE
Source: Statistical Abstract 2014Note: Change in GDP share (2013-2009), percentage point, and employment intensity (2009) as wage employment divided by value added.
-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%0
0.5
1
1.5
2
2.5
Financial services
Education
Information andCommunication
Wholesale trade
Accomodation
Public administration
Real estate
Transport
Professional services
Health
Changes in share in GDP (2013-2009)
Em
ploy
men
t in
tens
ity
SERVICES IN OTHER COUNTRIES ARE CATCHING UP RAPIDLY
Source: SET data analysis using EORA input-output database and World Development Indicators
Kenya Tanzania Uganda South Africa
Rwanda Ghana Nigeria India0%
5%
10%
15%
20%
25%
15%14%
12%
18%
11%
13%
16%
7%
19%18%
16%
21%
19%
12%
14%
9%2000
2011
Kenya
South Africa
Uganda
Tanzania
Rwanda
India
3040
5060
70
1960 1970 1980 1990 2000 2010
Share of services in value added, 1960-2013 Contribution of the service sectors to value addition in exports (2000 and 2011)
11
DEBATING SERVICES AND TRANSFORMATIONKEY CHALLENGES
1. Nurturing dynamic services sectors in Kenya (e.g. ICT, financial services):
a. What policy frameworks are needed for Kenya to move up a level (India: services exports 30 times higher)?
b. What is the private sector willing to do?
c. Scope for co-ordinated actions across public/private actors and ICT/financial/transport/education services
2. Improving the wider contribution of services sectors to the rest of the Kenyan economy
a. What are interactions with other sectors? E.g. lowering transport and financial intermediation costs, or improving collaborative networks.
b. What effects on jobs – targeting high vs low productivity jobs
3. Embrace service heterogeneity and avoid premature deindustrialisation and agglomeration of low productive services jobs
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The Supporting Economic Transformation (SET) is an ODI programme funded by UK DFID to support countries in their quest for economic transformation through data and policy analysis and covening. The views expressed are those of the researchers and do not necessarily represent the views of ODI or DFID.
For further information: Leah Worrall, SET programme manager