SERVICES SECTOR IN NEED OF NONCONVENTIONAL THINKING
TARIQ AHMED SAEEDI
June 4 - 10, 2012
Services sector is very important for the economy of Pakistan. Its share in gross domestic product (GDP) of the country is more than that of commodity producing and manufacturing sectors. It accounts for more than half of the country's GDP. Services sector grew at four per cent in July-Mar of current fiscal year (2011/12) as against 4.4 per cent in the same period last fiscal year, said the Pakistan economic survey. Finance and insurance showed significant expansion at 6.5 per cent, social and community services 6.8 per cent, and wholesale and retail trade 3.6 per cent, it added. As far as the other essential components of the services sector is concerned, transportation, storage and communication grew 1.3 per cent, ownership and dwellings 3.5 per cent, and public administration and defence 2.61 per cent.
Services sector gives a boost to the economic activities in the country and especially in the wake of 'major transformation in the economic structure', share of the sector rose up to 54 per cent of GDP in 2011/12, said the survey issued last week by the ministry of finance. Still the contribution of the sector in GDP is below than the average share of 75 per cent of the developed economies, it noted. It is 65 per cent in Singapore, 42 per cent in Indonesia, and services sector constitutes 52 per cent of GDP in India.
The survey said the government has acknowledged the importance of liberalized operating rights and separation of regulators from operators to improve performance of the sector, which it added, has immense potential to grow.
Contrary to the last yearís decline of 1.41 per cent, finance and insurance rebounded with impressive performance at 6.5 per cent this year because of the increasing integration of the country's financial system including state bank of Pakistan, local and foreign banks, nonbanking institutions, foreign currency dealers, stock brokers, etc. with the world economy, said the survey.
Everyone is well aware of the economic state of Pakistan. More or less, the obstacles facing the economic growth and in the way of normal progress of the economy are weighing down generally every person living in the country. Majority is hurt since masses are enduring implications of frail economic indicators including inflation, GDP, employment, balance of payments, fiscal positions, etc.
Comparing the performances of all prime economic sectors fundamental to the Pakistan's economy over last few years reveals the relatively constant upward share of services sector in GDP. Slow productivity and inefficiency are the prime causes of untapped potential of the services sector. Generally, all the economic sectors are suffering from these common problems. The government's new growth framework claims to have focussed on productivity and efficiency 'beyond brick and mortar perspective'.
Services sector is interlinked so much with the goods or manufacturing and commodity producing sectors as its separation implies end of dynamic value addition such as trading, financial intermediation, resource planning, distribution, transportation, warehousing, marketing and so forth. It has strong backward and forward linkages with commodity producing sector, manufacturing sector, construction, electricity, gas, etc.
The real potential of the services sector can fully be explored and its share in the economic building can increase through preferential development of one or few sectors on war footing. Information and communication technologies (ICTs) act like energiser for services sector. They are making the transactions faster, productive as well as cost-effective.
Developed world has realised the resources-friendliness of ICTs and therefore encouraging upfront investments in growth and promotion to ring up long-term benefits.
Economic slowdown affected the IT sector as well. However, the sector is growing. Pakistan ranks lower than other regional countries in the networked readiness index, according to the annual plan 2011/12 by the planning commission.
The government earmarked Rs3.2 billion for information technology sector in the public sector development programme (PSDP) 2010/11. The allocation was for 71 projects covering three main areas including human resource development (HRD), information technology industry development, and e-government. Only 40 per cent of the allocated funds were utilised, the document said.
It said important HRD projects completed during the last fiscal year were national ICT scholarship programme for students of rural areas, IT literacy and skill development for government employees, and pilot project for end-users and system administrators. Lands for establishing IT parks were bought in Karachi and Lahore. It was expected that IT exports would reach $270 million, it added. Further, second phases of machine-readable passport and automated fingerprint identification system were pulled off. Under e-government initiatives, online recruitment system for federal public service commission (FPSC) was launched.
Planning commission has reckoned with the generosity of ICT sector in giving out massive outputs in return of small investments. But, the conditions are innovation and creativity. There is a lot of room for improvement in quality of education system to make the country competitive at the world level.
Nonconventional training and education should be promoted to enable young entrepreneurs to take help from the ICT to transform their socioeconomic conditions.
Worldwide ecommerce is growing leaps and bounds. The last year was rather auspicious for the online retailers as it saw a 13 per cent surge in their sale to $161.5 billion, according to comScore. Fourth quarter of 2011 witnessed 14 per cent climb in online retail spending to $50 billion from $36 billion in the previous three months, it noted.
Another noteworthy development of this quarter was record-breaking free shipping. According to the world's leading digital world tracker, 52 per cent of all ecommerce transactions in three months factored in free shipping. The last record was of 49 per cent in the fourth quarter of 2010.
"Price and convenience continue to be the critical value drivers for e-commerce, and unless those conditions change we can expect to see more channel-shifting to online in 2012 and perhaps even acceleration in the current growth trend," said Gian Fulgoni, chairman comScore. "In the face of continuing uncertainty regarding the U.S. economy, consumers increasingly went online for their shopping needs."