What do call centers in Kenya, accounting companies in Sri Lanka, and human resources firms in Abu Dhabi have in common? From the surface, perhaps not much; but from an international trade perspective, these and other industries represent a fundamental change in how countries are doing business.
In the past, services such as customer service, IT, and accounting were viewed merely as inputs into the production of goods; today, these and other services have become exports for direct consumption, accounting for approximately 70 percent of global GDP. Why? Innovations in information and communication technology, paired with rapid global developments in the three Ts -- technology, transportability, and tradability -- have created a new channel of growth.
From call centers to medical records transcription to IT support, trade in services is becoming more sophisticated -- that is, exported services are increasingly moving up the value chain. According to the authors of the World Bank's Economic Premise edition of the week, "Sophistication in Service Exports and Economic Growth," increasing service export productivity can have a profound developmental impact. To be sure, developing countries are becoming increasingly big players in the service export sector, where total service exports nearly tripled between 1997 and 2007.
As argued by the authors, the rapid growth of service sectors in places like India and Sri Lanka "challenges the conventional notion that industrialization is the only plausible route to rapid economic development." Comparing increasing levels of service sophistication with levels of growth, the authors conclude, "Service exports and an increase in their sophistication may be an additional channel of sustained high growth."
So next time you troubleshoot your computer with an IT representative in Chennai, or make an inquiry with your Bank's customer service department in Manila, remember that these services are helping to underpin economic growth in countries around the world.
This blog was originally posted on the World Bank Institute Growth and Crisis website.