Digital services trade offers opportunities post-pandemic

The opportunities for developing economies in Asia and the Pacific to take part in digital services trade are promising especially after the pandemic, thus the need for all economies to adopt policies and programs to boost the region’s export growth prospects, according to a report by the Asian Development Bank (ADB).

“In the post-pandemic period, the opportunities are likely to intensify as consumers and producers continue to embrace online purchasing, digital transactions, and remote delivery of services.

These long-term shifts in behavior, production structure, and labor market needs offer all economies new opportunities to develop competitive advantages in digital services sectors,” said the Asian Economic Integration Report 2022.

The report said that with the bulk of digital services trade currently taking place in telecommunications, computer, and information services –as well as professional and other business services, liberalizing restrictions in these services sectors is important for driving the region’s export growth prospects.

However, the potential for digital services exports ultimately extends across all services sectors with growth already being experienced during the pandemic in health and education services as well as audiovisual and animation services, it said.

The report cited economic case studies highlighting the scope for digital services trade to facilitate the integration of economies into global and regional markets and to lessen the divide among them.

“Bilateral and regional agreements need to focus more on creating enabling conditions for digital services trade in their chapters and provisions on economic and regulatory cooperation, e-commerce, investment, and mobility of persons, as well as in their mode 1 commitments, including in sectors such as financial services,” it added.

The ADB report said there is scope to pursue cultivating digital services export markets as the range of tradable digital services grows.

“Niche export opportunities are on offer for a wide spectrum of economies that differ in their mix of endowments and conditions. The ability to tap digital services export opportunities depends on the capacity to leverage specific strengths and conditions, including in partnership between government and industry,” it said.

To keep pace with emerging needs in digital services sectors, the report said governments need to invest in information and communications technology (ICT) infrastructure and specialized skills and update their regulatory regimes for the digital economy, including to nurture an enabling environment for businesses to have ready access to the crossborder digital services trade.

It added even if economies fall short in some areas of digital readiness, they can still be successful digital services exporters if they leverage their strengths, including first mover advantage in information technology-business process outsourcing (IT-BPO) services, and fast-growing domestic demand for digital applications and solutions to develop digital services export.

“Economies can convert disadvantages, such as geographic remoteness and a small domestic market into an opportunity, by targeting niche markets and industry segments and serving as an experimentation ground,” the report said.

To foster the development of digital trade in services, it underscored the importance of deeper commitments and expanded coverage of relevant provisions in regional trade agreements (RTAs).

“In particular, developing Asia will need to strengthen such provisions, focusing on enabling business opportunities and consumer protection. Economy efforts could also be supplemented by mutual recognition agreements on services, which so far have been forged mainly among developed economies,” it added.

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