(World Bank) - Services Trade Overview: Services and trade-in-services have an important role in economic diversification
. Services are essential intermediate inputs and have the potential to enhance productivity and increase technology and skills transfers through significant positive spillover effects throughout the economy. Services sectors can help Sudan diversify its economy and reduce poverty. For example, while the agricultural sector is viewed as an important engine of growth, it has remained far below its potential and the country has stayed a net importer of agricultural products.
The productivity of farms will have to improve to increase agriculture production. That means better transport infrastructure, agricultural technology, and support services including financing.
Sudan’s economy faces numerous challenges that hamper the development of the services sector. While services such as transport and logistics, financial services, or energy are addressed in the context of various World Bank or other development partner projects, higher-value knowledge intensive services such as business services remain largely neglected.
Weak regulatory frameworks characterize most business services sectors. While regulatory self-assessments by ministries and regulators seem to suggest that the frameworks in place are adequate, the private sector points to numerous regulatory weaknesses. Also, stakeholders from both the public and the private sectors mentioned the absence of adequate regulations and standards. There seems to be a strong interest in developing the necessary regulatory framework using “good practice” from
the region or elsewhere as guidance. Additional constraints in business services sectors are skills shortages and mismatches.
This section focuses on professional services, a set of higher-value knowledge-intensive services sectors that are characterized by high
regulatory intensity and are crucial for skills generation, which in turn are essential for diversifying the human capital endowment of a country. A diagnostic of professional services markets in Sudan based on a recent World Bank Survey on Professional Services highlights the demand and the constraints to the provision of adequate professionalservices in Sudan. The section shows the importance of both exports and imports of high-value added, sophisticated services and professional skills for export diversification and increased competitiveness. The chapter also illustrates how regulatory and trade policy reforms can be coordinated as part of regional and multilateral negotiations. Policy recommendations call for action in four areas: education, regulation of professional services, trade policy, and labor mobility at both the national and international level.
There is also potential for Sudan to develop its Tourism sector based on its rich history, but there are also great challenges. From the analysis, which was originally carried out for the DTIS Update in 2014, it is clear that developing the tourism sector is a long-term endeavor that is closely linked to the country image of Sudan and the fact that sanctions imposed on Sudan prevent tourism technology to facilitate the sector’s development.
Sudan’s share of services Value Added (VA) in GDP is lower than expected for a country at its level of development. A comparative assessment of the share of services VA in GDP for Sudan and
selected Sub-Saharan African countries reveals that Sudan’s falls below the fitted curve in 2000–2 and 2010–12, implying a smaller services sector than expected for the country’s level of development.
Services export growth remains below that of goods exports and GDP growth. Sudan stands in stark contrast with most neighboring countries regarding growth of services exports compared to that of goods exports and GDP. While most Sub-Saharan African countries register more dynamic growth rates for services as compared to goods exports or GDP growth, Sudan’s services exports performance remains below potential.
Sudan registers more dynamic growth rates for other commercial services exports than for exports of travel or transport services, a fact that suggests the existence of some modern services.
This suggests that some modern, high-value-added services sectors already contribute to export diversification and provide new opportunities for export development. Indeed, a recent survey of providers of professional services carried out by the World Bank shows that about one-third of respondents in Sudan reported exports of services in 2011 (19 out of 60), a higher proportion than in most COMESA countries (15.7 percent at the COMESA level). These exports of professional services concerned, for the most part, regional clients, and represented on average a third of exporters’ total revenue. This suggests that there is potential to develop Sudan’s services exports provided an appropriate trade policy and regulatory framework are put in place and obstacles faced by professionals are lifted domestically and at the regional level.
Sudan’s services imports are undiversified. Imports of services can drive Sudan’s competitiveness. Imports of intermediate inputs such as transport services, construction, insurance, and other business services can improve the productivity of manufacturing and services firms. Also, services can help address shortages in crucial sectors of the economy. For example, imports of professionals help alleviate Sudan’s skills shortages in healthcare, education, or professional services. However, at this stage Sudan’s services imports are for the most part comprised of transport and travel services (Figure 4.5.4). Sudan’s access to competitive services from which to draw high quality services inputs is inadequate. Poor access to such critical services translates into a competitive disadvantage in any sector, be it services, manufacturing or agriculture. The fragmentation (by restrictive regulatory policies and regulatory heterogeneity) of
regional markets for these services prevents Sudan from fully benefiting from the potential gains from greater trade-in-services. Again, regional cooperation to facilitate the movement of various professionals could help address skills shortages or gaps in relevant sectors.
Ensuring efficient access to a wide range of services is a key determinant in international competitiveness and efficiency. This chapter identifies the constraints to the development of professional services, showing how inadequate domestic regulations in conjunction with a lack of regional cooperation holds back the development of the national markets for services, and creates skills shortages and skills mismatches, all of which have negative implications for competitiveness and limit exports.
Professional services matter for Sudan’s growth
Professional services contribute directly and indirectly to economic growth, including lowering transactions costs and creating spillover
effects of knowledge to other sectors. For example, engineering and IT services are knowledge intensive sectors essential to the productivity and sustainability of other economic activities, including the oil sector. Civil engineering is critical for the development and maintenance of a country’s physical infrastructure, while electrical engineering is important to the operation of public networks such as utilities or commercial facilities and communication systems (Cattaneo et al. 2010).
IT-based services including application services (such as application development and maintenance, system integration, IT infrastructure services, and IT consulting), or IT engineering services (such as
manufacturing, engineering, and software product development) also have an important impact on productivity and growth. Accountancy is critical for accountability, sound financial management, and good corporate governance (Trolliet et al. 2003).
Users of professional services in Sudan are more productive than non-users. Data from the World Bank Survey of Users of Professional Services in Sudan show that firms that use accounting services—whether externally outsourced or provided in-house—have higher average labor productivity than firms without such professional services linkages . Also, the labor productivity gap between users and non-users of accounting services is higher in Sudan as compared to the COMESA average.