Don't wait to be pushed to the wall on services [New Straits Time (Malaysia)]

(New Straits Time (Malaysia) Via Acquire Media NewsEdge) I DID a tad more shopping last month for the holidays, especially online. The experience has made me reflect on what I was consuming.

One of my recent buys was a book. But if you really thought about it, I was only able to make the transaction because I could access an online retailer, use my credit card over the Web and have the item delivered to my address.

These are all services, without which it would have been impossible for the book to get from the seller to me.

Even if I had gone to a bookstore and physically picked up a volume, most of the activities I mentioned - including an electronic payment system that works effectively, logistics to get the book from the publisher to the printer to the store, and inventory management systems that ensure the retailer has it in stock - are essential to get the book into my hands.

At the production level, too, someone had to conduct research and write it. The ink on paper that forms the book is essentially an embodiment of a service that I have outsourced to someone else. And the same is true for virtually all products that we buy.

Yet, perhaps because of their intangible quality, I tend to overlook the various services I use when buying things and how they are embodied in the products I purchase.

The intangibility of services, however, should not belie the crucial role played in making trade flow, and the significant contribution to the economy.

Quite often, the brainy part of a product, or its substantive value-added, is in the service aspect of it.

In the article I referred to in my last column, John Kay pointed out that the bulk of what you pay for when buying an iPhone "represents the return to 'designed in California'" - and not so much to "assembled in China", or the cost of parts and components.

Services also form a key part of the supply chain that allows individuals, companies and industries to deliver their output. Haven't all of us agonised over the inability to make the smallest of dents on some job because of a disruption in information technology and telecommunications Efficiency is also compromised when the services infrastructure is inadequate or outmoded. Observe, for example, how delays in the completion of Berlin's new airport have cost major airlines millions of dollars. Berlin's existing air travel infrastructure simply cannot cope with the growing passenger volume.

At the macro level, the services sector offers tremendous opportunities for employment, too. It tends to be a growing area, and/or account for a sizeable chunk of a country's gross domestic product, with more than 70 per cent in many advanced countries.

Where does this leave us policy-wise On this, I agree with Asian Development Bank chief econo-mist Rhee Changyong that making the services sector "more dynamic is essential to future growth" of the Asian region.

Of course, there are many hurdles to overcome. Skills gaps and lack of infrastructure are among those often cited.

But the services sector also tends to be a politically charged one because of interest-group capture.

Recall in the past year how India backpedalled on a planned liberalisation of its retail sector, bowing to political pressure.

After all the flip-flopping, India seems to have come around again these recent months with a raft of reform and services liberalisation measures -- opening up its retail sector, allowing foreign investment in local airlines, and outlining plans to raise the foreign shareholding limit in its insurance and pension fund sectors to 49 per cent from 26 per cent.

Prime Minister Manmohan Singh has said that these urgent steps were necessary so as to not deter investors and increase unemployment.

But it does appear as though India's hand was forced -- its senior officials have been quoted as saying that they were pushed to take action because of fears of an economic slowdown, and being downgraded by credit rating agencies.

While moves to reform and develop the services sector are steps in the right direction, they need not be as reactive for other emerging market economies and developing countries desiring to move up the value chain and diversify their production base.

Why wait to be pushed to the wall and risk your growth potential when you can nurture it Why not spread the cheer, and just make it easier and cheaper for your consumers to do their shopping for the next round of holidays this year, and for all the years to come, too (c) 2013 ProQuest Information and Learning Company; All Rights Reserved.

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