Services Reform Strategies for Developing Countries Christopher Findlay

Services Reform Strategies for Developing Countries Christopher Findlay March 14 2002

Plan n Goal – comment on reform strategies in service sector n Strategy – Use a case study of a particular sector to illustrate some key issues < Focus is on logistics

Logistics Defined Supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements. --- Council of Logistics Management (CLM), 1998

Logistics Service Sector: Options n Components – Traditional service: transport, storage and warehousing, forwarding – Integrated service: 3 PL – Value-added service: customization and others

Logistics n So coverage is – – Transport all modes Storage Forwarding Coordination < ie 3 PL, aggregate of above

1. How to make commitments? n GATS – covers components but not the aggregate < so n how to schedule commitments Distribution and logistics – Overlaps: defined in service sector – Relationships: distribution channel decide logistics channel < eg e-commerce

Background: Impediments can be significant n Significant barriers to trade and investment in services < eg logistics: rights to establish, rules on operations, geographic coverage, scope of business (export or domestic), etc – see Dee and Duc paper for examples < including n distribution Tendency to be higher in developing economies

2. Gains are large from reform n Some examples – air transport deregulation – logistics, eg in China, in Europe – Australian experience in transport < see n Dee and Duc Themes – costs, prices, service mix, service quality – substantial real gains not just transfers

3. Intersectoral effects interesting n Service sectors are big consumers of other services – removing impediments cuts some antiexport biases < in services – logistics itself – back-office functions < as well as goods – eg exports of fresh fruit and vegetables – e-commerce for local products

4. Value of policy transparency n Impediments hard to characterise – eg the effect of a licensing scheme – Dee and Duc show it can be done n Value in transparency – building coalitions < costs of current policy < track gains from reform < getting linkages worked out – setting priorities

5. Risks in partial reform n Partial reform – does it really control outcomes? < and n provide service reliability? Costs – in terms of delay of benefits – reform can stall < as new interests are created – including foreigners

6. Risks in a preferential approach n n n Interest in services is a driver of preferential strategy Discrimination is possible Same risks of stalling reform

7. Competition policy matters n Issues include – access to infrastructure – response by incumbents in the transport sector n So questions of – design of access regimes – rules on use of market power – design of regulatory system

8. Levels of government are a challenge n n GATS commitments made at national level Implementation requires local support – eg logistics which requires a national network – local protectionism can be a problem < and n possibly a source of dispute Strategy for local leaders

9. USOs and CSOs: what and how? n Market may not supply communities regarded as “marginal” – what options? < service quality – technological choices < funding – eg cross subsidies vs general tax based < alternatives – eg ‘cash out’, move house!

10. Risks in a sectoral isolation, eg air transport n n Air transport is an mfn exemption Only partial coverage due to ‘the annex’ – Yet air transport is a key component of a modern logistics sector n Options – Wider coverage of the annex? < eg cargo – Others to be defined