The recent report "Services Unbound: Digital Technologies and Policy Reform in East Asia and the Pacific" sheds light on the evolving role of services in the region's economic landscape. Over the past decade, services have increasingly contributed to economic activity and employment, now accounting for nearly half of all jobs. This sector has also surpassed manufacturing in contributing to aggregate labor productivity growth across major economies.
The report highlights that services are becoming a dynamic component of international trade and foreign direct investment (FDI) in East Asia and the Pacific (EAP). Notably, as development levels rise, the sector tends to employ more women.
A proposed framework within "Services Unbound" suggests that technological advancements and policy reforms are fostering structural changes both within and across sectors. This transformation is driving higher productivity not only in services but also in other sectors reliant on these services. Furthermore, it underscores the importance of sophisticated skills aligned with new technologies. The combination of service policy reform and technology diffusion is also enhancing education, health, and finance sectors, equipping people to capitalize on emerging opportunities.
Evidence presented includes firm-level analysis from countries like the Philippines and Viet Nam. In the Philippines, services firms possess significantly more data and software assets per worker compared to manufacturing firms. Meanwhile, Viet Nam's reduction in restrictions across various service sectors from 2008 to 2016 resulted in a notable increase in value added per worker.
Additionally, new jobs within digital services demand greater skill levels than traditional roles, as shown by microlevel evidence from Indonesia. The adoption of digital technologies coupled with educational reforms could address skill deficits and improve access quality across EAP nations.
To harness this potential fully, specific policy actions are recommended. These include pursuing liberalization alongside regulation due to existing restrictive regimes for service trade despite past reforms; collaboration between governments and private entities to build necessary infrastructure; and complementing domestic reforms with international cooperation addressing transborder market failures.
Ultimately, balanced policies that enhance endowments while shaping comparative advantage are crucial for fostering a virtuous cycle between opportunity and capacity—essential for sustainable development.