In a recent report, the World Bank has highlighted the growing importance of services in driving economic growth in the East Asia and Pacific region. The study, titled "Services Unbound: Digital Technology and Policy Reform in East Asia and Pacific," indicates that services have become a significant contributor to labor productivity growth, surpassing manufacturing over the past decade.
The research shows that services exports have been expanding at a faster rate than goods exports. Additionally, foreign direct investment (FDI) in services has increased five times more rapidly than in manufacturing across several countries, including China, Indonesia, Malaysia, the Philippines, and Thailand. The sector also employs a higher proportion of women, with this trend becoming more pronounced as economies develop.
Manuela V. Ferro, World Bank Vice President for East Asia and Pacific, stated: “East Asia is already known as a powerhouse of manufacturing. Today, new digital technologies are a source of innovation, jobs and growth.” She emphasized that governments could further enhance this growth by promoting the digitalization of small and medium-sized firms to boost productivity.
The report provides evidence that digital technologies and initial reforms are already enhancing economic performance. For instance, firms in the Philippines experienced a 1.5% annual productivity increase due to software and data analytics from 2010-2019. In Viet Nam, liberalizing transport, finance, and business services resulted in a 2.9% annual rise in value-added per worker between 2008-2016. Manufacturers utilizing these services saw their labor productivity grow by 3.1% annually.
Aaditya Matoo, Chief Economist for the World Bank in East Asia Pacific, noted: “Deeper domestic reforms and greater international cooperation on services liberalization and regulation can help countries benefit from digital technologies.” He added that such measures would create "a virtuous cycle of increased economic opportunity and enhanced human capacity to power development in the region."