Transcript Globalisation of services: trade, foreign direct investment and regional development Konstanze Höchtberger

Globalisation of services:
trade, foreign direct investment
and regional development
Konstanze Höchtberger
[email protected]
25/10/2005
CISC Seminar
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Intro
• Two-way relationship between globalisation
and services - mututally reinforcing
• Interest of the paper: the globalisation of
service activities
• Approach: qualitative
• Focus of the paper: internationalisation of
ICT and ICT-enabled services
• Limit of the paper: internationalisation by
the means of trade and FDI
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Organisation
of the paper
• Modes of service delivery
• Classification system
• Nature and patterns of services trade
• FDI and international production in services
• Internationally traded services (ITS) and
regional development
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Modes of
delivery I
Basic distinction: trade vs. FDI
• Trade: service transactions between
residents of two countries, also intrfirm
• FDI: subsidiary sales different from
trade due to residency principle of
balance-of-payment accounting
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Modes of
delivery II
United Nations distinction
1. Cross-border supply: trade
2. Consumption abroad: consumer moves
abroad to obtain a service
3. Commercial presence: FDI
4. Presence of natural persons: foreign service
provider moves to consumer country on
temporary base
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Modes of
delivery III
Delivery modes of business services
Trade:
•
wired
• domestically located
•
embodied
• transhuman
•
intrafirm
FDI:
•
export delivery system
•
services production facility
•
international production unit
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Services
Offshoring
UNCTAD - services offshoring:
•
Offshore outsourcing: wired exports
•
Onsite delivery (bodyshopping): transhuman
exports
•
Captive offshoring: international production
unit
•
Nearshoring?
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Classification
system
Borga and Mann (2004)
UN (2002) ITS Manua l
Roberts (1999)
Extensions
 Embod ied exports
Export of CD -Rom or PC w ith
computer software
 Wired exports
Offsho re outsourcing*
Crossborder data processing
services by third party service
provider
Cross-border supply
ÆIntrafirm trad e of core
service
Cross-border services trade
Intrafirm exports
Ø Intrafirm trade of non-core
services
Software licensing agreements
with foreign affiliate
Delivery of shared services like
supply chain management
solutions to affiliated foreigners
Provision of IT consul tancy by
local service provider to
foreign firm
Consumption abroad
• Domestically located
exports
Presence of natural persons
± Transhuman exports
Offsho re outsourcing*
Onsite IT services by software
engineers of foreign firm
Š Export delivery system
Sales subsid iary of foreign
software firms
• Services production facility
Affiliate sales through FDI
Case study of ICT and
ICT-enabled services
Commercial presence
International production unit
Captive offshoring*
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Production of core service
activities
µ
Production of non-core
service activities
Affiliate
developing
customized IT solutions to
clients in the host country
Affiliate developing software
for export and regiona
l
headquarters
Shared services centre
Customer c all centre
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Nature of
services trade I
• Services trade lags behind trade of
manuctured goods in international
trade statistics
• Services sector most important source
for global FDI
• Paradox of services globalisation ?
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Nature of
services trade II
•
Tarif and non-tarif barriers hampering
services trade
•
Non-storability and intangibility of services
necessiates close client-supplier interaction
•
Upstream and downstream services value
incorporated into the international trade of
goods
•
Statistical measurement problems, e.g.
presence of natural persons and intrafirm
trade
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Services trade
patterns I
ICT tradability revolution: time&space compression
•
Countries with well-educated and low cost
labour pool: outsourcing of lower value service
activities from core economies - comparative
advantage
•
India as the prime case study: software coding
and testing, data-processing services
•
Ireland, India, Canada and Israel accounted for
70% of the total offshored services market in
2001
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Services trade
patterns II
•
Bulk of services trade occuring between the
triad countries, to large extent intrafirm
•
Services trade as the result of an increased
technical and social division of labour within
the manufacturing sector
•
Absolute rather than comparative advantage
determining the services trade between the
triad nations
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Services
FDI I
•
Concentrated in triad nations
•
Factors driving the growth of services FDI
•
o
Demand side factors: structural change and the
knowledge-based economy
o
Supply side factors: corporate restructuring and
externalisation of services functions
Consequence
o
Growth of multinational business services firms
o
Much of services FDI occurs in the form of repeat
investment and M&As
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Services
FDI II
Market seeking services FDI:
•
•
•
Need for close client-supplier interaction
Export delivery system/production facility
Ownership advantages
Resource-seeking services FDI:
•
•
•
Far-flung client-supplier interaction
International production units
Locational advantages (cost, capabilities and
time zone)
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Services
FDI III
Types of resource-seeking services FDI:
•
Export base to a larger foreign market region:
software localisation in Dublin for EMEA
•
Coordination and administration: regional HQ
of IT firms in Singapore
•
Integrated production units: captive offshore
centres in Ireland, India and Australia
 follow the sun
•
Captive offshoring has broad spectrum ranging
from data entry to R&D!
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ITS and regional
development I
Centralisation and decentralisation tendencies:
•
Much of high value service activties cluster in
global city regions in proximity to major
clients NY, London, Tokyo…
•
A certain set of services offshored to “newcomer” global city regions
Dublin, Bangalore, Singapore
•
New offshore locations popping up, increased
empasis on “nearshoring”
Carribean, Eastern Europe, South Africa
•
Polarization of tasks?
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ITS and regional
development II
•
Sustainability: footloose nature of stand-alone
offshore service activities - vulnerable to
relocation
•
Regions with limited access to ICT: left out
from the transformation of services
globalisation
•
Manufacturing-services continuum:
ICT manufacturing base as pathway towards
higher value, sustainable ITS activity - Ireland?
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