What has the Services Sector taught the Pacific Alliance during the Pandemic?

 Non-traditional services and knowledge-based services have taught positive lessons to PA governments and businesses alike during the 2020 pandemic. Notwithstanding the tremendous hit that traditional services — tourism, hospitality, passenger transport, and travel — have experienced due to the government measures to stop the spread of COVID-19.

Similarly to the 2008 GFC, knowledge-based services have proved their resilience and ability to adjust to the new environment during the pandemic.

Services sectors in the PA countries have been vital in supporting government measures on mobility restrictions, social distancing and the closure of non-essential shops. While telemedicine, IT services, and the use of big data have helped PA countries in the management of health and sanitary risks, telecommunication services have been the backbone to support work-from-home (WFM) not only for businesses but also for government institutions.

The dynamism and productivity of the knowledge-based services sectors not only continues but in some industries such as call centres and other BPO services increased during the COVID-19 lock-down. New business models have either emerged or sped up their evolution, thanks to the mandatory use of digital platforms to operate. An example of these changes is the increase in the microsourcing of education, professional, and personal training services through digitalisation, despite persistent challenges for Internet access and capabilities. Demand for audiovisual contents, animation services, entertainment and online gaming services, and digital services in support of e-commerce —shopping carts, online catalogues, electronic payment platforms etc — increased in the last five months.

In this regional context, the lack of a regional policy to promote knowledge-based services trade and investment has become more apparent.

The services sector is crying for a regional policy and strategies within the PA that could contribute to delivering results on the goals set in the Pacific Alliance 2030 Vision.  Doubling and consolidating intra-regional services exports demand more robust and long-term regional strategies that are non-existent today.

Although PA countries have progressed in gaining a better understanding of services industries, these national efforts have not been translated into sustained regional policies for these sectors. These strategies could start by improving statistics on intra-regional trade in services towards better policy design tailoring appropriate government interventions. Accurate statistics in services are a challenge not only for the PA but to the global services trade. The strategies need to address cross-cutting themes such as building regional pools of human talent, regional access to financial resources for services industries and programs on entrepreneurial development that attend to the specificities of services industries. Addressing regulatory hurdles with a regional focus would also be part of a comprehensive regional policy to deliver on the goals set in the 2030 Vision in respect to services trade and investment. This regional policy should acknowledge the post-COVID economic and labour environment with strategies to encourage the upskilling and reskilling of affected workers to direct them towards those services industries that could boost recovery. Remote/online supply of services has also made it possible for services industries to benefit from broader sub-provincial pools of qualified employees in secondary and tertiary cities. The PA could capitalise from what national sub-provinces have to offer.

How the PA as a whole will be able to actively build on the opportunities that relocation and nearshoring trends offer to services industries is yet to be seen. However, it is clear that the PA needs to prioritise the services sector in its forthcoming agenda in the path towards economic recovery. Strengthening of backbone services to support the supply of other services has become more pressing if the PA is to benefit from the profound and long-term shift towards online services.

Photocredits: Photo by ConvertKit on Unsplash
Sources: IDB_INTAL; WTO, McKinsey; Dinero ; ProColombia ; Gestion