TRADE, SERVICES AND DEVELOPMENT€¦ · productive capacity in a country? Cont’d What is the...
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UNCTAD Multi-year Expert Meeting on TRADE, SERVICES AND DEVELOPMENT Enhancing productive capacity through services Geneva, 1–2 May 2019 The relationship between services and productive capacity; The “Servicification” of manufacturing by Mr. Murat A. Yülek Rector of Ostim Technical University Turkey The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
Transcript of TRADE, SERVICES AND DEVELOPMENT€¦ · productive capacity in a country? Cont’d What is the...
UNCTAD Multi-year Expert Meeting on
TRADE, SERVICES AND DEVELOPMENTEnhancing productive capacity through services
Geneva, 1–2 May 2019
The relationship between services and productive capacity; The “Servicification” of manufacturing
by
Mr. Murat A. YülekRector of Ostim Technical University
Turkey
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
The relationship between services and productive capacity:
The «Servicification» of Manufacturing
Murat Yulek
OSTIM Technical University
UNCTAD MULTI-YEAR EXPERT MEETING ON TRADE, SERVICES AND DEVELOPMENT
1–2 May 2019Palais des Nations, Geneva
The main source for slides:
Summary
The relationship between services and productive capacity
What is the relationship between services and productive capacity in a country? Is there a linkage between actual services development and enhancement of productive capacity?
How can services support building key industrial capabilities, including the creative industry?
How can services help SMEs enhance productive capacity? What could be done by governments to support SMEs?
Background: Services vs industry
Sectoral Employment in the USA
Services: the hotbed of employment
Manufacturing: the hotbed of innovation and productivity
Source: BLS
Productivity in non-farm services and manufacturing sectors in the USA
Source: Bureau of Labor Statistics https://www.bls.gov/lpc/prodybar.htm
Services sector Manufacturing sector
1990-2000 2.2 4.1
2000-2007 2.6 4.7
2007-2016 1.1 1.7*
*2007-2015
Background: Services vs industry
Services: the hotbed of employment
Manufacturing: the hot bed of innovation and productivity
Employment (million)
Output ($ thousand)
Output/employee ($ thousand)
Manufacturing 12.4 2,170 175.60
Services 101.3 12,293 121.41
Agriculture 6.9 175 25.23
Government 22.1 2,338 105.80
Mining 0.7 328 441.18
Construction 6.6 732 110.46
Total 150.0 18,037 120.22
Employment and output by major sectors in the USA (2015)
Source: Bureau of Economic Analysis, Bureau of Labour Statistics and the author’s calculations
Background: What did Kaldor say?
The second law of Kaldor: Productivity drives the growth of themanufacturing sector (also known asVerdoorn’s law)The third law of Kaldor: Productivity of the non-manufacturing sectoris positively related to the growth of the manufacturing sector.The first law of Kaldor: The manufacturing sector is the engine of GDPgrowth.
Background: World tradeprimarilyconsists of manufactures * Excluding intro - EU exports
Source: WTO (World Trade Statistical Review 2017)
Value ($ billion) %
Merchandise 15,464 76
of which manufactured goods 11,289 55
Services 4,808 24
Total world exports 20,272 100
Composition of world exports (2015)
Background: Patterns of industrialization, de-industrialization and premature de-industrialization But why?
35
15
Korea/Germany
India
USA
%
Years
Background: The paradox of manufacturing?
Manufacturing and total employment in the USA
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Total employment Manufacturing employment Share of manufacturing in total (%)
Background: The paradox of manufacturing? No paradox
Manufacturing employment vs manufacturing value-added in the USA
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Total value added (left axis) Employment (right axis)
Background: The paradox of manufacturing?
Manufacturing and total employment in the USA
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Total employment Manufacturing employment Share of manufacturing in total (%)
Background: Industry multipliers (USA, 2012)
Source: U.S. Bureau of Economic Analysis, Annual Input-Output Tables, Manufacturing Institute
$1.33000
$1.11000
$1.000
$.86000
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$.66000
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$.000 $.4000 $.8000 $1.2000 $1.6000
Manufacturing
Agriculture, forestry, fishing and hunting
Transportation and warehousing
Construction
Art, entertainment and recreation
Information
Education, health and social assistance
Retail
Other services (excluding government)
Professional and commercial services
Change in the total output in response to a one-dollar change in final demand for the product of the sector
Background: What is industrialization?
• Many factories = industrialization?• Ecological degradation?• …
Industrialization = A capacity building process• Capacity of the industrial layer (not only industrial firms)• Policy (state) capacity
Background: Stages of industrialization, skills and technical progress
Stage IImport and Use Machinery
Stage II Technology Adoption (Better Use of Machinery)
Stage II Technology Adoption(Servicing and Repairing Skills)
Stage IIIImitation
Stage IV Innovation
Stages of Industrialization
SkillRequirements
High
Low
Technical Progress
Background: The Industrial Layer
Background: Industrial Layer is affected by policies and regulations
Industrial Finance
Industrial Managers and Workers
Industrial Firms and
Entrepreneurs
Labor Force
SavingsEntrepreneurial Pool
Financial Institutions
Represents policies and regulations
On the relationship between services and productive capacity in a country?
What is the relationship between services and productivecapacity in a country? Is there a linkage between actual servicesdevelopment and enhancement of productive capacity?
A lot of services are directly linked to productive capacity and manufacturing:
Finance
Transportation
Professional services
Domestic and international trading
Education and training
R&D
…
On the relationship between services and productive capacity in a country?
What is the relationship between services and productivecapacity in a country? Is there a linkage between actual servicesdevelopment and enhancement of productive capacity?
Thus there is a direct link between those services and productivecapacity
Efficiency gains
Market access
Access to finance
Access to skilled manpower
Access to strategic and related (e.g. legal) services
On the relationship between services and productive capacity in a country? Cont’d
What is the relationship between services and productivecapacity in a country? Is there a linkage between actual servicesdevelopment and enhancement of productive capacity?
Thus, development of services sector has direct & positiveimplications on the productive capacity.
However, a more important link has emerged between the two through the process of «servicification of manufacturing»
Smile curve = servicification of manufacturing
The Smile Curve
Smile curve = servicification of manufacturing
Does all manufacturing always make money?
The Smile Curve
Services and key industrial capabilities
How can services support building key industrial capabilities, including the creative industry?
• Services is now a highly integrated part of manufacturing.
• So development of services (especially creative industries – design,branding, …) will support industrial capabilities
Components of industrial capacity
Superstructure (buildings, machinery etc)
Physical infrastructure
Ph
ysi
cal
cap
aci
tyIndividual and institutonal
learning outcomes
Educational system, Institutions
Hu
ma
n a
nd
inst
itu
ton
al
cap
aci
ty
Services and key industrial capabilities
How can services help SMEs enhance productive capacity? What could be done by governments to support SMEs?
• SMEs are at a disadvantaged in many respects• Access to resources• Small production scale• Access to finance• Unproportinate damage from bad business environment
• Governments provide a lot of tools and programs to support SMEs but often the rate of success is low primarily because of low access to market, among others.
• A major tool is development-based public procurement covering set-asides for SMEs
• A second related tool (practiced nowhere) is regulation to force large retail chains to put SME products on their shelves. There are different ways to do this.
