Services sector response to liberalisation.

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Clearly much work needs to be done to achieve the ambitious target of growing our services contribution to GDP from 55% today to 65% or more by 2020. Shaifubahrim Saleh, the President of the newly established Malaysian Service Providers Confederation shares an update of what is going on from where he sits.

With seven million out of the 12 million Malaysians who are in the workforce being employed in the services sector, it is clear that any changes that will impact this sector will have major consequences. Count the ongoing liberalisation of services as a major factor.

Nine out of 17 services sectors have been fully liberalised:

Application Service Providers (under telecommunications);

Technical & Vocational Schools;

Technical & Vocational Schools (special needs);

Private Hospitals;

Departmental & Specialty Stores;

Incineration Services;

Accounting/taxation;

Skills training centres; and

Courier services.

Naturally there were a lot of issues and challenges involved in this ongoing implementation and while dealing with industry bodies is important, it also cannot be done in isolation. Thus the Malaysia Services Development Council (MSDC) Committee was established to be the main platform to discuss policy issues, problems on implementation, implications, and recommendations to move liberalisation initiatives forward.

One of its goals is to achieve a 65% target for the service industry contribution to Malaysia’s GDP by 2020. At the same time the MSDC was tasked with identifying value added activities to export Malaysian services and to enhance the competitiveness of the service sector through a continues review of domestic regulations with the goal of elevating services to be the main engine of growth. It is a tall order but it can be done.

In this regard, the EPU-World Bank Research Study on Services Sector Blueprint will provide valuable insight on the current status of the sector and will be tabled at a MSDC meeting soon.

Meanwhile it is clear that transparency and clarity in the approval procedures/processes need improvements across all sub-sectors for predictability to potential investors. In this regard, the Malaysia Productivity Corporation is working closely with Ministries on work flows of approvals/licensing of establishments and has published and uploaded on its website, the Business Enabling Framework on the workflow for 16 services sectors excluding technical and vocational education

PricewaterhouseCoopers was commissioned to assess whether domestic regulations impede or assist the development of the services sector in Malaysia. This is a continuation process to value add to Malaysia Productivity Corporation efforts in looking at the whole value chain of the service sub sectors.

There are implementation issues across some service sectors in the autonomous liberalisation initiative program and there are Acts and regulations pending approval and adoption. Rules and guidelines for the implementation of the new Acts must be drafted or updated. Pemudah is now tasked to take up the reporting of operational issues and must enable integration and coordination between Ministries. This is no easy task.

Another important area is in human capital. Manpower skill training services must be accredited by established institutions and the scope of skill training services opened for liberalisation must be mapped out according to the World Trade Organization CPC (Central Product Classification) codes for clarity.

It is interesting to note that, in general, the private sector is not fully aware of the liberalisation efforts that have taken place and in response, MITI is in the process of putting a mechanism in place to disseminate information and updates. MITI is also providing information on the efforts and status of the FTAs (Free Trade Agreements) done and how the private sectors can benefit from such by lateral agreements.

EPU together with Frost and Sullivan is undertaking a study on utilisation of the trade agreement amongst services firms and to identify issues and challenges faced by firms while using such preferences. The overall awareness level of FTAs is 14.9% amongst the services firms in Malaysia while the utilisation rate is at 2.9%. Needless to say, these need to be drastically improved.

Another mechanism was the setting up of MSPC (Malaysian Service Providers Confederation), a private entity promoted as a sole platform for formulating common strategies, networking at national, regional and international levels for the service providers sector through member organization with the objective of outreaching, nurturing and organising partnering programs to embrace Government-driven initiatives.

With the launch soon of the MSPC portal, the services sector can have access to an online directory which will eventually be a comprehensive database of the services industry.

Besides having a link to the key Government agencies to promote their services and information, the MSPC portal aspires to create a one stop shop for service providers companies to source for products to help and improve their operations and services.

It’s a journey but we have begun on it.

 

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