The UN Trade and Development has urged developing economies, including Malawi, to look beyond manufacturing-led exports and enable productivity growth across the economic system in the face of rising services.
In a statement published on its Website, the United Nations agency said service exports, now representing 25 percent of world trade, offer a bright spot amid a subdued global economic outlook.
Unctad said as development strategy, services are gaining more traction than manufacturing, a long-standing growth engine for middle-income countries.
Reads the Trade and Development Report 2024: “This is largely because the comparative advantage of cheaper, less-skilled labour no longer aligns with the reliance of modern manufacturing on skill- and capital-intensive production.
“Additionally, industrialisation is increasingly scrutinised for its large ecological footprint and contributions to climate change.”
According to the data, developing economies account for under 30 percent of global services export revenues and 44 percent of merchandise trade.
In 2023, trade in services expanded by five percent in real terms, contrasting a 1.2 percent contraction in merchandise trade, according to the Trade and Development Report 2024.
An analysis by Lloyds Bank, one of Britain’s retail and commercial banks, showed that although the agriculture sector employs the largest share of Malawian workers at 61.9 percent, the economic value of the services sector, which employs 30 percent of the workforce, far outpaces that of agriculture.
The analysis showed that the services sector contributes the most to Malawi’s gross domestic product (GDP) at 54.9 percent while the agriculture sector’s contribution stands at 21.8 percent.
Figures from Ministry of Trade and Industry show that between 1961 and 2018, the country’s economic growth has averaged 4.3 percent with most of the GDP growth over recent years coming from the services sector.
The share of services in GDP rose from 38.3 percent to 52.4 percent during the 1960 to 2017 period due to an increase in the distribution of primarily imported products from South Africa, China, India and other trading partners.
However, most of the services output involves little value-addition and job-creation.
As a consequence, the services employment only grew from 14.6 percent in 1991 to 19.9 percent in 2019.
Scotland-based Malawian economist Velli Nyirongo said the data suggests that Malawi’s economy is undergoing a transition.
He said: “The services sector is bringing more value to the GDP than agriculture. If we can scale up service, mining and manufacturing and value, we can grow the economy, but all our focus is on agriculture now.
“We are lacking secondary industries.”
To promote services exports to reverse the deteriorating trend and to ensure that services contribute significantly to the generation of foreign exchange, employment, incomes and poverty reduction in Malawi, the Malawi Government formulated the National Export Strategy that runs from 2021 to 2026.
The strategy was motivated by the global trends where services are playing an increasingly important role in both developed and developing economies.
