The report noted that the region underperformed over the past four years and is lagging behind its targets, as stated in a release issued by the APEC Secretariat and received here on Thursday.
Under the APEC Services Competitiveness Roadmap, endorsed by APEC leaders in 2016, member economies agreed to reduce restrictions to services trade and investment as well as increase the share of services exports and overall trade in services by 2025.
However, progress has been uneven, and the pandemic will likely exacerbate this setback.
A mid-term review released by the APEC Policy Support Unit shows that while some service sectors have become more open in the last four years — such as logistics cargo handling, customs brokerage, maritime transport, and freight forwarding — others have become more restrictive, such as road and freight transport, accounting and air transport.
"The data shows mixed progress in efforts to make the region more open in supporting services trade and investment," Denis Hew, the director of the APEC Policy Support Unit, expounded.
"Several factors contribute to these constraints, including restrictions on foreign entry, barriers to competition, regulatory transparency, and regulations affecting the movement of people," Hew pointed out.
The report highlighted that APEC’s share of total world services exports had plummeted, from 38.8 percent in 2016 to 38.1 percent in 2019, thereby translating to the fact that APEC had decreased its trajectory and had to ramp up services exports rapidly if it was keen to increase its global share of services exports by 2025.
In connection with the trade in commercial services, data showed that APEC had registered an increase, from US$3.93 trillion in 2016 to US$4.58 trillion in 2019, reflecting a compound annual growth rate of 5.3 percent, which is lower than its target of 6.8 percent or more.
Services are critical for most economies, as they provide the bulk of economic activities and employment.
In most APEC member economies, services make up for over 50 percent of the gross domestic product (GDP). Collectively, services comprise around two-thirds of APEC’s GDP.
More than half of the total employment in 15 APEC economies over the past decade is driven by this sector.
"COVID-19 has particular implications for the services sector, given the importance of personal contact for some types of services trade, and the difficulty of maintaining those physical contacts in light of social distancing measures as well as travel restrictions," Andre Wirjo, an analyst at the APEC Policy Support Unit and the author of the report, explained.
"The containment measures put in place by economies in response to the COVID-19 pandemic led to a significant drop in the value of trade, including that of commercial services," Wirjo pointed out.
Firms that are able to conduct cross-border trade in services during the pandemic are more successful and resilient. This demonstrates the importance of digital trade and data flows in boosting competitiveness.
"The ability to shift online has been among the key success factors in responding to the crisis. We need to realize the critical role of the digital economy within the global value chains and seek to encourage policies that foster access, bridge the digital divide, and avoid barriers to the digital economy," Wirjo stated.
Structural reform efforts, such as those aimed at reducing administrative burdens and enhancing small businesses’ competitiveness, also play a key role in opening the services sector further to cross-border competition and creating a seamless APEC marketplace.
"This action will also help support economic recovery, enhance business resilience, and drive productivity," Wirjo added.
Related news: Puspayoga leads Indonesian delegation at APEC WEF 2021
Related news: APEC ministers renew commitment to women's economic empowerment
Related news: APEC to hold forum on women's empowerment on Sep 24