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New service-based economy

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The evolution of an economy from one dominated by agriculture and extractive industries (mining) through industrialisation, to one dominated by service industries are phases through which most developed countries have passed. Today, with the onset of globalization and its multiple impacts, it is conceivable that a developing country can evolve into a service-based economy without necessarily passing through the phase of full industrialization.{{more}}

A service is the non-material equivalent of a good. It is the provision of economic activity that does not result in ownership and this is what differentiates it from the provision of physical goods. By supplying some level of skill and experience, providers of a service participate in an economy without the restrictions of carrying stocks, or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require marketing and upgrading of skills in the face competition.

The key characteristics of services are that they are intangible, cannot be handled or heard, neither is there the potential or need for storage. Because services are difficult to conceptualize, marketing them requires creative visualization to evoke an image in the customer’s mind, thus making it difficult to evaluate before experiencing the service delivery. An unsold service time, is a lost economic opportunity. For example a doctor who is booked for two hours a day cannot later work those hours, he has lost that economic opportunity. There is a lack of transportability as services tend to be consumed at the point of production. Services are not generally homogenous they are modified for each consumer or each situation. Human resource management is important, for it is often the human resource factor that is key to the success of service industries. Sometimes there is a client-based relationship developed over a period of time as is the case with Accountants, Attorneys and Financial Advisers.

St. Vincent and the Grenadines has experienced a sharp decline in agricultural output and export incomes, concomitant with the decline in the flagship banana industry. Production declined from 82,700 tons in 1990 to 17,500 tons in 2007, while export earnings fell from $120.3 million to $24.0 million over the same period. Services (tourism, migrants’ remittances and banking) have long surpassed agriculture as the principal foreign exchange earner.

Technological advances are however narrowing the differences between services and other economic activities. Copies of movies and other performances can be recorded and mass produced for future consumption. There are aspects of our Annual Carnival that may readily lend themselves to quality production and marketing, serving at one and the same time as a marketing tool for our tourism product. Today, software is developed and boxed like any other manufactured product. In such instances services have, in a sense, taken on the characteristics of commodities. Technological advance has also been transforming other services.

Banking is a service industry and there was a time when a bank would lend to a business or provide a mortgage and take the documentation relating to these assets, place them on their books, in much the same way as a museum would place a piece of art on the wall under glass to be admired and valued for its security and constant return. Times have changed, banks now take those assets, (and to use a modern-day term) structure them into pools, issue securities based on those pools of assets and sell them to institutional investors and portfolio managers. In effect they use their balance sheets not as museums, bus as parking lots, temporary holding spaces to bundle up assets, and sell them to those investors who have a far greater interest in holding them for the long term. The Bank has thus gone from being a museum where it acquired only the finest assets and held and exhibited them in perpetuity, into a manufacturing plant which provides a product for the secondary market. Services have become a major driving force in economic growth. Rather than following and supporting manufacturing, manufacturing is seen as flowing to those countries and areas where the services infrastructure is efficient and well developed. Herein lies the challenge to our banking sector to provide upscale services and contribute to growth and dynamism in our transformation towards a service economy.

Electronic Commerce (e-commerce) is also transforming the way business is conducted. By establishing electronic links between businesses, the globalization of economic activity and the demands for more skilled workers is taking place. E-commerce will greatly increase interactivity in the economy as people will have the ability to communicate and transact business anywhere at anytime. This will tend to erode economic and geographic boundaries. It is also altering the relative importance of time by speeding up production cycles and allowing firms to operate in close coordination, and enabling consumers to conduct transactions around the clock.

There is scope for St. Vincent and the Grenadines to develop into a vibrant service-based economy. Many Vincentians on their own initiatives have sought employment in the police force in several islands of the Northern Caribbean, nurses have migrated further a field. Increasing numbers of our nationals have been serving on cruise ships and the arrangements with the U.K. government for recruitment of Vincentians to serve in the British Services should in time be contributing to enhanced migrant remittances. As our young population becomes increasingly computer literate and savvy, we should be able to attract more data processing business and eventually software development business.

Medical tourism, as I noted elsewhere, has tremendous potential as a foreign exchange earner while sports tourism, which needs to be tapped for greater utilization of our stadium facilities, will obviously require vigorous marketing efforts. The first vice president of the Jamaica Cricket Association is currently in Ireland to hold talks with officials of top International Cricket Council (ICC) European Associate and Affiliate member countries. The purpose of the trip is to foster a cooperation Agreement between Jamaica, Ireland and other ICC European Associate member countries, to position Jamaica as a premier cricket destination. Agriculture will of necessity continue to play an important role in our economic development, but while it seems clear that services are likely to play the lead role in the country’s future growth and development, it will take vision and much creativity for the full potential of this promising sector to be realized.