The Service Sector in Asia: Is It an Engine of Growth?

Publication | December 2012
The Service Sector in Asia: Is It an Engine of Growth?

Based on the analysis of 12 Asian economies, the study finds that the service sector already contributed substantially to the region’s growth in the past. Further, services labor productivity grew at a healthy pace in most of the region.

The underdeveloped service sector in Asia has the potential to become a new engine of economic growth for developing Asia, which has traditionally relied on export-oriented manufacturing to power its growth. The central objective of this paper is to empirically analyze the prospects for the service sector as a future engine of growth. The analysis of 12 Asian economies indicates that the service sector already contributed substantially to the region's growth in the past. Furthermore, somewhat surprisingly in light of the difficulty of achieving productivity gains in services, the services labor productivity grew at a healthy pace in much of the region.

Overall, the analysis provides substantial cause for optimism about the role of the service sector as an engine of growth in Asia. However, some Asian countries where the service sector is currently struggling, such as the Republic of Korea and Thailand, will find it more challenging to develop the sector.

Contents 

  • Abstract
  • Introduction
  • Evolution of the Service Sector in Asian Economies Over Time
  • Per Capita GDP and the Share of the Service Sector in GDP and Employment
  • Can the Service Sector be an Engine of Growth for Asia?
  • Concluding Observations
  • References