Page 163 - Contributed Paper Session (CPS) - Volume 1

CPS1239 Valerie M.B. et al.
Figure 2: Total (direct and indirect) contribution of services to manufacturing value added by
sector (2000 and 2017)

Source: Authors’ calculations based on ADB MRIOTs. Note: Figures represent the average input
coefficient of services for all 62 countries. The original data is expressed in terms of one dollar
of manufacturing output.

We also examined “servification of services” and found that business
services tend to be a key player in development for high-income
economies, despite being barely traded internationally. Since the majority
of services are not directly exported, it is easy to undervalue their importance
in the growth of manufacturing and an export-led development strategy.
When high-tech manufacturing products are produced, this tends to stimulate
business services (which include legal and professional services). Indeed, the
greater the direct and indirect linkages (servification) of business services in
manufacturing value added, the more developed the economy is (Figure 3).
This ratio is generally low for most of Asia except for Singapore and Hong
Kong, China. Interestingly, both direct and indirect linkages increase quickly in
the early stages of development. Indirect linkages are highly correlated with
development, particularly for advanced economies (Figure 3, right panel).
Contrary to interpretations by Rodrik (2016), it implies that the barometer for
the speed of economic development may no longer be to increase the share
of employment in manufacturing, but instead the degree of links
(servicification) between hi-tech services such as business services and
manufacturing value added.

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