The World Bank has identified the service sector as a significant driver of development in the East Asia and Pacific region, including Indonesia. This recognition comes as the service sector has been a primary contributor to aggregate labor productivity over the past decade. The Chief Economist for the East Asia and Pacific Region at the World Bank, emphasized that the growth of service exports has outpaced the growth of goods exports. In particular, foreign direct investment in the service sector has surpassed foreign direct investment in the manufacturing sector by a factor of five in countries such as China, Indonesia, Malaysia, the Philippines, and Thailand. The combination of digital technology with service sector reforms enhances economic performance.
He pointed out that the synergy between service sector reforms and digitalization not only creates new opportunities but also enhances the capacity of the population to benefit from these opportunities. For instance, remote learning and telemedicine, supported by locally selected, trained, and motivated staff, have yielded better educational outcomes and health achievements in the region, although significant disparities in access persist. A synergy of service sector reforms and digitalization can lead to a virtuous cycle, boosting economic opportunities and developing human resource capacity that drives development in this region. In the Philippines, the use of software and data analytics by companies has increased average firm productivity by 1.5% during the 2010-2019 period. In Vietnam, the removal of policy barriers, such as entry and foreign ownership restrictions, in the transportation, financial, and business services sectors has resulted in an annual increase of 2.9% in value added per worker in these sectors during the 2008-2016 period. The removal of these barriers has also led to a 3.1% increase in labor productivity for manufacturing firms utilizing these services, significantly benefiting small and medium-sized private enterprises. According to the East Asia and Pacific (EAP) October 2023 report by the World Bank, the East Asia and Pacific region is projected to be one of the fastest-growing and most dynamic regions globally. Growth in the developing East Asia and Pacific region is expected to reach five percent in 2023.
