Beyond offshoring: tradable services and regional markets in the Global South

ABSTRACT

Trade in services has grown more rapidly than trade in manufactured goods in recent decades. Countries from the Global South are chiefly responsible for this shift. The research note draws attention to service investment that originates in Southern economies and is directed at markets of the same (sub)continent. Such dynamics have been neglected by academic debates focussed on global value chains and offshored, largely generic services. The authors argue that direct integration into global markets is often disadvantageous for firms from the South, as they tend to play a subordinate role, face the risk of disinvestment and hardly upgrade. Regional markets offer better opportunities. These ideas are applied to Argentina and South Africa. The fDi Markets database and qualitative information from secondary sources are used to get a better grasp of the expansion of Argentinean and South African providers of advanced services into Latin America and sub-Saharan Africa, respectively. It is shown that regional markets matter. It appears that they allow companies from Argentina and South Africa to be lead firms, internationalize their business activities and achieve various forms of upgrading.

KEYWORDS:

• development
• global value chain
• regional value chain
• regionalization
• tradable services
• trade in services

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Advanced services are complex in terms of inputs, especially human capital and technologies. Value addition is high. Markets tend to be regulated and difficult to access. Examples include consulting engineering and software design. Low value-added services are about routine tasks such as those performed at call centres. They do not require complex inputs (Visagie & Turok, 2021).

2. Some caution is necessary with regard to this data, as it does not include mergers and acquisitions. The fDi Markets database moreover counts investment projects, not taking the value of the investment into consideration.

3. For more information, see: https://www.khula.co.za.

4. For more information, see: https://mfsafrica.com.

Additional information

Funding

This publication was supported by the Chilean National Research and Development Agency (grant number 1230008) and the German Research Foundation (grant number 505329997).