The Service

Sector

The Service Sector

The tertiary sector of the economy
Consists of the "soft" parts of the economy
Basic characteristic of this sector is the production
of services instead of end products
Services is also known as "intangible goods
Services may involve the transport, distribution
and sale of goods from producer to a consumer,
as may happen in wholesaling and retailing, or
may involve the provision of a service, such as in
pest control or entertainment
The term service economy refers to a model
wherein as much economic activity as possible is
treated as a service

The Service Sector

Service Characteristics:

Intangibility
Perishability
Inseparability
Simultaneity
Variability

The Service Sector

Examples of service sector employment include:

Government
Healthcare/hospitals
Public health
Waste disposal
Education
Banking
Insurance
Financial services
Legal services
Consulting
News medias
Casinos
Tourism
Retail Sales
Franchising
Real estate Sales

Brief History of the PHL

Service Sector
Since the end of World War II, the Philippines has
been on an unfortunate economic trajectory,
going from one of the richest countries in Asia
(following Japan) to one of the poorest.
During the 1990s, the Philippine Government
introduced a broad range of economic reforms
designed to spur business growth and foreign
investment.
Despite occasional challenges to her presidency
and resistance to pro-liberalization reforms by
vested
interests,
President
Arroyo
made
considerable progress in restoring macroeconomic
stability with the help of a well-regarded economic
team.

The Philippines Service

Sector
The service sector contributes more than half of
overall Philippine economic output, followed by
industry (about a third), and agriculture (less than
20%).
Important industries include food processing;
textiles and garments; electronics and automobile
parts; and business process outsourcing. Most
industries are concentrated in areas around
metropolitan Manila. Mining has great potential in
the Philippines, which possesses significant
reserves of chromate, nickel, and copper.
Significant offshore hydrocarbon finds have added
to the country's substantial geothermal, hydro,
and coal

The Philippines Service

Sector
Over the past years the services sector has shown
sustained economic growth and accounted for
53.7% of the country's GDP making it the highest
contributor compared to the industrial and
agricultural sectors.
GDP - composition by sector:
agriculture: 13.9%
industry: 31.3%
services: 54.8% (2010 est.)
The services sector also employs the highest
percentage of the workforce of Philippines. In
2004, it employed 49% of the country's workforce
which was way ahead of the other sectors.

The Philippines Service

Sector
Labor Force by occupation:
agriculture: 35%
industry: 15%
services: 50% (2008 est.)

Contribution to GDP

Contribution to GDP

Employment Contribution

Employment Contribution

Employment in Sub- Sector

Services Performance

Services Performance

Services Performance

Services Performance

Modes of Service Supply

Cross-border supply is defined to cover services
flows from the territory of one Member into the
territory of another Member (e.g. banking or
architectural services transmitted via
telecommunications or mail);
Consumption abroad refers to situations where a
service consumer (e.g. tourist or patient) moves
into another Member's territory to obtain a
service;

Modes of Service Supply

Commercial presence implies that a service supplier of one
Member establishes a territorial presence, including through
ownership or lease of premises, in another Member's
territory to provide a service (e.g. domestic subsidiaries of
foreign insurance companies or hotel chains); and
Presence of natural persons consists of persons of one
Member entering the territory of another Member to supply
a service (e.g. accountants, doctors or teachers). The Annex
on Movement of Natural Persons specifies, however, that
Members remain free to operate measures regarding
citizenship, residence or access to the employment market
on a permanent basis.

The Formal Service Sector

Commerce
Finance
Transportation
Private and Public services

The Informal Service Sector

The International Labour Organization (ILO) introduced the
concept of the informal sector more than 25 years ago.
The informal sector is a major provider of urban jobs 50
to 60 per cent of the workforce in many south-east and
south Asian cities
The economic crisis in several east and south-east Asian
countries could result in many more workers entering the
sector because of job losses in the formal sector.
The informal sector consists of small-scale, self-employed
activities (with or without hired workers), typically at a low
level of organization and technology, with the primary
objective of generating employment and incomes.

The Informal Service Sector

It consists of units engaged in the production of goods or
services with the primary objective of generating
employment and incomes to the persons concerned. These
units typically operate at a low level of organization, with
little or no division between labor and capital as factors of
production and on a small scale.
Labor relations - where they exist - are based mostly on
casual employment, kinship or personal and social
relations rather than contractual arrangements with formal
guarantees.
It is just as component of the non-observed economy which
also consists of illegal and/or underground/concealed
activities; or household production for own final use

The Informal Service Sector

Characteristics of the informal sector:
Informal sector enterprises usually employ fewer than ten
workers, mostly immediate family members.
The informal sector is heterogeneous: major activities are retail
trade, transport, repair and maintenance, construction, personal
and domestic services, and manufacturing.
Entry and exit are easier than in the formal sector.
Capital investment is generally minimal.
Work is mostly labour intensive, requiring low-level skills.
Workers learn skills on the job.
The employer-employee relationship is often unwritten and
informal, with little or no appreciation of industrial relations and
workers rights.
The informal sector works in conjunction with, rather than in
isolation from, the formal economy. It has increasingly become
integrated into the global economy.

The Informal Service Sector

Women
A general bias against women in formal employment
across the Asia-Pacific region, together with their typical
preference for working close to home, results in many of
them working in the informal sector. The sector offers the
advantage of flexible working hours, easy entry and exit,
and low skill requirements.
Fewer opportunities and lower incomes.
Homeworkers impoverished and exploited
Programmes for small-scale women entrepreneurs
In times of boom, it appears that men increase their
employment. Women may or may not benefit as much in
employment terms from this boom. In times of bust,
women expand their labor force participation and increase
their work hours (relative to men) while the men are
displaced.

The Informal Service Sector

Children
Most countries prohibit child labour; yet millions of children are working
in the informal sector under deplorable conditions. They are subjected to
exploitation, including long working hours and unsafe working
conditions, for very low pay. They work in small family businesses or as
self-employed workers such as shoeshiners and street vendors. But
children are increasingly involved in hazardous work in small enterprises
producing export goods for international markets.
According to UNICEF estimates, about 3.7 million children worked in
1988, and their number increased to between 5 and 7 million in 1994 .
Children work in both the formal and informal sectors. About 50 percent
of plantation workers in the vegetable industry (such as that of Benguet)
are children.
The labor code protects children working in the industry, the majority of
children working in agriculture, small industries and domestic work
settings are left unprotected.
The poverty trap
Phased Elimination

The Informal Service Sector

Workers with Disabilities
Since it is difficult for people with disabilities to secure
formal employment, many of them are engaged in selfemployment in the informal sector.
Disadvantages
Countermeasures

Urban poverty and infrastructure development

Meagre incomes of urban informal sector workers limit
opportunities to live and work in a hygienic and safe
environment

The Informal Service Sector

Income and employment
The very low incomes of most informal sector workers and
operators generally place them among the urban poor. None the
less, informal sector operators naturally earn more than workers
in the sector. Informal sector workers are generally found to earn
far less than formal sector workers

Micro- enterprise Development

Policy-makers in the region increasingly acknowledge the value of
improving productivity and incomes in the informal sector.
Effective strategies must identify at the outset the enterprises
with capacity to expand. Some micro enterprises have the
potential for growth and employment creation. Other activities
some forms of street vending, for example are usually
precarious jobs performed on an individual basis, without any
potential for expansion.

The Informal Service Sector

Workers Protection

Labour laws and labour standards

Legislative and bureaucratic obstacles
The role of international labour standards
Working conditions and occupational safety and health
Social protection

OFWs
EVEN as the services sector is the best performing sector of the
Philippine economy, theres a trump card that further bolsters
the sector as an engine of economic growth.
Recent report on the Philippine economy by the World Bank
wrote that providing services overseas through labor is
important. (The World Banks second-quarter Philippines
Quarterly Update)
Can build inclusive growth through direct and indirect
channels
Direct channels of services that the World Bank are shown in
examples such as business process outsourcing companies
(BPO)
Has to move up the value chain, particularly by moving away
from less formal, low-wage services.
The indirect channels, on the other hand, cover intermediate
services in other sectors and in other countries

OFWs
Importantly for the Philippines, these channels can be
thought of not only in domestic terms but also through
the provision of services overseas through migration of
labor and the resulting remittance flows (WB)
The Philippines deployed 1.4 million land- and sea-based
overseas workers in 2010. That same year, some US$18
billion in remittances from migrant workers, immigrants
and irregular migrants came into the country.
must play an important role in moving the Philippines
onto inclusive growth (WB)
Overseas migration and remittances, their links to
services and poverty reduction in the Philippines
areimportant but complex

Business Process Outsourcing

(BPO)
A subset of outsourcing that involves the
contracting of the operations and responsibilities
of specific business functions (or processes) to a
third-party service provider
Implemented as a cost-saving measure for tasks
that a company requires but does not depend
upon to maintain their position in the marketplace
Back office outsourcing which includes internal
business functions such as billing or purchasing,
and front office outsourcing which includes
customer-related services such as marketing or
tech support.

BPOs in the Philippines

The business process outsourcing industry in the
Philippines has grown 46% annually since 2006.
This boom is led by demand for offshore call
centers.
Industry estimates from the Board of Investments,
Business Process Association onf the Philippines
(BPA/P) and BPO Services Association (BSA/U) put
the number of people employed by the BPO sector
by end of 2008 at 435,000 (vs 372,000 in 2007)excluding the non-BOI/ non-PEZA entities. The BPO
output for 2008 was US$ 6.1B (vs US$ 4.5B in
2007), putting the Philippines as the 3rd largest
BPO destination (15%) after India (37%) and
Canada (27%)

BPOs in the Philippines

It was expected to hit US$ 7.2B to 7.5B in 2009.
The industry was optimistic of 18% growth in
headcount 2009.
Overall, Philippine BPO is forecast to earn
between US $11 to 13 billion and to employ
900,000 additional people in 2010.
The Philippines has now stepped out of Indias
shadow to become a competitive KPO (Knowledge
Process Outsourcing) and BPO (Business Process
Outsourcing) destination