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Services sector of Pakistan; problems and solutions

Outline:
1) Introduction
2) Types of services sector
3) Detailed analysis
4) Problems
5) Solutions
6) Conclusion
Loading of containers at Karachi port

The Service sector is a collective term used to describe the industry that produces intangible services and products.  Some examples of this sector include Banking, Transportation, Telecommunication, Real estate business, hotels, Recreational centers etc.  If we take notice of all the above-mentioned examples we will come to know that they don’t harvest anything solid in shape but does earn a handsome amount by giving services to the customers.

The percentage of the services sector in the economies of developed countries range up to 70 percent of the total GDP, more than 50 percent in developing GDPs and less than 40 percent in the economies of least-developed nations. Services sector plays an important role in our economy too with a contribution of more than 50 percent to our Gross Domestic Product. It employs almost half of the total workforce and is growing at a much faster rate compared to other sectors of the economy.

The services sector is a highly diversified and vast sector that can be divided into four basic sub-sectors. These include Distributive, Personal, producer and social services. The distributive services mostly provide utility to the common public along with generating handsome profits for the traders. Distributive services include Electricity transport, Pipelines transport, Water transport, Road transport and telecommunications etc. Producer services mostly consist of financial services such as banks, insurance corporations, and financial solution providers.

This sector provides services to the consumer and produces finances for the investors. Personal services sector provides very individual based services to the citizens such as Shelter, Recreational activities centers etc. Lastly, the social services sector covers the very basic needs of life such as medical and education facilities along with protection and defense of the public.

Services sector though growing at an immense rate but it still has to face many hurdles and obstacles. Lack of government support at all levels is a major constraint for this sector. Most of the bureaucracy is ill-educated or incompetent to deal with the challenges of the modern day. The government has imposed heavy taxes on this sector, which is severely hampering the growth of this sector. Recent taxes on telecommunication sector in Pakistan are one glaring example of the growing governmental taxes on the services sector. Less participation of private sector is another major constraint.

The government should try to involve private companies in this sector through the public-private partnership model, which can do wonders if given opportunity. Apart from involving them, there should be some incentives from the government for those who perform well in the national arena. Lack of such incentives is another setback. A high ratio of taxes on all the sectors and in particular on services sector is another major worrying point. Research and development are also an area of major concern in our country. There is no major focus on this area and is a big blow to our regional competitiveness in the international market. Lack of skilled labor, lack of technology up-gradation and less focus on human capital development are some areas that need to be focused.

The government needs to support this sector by providing tax-free zones and other incentives. The posting of competent people who can understand the problems of service sector will be a major boost for this sector. Public-private partnership can prove to be very helpful in this sector. The government should build institutes for the skill development of employees related to this sector.  Research and development should be encouraged and funds should be allocated on the government level.

Technology up-gradation should be started at an earliest and internet facility should be provided to all the areas of the country. The auction of 3G and 4G is a major step towards achieving this goal. Foreign investors should be attracted from across the globe by providing different incentives like tax concessions etc. Above all, Government should take measures to restore peace to the country. This will open major avenues for this sector.

The role the service sector has played in the development of European and other developed economies shows the importance of this sector. It’s now time for us to prove that this century is the ‘century of Asia’ as analysts call it.

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