« The voice of the European Service Industries for International Trade Negotiations in Services » COMESA (Common Market for Eastern and Southern Africa) Business Forum for the Signing of Interim EPA Mauritius – August 2009 Trade in services, trading into the future in the region “ Trade and Investment in Services Sector in COMESA: the view of the European companies and opportunities for ESA companies to link up with European investors” Pascal Kerneis, Managing Director ESF (European Services Forum)

« The voice of the European Service Industries for International Trade Negotiations in Services » CONTENT WHAT IS ESF THE IMPORTANCE OF SERVICES IN THE ECONOMIES AND OF INTERNATIONAL TRADE IN SERVICES THE IMPORTANCE OF FDI IN SERVICES SECTORS THE PARTICIPATION OF ESA & EAC COUNTRIES TO TRADE IN SERVICES NEGOTIATIONS

« The voice of the European Service Industries for International Trade Negotiations in Services » ESF covers most services sectors, including: Insurance Banking Business services: IT & Computer; consulting, advertising, after-sales services Professional services: legal services, accountants, architects, engineers Construction services Distribution services Postal & Express Delivery services Audio-visual services Energy related services Environmental services Telecommunication services Tourism Air Transport Maritime Transport But no members in Education or Health services For more information, see

« The voice of the European Service Industries for International Trade Negotiations in Services » ESF MEMBERS INCLUDE: For more information, see

« The voice of the European Service Industries for International Trade Negotiations in Services » The Services sector generates 90% of new jobs in the EU15 Services Agriculture Industry

« The voice of the European Service Industries for International Trade Negotiations in Services » World Economy: Percentage of GDP by Sector, 2006

« The voice of the European Service Industries for International Trade Negotiations in Services » Importance of the Services Sector in the Eastern and Southern Africa Region* Burundi services: 34.1% (2006 est.)(EAC) Comoros services: 56% (2001 est.) Djiboutiservices: 59.6% (2003 est.) Eritreaservices: 64.6% (2006 est.) Ethiopia services: 40.4% (2006 est.) Kenyaservices: 65% (2004 est.)(EAC) Malawi services: 47% (2006 est.) Mauritiusservices: 69.7% (2006 est.) Madagascar services: 27.2% (2006 est.) Rwandaservices: 37.3% (2006 est.) (EAC) Seychelles services: 66.7% (2006 est.) Sudanservices: 39.7% (2006 est.) Tanzaniaservices: 38,7% (2007 est.)(EAC) Ugandaservices: 48.5% (2006 est.)(EAC) Zambiaservices: 51.2% (2006 est.) Zimbabweservices: 59.4% (2006 est.) * except Tanzania = EAC + SADC Source: CIA – The World Fact book

« The voice of the European Service Industries for International Trade Negotiations in Services » EU International trade in Services (Trends in volume – Bio €)

« The voice of the European Service Industries for International Trade Negotiations in Services » Trade between Member States exceeds Extra-EU trade Source: Eurostat TOTAL EXPORT (intra + extra: Bio €) € 679.6bn € 498.5bn

« The voice of the European Service Industries for International Trade Negotiations in Services » International Trade in Services 28.9% 42.2%

« The voice of the European Service Industries for International Trade Negotiations in Services » Ra nk CountryTrade Volume ExportsImportsBalance 1 USA221,394116,284105,11011,173 2 Switzerland77,01643,93433,0829,921 3 Japan29,25518,92710,3283,798 4 Norway22,12512,9619,1642,758 5 China16,0508,7867,2641,522 6 Canada15,2878,0627,2258,37 7 Russia14,8728,2226,6501,572 12South Africa7,1513,5523, All ACP Countries30,72215,75914, EU-25 International Trade in Services with non-EU Countries 2004, EUR bn ACP countries export already services in the EU

« The voice of the European Service Industries for International Trade Negotiations in Services » What International Trade in Services (ITS) does not include? The activities of the foreign affiliates within the country in which they are established are not taken into consideration (= part of local GDP), nor the self financed investments through benefits (reinvested earnings/income) (also local). The flow of capital involved in mode 3 operations, i.e. the financing of the establishment of a new commercial presence in a foreign country; This is included in the Foreign Direct Investment (FDI) accounts, not in the balance of payment, hence not considered as services exports. More than 65% of global FDI flows are invested in services sectors (see hereafter).

« The voice of the European Service Industries for International Trade Negotiations in Services » Services contribute to the largest share of FDI (1) 444,1 Bn € were invested in Services sectors by the EU in 4 years (63,6 % of total 697,5 Bn €) (extra EU)

« The voice of the European Service Industries for International Trade Negotiations in Services » 93% of the investment coming to the EU are done in the Services sectors;

« The voice of the European Service Industries for International Trade Negotiations in Services » The importance of private Foreign Direct Investment in Developing Countries Bio US $/Year - Source: UNCTAD FDI Report & World Bank

« The voice of the European Service Industries for International Trade Negotiations in Services » IMPORTANCE OF SERVICES IN A SUSTAINABLE DEVELOPMENT  Attract FDI in Infrastructure services: Telecoms, Express Courier Logistics (transports, distribution, etc.), Energy distribution network, Water and Waste management, Financial services System, etc. Experience shows that foreign service suppliers that invest in a country do it for a long period.  Attract transfers of expertise and of know-how of foreign service suppliers, which in turn initiate: Local jobs creations Staff vocational training, etc. Better quality of the services, Cheaper services, More choice for the consumers Reduction of the cost of doing business for local SMEs.

« The voice of the European Service Industries for International Trade Negotiations in Services »  Why FDI is not coming to Africa? What is missing? Legal security for all investment is missing. This can be achieved through the binding of the domestic/autonomous legislation in the framework of a multilateral trade agreement (WTO) or a Regional (EPA or Bilateral trade agreement. This legal security is a crucial element for the services companies, but too often ignored by the governments. Foreign companies are reluctant or hesitant to invest time and money if the conditions of establishment or of doing business can be changed without notice (change of government, corruption, military coup, etc.).

« The voice of the European Service Industries for International Trade Negotiations in Services » List of criteria that a CEO looks at when taking a decision to invest in a developing countries: Potential market (size, income per capita, follow the demand, i.e. corporate customers) Existing competition, special treatment for local players Benefits prospects at short, medium and long terms Good governance (level of corruption, transparency of the legislation, etc.) State of the regulation (existing barriers at all levels, independent regulatory authority, implementation of the regulations, i.e. Regulatory Certainty) FDI incentives (special zones, tax incentives, corporate tax, etc.) Business Environment (incl. availability of human capital, level of education) Country Risk Assessment: political stability, GATS/Trade agreement sector specific binding commitments, i.e. the GATS/EPA are only additional criterion for companies to tick. But they can often make the difference. For the Developing countries, it is an additional opportunity to seize as to attract FDI.

« The voice of the European Service Industries for International Trade Negotiations in Services » Improved market access via Commercial Presence Abroad Mode 3 of the GATS – i.e. joint ventures; subsidiaries; branching: Removal of equity cap to allow 100% ownership of FDI Commitments for Cross-Border Supply via Mode 1 of the GATS, i.e. e-commerce, internet, sending electronic data to call centers, back offices, etc. Movement of Natural Persons via Mode 4 of the GATS, i.e. moving skilled business personnel within a company (intra-corporate transferees) and to a company’s clients on a temporary basis WHAT THE EUROPEAN SERVICES SECTOR WANTS FROM THE GATS NEGOTIATIONS, OR FROM ANY OTHER TRADE NEGOTIATIONS (INCL. EPA) ?

« The voice of the European Service Industries for International Trade Negotiations in Services » Hierarchy of European Interests in Trade Negotiations What EU companies want: 1.WTO DDA 2.Regional Trade Agreements (with Integrated Markets) 3.Bilateral Agreements 4.Autonomous Liberalisation… BUT =>What is happening in the reality: 1.Autonomous Liberalisation 2.FTAs 3.RTAs 4.RTAs (EPAs) without Services !!! 5.WTO ?? !!! No Legal Security !

« The voice of the European Service Industries for International Trade Negotiations in Services » Participation of ACP countries in DDA GATS negotiations 14 ACP countries have tabled an initial offer = Barbados; Dominica; Gabon; Grenada; Guyana; Fiji, Jamaica; Kenya; Mauritius; St. Chris & Nevis; St. Lucia; St Vincent & Grenadine; Senegal; Trinidad & Tobago 4 African Countries; 9 Caribbean Countries; 1 Pacific Region; 1 ESA Region; 1 EAC Region; 0 SADC (1: S.A.)

« The voice of the European Service Industries for International Trade Negotiations in Services » EAC Specific Commitments in the U. R. Sectors Total Max Poss Burundi (LDC & LLDC) Kenya Rwanda (LDC & LLDC) Uganda (LDC & LLDC) 5 (?) 27 Tanzania 11 1: Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4: Distribution Services; 5: Education Services; 6: Environmental Services; 7: Financial Services; 8: Health Services, etc.; 9: Tourism, etc.; 10: Recreational Services, etc.; 11: Transport Services; 12: Other Services (Kenya: 1 commitment) LDC= Least Developed Country; LLDC: Landlocked Developing Country; SIDS = Small Island Developing State

« The voice of the European Service Industries for International Trade Negotiations in Services » Sectors Total 162 Max Poss ComorosNot a WTO Member – LDC & SIDS Djibouti (LDC)8 (?)1110 EritreaNot a WTO Member – LDC EthiopiaNot a WTO Member – - WTO Observer (Accession) - LDC & LLDC Kenya Madagascar (LDC) 22 Malawi (LDC & LLDC) 5512?2428 Mauritius SeychellesNot a WTO Member - WTO Observer SudanNot a WTO Member - WTO Observer - LDC Zambia (LDC & LLDC) Zimbabwe10?7320 ESA (- EAC) Specific Commitments in the U. R. 1: Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4: Distribution Services; 5: Education Services; 6: Environmental Services; 7: Financial Services; 8: Health Services, etc.; 9: Tourism, etc.; 10: Recreational Services, etc.; 11: Transport Services; 12: Other Services

« The voice of the European Service Industries for International Trade Negotiations in Services » EPA Negotiations with ESA & EAC: WHICH ARE THE COUNTRIES CONCERNED? EU: Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden, United Kingdom EAC: Kenya, Uganda, Tanzania, Burundi, Rwanda * An interim EAC EPA was initialed by EC and all five countries. EAC is a customs union operational since 2005 and has the ambition of a common market (2009) and later political union. ESA initial configuration: Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Malawi, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia, Zimbabwe * An Interim ESA EPA was initialed by the EC and Comoros, Madagascar, Mauritius, Seychelles, Zimbabwe and Zambia. * Least developed countries (LDC) underlined, Tanzania is not member of ESA, but of SADC

« The voice of the European Service Industries for International Trade Negotiations in Services » Interests of European Services Sectors in EPA with ESA & EAC Region’s countries ESA – EAC Region’s countries should participate more actively to the services negotiations of the WTO (To table initial offers opening market access to key services sectors for the countries and giving national treatment. ESA – EAC Region’s countries should open services negotiations with the EU in the EPA framework, with the aim to reach a « GATS + » agreement, in accordance with GATS Article 5; The impact of this would be: – Sending a strong signal to foreign investors (legal security of investments) – Contribution to the integration of the region in the world economy. To increase the cooperation with European services companies: – Joint-ventures, subsidiaries, branches, back offices, transfers of skills in both ways, etc.

« The voice of the European Service Industries for International Trade Negotiations in Services » Interests of European Services Sectors in EPA with ESA – EAC Region’s countries What countries have agreed to commit in the services sectors in the Full EU-CARIFORUM EPA initialled in December 2007? Sectors Total Max Poss countries * *= Antigua & Barbuda; Barbados; Belize; Dominica; Dominican Republic; Grenada; Guyana; Jamaica; Saint Christopher & Nevis; Saint Lucia; Saint Vincent & the Grenadines; Suriname; Trinidad & Tobago + = more detailed commitments than the CPC Description NB: Total represent commitments by at least one country, not all Cariforum members have taken the same commitments; many have maintained limitations, or decided to open with a transitional period.

« The voice of the European Service Industries for International Trade Negotiations in Services »  What countries have agreed to do in Interim SADC EPA initialled in December 2007? (Art 67) “To liberalise 1 services sector (out of 12) by each of the participating countries, To agree on a standstill clause for all services sectors (as in Art. V.1.b (ii) of GATS) To agree to negotiate progressive liberalisation with substantive sectoral coverage within a period of 3 years following the conclusion of a full EPA.”  What are the provisions in EAC & ESA Interim EPA? The same or even less… Is this really going to fulfil European service providers ambitions? Is this really a big political price to pay by the EAC & ESA countries? Is this really a difficult challenge to achieve?

« The voice of the European Service Industries for International Trade Negotiations in Services » WHAT NEXT for the EU ? Bilateral Free Trade Agreements (FTA)? (RTA)?  EU/GCC (Gulf Cooperation Council) (2008?)  EU/Mercosur (negotiations since 1999)(?)  EU/ACP (6 Economic Partnership Agreements = 1 full EPA with Caribbean = 12/2007) – 5 other Full EPAs with services package = 2013?  EU/Mediterranean countries (EuroMed)(2010)?  EU/Central America – 2009?  EU/Andean Countries – 2009?  EU/South Korea  EU/ASEAN  EU/India ?  EU/China  EU/Ukraine

« The voice of the European Service Industries for International Trade Negotiations in Services » ESA-EAC REGION’s Services Providers are Welcome in the EU The EU’s Services Market is remarkably open World’s largest market for services, valued at US$7.8 trillion in 2004 Population of EU 27 = 493 millions GDP per capita of US$25,700 The more the market is open, the more it attracts FDI, the more it remains competitive. Services providers of the region might find opportunities, notably to serve the exporters of the region. Don’t be ashamed or afraid of your small size!

« The voice of the European Service Industries for International Trade Negotiations in Services » The European Union has adopted in December 2006 a directive on services in the internal market to improve the single market (implementation in 2010) It is automatically extended to all foreign owned company incorporated in one of the 27 EU countries The Directive 2005/36/EC, adopted on 7 September 2005, consolidates and modernises the rules currently regulating the recognition of professional qualifications. On 20 October 2007, at the end of the transposition period, this Directive has replaced fifteen existing Directives in the field of the recognition of professional qualifications. But the directive does not apply to non EU Professionals. They must sign either with each of the 27 EU Member States, or with the EC, a mutual recognition agreement (MRA), according to Article VII GATS. The EC has mandate to negotiate MRA for architects on a pilot phase. Private sectors associations agreement is a pre-condition to engage in negotiations. The purpose would then be to transform this private sector agreement into binding agreement. The profession has first to agree on the terms of equivalence of the diplomas and qualifications (+ 6 months study to learn local legislation, etc. + training period)

« The voice of the European Service Industries for International Trade Negotiations in Services » Pascal KERNEIS Managing Director European Services Forum – ESF 168, Avenue de Cortenbergh B – 1000 – BRUSSELS Tel: Fax: Website : THANK YOU FOR YOUR ATTENTION !