Development of services sector for economic diversification and integration in North and Central Asia

A key medium-term policy challenge faced by North and Central Asian economies is to gain competitiveness beyond the export of primary commodities. Among other measures, doing so requires improving the services component of the production process, which in turn would facilitate structural diversification and enhance regional economic integration. These services, also known as backbone infrastructure services or producer services, have direct consequences for adding value in production processes. More than two decades after the end of the central planning system, the role of services in the subregion remains limited. While the share of services in GDP increased in most subregional economies between 1993 and 2013, activities often involve small-scale trading rather than the business services that are required in a modern economy or by those intending to participate in global value chains. Furthermore, lack of adequate data measurements significantly reduces policy-makers’ understanding of the role services play in economic diversification, as well as their capacity for evidence-based policymaking.