Modern business services is a term that encompasses a range of professional services such as Financial Services, Insurance and Pension Services, Telecommunications, Computer and Information Services and Other Business Services.
In a recent blog, my colleague Tim Quinn distinguished these from more traditional services exports such as tourism and other travel related services (including transport).
Interestingly, recent data on the Australia-ASEAN relationship showed that in 2015-16, our sales of Other Business Services (OBS) to ASEAN outperformed OBS sales to even the United States.
OBS is a core component of the 'modern business services' export group, accounting for 48 per cent of the category overall. It includes R&D services, professional and management consultancy services and technical and trade-related services.
While the value of OBS exports that Australian businesses sold to ASEAN in 2015-16 exceeds the value Australia sold to the United States by just $100 million ($2.5 billion compared to $2.4 billion), the statistic helps to demonstrate the value of ASEAN in our modern services trade. It also suggests that Australian firms can grow the kinds of exports that require greater customer engagement, which will be important if we are to benefit from the opportunities created by Asia’s growing middle class.
Activity in the OBS sector can arise from advisory work associated with inward and outward investment, or more independent services contracts. Either way, OBS exports are an important indicator of Australia's future potential to sell larger volumes of modern business services into Asia.
Services sales to ASEAN look very different to services sales to China and India. For example, for the Asian giants, modern business services comprised less than 10 per cent of services sales in 2015-16 while for the ASEAN region, modern business services accounted for a third of total services exports. Additionally, the share of modern services exports to ASEAN countries (30 per cent) is comparable with other important trading partners including the EU and New Zealand (34 per cent).
Singapore of course accounts for a large share of ASEAN's modern business services exports. The share of modern business services to Singapore is 59 per cent, just second behind the United States where modern business services exports claim 63 per cent of all services exports to that country.
But if we exclude the value of Singapore sales from the ASEAN total, we still find that modern business services sales to the rest of the south-east Asian region remains important and accounts for almost 40 per cent more than our sales of modern business services to China.
Returning to the category of Other Business Services (OBS) - in 2015-16, OBS was the most important non-travel service export to a range of ASEAN countries, namely:
In contrast, after travel services,
Led by a strong OBS profile in individual markets, ASEAN holds strong promise for Australia's modern services exports.