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Economic Development in Africa Report 2015
Box 1 (continued) International Trade in Services of the United Nations Department of Economic and Social Affairs, which notes that there are currently few reliable international comparisons of foreign affiliate statistics. Only some member countries of the Organization for Economic Cooperation and Development (OECD) have developed this data and such data is not available for Africa, as it is not a priority in the allocation of already-scarce resources for statistics collection and construction. Services trade via mode 4 involves the temporary migration of labour from an exporting to an importing country to produce services for users in the latter, for example an employee of a South African investment bank moving to Kenya to arrange financing for a new power station for a Kenyan electricity company. Payment for the individual’s services would be a crossborder transaction and recorded in the current accounts of the balance of payments of the importing and exporting countries under factor services. It may be noted that there is a considerable amount of international trade in services in the context of the informal sector and unrecorded economy in Africa, given the relative porosity of borders and the large numbers of temporary and permanent migrants throughout the continent. Categorizing services There are essentially two approaches to categorizing services, depending on the object of measurement. Measures of value added and other national accounts variables defined by the System of National Accounts follow the International Standard Industrial Classification of All Economic Activities, in which sectors are classified into primary, secondary and tertiary groups, based on their relationship with and distance from natural resources.* Services make up the tertiary sector, including wholesale trade and retail trade, restaurants and hotels, transportation and storage, information and communications, finance and insurance, real estate, professional, scientific and technical, government (including defence, education and health) and other services. In the International Standard Industrial Classification hierarchy, construction, followed by electricity, gas and water, are placed before wholesale trade and retail trade, and these two sets of activities may be included in either the secondary or tertiary sectors. A sectoral classification for internationally traded services is detailed in the sixth edition of the Balance of Payments and International Investment Position Manual of the International Monetary Fund (IMF), which differs from the International Standard Industrial Classification (the Harmonized System used to classify traded goods also differs from the International Standard Industrial Classification). The main categories are as follows: manufacturing services on physical inputs owned by others; maintenance and repair services; transport, travel and construction; insurance and pensions; financial services; charges for the use of intellectual property; ICT; other business services; personal, cultural and recreational services; and government goods and services (IMF, 2009). Wholesale trade and retail trade services are included in the cost of the goods distributed by services. The differences between the two frameworks therefore complicate the analysis of services trade growth linkages at sectoral and national levels. * Some countries use their own variations of the International Standard Industrial Classification, such as the Statistical Classification of Economic Activities in the European Community, the General Classification of Economic Activities in Switzerland and the North American Industry Classification System in the United States.