Strategies for Stimulating Poverty-alleviating Growth in the Rural ...

55
Box 7--Services as sources of growth
Service activities frequently comprise the fastest growing segment of the rural nonfarm economy.
Demand for transport, construction, marketing, consumer retailing, prepared foods, health and education
services grows rapidly with income growth in dynamic rural regions. And unlike home-based manufacturing,
which proves to be the most vulnerable component of the rural nonfarm economy, rural services enjoy spatial
insulation from urban competitors. While home-based basket-making, pottery and weaving face stiff
competition as rural economies grow (Table 1), rural services ride the tide of growing local consumer demand.
In spite of its natural protection and frequent opportunitiesfor growth, rural services have been
historically ignored in promotional efforts – in part because they are often itinerant, seasonal and invisible and in
part because of a mistaken belief that only manufacturing is “productive”. Recognition of the importance of
service income suggests it deserves greater consideration in promotional efforts than it has received in the past.
Indeed, the three-pronged strategy advocated in Section 4 applies equally well to services as to other segments of
the rural economy.
In some instances, services can serve as motors of regional growth. Marketing services, such as export
promotion, brand development, bulking and efficient export distribution systems, often prove crucial to the
expansion of export-led growth in resource-poor zones. The introduction and enforcement of grades and
standards, likewise, often proves key to both efficiency and to poor household participation in rapidly evolving
marketing chains. Tourism development -- encompassing on an array of rural services from transport, to hotels,
to laundry services, restaurant and guide services – can serve as an important motor of regional development.
In other instances, service activities ebb and flow with purchasing power generated by the regional
economic base. Personal services such as tea shops, maid services, hair salons, consumer retailing, repair,
education and health services remain tightly linked to trends in general economic activity in a given region.
These activities remain, for the most part, handmaidens rather than engines of rural economic growth. In the
same way, rural manufacturing of consumer goods such as local beers, pottery, mats and construction materials
also rise and fall with changes in consumer spending in the region. In most cases, interventions which focus on
stimulating engines of rural growth will automatically carry along these demand-driven consumer services with
them. Where equity concerns arise, intervention may be necessary to ensure that the poor are able to participate
in these growing service activities. Elsewhere, intervention may not be necessary in these ancillary activities.
Efforts will be most productive if focused on revving up regional engines of growth, whether they be in
agriculture, manufacturing or services.