Global Sourcing of Services: How Well Are the New EU Member States Coping with the Challenges? (Part II)

by Ghibutiu, Agnes and Poladian, Simona 
Published in Romanian Journal of Economic Forecasting
, 2009, volume 10 issue 2, 184-199

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In the current debate on services offshoring, the New EU member states (NMS) have focused increasingly the attention of economists and politicians, as well as the public at large. Particularly in the light of the recent waves of EU enlargement these countries have been considered as highly attractive locations for offshored services both from a European and global perspective. While a fairly large amount of anecdotal evidence documents the NMS high potentialities in terms of services offshoring, academic research on this topic is limited. This paper aims to contribute to this discussion.
Drawing on recent literature on the complex issue of services globalisation, the paper investigates NMS trade and FDI flows in services over the 1995-2007 period to find evidence of enhanced offshoring-related activities in these countries. The focus is on NMS-10, i.e. NMS-12 excluding Cyprus and Malta. Given the shortcomings of available statistical data and instruments for gauging the scale and impact of services offshoring, the paper adopts a three-tier approach based on BoP trade and FDI statistics, complemented by alternative sources of information.
Notwithstanding the caveats associated with this kind of empirical exercise, the paper documents an accelerated pace of offshoring-related activities in the selected NMS, under both forms: international outsourcing and captive offshoring. Its findings show that the fastly growing exports in some individual services categories over recent years, coupled with the ongoing favourable changes in the structure and performance of NMS services trade are largely driven by enhanced offshoring activities hosted by their economies. Further, the paper highlights the NMS capabilities to cope with the challenges raised by the increasingly competitive global offshoring landscape, as measured by competitiveness indicators. Finally, the findings of the paper confirm that current anecdotal information and consulting companies-based projections on NMS growing attractiveness as targets of offshoring decisions by TNC originating both inside and outside EU-15 are widely backed up by available statistical data. The paper is organised in two parts under the same title. See for Part I Romanian Journal of Economic Forecasting, Volume X, No.1, pp. 123-135.

Keywords: globalisation, services, international trade, FDI, New EU Member States
JEL Classification: F02, L80, O52, O57