equity limits in the telecom sector; currently the foreign equity limit is 70 percent for network facilities providers and 100 percent for applications service providers. The limit was a more relaxed 70 percent in Vietnam, but foreign majority control required government approval, and in Thailand foreign majority owned or controlled providers could only offer services on a resale basis. In the context of the TPP negotiations, Vietnam has promised to relax or eliminate foreign equity restrictions over the same time frame. A number of countries allowed full foreign ownership in private companies, but restricted foreign ownership in state‐owned telecom operators. Thus, the Philippines did not allow acquisition of a state‐owned entity, whereas Cambodia and Lao PDR allowed only a minority foreign share in state entities. In Vietnam, the state held a dominant share in telecommunications service providers with network infrastructure. However, in the context of the TPP, Vietnam has pre‐committed to further liberalization.

Transportation services were relatively restricted in developing East Asian countries as they were in other parts of the world. Thailand, Vietnam, Philippines, and Malaysia had restrictions on foreign ships carrying government cargo but no limitations on private cargo. On commercial presence (mode 3), for the types of transport covered by the survey (maritime, air, road, and rail), the majority of developing East Asian countries mentioned that the control must be held by local companies. In air transport, all ASEAN member states, including the developing East Asian countries (except Mongolia), signed the ASEAN Multilateral Agreement on Full Liberalization of Air Freight and Air Passenger services. It was difficult to assess how much more openness the regional air services agreements offered beyond the existing Bilateral Air Services Agreements (BASAs).

# **ii. Services openness and productivity**

Research on several developing countries offers examples of the significant impact of openness to services on manufacturing productivity. Reforms in these countries visibly transformed services sectors, with greater openness and improved regulation leading to dramatic growth in domestic and foreign investment. Local manufacturing firms were no longer at the mercy of inefficient public monopolies but could now source services from a wide range of domestic and foreign providers operating in an increasingly competitive environment. As a result, they had access to better, newer, more reliable, and more diverse business services. These improvements enhanced firms’ ability to invest in new business opportunities and better production technology, to exploit economies of scale by concentrating production in fewer locations, to efficiently manage inventories, and to coordinate decisions with suppliers and customers.<sup>13</sup>

> 13 Several studies show that access to low‐cost and high‐quality (domestic or foreign) producer services can promote productivity and economic growth (Hoekman and Mattoo 2008). Arnold et al. (2016) collected detailed information on the pace of reform across Indian services sectors, with a focus on entry and operational restrictions. The results suggest that procompetitive reforms in banking, transport, insurance, and telecommunications boosted the productivity of both foreign and locally owned manufacturing firms. Using firm‐ level data for the Czech Republic for 1998–2003, Arnold, Javorcik, and Mattoo (2011) find a positive effect on the productivity of domestic firms in downstream manufacturing as a result of services sector reforms leading to greater FDI. Using the annual manufacturing survey of Chilean firms, Fernandes and Paunov (2012) find a positive

28