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steps overcome deficit in service account

steps overcome deficit in service account

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Published by tirazol

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Published by: tirazol on Jul 27, 2010
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Question 5 (c) : Explain three steps that can be taken to overcome the deficit in the
Services Account

There are several steps that can be taken in order to overcome the deficit in the Services Account. The deficit occurs when intangible imports are more than intangible exports. Therefore, in order to overcome the deficit, the three steps that can be taken are 1) reduce intangible imports/increase intangible exports, 2) Training, 3) ICT based education.

The first step is, reduce intangible imports/increase intangible exports. This step is where government should either reduce intangible imports or increase the intangible exports. The context of intangible here is the services for example hotels and restaurants, banking, and so on. Therefore to overcome the deficit, government need to reduce the imports of services from the other country and increase the exports of services outside country. On the ground of this, it will overcome the deficit, as the deficit occurs when intangible imports more than intangible export. For example, if government imports more services, it requires more expenditure rather than export the services as we can gain more revenue. Thus in order to reduce the intangible imports and overcome the deficit, Malaysia will require producing our own high quality services as well as knowledgeable and skilled workers to support those activities, so that government no need to imports the intangible services.

Second step is, throughtraining. It is clearly understood that unskilled workers also will affect towards the increasing of government expenses, as without a skilled workers in some sector such as manufacturing and communication, therefore government need to import more outside services in order to manage this problem. Due to this, definitely the expenses of government will increase and deficit in the service account. Therefore through the training program it possibly could overcome the deficit in services account as the purpose of training is to increase the KSA of workers. Thus through this, Malaysia can produce more knowledgeable and skilled workers that are competent enough to produce a high quality services. On the ground of this, when Malaysia have more skilled workers that will support in producing a high quality services, thus it can reduce the intangible imports as we have a sufficient skilled workers that can support the services activity in various sectors.

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