Fostering the development of competitive service sectors has great potential to enhance overall competitiveness and to contribute to the convergence process in middle-income countries. They can help create jobs and – with their relatively low resource intensity – drive inclusive, sustainable development. Rapid progress in ICT has allowed economies of scale in the production of most services and spillover effects to be realised. The first section endeavours in particular to show that services can contribute to the movement towards convergence in that they help increase consumption, complement manufacturing, and are increasingly tradeable. Sustained competitiveness in services can be achieved only through higher productivity and efficiency. The second section of this chapter shows that while emerging countries’ productivity levels in some services are still considerably lower than those of the advanced economies, they are catching up. The third section identifies policy options to develop competitive service sectors.