Roundtable Discussions

Contribution of Services in Value Chains and Product Cost: With a Focus on Ready-Made Garments, Engineering and Food Industries, and Agri Crops

Date : 4/27/2016

Speakers : Abdel Hamid Mamdouh and Dr. Abla Abdel Latif

Services plays a highly strategic role in providing inputs to the production of all products, be they goods or services. The backward and forward linkages with other sectors of the economy make the services sector the real "glue" for value chains, be they global or domestic.

This reality is not only true for advanced industries such as ICT equipment or sophisticated cars, but it also holds for the most basic of production operations such as producing a loaf of bread. A recent case-study by the Fung Global Institute in Hong Kong on the value-chain for the production and consumption of bread revealed that services account for 72 percent of the final cost of a loaf of bread.

Many services enter the value chain in a variety of ways. Services are invisible and in many instances customized or bundled with other products (goods or other services) and, therefore, often difficult to cost and easy to overlook in terms of their contribution to competitiveness. At the same time, services are often highly regulated. Policies can impact costs and supply chain configurations in ways that are sometimes not fully appreciated by policy makers and regulators, as well as businesses. They can add avoidable costs if policies are poorly designed or administered.

The purpose of this exercise, as laid out in this note, is to better understand the complex, multifaceted and often overlooked role of services in production, distinction and consumption in order to identify additional sources of efficiency and competitiveness, and consequently, arrive at proposed policy and regulatory reforms.

In context of the above, three roundtables were held that respectively addressed the ready-made garments industry, engineering industries, and food industries and agricultural crops. Each roundtable analysed the results of a survey conducted by ECES to determine the services related to the product’s value chain and the cost thereof. The aim is to reduce the cost of the product through improved economic efficiency of these services and to identify policies and measures that need improvement to achieve this objective.