Services Contribution to value chains: A Case Study of the Egyptian Food Processing Sector

The services sector has been increasingly dominant in most economies. According to the World Development Indicators, the share of services in world GDP was 69 percent in 2016 compared with 53 percent in 1970. This steady growth of the service sector over the years has led many countries to consider both manufacturing and services, as a double engine of growth and Egypt is no exception to that trend. Not only do services have the largest share of Egypt’s GDP (2016 – 55 percent), employing a roughly equal share of its labour force, it is also a sector that is expected to grow further in the future. According to the sustainable development strategy (SDS), the service sector is to reach 57 percent of the GDP by 2030. The importance of the service sector in any economy cannot be overstated. It has an impact on the level of social welfare and quality of life, as well as on the competitiveness of the economy.
Production services are an integral part of the value chain of any product, thus shortcomings in the provision of these services can have serious implications for the efficiency of production, leading to huge losses in competitiveness across the economy. This paper aims at highlighting the role of services in the Egyptian manufacturing sector, with a focus on the food-processing sector. By analysing services in the value chains of three case studies representing the following sub-sectors: agro-industries, dairy and juice, olives and olive oil, this paper shows that inefficiencies in service provision have negatively affected both the performance of the sector, and the ability of the economy to generate employment opportunities by increasing the cost of production and forcing firms to be increasingly
vertically integrated. The paper concludes with specific policy recommendations to turn the service sector from a shackle to a booster of the sector and the economy at large.