Why the services revolution?
Services drive growth in nearly 80% of countries. They transform economies – leading to higher growth, more jobs, more equal and inclusive societies.
SERVICES IN OUR ECONOMIES
All countries see their share of services grow
Since 1995, the share of services has grown everywhere – no matter the income level. Interestingly, services now dominate in the GDP share of developing countries, not just developed countries.
SERVICES IN GDP (%)
SERVICES IN EMPLOYMENT (%)
World
World
Developed countries
Developed countries
Developing countries
Developing countries
Least developed countries
Least developed countries
1995
2019
SERVICES IN GDP (%)
World
Developed countries
Developing countries
Least developed countries
SERVICES IN EMPLOYMENT (%)
World
Developed countries
Developing countries
Least developed countries
1995
2019
CONNECTED SERVICES
Faster growth, more jobs
FASTER GROWTH
in value added
Connected services
Agriculture
Other services
Manufacturing
Connected services
Agriculture
Other services
Manufacturing
2005 – 2018 yearly average
RISING EMPLOYMENT
in low income countries
Connected services
Other services
Manufacturing
Agriculture
Connected services
Other services
Manufacturing
Agriculture
2007 – 2019 yearly average
SERVICES IN VALUE CHAINS
Value chains are fragmented, and services are the connective tissue
How do you reignite growth? Traditionally, policymakers turned to manufacturing. But this graph shows that manufacturing captures much less value in the 2020s than in the 1970s.
Today, the greatest value is in the parts of the value chain that are intensive in services – at the beginning and the end.
Services are also the connective tissue of these value chains.
They are more embedded at each stage in the chain. Because today’s value chains are decentralized, the four key services of finance, ICT, transport/logistics, and business/professional services provide a greater contribution at each stage.
For example, manufacturers purchase research, design, sales and marketing services. Transport is essential to get parts delivered to factories and to deliver agricultural produce without wastage. Finance is often essential at each step along the way for decentralized providers.
WHERE SERVICES ADD MOST VALUE: BEGINNING AND END OF CHAINS
Source: Baldwin, R., T. Ito, and H. Sato (2014). ‘Portrait of a Factory: Production Network in Asia and its Implication for Growth – The “Smile Curve.”’ Joint Research Program Series No. 159, Institute of Developing Economies, Japan External Trade Organization (IDE-JETRO), Chiba.
How do you reignite growth? Traditionally, policymakers turned to manufacturing. But this graph shows that manufacturing captures much less value in the 2020s than in the 1970s.
Today, the greatest value is in the parts of the value chain that are intensive in services – at the beginning and the end.
Services are also the connective tissue of these value chains.
They are more embedded at each stage in the chain. Because today’s value chains are decentralized, the four key services of finance, ICT, transport/logistics, and business/professional services provide a greater contribution at each stage.
For example, manufacturers purchase research, design, sales and marketing services. Transport is essential to get parts delivered to factories and to deliver agricultural produce without wastage. Finance is often essential at each step along the way for decentralized providers.
WHERE SERVICES ADD MOST VALUE: BEGINNING AND END OF CHAINS
Source: Baldwin, R., T. Ito, and H. Sato (2014). ‘Portrait of a Factory: Production Network in Asia and its Implication for Growth – The “Smile Curve.”’ Joint Research Program Series No. 159, Institute of Developing Economies, Japan External Trade Organization (IDE-JETRO), Chiba.
How do you reignite growth? Traditionally, policymakers turned to manufacturing. But this graph shows that manufacturing captures much less value in the 2020s than in the 1970s.
Today, the greatest value is in the parts of the value chain that are intensive in services – at the beginning and the end.
Services are also the connective tissue of these value chains.
They are more embedded at each stage in the chain. Because today’s value chains are decentralized, the four key services of finance, ICT, transport/logistics, and business/professional services provide a greater contribution at each stage.
For example, manufacturers purchase research, design, sales and marketing services. Transport is essential to get parts delivered to factories and to deliver agricultural produce without wastage. Finance is often essential at each step along the way for decentralized providers.
WHERE SERVICES ADD MOST VALUE: BEGINNING AND END OF CHAINS
Source: Baldwin, R., T. Ito, and H. Sato (2014). ‘Portrait of a Factory: Production Network in Asia and its Implication for Growth – The “Smile Curve.”’ Joint Research Program Series No. 159, Institute of Developing Economies, Japan External Trade Organization (IDE-JETRO), Chiba.
DIGITAL SOCIETIES
Digitalization has accelerated, especially since COVID-19
Firms use digital technologies to compete. Lockdowns encouraged economies to rely more on digital tools. Some say that the digital revolution expected in a decade happened over several months at the start of the pandemic. An obvious example was e-commerce, where firms turned to online access and used digital skills to deliver services virtually, rather than in stores or in person.
The four connected services are all digitally intensive, especially the ICT and finance sectors. Value chains also rely on transport and business and professional services, which have built up their digital capacities in order to compete.
CONNECTED SERVICES ARE DIGITAL AND ADD VALUE TO EXPORTS
Source: ITC, based on OECD Structural Analysis database (STAN) and Trade in Value Added (TiVA) database.
Firms use digital technologies to compete. Lockdowns encouraged economies to rely more on digital tools. Some say that the digital revolution expected in a decade happened over several months at the start of the pandemic. An obvious example was e-commerce, where firms turned to online access and used digital skills to deliver services virtually, rather than in stores or in person.
The four connected services are all digitally intensive, especially the ICT and finance sectors. Value chains also rely on transport and business and professional services, which have built up their digital capacities in order to compete.
CONNECTED SERVICES ARE DIGITAL AND ADD VALUE TO EXPORTS
Source: ITC, based on OECD Structural Analysis database (STAN) and Trade in Value Added (TiVA) database.
Firms use digital technologies to compete. Lockdowns encouraged economies to rely more on digital tools. Some say that the digital revolution expected in a decade happened over several months at the start of the pandemic. An obvious example was e-commerce, where firms turned to online access and used digital skills to deliver services virtually, rather than in stores or in person.
The four connected services are all digitally intensive, especially the ICT and finance sectors. Value chains also rely on transport and business and professional services, which have built up their digital capacities in order to compete.
CONNECTED SERVICES ARE DIGITAL AND ADD VALUE TO EXPORTS
Source: ITC, based on OECD Structural Analysis database (STAN) and Trade in Value Added (TiVA) database.
ABOUT US
The International Trade Centre is the joint agency of the World Trade Organization and the United Nations. We promote trade-led growth in developing countries.
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Copyright: International Trade Center, unless otherwise indicated.
ABOUT US
The International Trade Centre is the joint agency of the World Trade Organization and the United Nations. We promote trade-led growth in developing countries.
SHARE THIS PAGE