The “servicification” of manufacturing is particularly important in the context of the internationalization of production.

Figure 18 shows that about 40 different types of services are involved when a manufacturing firm internationalizes its production (National Board of Trade, 2010). Recent trade in value-added data also suggest that services represent about 30% of the share of value-added in manufacture trade (OECD, 2013a – see Figure 19). Thus, a country cannot be competitive and join GVCs, even in the manufacturing sector, if it does not have efficient domestic services or is closed to the importation of such services. Managing the complexity of the chain and preserving the production standards throughout the chain require a strong coordination that relies on efficient services (e.g., auditors, lawyers, and managers) and the movement of key personnel across borders.

**Table 5. Improving domestic services, infrastructure, and market structure: Policy objectives and performance indicators**

||**Policy objectives**|**Performance indicators**|
|---|---|---|
|**Imp**|**roving access to finance**|•<br>Banking GATS commitment index (USITC, WTI 1.14)<br>•<br>Export credit – insured exposures (WTI 4.5)|
|•|Reforms of the financial sector, including micro-finance, to increase<br>affordability and availability of financial services|•<br>Indicators of financial structure, development and soundness (IMF)<br>•<br>Access to finance (WDI)|
|•|Export credit and trade finance|•<br>Enabling Trade and Global competitiveness indexes<br>–<br>financial market development (WEF GCI 8.01-8.08);|
|**Imp**|**roving other domestic infrastructure, including storage and energy**|•<br>Procedures and time to build a warehouse (WDI)<br>•<br>Time required to get electricity (WDI)|
|•<br>•|Storage infrastructure<br>Reforms pertaining to access, regulation, competition in the field of<br>energy (production and distribution) and other natural resources<br>essential to certain activities (e.g. water in agriculture)|•<br>Energy statistics / Access to electricity (IEA, WDI)<br>•<br>Quality of electricity supply (WEF 2.07)<br>•<br>Power outages in firms / value lost in power outages (WDI)<br>•<br>Electricity cost (WTI 4.6)<br>•<br>Pump price for fuel(WTI 4.6)|
|**Imp**<br>**perf**|**roving business support and the organization, connectivity and**<br>**ormance of markets, including e-commerce**|•<br>Logistics performance index and its indicators – quality of<br>transports and IT infrastructure, international transport costs,<br>logistics competence, trackability and timeliness of shipments,|
|•|Export and investment promotion and incentives|domestic transportation costs (WB, WTI 4.1)|
|•<br>•<br>•<br>•|Analyses and information on markets, opportunities, threats, etc.<br>Marketing, branding, international presence and promotion efforts<br>Sectoral, professional or other forms of associations (e.g. chambers<br>of commerce) and consultations<br>Development of trade corridors, and other regional forms of hard<br>and soft networks (e.g. regional regulatory agency, regional<br>distribution network, etc.)|•<br>Global competitiveness index – business sophistication: extent of<br>marketing, state of cluster development, value chain breadth,<br>control of international distribution production process<br>sophistication, delegation of authority (WEF GDI 11.05-11.09)<br>– goods market efficiency<br>•<br>Value of e-commerce, number of ICT firms, number of secured<br>servers (WDI, ITU, national statistics)|
|•<br>•|Development of regional markets and stocks / boards of trade,<br>price regulation mechanisms<br>Organization of the value-chains and sectors (filières), including<br>storage and distribution channels|•<br>Post-harvest losses (African Postharvest losses Information System)|
|•|Development of e-commerce (e.g. infrastructure, legal framework,<br>protection of data,securityofpayments,etc.)||

Source: Authors based on OECD, 2012a

# • _Other incentives_

Absence of flexibility in domestic laws, or deficiencies in domestic services and infrastructure, sometimes lead countries to offer an offshore status to foreign firms that are part of GVCs and export all or most of their production. Offshore status includes incentives such as tax cuts, reduced administrative and legal constraints, special customs procedures, etc. In the case of special economic zones (SEZs), some dedicated infrastructure and services (e.g., more reliable access to energy or telecommunications, one-stop shops) add to the attractiveness of the zone (see Farole and Akinci, 2011).

While this seems particularly appropriate for within GVC production (imported inputs and exported outputs), the offshore-onshore dualism also has some major drawbacks and raises a number of issues, including questions about the compatibility of some incentives with WTO agreements (Farole and Akinci, 2011). In particular, offshore production creates obstacles to the alignment of the 26