Martial Arts: "The 'Basic Act on Service Industry Development' Must Be Passed Quickly"

[Asia Economy Reporter Hwang Yoon-joo] The Korea International Trade Association (KITA) has urged the prompt passage of the Service Industry Development Framework Act, which has been pending in the National Assembly for nine years, to strengthen South Korea's service competitiveness. The association explained that once the bill is enacted, it will enable consistent policy support and the establishment of a system for nurturing high-level talent.

The KITA International Trade and Commerce Research Institute revealed this through the report "Analysis of Successful Cases of Service Industry Export Powerhouses and Implications," which analyzed the success factors of service industry export powerhouses such as Ireland, Singapore, Japan, and the United Kingdom.

According to the report, Ireland has developed into the world's top exporter of Information and Communication Technology (ICT) services by leveraging a corporate tax rate as low as 12.5%, broad R&D investment incentives, and a business-friendly tax environment. It has become a foothold for global IT companies in the European, Middle Eastern, and African markets. The UK enacted the Communications Act in 2003 to protect copyrights of independent producers and offered up to a 25% production cost tax credit in eight fields including film, broadcasting, games, and theater, capturing over 40% of the global broadcasting format market.

In contrast, South Korea raised its corporate tax rate from 22% to 25% last year, and the R&D tax credit rates vary depending on the nature of the expenditure, which has hindered the development of the ICT service industry. The content production tax credit, ranging from only 3% to 10%, applies solely to video content such as dramas and films, excluding games, which are a major export sector. Additionally, the guarantee of advances and copyrights for independent producers is insufficient, leaving the content industry ecosystem immature.

Singapore became the world's top medical service exporter through bold and consistent government policies such as introducing private for-profit medical corporations, opening the medical labor market, and allowing commercial facilities like shopping malls within medical corporations, thereby improving service efficiency and creating new added value.

Japan has recognized the tourism industry as a key growth sector since the 2010s and has implemented marketing that highlights regional characteristics through Destination Management Organizations (DMOs) that organically connect the government, private companies, and local residents. This effort propelled Japan from 26th place in global tourism service exports in 2008 to 9th place in 2018.

In contrast, South Korea lacks regional tourism products, with 80% of foreign tourists concentrated in the Seoul metropolitan area. Tourism content is sparse, and related policies have not been consistently implemented. Over 60% of tourists reportedly visit Korea primarily for shopping. Consequently, the revisit rate of tourists is only 38.6%, far below Japan's 59.3%.

The UK’s system of talent development linked to industry sites, including education for job seekers and current employees, laid the foundation for its strength in content exports. In particular, the apprenticeship system played a significant role in nurturing high-level talent across the entire value chain?from content creation to distribution, financing, and overseas expansion.

Senior Researcher Lee Jun-myung of KITA stated, "While global service exports grew at an average annual rate of 3.8% over the past decade since 2008, our service exports grew by only 0.8%, indicating a lag in service competitiveness." He added, "It is necessary to promptly pass the Service Industry Development Framework Act and provide comprehensive government support, including groundbreaking deregulation, broad incentives, establishment of dedicated service support institutions, and the creation of industry-specific talent development systems."

This content was produced with the assistance of AI translation services.