The Bank of Korea: "Korea's Intangible Asset Investment Ratio at 8%... Need to Expand Intangible Investment in the Service Sector"

[Asia Economy Reporter Eunbyeol Kim] Although the proportion of intangible asset investment in Korea is steadily increasing, there is a concern that it is overly concentrated on innovation-type intangible asset investments such as research and development (R&D), indicating a need to change the investment structure.

Seonyeong Jeong, Associate Research Fellow at the Macroeconomic Research Division of the Bank of Korea Economic Research Institute, analyzed the role of intangible assets in the era of the Fourth Industrial Revolution and its implications in the report "The Rise of the Intangible Economy" (BOK Issue Note) on the 2nd.

The report evaluated that "Korea is also transitioning from a tangible asset-based production structure centered on facilities and construction investment to an intangible asset-based production structure," adding, "Among these, the proportion of intangible investment in technology and science fields such as R&D is increasing."

The proportion of intangible asset investment in Korea rose from 7.7% of Gross Domestic Product (GDP) during 2001?2005 to 8.3% during 2011?2015. Investment in science and technology fields such as R&D accounted for the highest share at 44.2% (average from 2001 to 2015). Korea’s intangible asset investment ratio exceeds the average of the 10 major European countries (7.8%) but remains lower than that of the United States (10%) and Sweden (11%).

The report explained that this expansion of intangible investment contributes to economic growth and productivity improvement by combining with information and communication technology. However, it pointed out the need to diversify investments as intangible investment is concentrated in R&D. It emphasized the necessity to expand intangible investments in high-productivity service sectors such as finance and insurance and professional scientific and technical services to raise the overall level. Diversifying intangible investments is expected to enhance corporate competitiveness.

Meanwhile, the report added that as intangible asset investment expands, there are also negative effects, requiring policy responses in this area. The report recommended, "Despite the positive aspects of expanding intangible assets, macroeconomic side effects such as the strengthening of market dominance by large corporations, decline in corporate dynamism, and widening economic and social inequality are anticipated, so research on policy measures to minimize these effects should accompany this."

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