Establishment of Public-Private Joint 'Service Industry Development TF'... Planning a 5-Year Strategy

'Low Productivity, Current Account Deficit, Export Stagnation' Service Industry Promotion
Legislative Efforts for the Service Industry Development Basic Act

[Asia Economy Sejong=Reporter Kim Hyewon] The government is establishing a pan-ministerial public-private joint consultative body and reorganizing the legal framework to foster the service industry, which is suffering from low productivity, current account deficits, and sluggish exports.

On the 18th, the Ministry of Economy and Finance announced the 'Service Industry Innovation Promotion Strategy' at an emergency economic ministers' meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho.

The core of the strategy is to establish a Service Industry Development Task Force (TF) co-led by the Deputy Prime Minister and private experts to discover innovation tasks led by the private sector and reflect them in the 'Service Industry Development Framework Act.'

The Service Industry Development Framework Act was first proposed in December 2011 and has been pending in the National Assembly for over 10 years. During this time, several bills were submitted, but many pointed out that they failed to reflect structural changes in the service industry, such as the full industrial serviceization and convergence among service sectors.

The service industry significantly surpasses manufacturing in terms of added value and employment creation effects, but growth in the service industry has stagnated over the past decade due to manufacturing-centered existing support policies and regulations on the service industry.

Productivity in the service industry is considerably lower compared to major countries. South Korea's labor productivity in the service industry (as of 2019) stands at $63,900,000, which is only 72.2% of the OECD average ($88,600,000). It ranks 27th out of 35 OECD countries.

The labor productivity of the service industry relative to manufacturing has continuously declined since 2015, widening the productivity gap between manufacturing and service sectors. For small and medium enterprises, labor productivity is only about half (49.7%) that of large corporations.

South Korea's service exports amount to around $100 billion annually, ranking 16th globally. However, compared to goods exports, service exports have stagnated. The service trade deficit has persisted for several years, though the deficit has narrowed temporarily due to improvements in travel and transportation balances following COVID-19.

The Service Industry Development TF, scheduled to launch this month, will play a role in discussing and coordinating major policies related to the service industry, including measures to revitalize service exports to improve the current account balance. Meetings will be held once every six months.

Under the TF, three functional working groups and five industry-specific working groups will be established. These working groups will identify and specify key tasks such as regulatory improvements, tax and budget support. Meetings will be held as needed, and discussion results will be shared with the general coordination group. The goal is to announce the Service Industry Innovation Strategy (a five-year plan from 2023 to 2027) by March next year. Prior to that, short-term tasks to be pursued within one to two years will also be selected.

Efforts to reorganize and legislate the Service Industry Development Framework Act will be strengthened. The revised framework act is expected to include provisions for establishing a foundation for service industry convergence. A 'Service Industry Convergence Research and Development Innovation Support Group,' a network of service industry research institutions, will be established.

Additionally, to receive and handle service companies' difficulties and regulatory improvement tasks in a one-stop manner, a public-private joint 'Service Industry Ombudsman' will be established at the Korea Chamber of Commerce and Industry. As part of building a conflict resolution system in response to the emergence of new businesses, a 'Conflict Resolution Organization' will also be established under the Service Industry Development Committee.

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