"South Korea's Export-Led Growth Centered on Manufacturing Faces Limits, Service Industry Development Needed"

As South Korea's economy, long centered on manufacturing-led export growth, recently faces limitations, there are calls to foster the service industry, which has greater added value and job creation effects, going forward.

원본보기 아이콘

On the 12th, the Korea Economic Association held the inaugural meeting of the 'Service Industry Competitiveness Enhancement Committee' at the FKI Tower Conference Center in Yeouido, Seoul. The meeting was held with the invitation of the 'Meeting for Strengthening the Global Competitiveness of the Korean Economy,' composed of lawmakers from both ruling and opposition parties.

Since its founding in 1961, the Korea Economic Association has launched the Service Industry Committee for the first time. Through this committee, it plans to enhance the competitiveness of the underdeveloped service industry and propose various policies to the government and related institutions.

The committee is chaired by Kim Sang-hyun, Vice Chairman and CEO of Lotte Shopping, with 15 operating members including Jung Ji-young, CEO of Hyundai Department Store; Jung Ho-seok, CEO of Hotel Lotte; Lee Jae-sang, CEO of HYBE; Choi Jung-ho, Vice President of Korean Air; and Cho Young-seok, Vice President of CJ. Four advisory members, including Professor Lee Dong-il of Sejong University, also support the committee.

At the meeting held under the theme of "Tasks for Fostering the Service Industry," Chairman Kim emphasized in his opening remarks, "Our economy has reached the limits of the manufacturing-centered export-led growth strategy due to the expansion of protectionism," and stressed, "We must nurture and develop the service industry, which has high added value and job creation effects, as a future new growth engine."

In fact, among business circles and experts, there is an analysis that since the 2008 global financial crisis, the spread of protectionism, the slowdown in the growth rate of global trade volume, and the global economic growth rate have created an unfavorable environment for South Korea's economy, which is centered on exports and manufacturing. The committee agreed that a breakthrough must be found through the service industry. According to the 'Value-added Induction Coefficient' compiled by the Bank of Korea in 2020, the service industry recorded 0.89, higher than the 0.67 recorded by manufacturing. The employment induction coefficient also showed that when 1 billion KRW is invested, 8.62 jobs are created in the service industry, which is higher than the 4.74 jobs created in manufacturing.

Chairman Kim emphasized, "Policy support for the service industry should be strengthened to the level of manufacturing, and regulations should be eased to the level of advanced countries to promote corporate investment." He also urged the prompt enactment of the 'Basic Act on the Development of the Service Industry' to establish a systematic support system, including the training of service industry personnel. This bill was proposed by the government during the 18th National Assembly but has remained pending without passage up to the 22nd National Assembly.

Park Jung-soo, Senior Research Fellow at the Korea Institute for Industrial Economics and Trade, said, "Our service industry needs to resolve structural problems centered on small-scale and low value-added businesses," adding, "Capabilities are required to lead the future of the service industry by integrating new business models such as artificial intelligence (AI), automation, and robotics technology." He also argued, "For the service industry to lead the leap of the Korean economy, it is necessary to improve the public's undervaluation perception of the service industry and for the government to provide active support."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.