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[Editorial] Service Sector Reform Is a Must

Posted May. 09, 2009 17:27,   


The government presented yesterday plans to develop nine service sectors: education; clothing; medical care; logistics; broadcasting and communications; content providing businesses; consulting; design; and information technology. Such high value-added fields can create jobs and improve the service account. Service sector reform will greatly raise Korea`s global competitiveness, laying the groundwork for future growth.

The plan will provide the sectors with the same tax incentives and financial support as manufacturing, spelling out detailed measures for each area. Regulations will be adjusted to smooth the way for the healthcare industry to provide diet and tailored workout programs. Foreign educational institutions will be allowed to send surplus funds home. Competition will also be facilitated among program providers supplying content to broadcast companies.

Discriminatory regulations remain, however. The government has yet to resolve important issues, such as establishing for-profit hospitals, allowing convenience stores to sell over-the-counter medicines, and opening medical information to the public. The holdup is due to differing opinions among ministries and opposition from special interest groups. The plan is not the end of reform but a start, so the government should identify and resolve additional problems hindering the advancement of the service sectors.

Manufacturing and the service industry are the two main pillars of the modern economy. The service industry accounts for 57 percent of the Korean economy’s added value, the lowest among member countries of the Organization for Economic Cooperation and Development, whose average is 72 percent. If no action is taken, a global recession will undermine both exports and domestic consumption, as evidenced by the economic crisis.

Service sectors play a critical role in creating jobs as well. According the Bank of Korea, one billion won (802,600 U.S. dollars) in demand for the service industry creates 18.4 jobs, more than manufacturing (10.1) and construction (16.6). The development of the service industry is a prerequisite for the transformation of the country`s export-oriented economy into one driven by both exports and domestic consumption.

The development of the service industry is only possible, however, when the government overcomes opposition from special interest groups, who fear losing their vested interests when reform measures are implemented. The government should tide over the opposition by accurately informing the public of the pros and cons. For their part, the ruling and opposition parties must approach the issue, which is directly linked to the country’s future, from the perspective of national interest, not political interest, and promptly pass relevant bills at the National Assembly.