Service sector as a massive job creator

“The government has tried to modernize the medical industry over the past decade but the result is only wasteland.” (Jeong Ki-taek, a professor at Kyung Hee University in Seoul)

“We have a long way to go in developing the service industry in a country that took five years to sell cold drugs at a supermarket.” (Choi Byeong-il, director of the Korea Economic Research Institute)

Hosted by the think tank, a seminar on creating a "big bang" in the service industry for job creation was held at the Korea Chamber of Commerce and Industry in downtown Seoul Monday. Participants lamented about the government’s lackluster policy on the service industry over the past decade. While low-value service industries such as restaurants, retail and hospitality have fierce competition, high value-added service sectors such as medicine, education, law and contents face entry barriers and remain uncompetitive. Despite many talented people, the latter does not create enough quality jobs.

Singapore started developing its medical industry in the early 2000s as Korea did, and Shanghai is working hard to attract foreign hospitals and patients. In Korea, however, the site for an international hospital in Songdo near Incheon and a healthcare town in Jeju Island remain idle. The country managed to lay the foundation for a for-profit hospital for foreigners this year. The added value and jobs in the education service industry are generated mostly from the private sector, not the public. Korean law firms, which attract the nation`s best and brightest, remain in their infancy with just 102 staff dispatched to 15 countries. The contents industry accounts for less than 1 percent of Korea’s exports because of the heavy concentration in games and Asia.

The former Roh Moo-hyun administration and the incumbent Lee Myung-bak government tried to foster the service industry over the past 10 years, but domestic productivity in the sector remains the worst among developed economies. Park Geun-hye, the presidential candidate of the ruling Saenuri Party, pledged to foster the service industry, saying, “I’ll put the service industry at the center of growth engines.” Her main opponent, Moon Jae-in of the main opposition Democratic United Party, said, “I’ll legislate a framework act for the development of the service industry.” Both candidates apparently made such pledges with the 17 million workers of the service industry in mind, but no fundamental solution eliminates entry barriers and backlash from special interest groups.

If the service industry is perceived as a domestic one, conflicts between interest groups will be inevitable. Regulations should be eased and players in the service sector should be further specialized and increased in size to generate global demand and create a new market. Korea needs an ecosystem of the service industry, which the rich in Shanghai can send their kids to Korea for study, sightseeing and medical treatment. Byeon Yang-gyu, a fellow at the Korea Economic Institute, said, “By 2020, Korea can generate 348,000 jobs in education, legal services and contents,” adding, “It needs a regulation-free zone for the service industry.” This is simply impossible unless regulations in the industry are removed and market competition and innovation are allowed.