As South Korea’s Framework Act on the Development of the Service Industry has remained stalled in the National Assembly for years, major economies overseas have accelerated efforts to foster service industries and quickly strengthen competitiveness. Analysts say passage of the bill could give South Korea a chance to shift its service-sector policy.
In the United States, cloud computing, artificial intelligence and platform-based services have expanded rapidly on the back of private-sector-led research and development. Among the “Magnificent Seven” companies driving U.S. stock markets, Microsoft, Alphabet, Amazon and Meta are software-based knowledge service firms. Nvidia and Apple also have strong service-sector characteristics because their business models center on design and platforms, the report said, underscoring a broader shift in which services, not manufacturing, are leading global technology innovation.
Japan, meanwhile, adopted “service industry productivity innovation” as a national strategy in 2013 and has steadily pursued policies to modernize services and raise productivity. As part of that effort, it overhauled regulations to bring home-sharing businesses such as Airbnb into the formal system. Singapore institutionalized new industries to expand markets, including integrating the ride-hailing service Grab into the existing taxi framework.
Service industries account for a large share of output in advanced economies. The World Bank said services make up 77.6% of U.S. gross domestic product. Japan stands at 69.8% and Germany at 64.0%, while the average across the Organization for Economic Cooperation and Development is above 70%.
South Korea’s service-sector share is 57.5%, lower than in major advanced economies, reflecting a growth strategy long centered on manufacturing such as autos and shipbuilding. South Korea ranks 26th out of 38 OECD countries in service-industry labor productivity, the report said, citing lagging labor productivity and a lower share of R&D investment that has reinforced a low value-added structure.
If enacted, the framework law is expected to enable a policy system that includes long-term planning for the service sector, along with fiscal and tax support and regulatory improvements. The report said policymakers also expect gains from linking services with emerging industries, including an “AI transformation” (AX), expanded data use and more advanced digital services, potentially improving productivity and boosting exports of high value-added services.
The Korea Enterprises Federation said rising labor costs and heavier fixed-cost burdens have weakened service companies’ capacity to invest. “If a framework for policy support is established through enactment of the basic law, it is expected to increase companies’ investment capacity and lead to a virtuous cycle of expanded employment and service innovation,” it said. The group added that with many competitive areas such as digital and content, a policy coordination system could support both qualitative and quantitative export growth.
The report also cited expected benefits in strengthening competitiveness across key service fields including health care, education, content and logistics. If industry convergence and data-driven service expansion accelerate, it said, South Korea could move away from a manufacturing-centered growth structure toward a service-led model.
Still, it said results will depend less on passage itself than on implementation, warning that the impact could be limited without effective long-term plans, sufficient fiscal support and faster regulatory reform.
Kim Jeong-sik, an emeritus professor of economics at Yonsei University, said the service industry spans very different areas such as information and communications and tourism, making one-size-fits-all policies less effective. “A more detailed support strategy that reflects the characteristics of each industry is needed,” he said.
* This article has been translated by AI.
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