• Harmonized ‘Deregulation · Policy Support · Fostering Human Resources’ will Revive Competitiveness
    2020-01-21 hit 1376

    Harmonized ‘Deregulation · Policy Support · Fostering Human Resources’ will Revive Competitiveness in Service Industries 


    - KITA analyzed service export powerhouses such as Ireland (ICT), Singapore (Medical Service), Japan (Tourism), the UK (Content), etc.-


    It is argued that in order to strengthen service competitiveness in Korea, it is necessary to establish business-friendly environment, consistent policy support, and a system for fostering high-quality human resources.


    The Institute for International Trade of the Korea International Trade Association (President: Shin Seung-Kwan) issued a report titled The Case Studies of Export Powerhouses by Service Industry and Implications which analyzed the success factors of service industry export powerhouses such as Ireland, Singapore, Japan, and the UK.


    Ireland is the world's No. 1 information and communications and computer (ICT) service exporter, with business-friendly environment such as a low corporate tax rate of 12.5 percent and broader R&D investment incentives, making it the outpost for global IT companies to Europe, the Middle East and Africa. The UK enacted the Communications Act in 2003 and started to protect copyrights of independent producers and has dominated more than 40 percent of the global broadcast format market by providing up to 25 percent production tax credits for eight sectors, including film, broadcast, games and theater.


    In contrast, Korea raised the corporate tax to 25 percent last year from 22 percent, and the R&D tax deduction rate varies as tax credit system is different depending on the nature of expenditure. It creates more difficulties in the development of the ICT service industry. The content production tax credit, which is merely 3~10 percent, is applied only to video content such as dramas and movies. In addition, the content industry ecosystem is still immature due to the lack of advance payment and copyright protection of independent producers.


    Singapore has become the world's number one exporter of medical services through the government's bold and consistent policies, including the introduction of a private, for-profit medical corporation system, the opening of the medical workforce market, and the permission of medical corporations’ commercial facilities such as shopping malls. Korea also needs bold policy support such as strengthening the competitiveness of public hospitals by establishing a competition system between hospitals and linking additional services such as shopping and tourism.

    Japan has recognized the tourism industry as a major growth industry since the 2010s and carried out marketing activities utilizing local characteristics through local tourism management organization (DMO), which organically links government, private companies and local residents, and the country’s tourism service exports jumped from 26th in the world to 9th in 2018. On the other hand, Korea lacks local tourism resources and 80 percent of foreign tourists flock to the metropolitan area. More than 60 percent of tourists said they visited Korea for shopping purposes because of poor tourism content and inconsistent policies. As a result, revisit rate of the tourists to Korea was only 38.6 percent, far below that of Japan (59.3%).


    In the case of the United Kingdom, the system for nurturing talents in connection with industrial activities, such as training job seekers as well as employees helped the country to build the foundation to become a content export powerhouse. In particular, the internship system played a major role in fostering high-quality human resources throughout the entire value chain, from content creation, distribution, funding, and to overseas expansion.



    Lee Joon-myung, a senior researcher at the Korea International Trade Association, said, While global service exports grew at an average annual rate of 3.8 percent over the last 10 years since 2008, Korea’s service exports have fallen behind with the growth rate of only 0.8 percent. The researcher added, Korea needs full support at the governmental level. The National Assembly needs to pass the Framework Act on the Development of Service Industry, which has been sitting on the table for nine years now, as soon as possible. Significant deregulation, broad incentives, establishment of dedicated service support agencies, and building human resource development system for each industry are also required.

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