SEJONG, Feb. 7 (Korea Bizwire) — The government said Wednesday that it will seek drastic deregulation and greater spending on research and development (R&D) to raise service sector competitiveness and find a new growth engine.
The nation’s service sector needs to be transformed through innovative growth driven by policy backup, thus creating more quality jobs, the finance ministry said.
South Korea’s manufacturing sector, directly affected by exports, accounted for nearly 30 percent of the country’s gross domestic product (GDP) during the 2010-2015 period. However, the sector’s employment rate has hovered around 17 percent in recent years, lagging far behind its GDP contribution, previous government data showed.
The service industry, on the other hand, has been strengthening its presence in the economy, hiring 70 percent of the country’s total workforce in 2015.
South Korea’s R&D investment in the service industry accounted for only 8.6 percent of the total spending in 2016, compared to Germany with 13.2 percent in 2013 and Japan with 12.4 percent in 2014.
According to the finance ministry, the government has earmarked 773 billion won (US$716 million) in R&D for government service this year, and the figure will rise to 5 trillion won over the next five years.
The ministry said the increased service sector R&D spending is expected help private firms mark up their services R&D spending as well.
The ministry said the government will also give higher tax rewards and R&D incentives to the service sector in an effort to transform the nation’s manufacturing-oriented economy.
The software, medicine and tourism industries that are considered new growth engines will be subject to the government R&D plan, the ministry said.
During an economy-related ministers meeting, Finance Minister Kim Dong-yeon said up to 120,000 startups are expected to be launched this year, which will help create jobs for more young people.
“The government will continue its move toward tailored deregulations and seek ways to clear obstacles,” the policymaker said.