Increasing tourism is keyKorea’s service account deficit hit $18.7 billion last year. That is a record high, and worse is the fact that the deficit has been growing for eight straight years. The outcome is in large part due to the money Koreans spent overseas either for trips or study, which has snowballed in recent years.
The travel account shortfall, including studying abroad, amounted to $12.9 billion, which is two-thirds of the entire service account deficit.
For this reason, the current account surplus more than halved to $6.1 billion last year from $15 billion a year earlier. That indicates that Korea has poured the money it earned through exports into overseas trips and study.
With the Korean won retaining its strength, the trend is expected to last for the time being. Given that the pileup of account deficits in the mid-1990s caused the currency crisis, the service account deficit record for last year is more than worrisome.
Koreans spent $13.8 billion last year on trips abroad. On the other hand, foreign tourists spent a mere $5.3 billion here. That is in a way a natural outcome, given that Korea is not particularly entertaining, nor does it have low consumer prices.
Education is another sector that makes Koreans spend an immense amount of foreign currency. Students leaving for foreign countries for short-term or long-term education surpassed 100,000 last year, spending $4.5 billion. The students are not only leaving for developed countries but also small nations in Southeast Asia, which were previously less popular. It would have not happened if Korea’s public education system was adequate.
The medical sector is also in trouble. Koreans paid about $100 million last year in overseas medical institutions, according to industry data. But foreigners rarely visit Korea for medical treatment.
Thailand, for example, attracts 1.25 million international patients annually because the country allows hospitals to be run by private corporations.
In Korea, on the other hand, private medical entities are mandated to take the form of non-profit organizations. The are banned from reinvesting any profit into other businesses.
While the manufacturing sector created 670,000 jobs over the past 15 years, the service sector created 10 times more, 6.4 million.
The nation should foster the service industry, which will be bolstered by opening up tourism, education and medical sectors, and lift unnecessary restrictions.