It’s the service sector, stupid!President Lee Myung-bak had back-to-back meetings over two days last weekend with Prime Minister Kim Hwang-sik, all the ministers, deputy ministers and other bigwigs under his administration to find ways to rejuvenate the sluggish economy. Regardless of statistical proof of the recovery, many people aren’t feeling it.
Such a gathering should, of course, be appreciated rather than unappreciated. The problem was the substance. Despite the remarkable size - a total of 88 high-ranking officials - and the significance of the meeting, we were disappointed at what came out of it. The officials came up with trivial solutions, such as a plan to change working hours of government workers from 9 to 6 to 8 to 5. They skipped a more fundamental issue: how to raise the level of our service industries, which still lag behind other advanced economies.
A key to addressing a steep decline in domestic consumption is revitalizing the service industries, which account for 66 percent of our entire workforce and 54 percent of our GDP. Without fully advancing that sector, more jobs will not be created.
That’s why the Lee administration has been pushing for the development of the service industry. Yet no improvement seems to have been made, as we can see by our bottom-ranked productivity among OECD countries. Fields such as wholesale, retail and traditional areas like restaurants and hotels still take up too big a portion of the service sector, while educational, legal, medical and accounting services are still weak.
Basically, the government isn’t very sincere in its grand goal of advancing services. Otherwise, how can the administration explain the awkward situation of the long-touted free economic zones, which should by now be full of foreign hospitals? How can the government account for its failure to introduce medical corporations for investment? If the administration had really intended to push ahead with the service-sector enhancement project, it should have persuaded the National Assembly and addressed conflicts within various ministries.
The administration couldn’t mediate the turf war among various interest groups as seen with a bill aimed at opening the legal and medical markets. It’s still stuck in the Assembly due to resistance from powerful interest groups.
If the administration hopes to rekindle frozen demand, it must get rid of the biggest obstacle of all: numerous regulations of service industries. Only when quality service jobs are created will people feel the trickle-down.