Gov’t may push service industryFinance Minister Hyun Oh-seok has implied that the government will come up with a stronger policy package on the service industry in the upcoming investment promotion plan, citing the case of eased regulations on foreign investment in the service sector in China at a ministerial economic meeting yesterday in Seoul.
“The fourth investment promotion plan will be focused on enhancing the competitiveness of the country’s service industry,” said Hyun.
The minister used China’s newest free trade zone as an example. “Even though it is a socialist country, China has recently relaxed regulations radically in order to open wide its service sector to the world and promote competition,” he said.
China allows foreign companies to set up joint ventures with local businesses and establish education institutes and vocational schools for profit, especially in the Pilot Free Trade Zone in Shanghai, according to the ministry. The new free trade zone opened Sept. 29, granting approval to 36 businesses.
The Chinese government even allows foreigners to independently invest in medical institutes, it added.
Since the beginning of the Park Geun-hye administration, there have been some moves to pursue a shift from manufacturing to the service industry, to aid recovery and achieve 70 percent employment.
The government also announced a plan in July to boost the nation’s service industry, with a focus on eliminating discrimination against small providers in terms of tax incentives, financial support and regulations. But the plan didn’t have a measure to attract foreign capital into the service sector.
The government has held three meetings to discuss measures to promote foreign investment, but a measure to ease regulations on foreign investors has been blocked by lawmakers since May.
A Korean company has to hold a 100 percent stake in a joint entity with foreign capital. The pending legislation would ease the requirement to 50 percent, which the government estimates would increase foreign investment by 2 trillion won ($1.86 billion) annually.
Meanwhile, the Korea Institute for International Economic Policy released a report on China’s free trade zone, arguing that Korea’s free economic zones in Jeju, Busan and Incheon will face fierce competition with Chinese rivals in terms of trade volume.
“The Xi Jinping government is attempting to make a shift in China’s current economic development model from one that is focused on manufacturing to services,” the report said.
According to the report, the Chinese government has lifted restrictions on law firms, tourism, investment management and construction, enabling foreign businesses to set up joint ventures with less capital.
BY SONG SU-HYUN [firstname.lastname@example.org]