FKI calls for red tape to be cut to bolster services

The Korean government should aggressively deregulate the services sector and designate zones for such promising sectors as medicine, tourism and cultural content, according to the Federation of Korean Industries (FKI) on Monday.

The lobbying group representing conglomerates said in a report that regulations on service industries are 10 times as complicated as for manufacturing, even after the government in August 2014 named seven service sectors that could create jobs and promised to support them. Those sectors included health and medicine, tourism, education, finance, software, cultural content and logistics.

But a bill that would make possible remote medical treatments, for example, has been stalled since 2004 because of opposition from doctors. Another bill that would allow non-pharmacists to run pharmacies has been stalled for 13 years.

The FKI said excessive regulations, a relatively small domestic market and lack of research and development were key obstacles to growth in services in Korea.

Korea has a relatively small population at 50 million and its per capita gross national income has remained at $20,000 for a decade. Both the public and private sectors are reluctant to set aside a large sum of their revenue for research and development. The government’s R&D budget for the service sector is a mere 0.5 percent of its total for research. The private sector’s spending on R&D for services ranks at the bottom of OECD members.

The FKI proposed the government designate seven different zones to specialize in different service sectors. Regulations could be lifted in the special zones.

“Each past government tried to foster services, and the biggest reason for their failures is regulations,” Yoo Hwan-ik, head of the industry research division at the FKI, said. “Activation of service industry special zones will help industries that have fallen behind global standards to eventually contribute to the national economy.”

Japan and China, neighbors also known for tight regulations on services, have introduced such a system in recent years. In 2013, Japan designated the Kansai region as a special medical zone, and the quality of medical services has improved in such a short time. Osaka University Hospital, which is in the special zone, has been treating patients with the latest techniques, such as a cure for ovarian cancer approved overseas but not by the Japanese government.

China has this year named Beijing as a service industry regulations-free zone to be effective until 2018 so that the capital can attract advanced companies in medicine, finance, culture and education. The world’s No. 2 economy was notorious for barring the entry of foreign companies into its services sector, including insurance and culture.

The FKI also noted that the government should prioritize measures to draw more foreign tourists. It recommended that Korea join hands with China and Japan to launch a joint tourism organization, run a visa waiver program for Chinese tourists and build a Ferris wheel along the Han River that could become a landmark tourist attraction like the New York Wheel or the London Eye.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]