Gov’t says services in Korea need an upgrade

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Gov’t says services in Korea need an upgrade

The government will invest 5 trillion won ($4.6 billion) over the next five years in research and development of the services sector.

The goal is to upgrade the sector, heavily dependent on lodging and restaurants, to more tech-based services by encouraging fourth industrial revolution technologies, including big data and artificial intelligence.

This will include development of core technologies such as blockchain and autonomous vehicles to bring them much closer to the level of advanced countries by 2022. The announcement was made Wednesday during an economics-related ministers meeting led by Finance Minister Kim Dong-yeon.

Although he didn’t go into details, the Finance Minister said that the government will not just fund R&D as it did in the past because it wants to change the way it supports industries. One of the key changes that Kim cited was extending the time for which R&D is funded.

“R&D [in the past] faced limitations in generating innovation or securing the core foundation of innovative growth despite investments,” said Kim. He stressed that regulations have held back new businesses being created with the advancement of technologies.

While services in other advanced countries have gone into new businesses with the help of disruptive technologies, for instance, shared economy services such as Airbnb and Uber as well as remote medical services and digital health management, Korea’s services sector seems stuck in the past of wholesale, retail, lodgings and restaurants.

Starting this year, the government will spend 773.4 billion won on research in services, a 16.4 percent increase compared to a year ago. The government said it will be providing incentives such as tax breaks to encourage the private sector to invest more heavily in services sector R&D.

According to the government, the private sector’s R&D investment in services as of 2016 only accounted for 8.7 percent of total investment. This is far short of 12.4 percent in Germany, 29.9 percent in the United States, 12.1 percent in Japan and 46.4 percent in France. One measure under consideration is lowering the requirements of companies seeking tax benefits for setting up R&D centers.

Additionally the government will offer tax benefits to companies that develops new technologies that create new services such as in the sharing economy in lodging and digitalized health management. Also it is considering supporting R&D on using virtual and augmented reality in the tourism and education industries as well as developing new drugs against diseases or other medical services such as robotic surgery and artificial intelligence for diagnostic purposes.

The government’s improvements to the services sector along with overall deregulation and support for innovative growth will lead to the creation of over 100,000 new startups by the end of this year, the Finance Minister said.

The Finance Minister recalled what he learned during a visit to Beijing’s Zhongguancun Venture Street last week. “In a year, there are 8 million students graduating from colleges in China, and it needs 11 million job opportunities in a year,” he said. “In Zhongguancun alone, 6 million jobs are created [through startups].”

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