By Kim Jae-kyoung
Despite the government's efforts over the past few years, the nation is still lagging behind in the services industry, the Bank of Korea (BOK) reported Monday.
The central bank said that the country has made progress in its transition to a services-driven economy but has a long way to go to catch up with advanced countries, such as the United States and Britain.
In 2007, the output by the nation's services industry accounted for 40.4 percent of the total gross domestic product (GDP), well below the United States (70 percent), Britain (66.9 percent) and Japan (55 percent), according to the central bank.
Of the total service output, the production by so-called producer services took up 16.7 percent, compared to the United States with 32.2 percent, Britain at 27.8 percent and Japan with 21.4 percent.
Producer services refer to business-related professional services, including knowledge-based industries, such as law, accounting, management consulting, software development and advertising.
The proportion of the workforce in the services industry rose to 66.7 percent in 2007 from 54.8 percent in 1995. But that's well below the 81.6 percent of the United States and Britain's 80.9 percent.
The country posted a deficit of $19.8 billion in the services account in 2007, while the United States and Britain enjoyed surpluses of $115 billion and $78.3 billion, respectively.
Experts said that Korea should speed up moves to transform its economic structure into a service economy to sustain high economic growth.
In particular, they pointed out that it is important not only to expand the services industry, but also to improve its efficiency as the manufacturing sector is fully matured.
"To succeed in the global economy, South Korea should transform… into a services economy," said Mauro Guillen, a professor of the Wharton School of the University of Pennsylvania, noting that the global economy is primarily a services economy and countries that do not succeed in services are doomed to fall behind.
"Of the original tiger economies, only Hong Kong and Singapore have continued to do well, and that's because they've moved into services. That's what Korea must do, emphasizing high-value added services," he said.
He pointed out that the country's biggest problem is that it has made over-investment in the manufacturing of commodity-type industrial products and that it is not making the transition to a services fast enough.
"There are many other countries in the world that can make commodity-type industrial products at low cost. Korea must look for higher value-added activities, not just in manufacturing but also in services," he added. "Korea must liberalize and deregulate services as soon as possible."