Korea announces boost to services sector

Korea's Ministry of Strategy and Finance reveals details of its $19.6 billion plan for the economy's new growth engines.

Against a background of increasing tension with North Korea, the South Korean government on Wednesday unveiled its plans for the 17 industries that it designated as the new "growth engines" for the economy last January. They fall within three broad categories -- green technologies, converged industries and high valued services -- and W24.5 trillion ($19.6 billion) has been allocated to them for the next four years.

Green technologies range from the promotion of renewable energy to building "environment-friendly cities", while the so-called converged industries include a variety of IT and nano-science technologies applied to broadcasting and communications, pharmaceuticals and food production.

Korea's Ministry of Strategy and Finance was keen to highlight the measures being introduced for the third category, high valued services, which encompass education, healthcare and tourism. It sees the nurturing of this sector as the next logical step in the country's development, following the large-scale industrialisation over the past 50 years, which has propelled its per capita income to around $20,000.

This follows moves to liberalise the financial sector. On February 4, the Financial Investment Services and Capital Market Act became effective, with the aim of opening up the financial sector to foreign competition and a new generation of products. Most recently, the Financial Services Commission announced that short-selling of non-financial stocks will be allowed from June 1.

The government's plans are intended to make more effective a sector that has suffered from poor investment and sclerotic restrictions. In particular the government will revise current laws in order to help expand markets and grow domestic enterprises, while also focusing on raising their global competitiveness by developing core technologies and achieving international standards.

National certification and approvals will be awarded to schools, hospitals and tourist centres which attain global quality, and it will, finally, become easier for "foreign educational establishments" to open schools in Korea. Special visas will be issued to foreign patients admitted to the country's hospitals in a move designed to build a Northeast Asia medical hub.

Also on Wednesday, the Bank of Korea said that South Korea posted a current-account surplus in April for a third successive month as imports fell faster than exports. The surplus was $4.28 billion, compared with a record $6.65 billion in March. Last year, the current account was in deficit by $6.4 billion. The won has gained 20% in the past three months, supported by the positive balance and by portfolio investment inflows.

GDP growth has also turned positive. In the first three months of the year the economy grew 0.1%, partly helped by the government's fiscal stimulus measures, which have prompted a pick- up in domestic demand. Consumer confidence in May jumped to the highest level in nearly two years.

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