[Editorial] Service Industry Bill Stalled in the National Assembly for 15 Years Must Be Passed Quickly

The Federation of Korean Industries (FKI) on the 15th submitted an opinion paper to the National Assembly of the Republic of Korea and the government, calling for the swift enactment of the Framework Act on Service Industry Development. The bill aims to strengthen the competitiveness and productivity of the service sector and to establish basic plans every five years. It was first introduced in 2011 under the Cabinet of Lee Myung-bak. Fifteen years have passed since then.
The service industry, also known as the tertiary sector, covers non-goods-producing areas such as lodging, food service, wholesale and retail, finance, transportation, telecommunications, tourism, real estate, education, healthcare, and culture. It accounts for 71.1% of employment and 61.9% of total value added in Korea. The number of people working in services stands at 14.44 million, 4.8 times that of the manufacturing sector.
Yet productivity has been stagnant or even declining for two decades. Compared with manufacturing, labor productivity fell from the 40% range in 2005 to 39.4% in 2024. Although employment and total value added are high, the sector’s share of gross domestic product (GDP) is only 44%. Its global competitiveness is even weaker. If U.S. productivity is set at 100, the productivity of Korea’s service industry is just 51.1 as of 2021.
The more advanced a country becomes, the larger and more sophisticated its service industry grows. While developing and middle-income countries are centered on the primary and secondary sectors, advanced economies are driven by services. Korea may have reached the threshold of advanced-economy status, but its service industry remains underdeveloped. The sector’s low competitiveness can be seen as a key reason for the decline in potential growth and the stagnation of national income.
The main obstacle holding back this bill is the controversy over so-called medical privatization. The current ruling party and civic groups argue that healthcare, which has a strong public-interest character, could be turned into a profit-seeking business and that medical costs could rise. If so, one option would be to first pass a version of the bill that excludes healthcare and other areas where there are sharp disagreements.
Korea’s industrial policy framework is centered on manufacturing. Policy programs worth tens or even hundreds of trillions of won are implemented for manufacturing, but not for the service sector. This is partly because there are no institutional mechanisms or systems in place to support it.
New service models, in fact, often fail to break through the walls of traditional industries and end up being halted. Regulatory barriers are to blame. Telemedicine, platform-based mobility services, and home-sharing accommodation are blossoming as innovations in other countries, but in Korea they repeatedly run into failure.
Global powers are dominating the world by developing finance and information and communications into core industries.
Of course, some manufacturing sectors such as semiconductors and automobiles are still being actively fostered by advanced economies. Even so, the industrial focus of those countries lies in services. Korea alone is effectively neglecting its service industry.
K-pop and Korean drama (K-drama) have risen to global prominence without government support. The government’s contribution to the success of K-culture, which has become world-class to a striking degree, is minimal. That is just one example. The government and the National Assembly of the Republic of Korea must now come up with real answers. Medical privatization should not simply be rejected out of hand. Whatever conditions need to be written into the bill, the Framework Act on Service Industry Development must be passed. Politics must not be allowed to stand in the way of national progress.