According to data from the Bank of Korea, exports accounted for 57% of GDP for the first three quarters of the year. In 1996, it was 27.7%, then hit 44.3% in 1998 with a steady increase ever since.
The solution to the problem of Korea placing too much of its eggs in the export basket is to completely open the domestic market to real competition.
An article in the Chosun Ilbo best describes the answer to the problem:
Most of all, Korea needs a strategy that will allow it to use the service industry opening to its benefit. The Economist wrote in a recent special report on Korea that the country's manufacturing industry is top-notch but the service sector is still Third World. It accounts for 60 percent of Korea's GDP (two years ago), but productivity is only 40 percent of the manufacturing industry's. At this rate, the country will not be able to sustain growth and create jobs. Japan boasts the world's best manufacturing technologies, but failed to innovate its service sector. As a result, it has fallen from being the world's No. 2 economy to third place behind China.
Korea needs to tap its experience in bolstering the manufacturing industry and apply it to boosting the legal, financial, retail, culture and arts, tourism and education industries and accomplish what Japan was unable to achieve. The country needs a vision to use the FTA as a chance to embrace the methods of advanced countries and boost the productivity and competitiveness of the service sector so that it can generate top-notch products the world envies. Such a big push could transform the very landscape of Korea's economy.
The editorial may be found at: Korea's Service Sector Needs a Big Push
What do you think?_______
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.