SERVICE INDUSTRY POLICY DIRECTIONS AND STAGE 1 MEASURES

Deputy Prime Minister and Minister of Strategy and Finance Hyun Oh-seok hosted the Ministerial Meeting on the Economy, where the main topic of discussion was ‘Service Industry Policy Directions and Stage 1 Measures,’ which had been mainly developed by the Ministry of Strategy and Finance (MOSF), the Ministry of Science, ICT and Future Planning (MSIP), and the Ministry of Culture, Sports and Tourism (MCST).

Stage 1 measures include ‘Measures to Expand Service Industry Infrastructure and Resolve Difficulties in the Field (MOSF),’ ‘Plans to Promote the Contents Industry (MSIP/MCST),’ and ‘Comprehensive Measures to Develop the Information Security Industry (MSIP).’

Part 1: Service Industry Policy Directions

The government has set two major goals for developing the service industry: ‘creating high quality jobs to support the 70 percent employment target’ and ‘boosting productivity and fostering high value-added industries by improving competitiveness.’ The government is proposing four major principles to promote service industry policy:

4 Major Principles to Promote Service Industry Policy

① Expanding Infrastructure ？ ending discrimination in the service industry, fostering human capital and improving awareness, and providing commercialization support
② Strengthening Promising Industry Competiveness ？ centered on choice and a focus on principles for promising high valued-added industries
③ Resolving Difficulties in the Field ？ collaborating with the related ministries to resolve difficulties quickly
④ Reviewing Disputes ？ reviewing cases of opposing interests from the foundation of mutual agreement

The government plans to continuously phase-in new measures to develop the service industry over the middle to long-term. In order to accomplish this task, the government will form a joint service industry development task force, which will include the related ministries, industry associations, research institutes and academia.

Part 2: Stage 1 Measures, ‘Expanding Service Industry Infrastructure and Measures to Resolve Difficulties in the Field’

1. Expanding Service Industry Infrastructure

The government will work to expand service sector infrastructure by improving taxation, finance and regulatory systems, fostering service sector human capital, and providing commercialization support in order to level the playing field between the service industry and other industries.

① Improving Existing Tax and Financial Systems

Ending Tax System Discrimination

The ‘SME Special Tax Deduction and Exemption’ and the ‘Job Creation Investment Tax Credit,’ which target service industries, will be expanded.

* Specifics will be presented in the ‘2013 Tax Revision Proposal’

R&D will receive increased support through the tax system, such as expanded tax benefits for R&D service businesses and special tax treatment for income on technology transfers for SMEs.

* R&D service businesses will receive tax credits on research and human capital development fees, and the ratio of indirect R&D costs that may be appropriated will be expanded from 10% to 17%. 
** In the case that an SME sells a technology, they will receive a deduction and exemption on the income and corporate taxes resulting from the transfer.

Improving Financial Support Systems

The government will carry out an investigation into the actual conditions of service sector support given by public financial institutions, and will work to resolve any discriminatory practices with regards to financial support in the service sector. The government will prepare as much equal export financing and goods export support as possible for domestically occurring service exports (MICE, tourism). The ‘Export Performance Confirmation System’ was implemented this past June, and export financing support will be provided beginning in September of this year. Regarding credit guarantees for the service industry, the government will introduce an intellectual property evaluation model, and will expand credit guarantees for technology related to the culture, information and contents industries.

② Improving Systems and Social Image

The government will promote system improvements through measures that will resolve discriminatory practices (in the tax system, exclusions from financial support, etc.) for service enterprises that are classified as SMEs. Public utility fee systems for the service industry, which are at a disadvantage when compared to the manufacturing industry, will be made fairer. The government will work to transform the social image of the service industry, including the introduction of the ‘citizen’s star’ for exemplary service companies and offering the APEC Business Travel Card to companies in the service industry. Consumer reports, private sector brand evaluations, Korean Standard Association certificates and corporate certificates will be expanded to the service sector in order to increase the amount of information being offered.
③ Fostering Professional Human Capital in the Service Sector and Expanding Job Training

Highly trained professionals in the service industry will be fostered by constructing an institutional education system that takes into account the stages of one’s life, including youth, workers, the unemployed, and retirees. The government will promote meister’s designations in the SW and ICT sectors, the expansion of new courses in promising service industries at Polytech Universities, and college specialization. Worker education programs will be strengthened through the establishment of ‘corporate universities,’ and e-learning systems will be introduced to provide startup consulting support for the unemployed and retirees. New types of service work will be discovered, and job training groups will be established for the service industry along with existing backbone industries, strategic industries.

④ Providing Support for Service Sector Startups and Commercialization

The early commercialization of ideas will be supported through the establishment of ‘smart venture startup schools’ and integrated business centers* will be expanded, including contents and startup support centers.
* This includes contents centers, service sector startup support centers and 1-man startup business centers.

Certification systems will be introduced for excellent R&D outcomes in the service sector, and commercialization support will be provided, funding and tax support as well as market expansion.
2. Measures to Resolve Difficulties in the Field for the Service Industry

    1. Improving Outsourcing Contract Systems at Pro Baseball Stadiums

Current Situation

In the case that a professional baseball team jointly invests with local governments in the construction of a stadium, there are worries regarding rights to operating income being insecure and the signing of outsourcing contracts before the baseball stadium has been completed is impossible.
Improvements

Private contracts will be permitted for clubs that shoulder a certain amount of the construction burden (for example, 20%), and outsourcing contracts will be permitted before stadium construction is completed (revision to the Sports Industry Promotion Act).

    2. Support for Service Businesses Entering the Public Procurement System

Current Situation

It is important for the convergence services of venture firms to secure markets early but the pathway to enter the public sector is narrow.

Improvements

Twenty new service contracts will be signed, including mobile surveys, big data analyses, and mobile e-publishing. Consulting services will be offered to new venture firms that are trying to access the procurement market.

    3. Supplying IT Solutions to Small Businesses

Current Situation

Small businesses have difficulties improving their productivity because they have to handwrite appointments, sales and inventory management reports.

Improvements

Valuable IT solution developments regarding related business activities will be supplied to service SMEs and other small businesses.

* (Stage 1, 2013-2015) IT solutions will be supplied to 5,000 companies (cleaning servies, floral distribution companies, etc.), (Stage 2, 2014-2018) New IT solutions will be developed.

    4. Introducing New Financial Products for New Technologies in the Cultural Sector

Current Situation

Only in the case that a distribution contract has been signed is it possible to procure production funding for entertainment, such as the movie industry, through credit guarantees.

Improvements

The ‘High Value Service Project Guarantee System’ will be introduced to provide production funding support even if a distribution contract has not been signed.

    5. Flexible Fiscal Support for Foreign Education and Research Institutes in Free Economic Zones

Current Situation

Universities receive national funding support regardless of their ranking and research institutions uniformly receive support regardless of their renown or research plans.

Improvements

Flexible support measures will be introduced that reflect ranking and research outcomes in order to receive expanded funding support for excellent foreign institutions.

    6. Expanding Barbeque Facilities in City Parks

Current Situation

The number of parks with barbeque facilities is inadequate and it is burdensome to include barbeque facilities in park creation plans.

Improvements

A basis for establishing barbeque facilities as part of park facilities will be prepared, and the number of barbeque facilities will be expanded.
However, supplementary measures will be studied, which may include a city ordinance prohibiting the drinking of alcohol inside parks and the deployment of park staff.

    7. Expanding Serviced Residences

Current Situation

It is necessary to expand lodging and vacation facilities due to the increase in foreign tourists, but there are few areas where such an expansion is possible.

Improvements

Lodging and Vacation facilities will be permitted to be built in semi-residential areas through reforms to local government ordinances.

3. Future Plans

The government will collaborate with the related ministries to uncover and alleviate difficulties in the field and plans to phase-in competitiveness strengthening measures by sector.