Losing Money
According to the Hyundai Research Institute, South Korea’s service exports fell for 13 months in a row until February this year. Last year, its service exports showed a decline of 12.7% from a year ago while the commodity exports fell 10.5% and each of the United States, Japan, China and Germany succeeded in increasing its service exports.
The institute mentioned that such a decrease in South Korea’s service exports was because its transport, tourism and construction sectors, the three main pillars of the service industry, lost their vitality.
At present, transport exports account for one-third of South Korea’s total service exports. The amount fell 14.7% from a year earlier last year with the global economy taking time to recover. Tourism exports, constituting 15% of the service exports, decreased by 14.3% during the same period as the number of inbound tourists plummeted due to the MERS outbreak. Construction exports, equivalent to 14% of the total, dropped by 30.3% as low international oil prices affected the number of new construction projects in the Middle East.
Another reason is the low level of competitiveness of high value-added services and the overwhelming ratio of low value-added services to the total service exports. Meanwhile, the U.S., Japan and Germany are characterized by high value-added intellectual property and financial services and the like forming the center of service exports. Under the circumstances, South Korea’s service trade deficit hit an all-time high of US$15.71 billion last year.