Korea’s service industry has expanded at a rapid pace in recent years, accounting for an increasing portion of growth.

A recent study by the Korea International Trade Association showed the rate of the services sector’s contribution to the country’s economic growth rose from 37.2 percent in 2010 to 52.9 percent in 2013. Over the cited period, the corresponding figure for the manufacturing industry declined from 54.8 percent to 35.4 percent.

Compared with other advanced economies, however, it still lags behind and has more scope for growth to become competitive.

The rate of the service industry’s contribution to growth, which is calculated by dividing the on-year change in added value created by the sector with the on-year growth in gross domestic product, stood at 160.9 percent for France, 105.4 percent for the U.K., 82.1 percent for Germany, 61.7 percent for the U.S. and 56.8 percent for Japan, according to the KITA study.

The international comparison, which was based on figures from the Bank of Korea, Eurostat and other institutions, also highlighted the low efficiency of Korea’s services sector.

The country’s per capita labor productivity in the service industry remained at $51,401 in 2013, far below the corresponding figures for the U.S. and Japan, which reached $101,470 and $72,374, respectively.

Korea also marked the largest gap in productivity between service and manufacturing industries, with the productivity of the services sector being less than half of that in the manufacturing field.

Economists here attribute this imbalance partly to the relatively high proportion of self-employed businesses in the country’s services sector. Nearly a quarter of workers in the sector work at accommodation facilities, restaurants and retail shops, most of which are struggling to stay afloat in overcrowded markets.

To the contrary, the proportion of employees in the high value-added areas of scientific and technological services and entrepreneur support services remained at 4.1 percent and 4.7 percent, respectively.

Korea also saw the deficit in its services account widen from $5.21 billion in 2012 to $8.16 billion in 2014 and further to $15.7 billion last year. This ballooning deficit contrasts with services account surpluses recorded by some advanced economies, including Italy, the U.K., the U.S. and Canada, over the same period. Korean companies in the services sector have suffered from a steeper decline in operating profit than manufacturing firms, whose competitiveness itself has eroded in global markets.

Economists and corporate officials note the country has not seen its service industry grow enough to be commensurate with the level of its national income as has been the case with major states of the 34-member Organization for Economic Cooperation and Development.

Boosting the service industry is seen as an effective way of reinvigorating the country’s sluggish economy that is struggling with declining exports and stagnant domestic demand.

Efforts by President Park Geun-hye’s administration to promote the services sector by increasing tax breaks and eliminating regulations have so far brought about little tangible outcome.

Government policymakers have blamed the parliament for dragging its feet on passing a bill designed to enhance the service industry.

Business circles have joined in urging opposition lawmakers to cooperate for the early passage of the bill, which they say will be crucial for improving the competitiveness of the service industry by nurturing companies in high value-added fields.

The Park administration has pledged to focus support on seven service areas -- health, medical, tourism, education, finance, logistics and software -- to foster them as globally competitive players.

Economists and corporate officials indicate the government has more work to undertake aside from pressing for the parliamentary approval of the bill on the advancement of the services sector.

An official at the Federation of Korean Industries, a major business lobby here, called for measures to create an industrial complex exclusively for services companies and increase the government’s spending on research and development in the sector, which currently accounts for a meager 0.5 percent of its total R&D budget.

Lee Geun-tae, an economist at the LG Economic Research Institute, raised the need to step up measures to help solve problems with unprofitable self-employed businesses.

By Kim Kyung-ho (khkim@heraldcorp.com)