While the Korean Wave, spanning K-pop and K-dramas, appears to be driving rapid growth in South Korea's service exports, a comprehensive analysis of the service industry's actual competitiveness—incorporating the performance of overseas local subsidiaries—reveals that South Korea's digital service competitiveness ranks at the very bottom among major nations.
The Korea Institute for Industrial Economics and Trade (KIET) recently released the results of an analysis on service export competitiveness utilizing TISMOS (Trade in Services by Mode of Supply), a new service trade database established by the WTO.
TISMOS reflects the sales of overseas local subsidiaries, which were previously omitted from traditional balance of payments statistics.
This analysis is significant as it marks the first comprehensive evaluation comparing the actual competitiveness of national service industries by including overseas subsidiary performances, which account for more than half of service trade.
The analysis showed that from 2020 to 2022, South Korea's average annual service exports stood at 309.4 billion dollars, placing it near the bottom among the top 10 service-exporting countries.
In particular, exports in four high-value-added digital service sectors—telecommunications, computer and information services, finance and insurance, other business services, and charges for the use of intellectual property—totaled 125 billion dollars, amounting to just 6.7 percent of the United States' 1.871 trillion dollars.
Furthermore, when analyzing global market competitiveness by measuring whether exports exceed imports and whether specific services hold comparative advantages on the world stage, South Korea failed to secure a competitive advantage in any of the four digital service sectors.
It ranked dead last alone among the 10 major countries.
The Korea Institute for Industrial Economics and Trade analyzed that while Korean companies are exporting K-contents and other offerings overseas, global big tech firms such as Netflix and Google generate vastly larger subscription fees and advertising revenues through their local Korean subsidiaries, sustaining a structural deficit in digital services.
In fact, the proportion of digital services sold by Korean companies through overseas local subsidiaries—such as K-content sales via OTT platforms—stood at a mere 25 percent, whereas the proportion of service imports through local subsidiaries of foreign companies operating in South Korea exceeded 75 percent.
The findings indicate that even when combining overseas subsidiary performances, the sectors in which South Korea showed a competitive advantage were limited to traditional services such as distribution and transportation.
The Korea Institute for Industrial Economics and Trade advised that beyond expanding content exports, there is a pressing need to bolster the overseas expansion of information and communication technology companies, strengthen intellectual property monetization frameworks, and enhance service industry competitiveness through measures such as enacting the Service Industry Development Act.
Reported by Kim Minjeong | Video by Na Hong-hee | Graphics by Yook Do-hyun | Produced by SBS Digital News
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