Korea-U.S. FTA to Spur
Development of IT Industry

Korea was named the top place in the Digital Opportunity Index released recently by the International Telecommunication Union for two years in a row, among some 180 countries surveyed by the union. This is a representative index that shows Korea is a strong IT country.
But when you take a close look at the various recent development in Korea, we cannot be satisfied with the index and be complacent because there are many problems for Korea to continue to be a top IT country.
First of all, let's take a look at the IT equipment industry. Many electronics makers including Samsung Electronics and LG Electronics, which lead the country's economic growth by producing handsets have been engaged in a stiff competition with world rivals, fighting high oil prices, the appreciation of the Korean won and excess supply, among other woes. The IT infrastructure, which has been the core force for the IT industry'competitive edge, is being faced with challenges. The supply rate of super-speed Internet in Korea has been surpassed by Iceland as the top country and the Netherlands and Denmark are chasing us closely.
Secondly, the imbalances between the various IT sectors have reached a critical stage with the value-added rate in the IT equipment taking up over 67 percent, showing that the imbalances in different IT sectors are serious compared to those in advanced countries. This is more so with IT software, showing that the imbalance between the IT equipment and IT service sectors has been lowering an overall efficiency of the IT industry.
Thirdly, the government's role for the IT service sector is also a problem. Korea ranked 38th among 61 countries surveyed by the Switzerland-based Institute of Management Development for national competitive power, showing that Korea slipped 9 steps from last year's 29th place. The IMD report showed that the government regulations have been what brought down Korea's position because they have been a major factor for the weakness of our country's structural competitive power and for boosting the private sector's competitiveness.
Then, what can be answers to solve the problems for the IT industry in Korea's I would like to stress that the Korea-U.S. FTA would be one of the important vehicles to solve the problems.
Firstly, the FTA when concluded could revitalize the IT equipment sector which has been growing sluggish. It will not only boost the opportunity for the IT industry to secure the world's largest IT market, but also Korean IT products sold in the U.S. to continue to keep their markets. The FTA will also help growth of parts and material and the early industrialization of the government's next generation growth engine and make Korea the supply base of those parts and materials.
Secondly, the FTA will help the IT service sector raise its global competitiveness. There are concerns that the highly competitive U.S. service industry will give negative effect to growth of Korea's service industry. But Korea's service industry market has been opened to foreign investors widely since the financial crisis. The expansion of markets and competition through the FTA would spur the development of communication and the broadcasting service further up.
Thirdly, it will also raise the government's competitiveness through the global standardization of government policies. In order to speed up the development of the IT industry, the direction of government policy should get away from being a supplier of regulations and should be taken as a factor stimulating the competitiveness of private sector.
Consequently, the FTA between Korea and the U.S. would lead the market-friendly regulations to maximize the private sector competitiveness, resulting in a balanced strong IT country. Of course the FTA can't be a cure for all. It will have some problems. We have to make sure that some issues are resolved satisfactorily during the negotiation such as the limit on foreign ownership and flexibility in technology choice.
However, we should know that the ultimate beneficiaries would be consumers and businesses in terms of long-term perspectives. Consumers would benefit from high quality of goods available at inexpensive prices and business firms would not only be able to have their competitiveness through tough competition, but also secure opportunities to advance into overseas market. But these would have to depend on how best we can take advantage of the FTA for our country to be reborn as a true strong IT nation in the world. nw

By Lee Kwang Chul,
Chairman of Korea Association for Telecommunication Policies