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Private entities should expand investments in intellectual property (IP), telecommunications, culture and entertainment, in a swift collective move to identify new growth drivers, a central bank report said Thursday.

This together with government deregulation will elevate the country's long-undervalued services industries as a new source of export growth, it added. Korea has long relied on manufacturing, construction and facility investments for growth.

According to the Bank of Korea (BOK) report on the status quo of Korea's service exports and future growth outlook, knowledge services constituted 26.5 percent of service exports last year, up from 7.6 percent in 2010.

Knowledge services are part of overall service industries and include IP rights and royalties, information and communication services, cultural and leisure services and other professional and business services.

According to the report, service exports are emerging as new growth drivers after global goods trade slowed down by about 5 percentage points in the aftermath of the global financial crisis in the late 2000s.

Services trade in comparison has increased to 24.1 percent in 2023, up from 19.4 percent in 2011.

However, the report said Korea's service exports growth remains stunted, with limited global market share.

This is because legal and consulting services are dominated by advanced economies including the U.S. and Europe, while low-cost services are led by China and India.

Still, knowledge service industries are showing substantial growth potential, as evidenced by its faster rise compared to the country's overall service industries.

From 2010 to 2024, knowledge service exports grew 13.4 percent, far faster than the rate of overall services exports at 3.8 percent.

IP rights royalties account for 54 percent of the total, while professional and business services constituted 27 percent.

Of the IP sectors, gaming, music and other creative contents led the growth, underpinned by soaring global popularity of cultural content such as K-pop, webtoons and games.

Also notable are content generated by artists, filmmakers, singers, songwriters and actors.

The report said deregulation in the gaming industry, for example, will foster further growth of digital content.

"The gaming industry remains somewhat underappreciated, tied to the negative image of addiction and a group of recluses lacking social skills," a BOK official said. "However, digital entertainment is emerging as a significant source of export growth, alongside a variety of cultural content such as films and music."

The central bank added that intangible assets should be recognized as a new growth driver, helping Korea's export-reliant economy enhance the competitiveness of both the services and manufacturing industries.

"Firms should strengthen investments in the service sector, and the government should push ahead with deregulations," the report said. "Early training of promising talents in digital technologies and research and development will further accelerate industry growth."