South Korea has recently been experiencing economic instability. The country is struggling to return to pre-pandemic levels, due to slowing global trade and suppressed employment within service sectors. The ongoing Russia-Ukraine conflict has significantly impacted Korean businesses through sanctions leading to payment delays and withdrawal from trading with Russia. The Bank of Korea has also revised its 2022 inflation growth outlook upwards to 3.1% as energy costs spike. South Korea-US economic ties are also undergoing drastic changes driven by intensifying competition in critical technologies, supply-chain fragility, and geopolitical trade risks. However, a possible opportunity has emerged for this uncertain economic state, the metaverse.
The metaverse is a virtual environment where users can enjoy fully immersive experiences through avatars. South Korea has recently announced their plans to invest approximately 186.7 million USD into a national metaverse ecosystem, known as “Expanded Virtual World”. This investment plan forms part of the country’s “Digital New Deal”, the plan to invest 7.5 billion USD into digital technologies in 2022, with almost 9% devoted to South Korea’s metaverse industry and cloud services. This five-year strategy to cultivate the fifth-largest metaverse industry in the world by 2026 was announced in January 2021 by the country’s Ministry of Science and ICT (MSIT). The plan does not come as a surprise. Meta has already reported South Korea’s compatibility with metaverses. It is seen as the optimal condition for the metaverse, due to society’s receptivity to it, hardware manufacturing capabilities, and content creation. This is also reflected in how the country’s VR market showed over 36% average annual growth rate in 2018 and is expected to be worth more than 2.5 billion USD by 2024. This justifies the country’s ambitious plans for its capital to be the first city in the world to enter the metaverse. This national ecosystem would be used as a platform for expanding the virtual growth of various sectors, including education, media, politics, and culture.
The Seoul Metropolitan Government has already created a digital counterpart, named “Metaverse Seoul”. Planned to provide a virtual communication ecosystem for the city’s municipal administration, residents will be able to attend meetings as avatars at the virtual city hall and meet with avatar officials to deal with civil complaints and consultations, which are currently handled only by visiting offices. Seoul’s leading festivals, including its Lantern Festival, will also be held in the metaverse so that it can be enjoyed by people around the world, and individual companies will also be able to use this opportunity for business growth. This is exemplified by Hyundai Oilbank’s digital all-in-one service station that allows access to a 3D model of the site.
The opportunities this breakthrough brings could potentially mitigate the country’s current uncertainty; MSIT has reported that a single metaverse has the potential to create 1.5 million jobs that aren’t related to the physical world, predicting 40,000 professionals and at least 200 companies to occupy these positions. This viable opportunity is reflected by how South Korea isn’t the only country with ambitious plans for this exciting new world. China trails closely behind, the metaverse’s initial market in the country also predicted to be worth approximately 4 trillion USD as it replaces the mobile internet, increasing to 8 trillion USD when it starts to disrupt offline activity, such as vehicle test drives, real estate showings, and education.
With its opportunities, the metaverse also entails risks for the country, as this merger of physical and virtual life could be completely unprofitable if the technicalities and details in replicating physical life on a virtual platform are not meticulously established. In South Korea, there have already been growing concerns regarding the potential exposure of minors to sexual harassment and assault in metaverses, where laws haven’t yet been adequately crafted to address abuse. Such complex issues that could drain money and time suggest that emerging economies should not entirely depend on this unstable new market for GDP growth. Specifically, in South Korea’s case, perhaps the intervention of SMEs to drive forward in a digital era should be considered as a more feasible solution for its economy.
In short, it will be exciting to see how South Korea will proceed with its ambitious plans, and whether this economic and technological fusion is sufficient to overcome current domestic and international uncertainty. Only time will tell whether South Korea proves to be as accommodating to the metaverse as predicted- and if so, whether it will set the trend for the rest of the emerging market economies.
By June Seo Chung
Sector Head: Gregor MacDonald