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Country Commercial Guides for FY 2000: Korea Report prepared by U.S. Embassy Seoul, released July 1999 Note*

CHAPTER III. POLITICAL ENVIRONMENT

Nature of Political Relationship with the U.S.A.

The ROK has witnessed a sweeping political transformation over the past decade. Korea's democratization is now deeply entrenched. The last three presidential elections have been free, open and fair. In 1992, Koreans elected Kim Young-Sam, the first president in over thirty years without a military background. In 1997, Koreans voted for opposition leader Kim Dae-Jung, the first transfer of power to the opposition since Korean independence. On a political level, the U.S-ROK relationship has matured into a close bilateral relationship; the two countries are friends, partners and allies. Korea and the United States share common democratic values and practices and are working together, both in the region and in the rest of the world, to advance democratization and human rights.

The United States has a strong security relationship with Korea and is committed to maintaining peace and stability on the Korean Peninsula. The United States is obligated under the 1954 U.S.-Korea Mutual Defense Treaty to help Korea defend itself from external aggression. In support of that commitment, the United States maintains about 37,000 uniformed men and women in the country, commanded by a U.S. four-star general who is also commander of the United Nations forces, including the Second Infantry Division and air force squadrons.

Major Political Issues Affecting the Business Climate

Kim Dae-Jung's victory in the December 1997 presidential election has had wide ranging implications for the business climate. President Kim was elected at the height of the financial crisis. He promised sweeping economic and political reform, transparency in business practices, and further liberalization in trade and investment. Already, President Kim has achieved much, including legislative changes to promote labor flexibility, corporate transparency, and capital market liberalization.

Over the short-term, President Kim's ability to deepen and consolidate economic reform will depend to a large extent on the support of labor and the National Assembly. On the labor front, despite an increase in unemployment to over 8 percent, President Kim has been successful in avoiding a major clash between his government and labor. Although there are some signs that labor is showing increasing resentment towards the Kim administration's policies, labor leadership has so far failed to generate support both from the public and in the unions' rank and file for a strong stand against the government. On the political front, President Kim's coalition government enjoys a majority in the National Assembly, which has made passage of legislation easier for the Kim administration. However, ongoing clashes between the ruling coalition and the opposition Grand National Party have made bipartisan passage of legislation difficult and led to boycotts of legislative sessions by members of the opposition.

A number of developments regarding North Korea could also affect the business climate. At his inauguration, President Kim laid out three principles for his policy toward the North: no tolerance of armed provocation; no intention to absorb the North; and mutual reconciliation and cooperation where possible, especially in the area of economic relations. Characterizing this policy as his engagement policy, President Kim has shown a willingness to encourage cooperation with the North, both in economic and political issues. One recent example of President Kim's policy to give free rein to South Korean businesses was Hyundai founder Chung Ju-Yong's visit to North Korea through Panmunjom, the first crossing of the DMZ by a South Korean businessman. Chung's visit resulted in tourist cruise ships being allowed to visit the Kumgang Mountain area of North Korea, the most significant business development to date between the two Koreas.

Brief Synopsis of the Political System, Schedule for Elections and Orientation of Major Political Parties

Korea is governed by a directly elected President and a unicameral National Assembly that is selected by both direct (90 percent) and proportional (10 percent) elections. The president serves a single five-year term. National Assembly legislators are elected every four years.

Kim Dae-Jung was elected president in the last presidential election, which was held in December 1997. The last National Assembly elections were held in April 1996, and the last regional elections, which select mayors, governors and other local government officials, were held in June 1998. The next presidential election will be in 2002, and the next National Assembly election will be in April 2000.

As of mid-June, the opposition Grand National Party (GNP) had 135 seats in the 299-person National Assembly, followed by President Kim's National Coalition for New Politics (NCNP) with 105 seats, and Prime Minister Kim Jong-Pil's United Liberal Democrats (ULD) with 55 seats. 4 seats were held by independents.