Identifier | Created | Classification | Origin |
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06SEOUL1858 | 2006-06-05 09:17:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Seoul |
VZCZCXYZ0000 PP RUEHWEB DE RUEHUL #1858/01 1560917 ZNR UUUUU ZZH P 050917Z JUN 06 FM AMEMBASSY SEOUL TO RUEHC/SECSTATE WASHDC PRIORITY 8264 INFO RUCPDOC/DEPT OF COMMERCE WASHDC 1476 RUEAUSA/DEPT OF HHS WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC |
UNCLAS SEOUL 001858 |
1. (SBU) Deputy Prime Minister and Minister of Finance and Economy (MOFE) Han Duck-soo told the Ambassador on June 2 that the results of the May 31 local elections were probably unrelated to the economy, which is doing well. He attributed the poor showing of Uri Party candidates to personality politics and unfair treatment of the Roh Administration and the Uri Party by the local press. The Ambassador raised USG concerns about excessively harsh regulatory and investigatory treatment of certain politically unpopular foreign firms. Han countered with familiar assurances about a "level playing field," and noted that the Korean government cannot intervene in judicial investigations. 2. (SBU) On issues related to the U.S.-Korea Free Trade Agreement (KORUS FTA), Han affirmed the plan announced by the Ministry of Health and Welfare (MHW) to reform the National Health Insurance system, including introducing a "positive list" for reimbursing pharmaceuticals. Han said the plan had been under discussion by the Korean government for some time, and is necessitated by the fiscal constraints faced by the government. The Ambassador strongly reiterated our criticism of the plan and noted that it could complicate the KORUS FTA negotiations. Han stressed that he and other cabinet officials would continue to vocally support the KORUS FTA and that President Roh remains firmly committed to the agreement. End Summary. ELECTION RESULTS -------------------------- 3. (SBU) Han told the Ambassador that the results of the May 31 local elections (Ref A) would not have any affect on Korean economic policy, or on the KORUS FTA. He asked rhetorically, "What economic policy could we possibly change?" Han commented that, contrary to press reports, he does not think that economic issues played any significant role in the election outcome, particularly since the economy is performing well. Instead, Han suggested that Korean voters are more swayed by the relative strengths of the candidates' personalities. He laid the most blame for the Uri Party's poor performance, however, on the media's unfair and relentless criticisms of the Roh Administration and the Uri Party. He declined the opportunity to speculate on his own future in the Administration. PHARMACEUTICALS -------------------------- 4. (SBU) DPM Han stressed to the Ambassador that MHW's envisioned reforms to the pharmaceutical pricing and reimbursement system, including the introduction of a positive list system and eliminating A7 pricing, had been under consideration by the ROKG for some time, including mention in the Health Minister's confirmation hearings, and could not have come as a surprise to the U.S. Government. He said that the reform of the system along the lines proposed by MHW is essential due to the fiscal constraints the government is facing. In current budgetary circumstances, reducing costs is "critical." Han also noted that even though the current system is a "negative list," MHW has been running it as a de facto positive list for some time (Note: thereby confirming one of U.S. industry's chief complaints), meaning that the reform would not mean a great deal of change for U.S. industry. 5. (SBU) Han denied the Ambassador's criticism that the reform plan was launched by Health Minister Rhyu Si-min without full consensus be other ROKG elements, saying that the reform plan had been fully coordinated and approved in advance. He tried to allay U.S. concerns by commenting that the reform would not imply dramatic changes for treatment of U.S. industry, though he admitted that the positive list would try to exclude some of the "more expensive" drugs. Responding to the Ambassador's point that the health system's financial difficulties are more attributable to the relatively high price of the local generics (which account for 72 percent of drug expenditures), Han said that the government would also seek to cut those costs by eliminating insurance fraud and other corrupt practices. He disagreed with the Ambassador's premise, however, saying that the high costs of new drugs are the primary cost driver. 6. (SBU) DPM Han noted that the Korean government also plans to introduce supplementary private health insurance designed to cover costs not covered by the national plan. This optional coverage could include costs for drugs not included on the positive list. 7. (SBU) The Ambassador reiterated our serious disappointment and disagreement with the MHW reform plan, and expressed regret that Han was not willing to reconsider the proposal. He emphasised that the United States views the plan as a breach of faith that will complicate the upcoming KORUS FTA negotiations. He also noted that the MHW proposal would do a disservice to Korean patients by restricting their access to new and innovative drugs. Han responded that such an argument may have merit, but needs to be carried out by Koreans amongst themselves. He added that Korea cannot wait until all its FTAs are completed before making necessary reforms. He opined that it was in fact better to get the reform over with, and negotiate based on the new situation, rather that negotiate on something that had to change eventually in any case. BROADER FTA ISSUES -------------------------- 8. (SBU) Han assured the Ambassador that he and other cabinet officials would continue to speak out in favor of KORUS FTA. He emphasized that President Roh remains "firmly committed" to pursuing the FTA, and is convinced that the pact is necessary to raise Korea's competitiveness. The Ambassador asked about Han's view of the U.S. FTA texts and whether Han saw any particular issues with our drafts. Han replied that our demand related to the elimination of certain taxes on automobiles is "far too ambitious," and would cut Korean government revenue too much. He asked if taxes are really the reason why U.S. autos do not sell well in the Korean market, pointing out that, overall, imports are doing quite well in recent years as measured by sales value (rather than number of units). VERSHBOW |