ROKG-AMCHAM ON REGULATORY REFORM

UNCLAS SEOUL 004123 SIPDIS SENSITIVE SIPDIS STATE FOR EB, EAP/K STATE PLS PASS USTR FOR CUTLER, AUGEROT, KI COMMERCE FOR ITA/MAC/DUTTON NSC FOR TONG E.O. 12958: N/A TAGS: ETRD EINV ECON KS SUBJECT: ROKG-AMCHAM ON REGULATORY REFORM SUMMARY -------------- ¶1. (U) The American Chamber of Commerce (AmCham) held its semi-annual meeting on regulatory reform with Deputy Minister Park (in the Office of Policy Coordination under the Prime Minister) on November 22. Park emphasized the ROKG's continuing commitment to regulatory reform, and highlighted major milestones over the past year including reforms in the air transport, tourism, and property management sectors. Park emphasized that the reform process was separate from ongoing FTA negotiations, and designed to address regulatory issues of concern to U.S. investors (or potential U.S. investors) in Korea. ¶2. (SBU) AmCham President Tami Overby raised four issues: (1) draft Ministry of Health and Welfare regulations that limit the ability of private insurance providers to cover co-pays for Korea's national health insurance system (and subject providers of health insurance to regulation by both the Financial Supervisory Service and the Ministry of Health and Welfare),(2) mandatory inclusion of foreigners in Korea's national health insurance (even if they already have private insurance, as many expatriate staff of AmCham member companies do),(3) Lear Corporation's difficulty in setting up a manufacturing plant in the Pusan Free Economic Zone, and (4) the obligatory surrender of foreign driving licenses to obtain Korean licenses. The Regulatory Reform Bureau (RRB) promised to look into each of these issues and get back to AmCham. Park also undertook to accept Amcham submissions continuously throughout the year rather than on a quarterly basis. END SUMMARY. SEMI-ANNUAL MEETINGS -------------- ¶3. (SBU) In June 2005, the RRB of the Office for Policy Coordination (under the Prime Minister's Office) and the American Chamber of Commerce in Korea (AmCham) agreed to create a channel to address regulatory issues of concern to the U.S. business community. A top-level Steering Group was created to give the process direction, with a Working Group under that meeting to discuss specific regulatory issues that U.S. businesses have raised. Since June 2005, AmCham officials and member company representatives, accompanied by ECON section staff, have met with the RRB four times at the steering or working group level. These semi-annual meetings serve dual purposes: both to encourage the RRC to stay the course on regulatory reform, and also to try to resolve specific regulatory issues that U.S. companies have said are impediments to their doing business in Korea. Thanks first... -------------- ¶4. (SBU) Deputy Minister (for Regulatory Reform) Park, Cheol-gon opened the November 22 meeting by emphasizing the RRB's commitment to stream-lining and clarifying commercial regulations, (although he acknowledged that commitment wasn't always shared by individual ROKG ministries or offices),and highlighted some of the RRB's major efforts over the preceding year, which included reforms in the air transport, tourism, and property management sectors. Referencing the ongoing KORUS FTA negotiations, Park clarified that the FTA was separate from the AmCham-Regulatory Reform Bureau discussions, which were aimed at reducing the regulatory burden on foreign companies operating in (or interested in operating in) Korea. He thanked AmCham for the positive assessment of RRB work it had provided to visiting OECD officials, as the RRC readies its first annual reform report to the OECD this December. ...then the regulatory issues. -------------- ¶5. (SBU) AmCham President Tami Overby acknowledged the hard work the RRC has done to date to improve the business environment in Korea and noted the AmCham had apprised the OECD of this fact. She then turned to four key issues that AmCham members believe currently constitute regulatory issues that are impeding their ability to doing business in Korea. PRIVATE HEALTH INSURANCE -------------- ¶6. (SBU) Referring to recently announced draft Ministry of Health and Welfare (MHW) regulations that would bar private health insurance providers from covering mandatory national health Insurance "co-payments" of medical fees, Overby noted this regulation, if finalized, would constitute a major disruption to the market and raise insurance costs by eliminating competition. She emphasized the regulations would also set up a new regulatory, supervisory authority in the MHW that would overlap with the current one in the Financial Supervisory Service (FSS). ¶7. (SBU) Deputy Minister Park acknowledged that this issue is important, the subject of active inter-agency discussions. Some officials argue the regulation will raise costs to consumers and deny them choice, while others (read: MHW) are worried about the "adverse" competitive effects of private insurance providers on the national health insurance system. Park added the MHW and FSS are the main players that will ultimately hammer out a common position that requires the RRB's approval. Park did not cite a timeline for approval of the regulation but promised to keep the AmCham and Embassy informed of developments. MANDATORY HEALTH INSURANCE -------------- ¶8. (SBU) Overby observed that foreigners working in Korea were required to join the national health insurance program, effective January 1, 2006. Up to that date, foreigners residing here were able to voluntarily opt out of the program. Overby requested that the RCC consider reinstating the earlier opt-out provisions upon proof of coverage by another insurance provider. She noted this solution would address the ROKG's concern that many of its 300 thousand foreign "guest workers" from developing countries do not have adequate coverage. At the same time, it would enhance Korea's prospects of becoming a regional business hub by holding down costs for major corporation employees (e.g., GM-Daewoo and Citigroup) who must now maintain two insurance plans for their expatriate staff. Park promised to look into this issue with the relevant authorities. LEAR CORPORATION AND PUSAN -------------- ¶9. (SBU) Overby raised the issue of Lear Corporation's long-standing effort to set up a car seat manufacturing plant in the Pusan Free Economic Zone (FEZ) where many other auto-parts makers are locating. She noted that the ROKG Bureau of Statistics currently categorizes car seats as furniture rather than auto parts, thereby preventing Lear from satisfying FEZ investment requirements in auto parts. Park said he would pursue this request (in his internal discussions with his colleague he used the word "ridiculous") and acknowledged the barriers it posed for a new factory that could potentially employ hundreds of people. DRIVERS LICENSES -------------- ¶10. (SBU) Finally, Overby observed that foreigners are required to surrender their foreign drivers licenses when obtaining a Korean license without taking a driving test. The rule makes living more difficult for foreign residents traveling back home on holiday or business. Before each departure, they must pick up their foreign licenses from the Road Traffic Safety Authority (RTSA). Park committed to discussing this request with the RTSA. EXPEDITED PROCESS -------------- ¶11. (SBU) As the meeting concluded, Park said while up till now, the RRB had received submissions of specific regulatory issues from the AmCham on a quarterly basis, in order to expedite the process, the RRB would now be open to receiving specific AmCham submissions continuously throughout the year. Overby thanked Park for this change, and for the session generally, and noted that AmCham looked forward to continued close cooperation with the RRB to develop this into a fruitful channel to resolve regulatory issues of concern to U.S. investors in Korea. VERSHBOW