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
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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
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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...
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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.
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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
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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
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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
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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
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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
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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