South Korea to get open markets warning

Date: 03/12/1998

By Gareth Harding

THE European Commission will next week issue a stern warning to South Korea to open up its markets fully and speed up the process of economic and political reform in the country.

In a policy paper due to be adopted next Wednesday (9 December), the Commission praises recent efforts by South Korean President Kim Dae-jung to restructure the economy, but says the reforms do not go far or fast enough to tackle the root causes of the country's economic crisis.

The paper accuses Seoul of being too timid in reforming its commercial sector, foot-dragging on liberalising its economy and failing to take on the massive industrial conglomerates, the Chaebol, which are alleged to be standing in the way of economic reform.

The Commission is also fiercely critical of European firms' lack of access to South Korean markets. It says serious obstacles continue to hinder outside investment in the country, warning that EU-South Korean relations will not improve unless progress is made in lifting these barriers.

The EU has an obvious interest in opening up South Korean markets.

The Union became the largest outside investor in the country this year, but this has been jeopardised by the sharp economic down-turn in Asia.

In the first quarter of the year, EU exports to Korea dropped by one-third while imports increased by 36&percent;.

The EU's worsening trade deficit with South Korea has heightened tensions between the two trading blocs.

The Commission says that in order to improve relations, economic cooperation with Seoul needs to be intensified.

As a first step, it will urge member states to ratify a trade agreement with the Republic of Korea signed more than two years ago and argue that the EU should work more closely with the South Koreans in the next round of world trade talks.

The policy paper admits that bilateral relations have been dominated by commercial issues in the past, but says this is rapidly changing due to political developments on the peninsula.

In something of a eulogy to President Kim, the Commission praises the new Korean leader for stabilising the “young” and “fragile” democracy and making progress towards improving the country's poor human rights record.

Describing the northern Communist state as the “most unpredictable and impenetrable” in the world, the paper says the EU should nevertheless continue to provide aid to stave off a humanitarian crisis and clean up the country's ageing nuclear power plants.