Republic of Korea
Country Brief - July 2008
Introduction
Australia and the Republic of Korea (ROK) are strong economic, political and strategic partners who share common values and interests. Direct personal links between the two countries are increasing and make a significant contribution to the relationship. Economic relations are complementary and growing, with the ROK a key market for Australian resources, energy and travel services (education, business and personal travel). Australia is a major market for ROK passenger vehicles and household appliances.
Australia and the ROK have common strategic interests, particularly in seeking a peaceful resolution to tensions on the Korean peninsula. Both countries have important alliance partnerships with the United States and both have made significant and practical contributions to efforts to secure regional security and stability, such as sending troops to Afghanistan, Iraq and East Timor.
Political Overview
Government and Administration
Since the establishment of the ROK in 1948, Korea has maintained a presidential system (except for a brief period between June 1960 and May 1961 when a parliamentary system was in place). Under the presidential system government power is shared by three branches: the executive (headed by a President, elected for a single five-year term); the legislative (a single-house National Assembly); and the judiciary.
The President
The President holds supreme power over all executive functions of government, within the constraints of the Constitution. The President appoints public officials, including the Prime Minister (with the approval of the National Assembly), Ministers (who need not be members of the National Assembly) and the heads of other executive agencies. The President is also commander-in-chief of the armed forces. The President is limited to serving a single five-year term. Lee Myung-bak was elected President on 19 December 2007 and inaugurated on 25 February 2008.
The current Cabinet of the Republic of Korea
The National Assembly
Legislative power is vested in the unicameral National Assembly, comprising 299 members elected for a four-year term. This includes 245 members elected by popular vote, with the remaining 54 seats distributed proportionately among political parties according to a second preferential ballot. A regular legislative session, limited to 100 days, is convened once every year. An extraordinary session, limited to 30 days, may be convened at the request of the President or 25 per cent or more of the Assembly members. Several extraordinary sessions are usually held each year. The Grand National Party won a majority of 153 seats in the National Assembly elections on 9 April 2008. The next National Assembly elections are scheduled for April 2012.
The Judiciary
Judicial power is vested in the courts, constitutionally an independent branch of government. The court system functions on three levels: the district courts, appellate courts and the Supreme Court. The Supreme Court is the final court of appeal. The Chief Justice is appointed by the President, with the consent of the National Assembly, to a single six-year term. The President appoints Supreme Court justices on the recommendation of the Chief Justice, and lower-court judges are appointed by the Chief Justice with the consent of the Conference of Supreme Court justices. A separate Constitutional Court renders judgments regarding the constitutionality of laws, impeachment cases, jurisdictional disputes between state agencies and the dissolution of political parties. There is also a Family Court, empowered to hear cases involving domestic family matters.
Local Government
The ROK is administratively divided into seven metropolitan cities and nine provinces. Metropolitan cities are further divided into districts or wards, while provinces are divided into cities, counties and towns. Until 1995, senior local or provincial government officials were appointed by the President. From that time, elections for city mayors, provincial governors, and other local representatives have been held every four years. The most recent local elections were held in June 2008.
More detailed information on the ROK's system of Government can be found at the official ROK Government website.
Recent political developments
During the twentieth century, Koreans were subject to frequent dictatorial rule, first by colonial Japan (1910-1945). Korea was under US military control for three years following Japanese rule. The first ROK government since the Japanese occupation was established in 1948, after a UN-supervised election. In the post-Korean War period (post-1953), following the Presidency of Syngman Rhee, there were a series of Korean military dictatorships, with the first democratic election of a president occurring in 1987.
While the ROK is today one of the most democratic countries in Asia, political parties have weak institutional roots. In general, political parties divide according to the personality of their leaders and regional affiliations rather than along ideological lines, although this is changing gradually, reflecting a new generation of National Assembly members and voters.
Lee Myung-bak of the Grand National Party (GNP) won the presidential election on 19 December 2007. Lee, a former top executive of the Hyundai Group and former mayor of Seoul, attracted 48.7 per cent of the vote, ahead of Chung Dong-young from the opposition United New Democratic Party (UNDP) (26.1 per cent) and former GNP colleague Lee Hoi-chang (15.1 per cent), who ran as an independent. Lee was elected on an economic reform platform, including further deregulation of the economy and a crackdown on unions that take illegal labour actions. These reforms aim to make the country more attractive to foreign investors.
President Lee’s conservative party, the GNP, won 131
of 245 districts and secured 22 of 54 proportional seats in the
National Assembly elections on 9 April 2008, giving the GNP a
majority of 153 of 299 seats in the 18th National
Assembly. The main opposition party, formerly called the United
Democratic Party (UDP) won 81 seats in total (66 districts and
15 proportional seats), down from 136 seats prior to the
election. The UDP has now merged with the minor Democratic
Party under that name. The Liberty Forward Party and Pro-Park
Alliance conservative parties won a total of 18 seats and 14
seats, respectively. Voter turnout was a record low 46 per cent
of 37.8 million eligible voters, according to the Korean
National Election Commission.
Political Party |
9 April 2008 |
15 April 2004 |
13 April 2000 |
Grand National Party (GNP) |
153 |
121 |
133 |
Democratic Party (formerly UDP, UNDP and Uri Party) |
81 |
152 |
- |
Pro-Park Alliance (PPA) |
14 |
- |
- |
Liberty Forward Party (LFP) |
18 |
- |
- |
Democratic Labor Party (DLP) |
5 |
10 |
0 |
New Progressive Party (NPP) |
0 |
- |
- |
Create Korea Party |
3 |
- |
- |
(Former) Democratic Party (DP) (now part of the main opposition Democratic Party) |
- |
9 |
115 |
United Liberal Democrats (ULD) |
- |
4 |
17 |
Minor parties |
- |
0 |
3 |
Independents |
25 |
3 |
5 |
Total |
299 |
299 |
273 |
Foreign Relations
Since the end of the Korean War, the ROK has been preoccupied with the military threat from North Korea (the Democratic Peoples' Republic of Korea or DPRK) and has relied on the United States to guarantee its security. With the end of the Cold War, these links have been held in place by the continuing DPRK threat, including its nuclear weapons and ballistic missile programs. At present, the United States maintains around 28,000 troops in the ROK, although it is scheduled to reduce its deployment to 25,000 troops in 2008.
Following the collapse of the Soviet Union and the end of the Cold War, the ROK no longer needed to regard the rest of the world solely from the perspective of its relationships with the United States and the DPRK. Nevertheless, by virtue of geography and economic influence, relations with the major powers - China, the United States, Japan and Russia - remain the most important foreign policy priorities for the ROK, after its relationship with North Korea.
The ROK has actively sought to diversify its diplomatic and trade links and has made considerable efforts to ensure itself a place in the international community commensurate with its growing economic status. It joined the UN in September 1991 and the Organisation for Economic Co-operation and Development (OECD) in 1996. It is an active member of the World Trade Organization (WTO), regional fisheries organisations, UN agencies and regional organisations such as Asia-Pacific Economic Cooperation (APEC), the ASEAN Regional Forum (ARF), and the East Asia Summit (EAS). The ROK is also a dialogue partner of the Pacific Islands Forum.
Following the 1997-8 financial crisis, foreign policy under the Kim Dae-jung administration (1998-2003) emphasised a 'sunshine policy' of engagement with the DPRK and the need to renew international confidence in the ROK economy. Diplomatic activities focused on diversifying export markets and promoting the ROK as an investment destination. At the time, President Kim's overriding objective was to secure regional peace and stability, and build a firm foundation for reconciliation with the North and the eventual reunification of the peninsula.
Since then the ROK has pursued a consistent approach towards developing economic and political contacts with North Korea to induce it to reform and adopt international practices. Under the Roh Moo-hyun administration (2003-2008), diplomatic activities sought to encourage regional partners to urge North Korea to seek a peaceful, diplomatic route to engagement with the international community and to abandon its nuclear weapons programs. President Lee Myung-bak has pledged to take a tough line on North Korea, linking the ROK’s aid to North Korea ending its nuclear arms program. Since August 2003, the ROK, North Korea, the United States, China, Japan and Russia have met regularly in Beijing for the so-called Six-Party Talks, a process focused on finding a lasting solution to the North Korea nuclear issue.
Economic Overview
At a glance
ROK country fact sheet (pdf)
Economy
The ROK has made remarkable economic progress in the last half-century. When the Japanese occupation ended in 1945, the ROK economy was impoverished and rurally-based. Much of its infrastructure was destroyed during the Korean War, which also had an enormous human cost. As a result, by 1960 the ROK's per capita GDP lagged behind that of Zambia and Bangladesh. Since then, sustained high economic growth has led to the ROK's transformation into a highly industrialised and internationally-competitive economy. It is now the 13th largest economy in the world.
The ROK’s economy is forecast to grow by four per cent in 2008 following a slightly higher average rate of 4.9 per cent in 2007. Consumer confidence and the external environment are key determinants of growth, with any slowing of growth in the United States, Japan or China - the ROK's most important markets - likely to have a negative effect on export earnings. The average exchange rate for 2008 is forecast to appreciate to 910 Won/USD. Inflation and unemployment are forecast to reach five per cent for 2008.
ROK's Global Partners
The ROK's traditional trade and financial linkages with the United States are supported by strengthening ties within Asia. China has recently become the ROK's largest trading partner, having overtaken the United States as the ROK's premier export destination. Despite these trends, as the ROK's main supplier of key products such as computer chips and as the main market for many Chinese goods manufactured from ROK inputs, the United States is likely to remain central to the ROK's economic prospects for the foreseeable future.
The ROK has concluded free trade agreements (FTAs) with the United States (not yet in force), Chile, Singapore, the European Free Trade Association (Iceland, Norway, Liechtenstein and Switzerland) and ASEAN (excluding Thailand). It is currently negotiating FTAs or similar agreements with the EU, Canada, Mexico, India and Japan, and conducting FTA-type studies with China, the Gulf Cooperation Council and Russia. It recently concluded non-government FTA studies with MERCOSUR, New Zealand and Australia (see below under ‘Bilateral trade and economic relationship’) The ROK is active in a number of international trade fora, including the World Trade Organization, APEC and OECD. It holds regular consultations with Europe within the Asia-Europe Meeting (ASEM).
Economic Reform
President Lee is the ROK’s first president with a business background and was elected on a reform and privatisation platform. The ROK’s most important remaining reform tasks include reform of state-owned enterprises and the chaebol business groups, bank privatisation, encouraging good corporate governance and transparency, and improving labour relations.
Bilateral Relationship
History
The first contact between Australia and Korea took place in 1884, when Australian missionaries landed at Busan. Australian photographer George Rose travelled the length of the Peninsula in 1904 and photographed the country and its people. His images of everyday Korean life, clothing and customs form a valuable part of Korea’s documentary history.
The relationship was strengthened by Australia's participation in the United Nations (UN) Commissions on Korea (beginning in 1947) and Australia's participation in the Korean War (1950-53). More than 18,000 Australian troops served under UN command. During the war, Australian forces suffered 339 deaths.
Full diplomatic relations were established between Australia and the ROK in 1961. Since then, Australia and the ROK have become important economic, political and strategic partners who share common values and interests. People-to-people links are strong and increasing, and our bilateral economic relationship is complementary, longstanding and robust.
Government Contacts
Australia-ROK high-level contact is substantial and expanding. The Minister for Foreign Affairs, The Hon Stephen Smith MP, visited Seoul from 6-8 May for the annual Foreign Ministers Meeting. Besides meeting his counterpart Mr Yu Myung-hwan, Mr Smith held discussions with ROK President Lee Myung-bak; Minister for National Defence General Lee Sang-hee; Minister for Unification Mr Kim Ha-joong; and National Assembly Representative Mme Park Geun-hye.
The Hon Tony Burke MP, Minister for Agriculture, Fisheries and Forestry visited the ROK from 8-10 April. During his visit, Mr Burke met then-Minister for Agriculture, Fisheries and Food Chung Woon-chon and Minister for Trade Kim Jong-hoon. The Australian Speaker of the House of Representatives, Mr Harry Jenkins MP, represented Australia at President Lee Myung-bak's inauguration in Seoul on 25 February 2008. At that time, Mr Jenkins met with President Lee, then Prime Minister-designate Han Seung-soo, Foreign and Trade Minister-designate Yu Myung-hwan and Speaker of the National Assembly Mr Lim Chae-jung.
Shortly after taking office in late November 2007, Australian Minister for Trade The Hon Simon Crean MP met with ROK Minister for Trade Kim Jong-hoon in Bali on 7 December. In December 2006, former ROK President Roh Moo-hyun made a state visit to Australia and in August of that year former Minister for Foreign Affairs Ban Ki-moon, now Secretary-General of the UN, visited Australia.
Leaders meet annually at the APEC Economic Leaders meeting (AELM); a high-level meeting that both countries have hosted in recent years. In September 2007, former ROK President Roh visited Sydney to attend the AELM. In November 2005, then-Prime Minister Howard visited the ROK to attend the AELM in Busan. Australia-ROK Ministerial Joint Trade and Economic Commission (MJTEC) meetings discuss bilateral trade and economic issues. The fourth MJTEC was held in the ROK on 1 June 2005.
The strength and breadth of ministerial relations is reflected at the officials level. Officials meet regularly for wide-ranging consultations. These include bilateral political and military talks, nuclear consultations, quarantine talks and general senior officials' talks.
Security
Australia and the ROK share key security interests in North Asia and the Asia-Pacific region, with peace and stability on the Korean peninsula critical to the economic performance and security of both countries. Both support a nuclear-free Korean peninsula and regard the continued commitment of the United States to the Asia-Pacific as critical to stability and prosperity in the region.
Security issues are discussed regularly by the two countries, including at Foreign Ministers' consultations, Pol-Mil (political-military) meetings between senior foreign ministry and defence officials, Mil-Mil talks, annual Chief of General Staff Exercises and exchanges with the Australian Defence Force (ADF) staff colleges and the ADF Peacekeeping Centre. The Royal Australian Navy makes routine ship visits to the ROK, conducts exercises with the Korean Navy and holds Navy-to-Navy talks. Security issues are also addressed in multilateral forums like the ASEAN Regional Forum.
The ROK and Australia share a strong commitment to regional and global initiatives against terrorism and to preventing the proliferation of weapons of mass destruction. ROK military personnel, mostly engineers and medics, are currently deployed in Iraq. In December 2007, the National Assembly voted in favour of a proposal to reduce ROK forces in Iraq to 650 but extend their deployment until December 2008. The ROK has also allocated US$260 million in aid to Iraq during 2003-2008, and an additional $200 million for 2008-2011. ROK forces formerly serving in Afghanistan were withdrawn in December 2007, and there are a small amount of civilian staff left in the country, working in the Provincial Reconstruction Team in Parwon province. The ROK also has around 350 troops serving in the United National Interim Force (UNIFIL) in Lebanon.
Science and Technology
The ROK has made advancing its science and technology capacity a major policy. Australia's strength in basic scientific research and innovation offers strong synergies with ROK's strength in commercial application. Close cooperation already exists in areas such as environmental technology and biotechnology, and a scientific and technological cooperation treaty was concluded in 1999. A recent area of mutual interest has been cooperation and collaboration on broadband services. Three ministerial-level Broadband Summits have been held, the most recent held in Adelaide in December 2006. The fourth Summit took place in June 2008 in Seoul.
People-to-People and Institutional Links
Direct personal contact between Australians and Koreans is an important component of the bilateral relationship. Education, tourism and cultural and media exchanges have increased over past decades, underpinned by strong support from the two governments, the estimated 115,000 people of Korean descent living in Australia and the growing Australian presence in the ROK.
The Australia-Korea Foundation (AKF), an Australian Government initiative established in May 1992, makes an important contribution to people-to-people links. The Foundation funds projects and programs that broaden and deepen the relationship between Australia and the ROK, especially in the fields of commerce and industry, science and technology, education and the arts, sport and media.
Non-governmental links also include the Korea-Australia and Australia-Korea Business Councils. Their annual joint meeting allows members to network and exchange views about recent developments in the relationship, and to develop and consolidate bilateral private sector linkages.
People-to-people links have also been fostered through sister-city relationships, such as those between Townsville and Suwon, and Adelaide and Daejeon. Queensland and Gyeonggi Province, New South Wales and Seoul, South Australia and Chungcheong Province, and Victoria and Busan enjoy sister-state relationships.
Bilateral economic and trade relationship
Australia's trading relationship with the ROK developed rapidly during the 1960s as Seoul pursued industrialisation policies requiring large amounts of raw materials. The two countries now share a vibrant and complementary trading relationship, with Australia providing raw materials, foodstuffs and services to the ROK, and importing finished products, such as cars, telecommunications equipment and computers from the ROK.
The ROK was Australia’s sixth largest trading partner in 2007 with total trade in goods and services amounting to A$21.8 billion. Total exports amounted to $15.3 billion in 2007, placing the ROK as Australia’s fourth largest export market, behind Japan, China and the United States.
Australia's merchandise exports to the ROK in 2007 grew by 9 per cent over the previous year to reach A$13.5 billion, making the ROK Australia's third largest merchandise export market, behind Japan and China, but ahead of the United States, New Zealand, India, Taiwan and the UK. The top four export items in 2007 were crude petroleum, iron ore, coal and beef. Australia's beef sales to the ROK, especially premium chilled beef, have increased dramatically over recent years, including as a result of the BSE-related ban on entry of US beef imposed in late 2003. Australia has earmed a reputation as a clean and green producer of high quality beef in the ROK market. While the return of US beef to the ROK market will cause our market share to fall, consumer awareness of Australian beef will aid our competitiveness. Further growth in beef exports is forecast over time.
In the services sector, Australian exports amounted to A$1.9 billion in 2007. Education has been particularly successful, with the ROK ranked as Australia's third largest source of overseas students. There were 34,674 ROK student enrolments in Australian institutions in 2007, an increase of 11.34 per cent over 2006. The Australian Education International Network (AEI) supports the education industry by maintaining a high profile presence for Australian education and training in the ROK and promotes Australian capabilities and qualifications through generic marketing and outreach activities. Tourism is also very important, with 253,000 Koreans visiting Australia in 2007. Around 68,000 Australians visited the ROK in 2006.
The ROK's agricultural sector is particularly sensitive and, as a result, tariffs on agricultural imports tend to be very high. The ROK is engaged in the Doha Development Agenda Round of WTO negotiations, which aims to reduce tariffs on imports, including the agricultural sector. The ROK's agricultural sector is currently undergoing gradual structural reform to increase its efficiency and allow it to compete with imported produce.
In December 2006, Australia and the ROK agreed to commence a joint non-government study to examine the merits of a bilateral free trade agreement (FTA). The report was undertaken by Melbourne-based trade consultancy, ITS Global, and the Korea Institute for International Economic Policy. The report, which was released in April 2008, found that both Australia and Korea stand to gain from an Australia-Korea FTA, which could boost Australia’s GDP by up to US$22.7 billion and Korea’s GDP by up to US$29.6 billion, in the period 2007-2020. Completion of the joint non-government study report provides a useful basis for both governments to consider moving towards the commencement of formal FTA negotiations. For more information, visit the Australia-Republic of Korea FTA Study website.
Export opportunities
Despite the dominance of primary resources among Australian exports to the ROK, other opportunities exist in a diverse range of sectors, including automotive, biotechnology, building and construction, dairy, defence, fruit and vegetables, information and communications technology, seafood, textiles and clothing and wine.
Energy and Utilities: LNG
Australia's traditional trade in energy resources with the ROK is set to grow as the ROK's demand for energy rises. Coal and uranium are critical requirements for ROK power generation, and LNG is the next strategic fuel for the ROK's economic growth. In coal, uranium and LNG, Australia is a major world player and, as a reliable supplier, has the capacity and experience to be a reliable supplier to meet ROK energy needs.
The ROK is the second largest importer of LNG in the world. In January 2003, Australia won a major contract to supply the ROK with more than three million tons of LNG over seven years. This contract was recently extended until 2016. The contract is a vote of confidence in Australia's long record as a reliable, stable and competitive supplier of the ROK's energy needs. Suppliers of Australian LNG are pursuing further opportunities in the ROK market.
Wine
In recent years, ROK interest in wine has developed, resulting in a 250% increase in wine exports to the ROK since 2003.
Motor Vehicle Engines and Components
The ROK is one of Australia's major markets, alongside the United States and New Zealand, for motor vehicle components. Since GM Daewoo launched its joint venture (GM Daewoo Automotive and Technology Co.) in the ROK in 2002, growth in production has led to an increased demand by GM Daewoo for motor vehicle engines and components. In May 2005, Holden began exports of its Statesman model to the ROK.
Investment
Historically, bilateral investment levels have not been strong, but this is beginning to change. The ROK ranks 12th as a destination for Australian investment abroad, with a total investment stock of A$6.9 billion in 2006. The ROK stock of investment in Australia reached A$5 billion in 2006, more than ten-times its value in 2001. Highlights include Korea Zinc's A$1 billion investment in the Sun Metals Corporation refinery in Queensland in the late 1990s, and POSCO's A$16 million investment in 2002 in BHP-Billiton's iron ore resources in Western Australia. Macquarie Bank has a strong presence in the ROK, built on its diverse investment portfolio in sectors such as infrastructure, real estate and Small and Medium Enterprises (SMEs). Australia's largest investment in the ROK leisure industry, the US$35 million Busan Aquarium managed by Oceanis Australia, was opened in 2001. Australian automotive firm Holden announced in October 2002 it would assume a role as General Motor's shareholder in a new joint venture in the ROK - GM Daewoo Automotive and Technology Co. The US$251 million investment will enable Holden to capitalise on growing opportunities in the Asian automotive market and allow continued engine sales to GM Daewoo.
Business and Financial Services
Growing exports of Australian financial services include infrastructure finance, banking and management advice. Macquarie Bank and ANZ Bank maintain commercial offices in Seoul.
Doing business in the ROK
Business success in the ROK market requires awareness of the opportunities available and an appreciation of how the market and culture operates. In addition, a well-placed and sourced personal introduction is helpful. Austrade's office in Seoul is able to assist.
For more information on doing business in the ROK and about specific export opportunities, go to the Austrade website. As well as country-specific information, the Austrade website also has a database that can be searched by industry.
Business Hours
Most businesses and government agencies in the ROK work a five-day week from Monday to Friday. Business hours are generally 9:00am to 6:00pm. Banks are open from 9:30am to 4:30pm on weekdays; major department stores are open from 10:30am to 7:30pm; and smaller shops tend to be open longer hours.