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Secretary of Foreign Affairs and Trade Simon Murdoch visited Korea 1-2 March to lead the New Zealand-Korea Foreign Ministry Consultations (FMC). Murdoch also called on Vice Minister and Acting Foreign Minister Cho Jung-pyo prior to the FMC to discuss the respective countries' foreign policy objectives. Deputy Minister Shim Yoon-joe led the Korean delegation at the FMC, where the two parties discussed various bilateral, regional and international issues, including implementation of the 21st Century Partnership document agreed between the two leaders during President Roh's December 2006 visit to New Zealand.
Developments in the 6 Party Talk Process, regional developments such as the East Asian Summit, and UN Reform were other subjects of interest. Murdoch also called on Deputy Trade Minister Cho Tae-yul to discuss developments in the bilateral economic relationship, in particular the launch of a joint study by private institutes on the feasibility of a New Zealand-Korea FTA. They also discussed regional and global (WTO) developments.
Special Agricultural Trade Envoy (SATE), Alistair Polson, visited Korea from 13-17 March to talk with a range of Korean agriculture stakeholders about the benefits of trade liberalisation, New Zealand’s experience of agricultural reform, and possible opportunities for agricultural collaboration/ partnerships between Korea and New Zealand. SATE had a positive reception from some of Korea’s most powerful farmers’ groups, most of whom showed a genuine interest in a dialogue on the issues he raised. SATE’s speeches to Korea’s leading agriculture think-tank, the Korea Rural Economic Institute (KREI), and to a forum of sixty CEO’s from Korea’s most prominent agriculture companies, provoked lengthy and constructive exchanges with participants.
SATE also met with Korea’s Agriculture Minister Park Hong-soo, Vice Minister for Agriculture Park Hae-sang, and Vice Chairman of the Korean National Assembly Agriculture Committee, Hong Moon-pyo, all of whom acknowledged both the necessity and inevitability of agricultural reform in Korea, but argued that more needed to be done to prepare farmers before protections were removed. The overall reaction to SATE’s message was that the New Zealand experience could be useful for Korea as it sought to manage adjustment pressures in the farm sector, but that low competitive advantage and the advanced age of Korean farmers meant reform would occur incrementally.
New Zealand and Korean researchers met in Wellington 24-25 February to discuss the terms of reference for a joint study on the implications of a free trade agreement (FTA) between the two countries. Prime Minister Helen Clark and Korean President Roh Moo-hyun announced the joint study last December during the Korean President's State visit to New Zealand. The joint study will be conducted by private research institutions during 2007 – the Korea Institute of International Economic Policy, and the New Zealand Institute of Economic Research. Once completed, the outcomes of the study will be considered by a Government Roundtable of officials from Korea and New Zealand which will form the basis for a report to each country’s respective Trade Ministers. Korea and Australia are following a similar process.
New Zealand Climate Change Ambassador Adrian Macey’s visit to Seoul from 21-22 January provided an excellent opportunity to broaden New Zealand’s engagement with Korea on climate change issues. In a broad ranging programme comprising meetings with the Minister of Finance and Economy Kwon O-kyu, senior officials from a range of agencies, parliamentarians, businesses and the environmental NGO sector, Ambassador Macey was able to present New Zealand’s approach to climate change and to develop an understanding of Korean concerns and goals, which to a large extent New Zealand shares.
Among Ambassador Macey’s key messages were that a future international regime addressing climate change would need to be global, fair, allow economic growth, and not damage competitiveness, and have public and private sector support; that there is a number of ideas to engage with on how to achieve this, beyond simply extending Kyoto Protocol type commitments; and that there was a 2-3 year window of opportunity in the UN negotiation process. Both sides agreed there was room for further bilateral collaboration on climate change under the 21st Century Partnership’s environmental provisions agreed on the occasion of President Roh Moo-hyun’s visit to New Zealand in December last year and under the RST cooperation framework (see further below for predicted effects of climate change on Korea).
Dame Kiri Te Kanawa performed at the Seoul Arts Centre on 13 March on what was billed as her official farewell tour of Asia. As a well-known soprano to Korean classical music lovers she attracted much media and public attention. The New Zealand Embassy invited 100 VIPs drawn from the Government, business, culture and media sectors to the concert and hosted them at a reception for Dame Kiri in cooperation with Rolex Korea. This was Dame Kiri’s second performance in Korea, her first being held 13 years ago. The Embassy arranged an interview with Korea’s largest daily, the Chosun Ilbo, which emphasised the support Dame Kiri had provided to talented young New Zealand singers over the years through the Kiri Te Kanawa Foundation. Dame Kiri also personally supports Korean Baritone Sung Seung-wook. At the reception New Zealand Ambassador Jane Coombs noted that Dame Kiri has been an outstanding Ambassador for New Zealand.
Artist Hye-rim Lee, who migrated to New Zealand from Korea in 1993 and is currently based in Auckland, participated in a group exhibition held from 9 February-18 March at Kookje Gallery in Seoul. The exhibition involved four young artists -two Korean artists living overseas including Lee, one based in Korea and a Japanese artist - to show how different cultural settings had influenced their art. Lee’s artworks included 3D DVD animations displaying her unique digital character TOKI (the Korean word for “bunny”) which reflects a type of woman and beauty idealised particularly in Korean culture. Creative New Zealand and Asia:NZ Foundation supported Lee’s exhibition. The exhibition enjoyed good media coverage.
Tourism NZ held a “New Zealand Dream Holiday” event for a month from 19 February to 19 March, to promote their Korean website – www.newzealand.com [external link]. Visitors to the website were given the opportunity to enter a competition using the online Travel Planner to plan their dream holiday. The eight best dream holidays were then selected and the eight winners were given air tickets and 3 nights free accommodation in New Zealand. As part of the promotion Tourism NZ gave Linden Leaves cosmetics to the first 1,000 participants. Tourism NZ also advertised the promotion on OCN, a leading cable TV film channel.
The Six-Party Talks between North Korea, the US, China, Japan, Russia and South Korea concluded an “Initial Actions Agreement” (IAA) on 13 February. In return for specific denuclearisation commitments by North Korea, including shutting down and sealing its main nuclear facilities at Yongbyon within 60 days, the other participating countries agreed to provide North Korea with 50,000 tons of heavy oil emergency energy assistance within 60 days. The equivalent of 950,000 tons will be provided during a second phase as North Korea carries out its further commitments including disablement of the Yongbyon facilities and a full declaration of all of its nuclear programmes. Five working groups were formed to discuss issues ranging from denuclearization to energy assistance and US-North Korean relations. Experts see the agreement as a significant step in the right direction. After the conclusion of the agreement normalization talks between the US and North Korea, and Japan and North Korea followed in early March in New York and Hanoi. Meanwhile, the New Zealand Government has welcomed the North Korea nuclear deal and offered to contribute to the second phase of the energy assistance package for North Korea at the appropriate time and if North Korea genuinely commits to implementing its obligations.
The 20th Inter-Korean Ministerial Talks, which took place from 27 February to 2 March in Pyongyang, were the first talks at minister level since the DPRK’s missile tests in July 2006. The six point Joint Press Statement issued after the talks record agreement to re-commence construction of a family reunion centre; hold Red Cross talks on ROK POWS and abductees (“the issue regarding those missing during and following the Korean War”, as the statement puts it); hold the next round of the Economic Cooperation Promotion Committee (on 18 April); carry out test runs of trains (a long-sought ROK objective) “within the first half of this year”, subject to military guarantee measures being put in place; and to “revitalise construction of the Kaesong Industrial Complex”. The next Ministerial Talks are scheduled to begin on 29 May, in Seoul.
Korea’s 17th presidential election will take place on 19 December this year. Seven major contestants are running for the presidential race at present. According to a Gallup survey conducted on 19 March two from the main opposition Grand National Party (GNP), former Seoul Mayor Lee Myung-bak and former Chairwoman of the GNP Park Geun-hye, lead the contestants with an approval rating of 44% and 20% respectively. The GNP plans to pick its presidential candidate through a vote by 200,000 people, party members and ordinary citizens, before 21 August.
Meanwhile, there have been some major changes in the line-up of the other presidential contenders. Former Kyonggi Governor Sohn Hak-kyu, formerly a GNP presidential contender, left the party on 19 March and has been wooed by Uri lawmakers to join their move to create a new party. In addition, former Prime Minister Koh Kun who had been regarded as a distinctive presidential contender drawn from the (former) ruling Uri Party announced his decision on 16 January not to run for the presidential election.
From the Uri Party former Chairmen Chung Dong-young and Kim Geun-tae are considered hopefuls but they have only about a 2% approval rating in the polls. Former Prime Minister Han Myung-sook and Representative Chun Jung-bae are also hopefuls from the Uri Party. Due to the low approval ratings of all these hopefuls from the Uri Party, anti-GNP forces including the Uri Party and former pro-government forces are eager to find a strong candidate to represent the progressives.
A group of 23 Uri Party lawmakers, including former Floor Leader Kim Han-gil and former Chief Policy Maker Kang Bong-kyun defected from the Uri Party en masse on 6 February. The mass defection (along with 6 prior defections) reduced the Uri Party to second place in the Parliament with 110 seats. The top position is now taken by the conservative opposition Grand National Party (GNP), which has 127 lawmakers. Neither has an absolute majority. The defectors have formed a so-called “negotiation group” that is the largest in the parliament and they are expected to create a new political party.
President Roh Moo-hyun left the Uri Party on 28 February amid mounting calls from the governing and opposition parties to distance President Roh from political affairs. It is expected that President Roh will spend the remainder of his term of office without a party affiliation. With President Roh’s withdrawal from the party, the Uri Party has lost its legal status as the ruling party.
President Roh Moo-hyun proposed on 9 January a nationwide debate on a constitutional revision to change Korea’s presidential system from the current five-year single term to two four-year terms. President Roh also proposed synchronising the term of the President and that of the National Assembly. The reason for the proposed change is that the current system is criticised for undermining the authority of the administration, because one-term presidents have tended to become “lame ducks” in the last year or two of their term. The inauguration of a new President is due in February next year after this December’s presidential election and parliamentary elections are scheduled for April 2008. With a lack of meaningful public discussion on the issue, however, President Roh announced in a press conference on 8 March that he could leave his proposal for constitutional revision in his successor’s hands if presidential contenders publicly pledged to take it up during the next administration. The Government subsequently released a draft plan for the constitutional amendment in press conference, aiming for finalisation by the end of March. The constitutional change requires the agreement of two-thirds of the National Assembly, or 198 lawmakers in the 296-member parliament.
Korea will take wartime operational control over its military in 2012 for the first time since President Rhee Syng-man, during the Korean War, gave up the Korean force’s operational command to the Allied Commander of the UN Forces General Douglas MacArthur in 1950. Korean Defence Minister Kim Jang-soo and US Secretary of Defence Robert Gates met in Washington D.C. on February 23 and announced that the two countries will deactivate the current Combined Forces Command (CFC) on April 17, 2012 and transform the existing wartime operational control into a new “leading-supporting command relationship” between the two countries. Conservatives believe that the move comes too early, especially in view of the fact that denuclearization of North Korea has not taken place, while progressives claim that the 2012 date is too late as Korea will not be able to lead the process of instituting a peace regime on the Korean Peninsula if it does not have full control of its military.
Former Deputy Prime Minister cum Finance and Economy Minister Han Duck-soo was nominated Prime Minister on 9 March. Han has served as Chairman of the Presidential Committee on Facilitation of Korea-US FTA Finalization since Han resigned as Finance-Economy Minister last year. It is widely agreed that the job of Prime Minister Han will largely be concerned with the task of realizing and implementing an FTA with the US. Upon the nomination Han went through the confirmation hearing process in the National Assembly and Han’s appointment has now been approved by the National Assembly. Meanwhile, former Prime Minister Han Myeong-sook returned to the Uri Party and is seen as a potential presidential candidate for the Uri Party.
Korea and the US have successfully concluded a negotiated text towards a free trade agreement. Under the agreement more than half (US$ 1.6 billion) of current US agricultural exports to Korea will become duty-free immediately and remaining tariffs will be phased out over the first 10 years the agreement is in force, except for some sensitive products (like apples and pears) extending out to 20 years. Rice appears to be the only product excluded from the agreement. The current beef tariff of 40% will reduce to zero over the next 15 years and Korea has agreed to fresh talks in June to establish new import guidelines for US beef, once the OIE confirmed the "controlled risk" status of US beef in May.
Nearly 95% of bilateral trade in consumer and industrial goods becomes duty-free within three years of the agreement entering into force, with virtually all remaining tariffs eliminated within 10 years. In autos, the US will remove all tariffs on Korean cars and auto-related products (which comprise nearly 25% of Korea's total outward trade with the US by value) over the next 3 years. In return, Korea agreed to remove aspects of their domestic regulatory treatment of foreign vehicles that were said to discriminate against US auto exporters. In addition, Korea agreed not to impose any new taxes based on engine size, and not to apply existing tax structures in a discriminatory manner.
Korea offered WTO plus commitments in services, providing improved (cross border and commercial presence) access across virtually all major service sectors. Significant gains were reported by the US in legal, accounting, health care, education, express delivery and financial services.
President Roh Moo-hyun and President Bush are expected to sign the agreement in late June before submitting it to their respective legislatures for approval.
The Korean economy was estimated to be worth US$876 billion by the end of 2006, with real GDP having grown 5.1% during that year. Booming exports continued to drive the economy, increasing almost 15% to $US326 billion, but delivering only a modest current account surplus due to high import growth also and a service sector deficit. Domestic consumption, however, continued to be relatively sluggish due to factors such as a modest growth in real household income and employment, high household debt to income ratios, and high price rises in sensitive areas of consumer spending such as oil, transport and real estate.
Korea’s real GDP in 2007 is projected to grow by round 4.5%, and both domestic and external economic conditions are expected to be less favourable than in 2006. Concerns centre on the risk of consumer spending remaining weak, a volatile foreign exchange rate, a possible significant moderation in US economic growth, and an oil price surge. The Finance Ministry has identified stabilizing the macro-economy, creating quality jobs and improving income distribution as the key challenges in 2007. Longer term, commentators stress the importance of Korea making the transition from an exporter of ships, cars, machinery and TV screens to a strong consumer society and a service based economy, while noting this will also take strong political leadership.
The largest goods export market for Korea in 2006 was China (total goods trade US$118 billion), followed by the United States, the EU and Japan (and see further on export volumes below). India is emerging as an important trading partner – total trade was US$9.2 billion in 2006, almost double the 2003 figures. New Zealand ran a trade surplus with Korea of about NZ$165 million in 2006, with our exports increasing by 26% according to provisional New Zealand data. Korea was New Zealand's seventh largest trading partner – but only just behind the UK and Germany – and sixth largest export destination in 2006.
According to provisional figures for 2006 released by the Bank of Korea (BOK), Korea’s per capita GNI jumped 11.9% from US$16,413 in 2005 to US$18,372 in 2006, bringing the long-sought goal of US$20,000 GNI per capita a step closer. However, Korea’s real GNI only rose 2.3% last year, far below the nation’s GDP growth of 5%. The fact that the real GNI figure is lower than the GDP growth rate means that despite the external growth of the economy (both in exports and GDP), national income is not growing and business sentiment in the domestic market is not particularly strong. The BOK attributed such sluggish GNI growth last year to a deterioration in the terms of trade with major countries, as the prices of oil and raw materials rose and the won strengthened against key currencies.
Korea’s export volume ranked 11th globally in 2006, recording US$325.5 billion with an increase of 14.4% from 2005. According to the Korea International Trade Association (KITA), Korea’s export volume overtook Hong Kong (US$316.8 billion) in 2006. Strong exports of key items such as semiconductors, cars and ships drove the Korean economy’s 5% growth last year. Meanwhile, Korea’s import volume remained at 13th place globally in 2006 (US$309.4 billion). Korea’s total goods trade in 2006 amounted to US$634.9 billion, ranking 12th in the world. Trade statistics show that the Korean economy is becoming more dependent on international trade – recording an export/import-to-GNI rate of 75.8% in 2003, 86.2% in 2004, 85.2% in 2005 and 88.6% in 2006.
According to a report released by the Intergovernmental Panel on Climate Change (IPCC) in February, the earth’s surface temperature will probably rise by between 1.8 and 4.0 degrees Celsius by the end of the century. Korea has faced typhoons and severe rainstorms more frequently since the late 1980s and some are linking this to climate change. Damage caused by China-originated yellow dust has also become more severe. Samsung Economic Research Institute (SERI), a leading private economic research institute in Korea, states in a report that Korea is also becoming subtropical in climate and its ecosystem may be threatened in the long-term. The report also discloses that Korea’s economic damage caused by typhoons, torrential rainfall and other abnormal climate change is expanding yearly from an average annual 100 billion won (NZ$149 million) in the 1960s, to 600 billion won (NZ$894 million) in the 1990s, to 2.7 trillion won (NZ$4.02 billion) after the year 2000.
UCC (User-Created Contents) has become a buzzword in Korea since last year, and more Web sites as well as companies are using them for promotion. UCC refers to online video clips, photos and blogs that internet users produce and share with others on the internet. UCC has also become a keyword in politics. Election watchers point out that UCC is expected to play a decisive role in swaying the December presidential election this year as campaigners seem determined to promote their candidate’s image on the internet. With the boom, Korea’s UCC model is now attracting global business interest, particularly by foreign media firms.
