3 July 2004
Korea-U.S. investment treaty likely by year end
By Rambabu Garikipati
A bilateral investment treaty between the United States and Korea appears likely by the end of this year, paving the way for a free trade agreement between both the nations, said Maurice R. Greenberg, chairman of the U.S.-Korea Business council.
Briefing reporters after the conclusion of the council`s 17th annual plenary session, Greenberg said that Korea`s controversial screen quota may no longer be a stumbling block as Seoul has signaled a desire to be more flexible.
The quota, introduced in 1967, requires domestic theaters to show Korean movies 40 percent of their screening days. Washington has demanded the screen quota be halved to 20 percent and eventually scrapped as a precondition for signing a bilateral investment treatment, or BIT, with Korea.
The Korean Culture Ministry, reversing its stance, recently expressed support for lifting the quota. Korean movies have enjoyed more than 50 percent market share since last year, but the local film industry insists the quota is still needed to avoid a possible flood of Hollywood imports.
Greenberg, who is the chairman of American International Group, Inc. (AIG), a leading international insurance and financial services organization, said that a BIT and a free-trade agreement is essential if Korea wants to attract more U.S. investment.
"Discussions on a future U.S.-Korea FTA will likely begin only following the conclusion of a BIT. It is therefore extremely important that the screen quota is abolished. The Korean government seems to be receptive and we are confident that the investment treaty can be signed by the end of the year, paving the way for substantial U.S. investments in the country," he said.
Greenberg said to attract more investment, it is important to strengthen intellectual property protection, to enforce laws more consistently and to apply greater flexibility in labor regulations.
"There are plenty of places to invest around the world, and unless the government introduces comprehensive reforms, no foreign investor is going to risk his money here. Korea`s dream of becoming a regional hub can only be fulfilled if the investment regulations are made as free as Singapore and Hong Kong," he said.
The AIG Chairman also said that the introduction of class-action suits in Korea, starting next year, is a dangerous move that could have adverse effects on the business environment.
"Korea should learn from the U.S. experience and realize the negative impact class-action lawsuits have had on businesses. It poses a great risk to Korea`s economic vitality," he said.
Beginning in January 2005, groups of 50 or more shareholders with combined shareholdings exceeding 0.01 percent of outstanding shares will be permitted to file lawsuits against companies with assets of 2 trillion won or more. An extended enforcement deadline of January 2007 has been set for smaller companies with assets of under 2 trillion won.
A Korea-U.S. investment treaty was proposed in 1998 by then-President Kim Dae-jung. Some analysts question the need for the pact, saying a BIT would only complement current agreements.