U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

Alternatively, the U.S. services sector may benefit from the Korean Private Participation in
Infrastructure Act, where five firms dominate the market and foreign participation is reported
as very limited. 68 The electronic procurement procedures set out in the chapter may help
support the government’s anti-corruption efforts through greater transparency and, in
particular, help expand access for foreign participation under the Korean Public Procurement
Service Implementation Pact. 69
Summary of Provisions
Chapter 17 of the FTA would address procurement of goods and services by any contractual
means—purchase, lease, rental, hire, etc.—where the value of the contract reaches or
exceeds the threshold level for procurement contracts issued by the government entities
listed in the annex to the chapter. The procurement covered under the chapter is government
procurement and may not involve commercial sale, resale, or use in commercial production.
Exclusions would include (1) noncontractual agreements or assistance in the form of grants,
loans, fiscal incentives and guarantees, equity infusions, and the like; (2) procurement by a
fiscal or similar agency, services related to regulated financial institutions, and matters
related to public debt, government bonds, notes, and other securities; and (3) procurement
specifically for the provision of international assistance, including development aid.
Procurement under the chapter would cover digital/information technology products,
although the FTA chapter on electronic commerce imposes no further obligation regarding
procurement of digital products.
67 (...continued)
banks and corporations. The U.S. schedule under the GPA covers procurement contracts valued at SDR
355,000 for supplies and services, and SDR 15 million for construction services (the latter applicable to
Korea only) for subcentral government and other covered entities. Annex 2 lists various entities of the
37 U.S. state governments, which agreed to be bound by the trade agreement containing the GPA that the
U.S. federal government signed into law (the 1995 Uruguay Round Agreements). Annex 2 lists the covered
entities in Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nebraska, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island,
South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin, and Wyoming. Annex 3 covers
other entities at various contract value thresholds, for example, regional power and port authorities.
68 Prompted by the 1997–98 Asian financial crisis, the Korean government began to institute a number of
structural economic reforms to make its economy more attractive to foreign investment by moving toward a
more market-oriented economy based on open private-sector competition. The government enacted the
Private Participation in Infrastructure Act to remove impediments to private investment in infrastructure
works such as transport, water, electricity, and telecommunications projects. This market has hitherto been
dominated by five main Korean construction and engineering firms: Samsung, Daewoo, Posco, Hyundai, and
Kumbo construction. Noumba and Dinghem, “Private Participation in Infrastructure Projects in the Republic
of Korea,” September 2005, 2 and 25.
69 Korea became a member of the OECD in December 1996 and a signatory of the WTO Agreement on
Government Procurement in 1997, and joined the OECD Convention on Combatting Bribery of Foreign
Public Officials in International Business Transactions in 1999. As a consequence, the government enacted
in 2001 the Corrupt and Illegal Practices Prevention Act and in 2002 launched the Korea Independent
Commission Against Corruption. Since 2001 the Korean Public Procurement Service has operated an
Integrity Pact that requires contract officials and private businesses to certify in a written pledge that they
have conducted business in an open and fair manner that does not hamper competition. Choi, “Republic of
Korea: The Potential of E-Procurement,” 93–96, 289–291. Korea launched the Government e-Procurement
Systems (GePS), a national electronic procurement system, on September 30, 2002 as part of a national
information technology project to institute electronic government (“e-government”) services started in 1978.
Seong, and Lee, “Developing E-Procurement Systems,” 138 and 150.
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