(Updates with analyst comments, background)
By Kim Myong-hwan
SEOUL, Sept 25 (Reuters) - South Korea said on Thursday the government would press to make the labour market more flexible and prevent illegal work stoppages, some of the main bugbears for foreign investors doing business in the country.
Alarmed by warnings that militant labour unions would scare away foreign investment, authorities plan to unveil a five-year plan by the end of 2003 to improve labour-management ties.
However, analysts said the government's apparent tougher line on labour could be watered down for now by domestic political considerations ahead of parliamentary elections in April.
President Roh Moo-hyun, a former labour lawyer, came to power enjoying strong backing from workers.
"The government will put every effort into eradicating illegal activities that disturb the basics of industrial relations," Labour Minister Kwon Ki-hong told foreign reporters.
The ministry unveiled this month a draft of the plan, aimed at clearing up doubts over labour practices and making it easier for employers to lay off workers and replace striking workers.
The government, business and labour representatives are supposed to discuss the plan with an aim of reaching an agreement by the end of this year. But labour, which fears the draft would undermine labour rights, has threatened to boycott the talks.
"Even without labour's participation, the government will go ahead with its legislation next year," Kwon said.
But analysts said the government's hand might be forced by political realities.
"It is little hard to believe Roh's government can remain tough with labour until the reform plan becomes a law without compromise," said Bae Kyu-shik, an analyst at the Korea Labour Research Institute.
South Korea's single-floor parliament is controlled by the majority opposition Grand National Party.
HIGHER JOBLESS RATE SEEN
Sohn Nark-koo, a leader of the Korean Confederation of Trade Unions, said the government and business tended to exaggerate the impact of industrial unrest on the economy.
"Unionised workers represent only 11.7 percent of South Korea's entire workforce," said Sohn. "Also, violent labour action has been limited largely to a handful of large-scale manufacturers."
The minister said he expected South Korea's unemployment rate to come in at 3.4 percent in 2003, provided there were no big shocks to the economy, up from 3.1 percent last year.
"Youth unemployment is emerging as a serious social problem", Kwon said in the speech, where he also said the government would strengthen social protection for temporary and part-time workers.
The unemployment rate in August edged down to 3.5 percent, but stayed near a 22-month high of 3.6 percent set in July.
Labour unrest in South Korea has come under the spotlight this year after President Roh intervened in some disputes to ensure union demands were met, in the face of criticism from business leaders.
And despite the government's apparent tougher stance, it was able to persuade 30,000 truck drivers to end a two-week strike costing $600 million in delayed shipments, only after the state agreed in August to hold more talks on improving work conditions.
Hyundai Motor Co , also yielded to union demands for an 8.6 percent wage hike and other benefits to end a 47-day strike that cost the country's largest car maker $1.2 billion in lost output. The deal pushed Hyundai wage rates over $20 an hour, closer to U.S. rates.
Foreign direct investment (FDI) in first-half 2003, measured by investment plans submitted to the government, fell 44 percent from a year earlier to $2.7 billion. FDI has been falling since hitting a peak of $15.5 billion in 1999, government data show.