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By Lee Jae-won
PUSAN, South Korea, May 15 (Reuters) - South Korean truck drivers agreed on Thursday to end a week-long strike which had choked freight flow in the world's third-busiest port, but analysts saw more labour troubles ahead.
The government buckled to union demands just days after it had declared the Pusan strike illegal, sent in the troops and issued arrest orders for strike leaders.
In a statement it said it had agreed to expand discounts on expressway tolls for trucks, provide subsidies to cushion a planned petrol tax increase and improve welfare payments.
Local television said Construction and Transportation Minister Choi Jong-chan had offered to resign. Officials were not available for comment.
"This is another case in which the government has failed to make good on its word and I think this will further increase the bargaining power for labour unions," said Lim Ji-won, an economist at JP Morgan.
Tim Condon, an economist at ING Barings in Hong Kong, agreed.
"Labour tensions could make for a hot summer in Seoul," he said.
The government had refused to recognise the truckers' union in Pusan, South Korea's largest port, saying members were self-employed.
But it ended up succumbing to its demands as the strike threatened an already struggling economy, faced with slowing consumer and corporate spending.
No strike leaders have been arrested.
It said the strike had blocked $450 million in export shipments.
About 5,000 drivers will return to work, but a government official said freight flows would remain slow for another two to three weeks while piles of containers are cleared.
Pusan is about 400 km (250 miles) southeast of the capital, Seoul, and handles 80 percent of containerised cargo in and out of the export-dependent country.
Stock investors welcomed the news and the Seoul stock market's transportation and storage service sector soared 3.4 percent in morning trade, outperforming a slim 0.7 percent gain on the broadest index .
Economists said the result could encourage unions to raise their voice in the upcoming collective bargaining season and deepen concerns among foreign investors.
"It is worrying that the government accepted their demands to produce an agreement and failed to show that illegal action gets punished," Choi Jae-hwang, chief spokesman for the Korea Employers' Federation, told Reuters.
President Roh Moo-hyun, a former labour lawyer, won the December election with a strong support from unionised workers, but the government took the unusually tough decision on Tuesday to send in the troops.
Cargo flows in and out of Pusan had been recovering but were still at less than half the daily average of around 22,000 TEUs (twenty-foot equivalent units). (Additional reporting by Yoo Choonsik in Seoul)