South Korea's embattled Screen Quota System is facing its gravest challenge to date after president Roh Moo-hyun and other members of the executive branch have spoken out in favour of weakening the system.

In a meeting with reporters on October 30, the Chief Presidential Secretary for National Policy spoke of finding a "middle ground" between the quota's current level and the 50% reduction demanded by U.S. trade negotiators.

"The screen quota is an issue that must be resolved to conclude a Bilateral Investment Treaty with the United States. Although we do not have a firm time limit in mind, we will find a solution as quickly as possible."

The quota system is said to be the last remaining hurdle to signing the treaty, which experts predict will bring $3.2 billion of foreign direct investment into South Korea. With the country facing a worsening financial downturn, public opinion is beginning to turn against those who support the system.

Prior to this month, president Roh Moo-hyun has refrained from commenting publicly on the issue. However, at a meeting of APEC (Asia-Pacific Economic Cooperation) on October 19 he termed the situation a "crisis" and said he would try to persuade members of the film industry to "forge an agreement."

The quota system stipulates that each theatre must screen Korean films for 106 to 146 days per year, depending upon the total number of films released and other factors. U.S. trade negotiators are demanding that the level be brought down to 20% of the year, or 73 days.

With local market share for 2003 currently at 48%, many theatres regularly exceed their quota requirements, however supporters argue that any reduction in the system will provide a serious blow to film investment and the long-term health of the industry.