South Korea's president elect, Lee Myung Bak, has announced his cabinet, consisting of veteran bureaucrats and academics. -- PHOTO: AFP

Mr Lee Myung Bak, a conservative former construction firm boss who takes office on Feb 25, has pledged to encourage business investment and boost the economy while mending ties with allies the United States and Japan.

'I've promised to revive the economy,' Mr Lee told a news conference announcing his cabinet. 'The first step would be to make a small...but capable government.'

Former vice-finance minister Kang Man Soo was named to head the finance ministry, as widely expected.

Mr Kang, who rose through the ranks of the finance ministry, is considered a proponent of business tax cuts and a central bank that cooperates more closely with government economic policy.

Mr Lee's choice of Mr Yu Myung Hwan, a seasoned diplomat and current ambassador to Japan, as foreign minister signalled a pragmatic approach to ties with Washington and Tokyo compared with an often tense relationship during outgoing President Roh Moo Hyun's term, analysts said.

For the top official to command the country's 670,000-strong military, Mr named former chairman of the Joint Chiefs of Staff Lee Sang Hee as defence minister.

Plain-speaking Lee Sang Hee is known as a straight-forward military man who has openly criticised politicians in the past for usig North Korea's perceived threat to the South for political purposes.

Most of the other cabinet choices were bureaucrats and academics.

Mr Lee is likely to escape the taint of being linked to a firm suspected of securities fraud.

Parliament has ordered a special investigation into the case and that investigation is scheduled to conclude at about the same time Mr Lee takes office.

Yonhap news agency said the special counsel probing Lee's suspected role in the fraud have found little evidence to take legal action against him.

A separate team of prosecutors last year cleared him of any wrongdoing. -- REUTERS