Seoul: South Korea will "temporarily" establish a strategic investment corporation that will operate a special fund for the country's US$350 billion investment in the United States as agreed under a bilateral tariff deal finalized last month, the government said Wednesday.
According to Yonhap News Agency, the envisioned corporation, tentatively named Korea-U.S. Strategic Investment Corp., will be created for a maximum 20-year operation under a special bill submitted by the ruling Democratic Party to support Seoul's investment plans in the U.S., the finance and industry ministries said in a joint press release. The government had aimed to submit the bill within this month after President Lee Jae Myung and U.S. President Donald Trump finalized the details of Seoul's $350 billion investment pledge, made in exchange for lower U.S. tariffs, during their summit in Gyeongju on Oct. 29.
Under the final terms, the investment will consist of $200 billion in cash installments, with an annual cap set at $20 billion, and an additional $150 billion for bilateral shipbuilding cooperation. In return, the U.S. administration agreed to reduce the 25 percent tariffs on Korean automobiles, with the reduction to be applied retroactively from the start of the month the bill is submitted.
The envisioned investment corporation, to be established with government funding, will be tasked with creating, managing, and operating the Korea-U.S. strategic investment fund, the ministries said. The fund's resources will be raised through earnings from foreign exchange reserves entrusted by the government and the Bank of Korea, and through overseas issuance of government-guaranteed bonds, they explained.
The government said the special bill stipulates that related authorities must comply with safeguard measures specified in the memorandum of understanding (MOU) on the investment pledge signed by the two countries. The safeguard measures include the $20 billion annual cap on investments, adjustments to the amount and timing of the investment when it is feared to cause instability in Korea's foreign exchange market, and selection of "commercially reasonable" projects.
Under the MOU, the two countries will establish a Consultation Committee, headed by Korea's industry minister, and an Investment Committee, headed by the U.S. commerce secretary, that will look over a special purpose vehicle (SPV) to be formed by the U.S. side to manage their joint projects.