The Democratic Party of Korea introduced a special U.S. investment bill on the 26th as a follow-up to the Korea-U.S. tariff negotiations. It includes provisions on establishing a Korea-U.S. Strategic Investment Fund and temporarily creating a Korea-U.S. Strategic Investment Corporation to operate it.
Kim Byung-kee, the Democratic Party floor leader, on the morning of the day introduced the "Special Act for Managing Korea-U.S. Strategic Investment (Special U.S. Investment Act)" as the lead sponsor. It is a follow-up step to implement the "memorandum of understanding (MOU) on Korea-U.S. strategic investment" signed by the two governments on the 14th. The government has agreed to make $350 billion (about 510.65 trillion won) in strategic investments in the United States. The $350 billion investment consists of $200 billion in strategic industry investment and $150 billion in shipbuilding cooperation investment.
Heo Yeong, the Democratic Party senior deputy floor leader for policy, said, "As we introduce the special act, it is scheduled to be published in the U.S. Federal Register that a tariff cut will apply starting Nov. 1," adding, "The ruling and opposition parties plan to put their heads together and review closely whether there is anything that could undermine the national interest."
◇ Establishing the Korea-U.S. Strategic Investment Corporation with 3 trillion won in capital
The Special U.S. Investment Act specifies the implementation framework and procedures for strategic investment. First, it establishes the Korea-U.S. Strategic Investment Fund. The fund's resources will be raised from income earned from managing foreign exchange reserves entrusted by the government and the Bank of Korea, and from government-guaranteed bond issuances overseas. The resources raised will be used for U.S. investments within the annual $20 billion cap set in the MOU and for financial support (guarantees, loans, etc.) for shipbuilding cooperation investment. To systematically manage income and expenditure by the fund's operational purpose, it allows separate accounts for U.S. investment support and shipbuilding cooperation investment support.
The special act specifies the establishment of the Korea-U.S. Strategic Investment Corporation as the manager and operator of the Korea-U.S. Strategic Investment Fund. It will be established with a government capital contribution, operated temporarily for up to 20 years, and then dissolved. Its statutory capital is 3 trillion won, and it will handle tasks such as creating, managing, and operating the Korea-U.S. Strategic Investment Fund.
The work of the Korea-U.S. Strategic Investment Corporation may be entrusted to the Korea Development Bank, The Export-Import Bank of Korea, Korea Trade Insurance Corporation (K-sure), and the Korea Investment Corporation (KIC). For transparent fund management and operation, it requires reporting the fund's management and operation status to the National Assembly at least once a year.
Within the Korea-U.S. Strategic Investment Corporation, an operations committee chaired by the Minister of Economy and Finance will be established to be responsible for decision-making. At the Ministry of Trade, Industry and Energy, a project management committee chaired by the Minister of Trade, Industry and Energy will also be set up to share decision-making with the operations committee.
◇ Managing the fund through a layered structure of operations and project management committees
The special act also sets out a concrete investment decision-making structure. When a U.S. investment committee proposes candidates for U.S. investment projects, the project management committee reviews the projects' commercial rationality and strategic and legal considerations and then requests deliberation by the operations committee. The operations committee deliberates and votes on the investment intent, comprehensively considering the project management committee's review results on commercial rationality and the fund's financial status. Based on the operations committee's deliberation and vote, the Minister of Trade, Industry and Energy, through the Korea-U.S. consultative committee chaired by the Minister of Trade, Industry and Energy, will state whether to proceed with the U.S. investment projects.
After that, through consultations at the Korea-U.S. consultative committee, the U.S. investment committee will recommend commercially rational investments to the U.S. president and, once the investment destinations are decided, the operations committee will make the final deliberation and vote on the execution of investment funds.
The special act also specifies several safeguards. Within the annual $20 billion remittance cap, it requires executing amounts that reflect the progress of projects, and if it is anticipated that executing U.S. investments could cause instability in the foreign exchange market, it allows requests to adjust the amount and timing of investment execution. It also stipulates that only investment projects with commercial rationality can be recommended by the U.S. investment committee, and that the United States must be presented with the projects' strategic and legal considerations, including whether they conflict with domestic law.
For selecting vendors and suppliers to provide goods and services to the projects, as well as for selecting project managers, it will recommend and consult with the United States so that, where possible, Korean companies or Koreans can be chosen, and it allows consultations with the United States on needed U.S. government support during project implementation. The needed U.S. government support includes federal land leases, water, power and energy supply, assistance in arranging procurement contracts, and efforts to expedite regulatory procedures. If it is expected that recovering the investment in individual U.S. investment projects within the 20-year period will be difficult, it provides for consultations with the United States on adjusting the cash flow distribution ratio.
Floor leader Kim said of the bill, "This is not a simple implementation measure of the MOU between the two countries but a special act for the national interest," adding, "We will spare no National Assembly-level support to spread the diplomatic results of the tariff negotiations into economic results."
The Ministry of Economy and Finance assessed, "With the introduction of this special bill, the conditions have been met for the automobile and parts tariff cut (25%→15%) to be applied retroactively as of Nov. 1, which has eased our companies' uncertainty in exports to the United States."