The Korea-U.S. Strategic Investment Corporation, which will oversee Korea's $350 billion investment in the United States, was launched on the 18th. The corporation's life span is set at 20 years, but the duration of each investment project is to be determined in consultation with the United States under the law. That means there could be cases where investments continue long after the corporation ceases to exist.
Reactions are mixed. Some worry, asking, "Shouldn't the investment in the United States be maintained indefinitely?" while others analyze that "long-term investments could be favorable for recovering principal and interest."
◇ Project life to be decided in consultation between Korea and the United States... up to 50 years possible
Korea's $350 billion investment in the United States stems from last year's tariff negotiations between the two governments. In exchange for lowering reciprocal tariff rates imposed by the United States, the government decided to invest $200 billion in cash in strategic industries such as semiconductors, energy, pharmaceuticals, and artificial intelligence (AI), and to channel $150 billion into shipbuilding through loans and guarantees led by the private sector.
The government's criteria for selecting investment projects were laid out in the Korea-U.S. Strategic Investment Special Act, which passed the National Assembly in Mar., and its enforcement decree approved at the Cabinet meeting in Jun. The special act says the government will invest in "projects where commercial rationality is secured." The enforcement decree defines commercial rationality as "an investment that generates cash flow sufficient to fully cover principal and interest for the individual U.S.-bound investment project with the total expected revenue distributed to the Republic of Korea over the expected life of each project."
The Korea-U.S. Strategic Investment Corporation is required by law to operate on a temporary basis for 20 years and then be dissolved. By contrast, no specific duration is set for the investment projects. The enforcement decree states, "The expected life of each individual U.S.-bound investment project shall be decided through consultations between Korea and the United States." This leaves open the possibility of long-term investments exceeding 20 years.
On this, an official in the investment industry said, "There is concern that investments in the United States could remain tied up for a long time without proper management once the investment corporation is gone."
However, the Ministry of Trade, Industry and Resources said some projects, such as nuclear power, inevitably require long-term investment, so the duration cannot be restricted. In Japan's case as well, there is reportedly no limit on project terms.
However, unlike Japan, Korea has a National Assembly reporting procedure before deciding on U.S.-bound investment projects. This can serve as a control to prevent project lives from being stretched excessively.
Another investment industry official said, "Investment in the United States is effectively structured as Korea lending a certain amount to the United States," adding, "Just as the likelihood of repaying principal and interest increases when the maturity of a mortgage loan is longer, a longer project term for U.S.-bound investment makes it easier to meet the investment requirement of 'commercial rationality.'"
◇ Japan's first investments: "thermal power plant," "synthetic diamonds," "oil and gas export port"
The Korea-U.S. Strategic Investment Corporation is expected to select the first U.S.-bound investment project soon. The government earlier said it would invest only in projects where principal and interest can be repaid with total expected revenue over the project period.
Japan, which has decided to invest $550 billion in the United States, announced in Feb. three first destinations: ▲ construction of a gas-fired power plant in Ohio ▲ construction of a synthetic diamond manufacturing facility in Georgia ▲ improvement of an oil and gas export port in Texas. The investment totals $36 billion (about 55 trillion won).