Cabinet passes enforcement decree on S. Korea-US investment act

The Special Act for Korea-U.S. Strategic Investment Management is put to vote at the National Assembly, March 12. Korea Times photo by Min Kyung-suk

South Korea's Cabinet on Tuesday passed the enforcement decree detailing a special act on the country's $350 billion investment pledge to the United States, which is set to take effect this month, the finance ministry said.

The Cabinet's approval of the enforcement decree came as the Special Act for Korea-U.S. Strategic Investment Management, passed at the National Assembly in March, is set to take effect on June 18, according to the Ministry of Finance and Economy.

In October, South Korea and the U.S. reached an agreement on Seoul's $350 billion investment pledge made in return for lower U.S. tariffs.

The investment will comprise $150 billion for shipbuilding cooperation and US$200 billion for projects in various strategic sectors.

According to the ministry, the enforcement decree details the "commercial viability" of potential investment projects in the U.S.

The enforcement decree stipulates that a project can be considered commercially viable when the total income allocated to South Korea during the duration of the project can fully cover the principal and interest of the investment.

When calculating the principal and interest, the ministry said the rate will be based on 20-year U.S. Treasury yields plus an additional spread agreed upon by Seoul and Washington at the initiation of the investment.

The trade minister will also chair a special committee on the investment to review and approve the projects under the enforcement decree. The committee will examine viability, legal issues and expected profits.

South Korea will additionally launch the Korea-U.S. Strategic Investment Corporation, which will operate for 20 years, with the government providing 2 trillion won (US$1.3 billion) in cash as its establishment fund.

The government added it plans to speed up efforts to promulgate the enforcement decree for the smooth implementation of the special investment act.