ED Korea's US investment takes shape

The first step in Korea's planned $350 billion investment in the United States appears to be a gas project in Texas, as Seoul also considers building eight nuclear reactors and taking part in a liquefied natural gas (LNG) pipeline project in Alaska, despite questions remaining about its feasibility.

As Washington has been increasingly critical of Seoul for allegedly dragging its feet on the pledged investment, the progress the two sides have made should give momentum to the investment and further cooperation between the two allies.

The $350 billion investment was agreed to last October with the United States, as part of an agreement that kept Korea's flat tariff at 15 percent instead of the threatened hike to 25 percent. By investing in gas plants and nuclear reactors, Korea's investment blueprint will help meet U.S. demands for electricity in the artificial intelligence era while providing a platform for Korean nuclear power-related technology to advance further into global markets.

The Texas gas project is estimated at $22.3 billion, while plans for the eight nuclear reactors and the Alaska LNG project, if pursued, would bring the combined value of the projects to roughly $200 billion. Together with the $150 billion pledged for shipbuilding cooperation, Seoul appears poised to have identified its full $350 billion investment in the U.S. The details, shared in a closed-door meeting between the government and the ruling Democratic Party of Korea, are expected to be finalized on Sept. 18.

When the plans are finalized, Seoul will have made significant inroads toward dispelling Washington's doubts over its commitment to following through on the pledged investments. Japan, which promised a $550 billion investment in return for a 15 percent tariff, has already embarked on the second tranche of its investment project.

A comparatively late investment and implementation on the part of Seoul may have unnecessarily given the impression the government was stalling. To be sure, Washington has been increasing pressure on Seoul lately, including with the U.S. decision to abruptly scale back the annual Ulchi Freedom Shield joint military exercise between the two allies, along with Washington's increasingly loud demands for Seoul to participate in its war against Iran.

For Korea, there are other crucial interests tied to seeing its investment through. A few months after Korea and the United States reached the agreement, President Lee Jae Myung asked U.S. President Donald Trump for his backing to pursue uranium enrichment and spent-fuel reprocessing for a nuclear-powered submarine. A bilateral relationship that is less strained would no doubt facilitate that process. Meanwhile, for Trump, Seoul's commitments mean another win ahead of the crucial U.S. midterm elections.

Korea and the United States are reportedly discussing an initial plan to build two U.S.-designed nuclear reactors and two Korean-developed APR1400 reactors, each with a capacity of 1,400 megawatts. Plans to build the Korean-designed reactors in the U.S. are raising expectations that Korean companies could benefit, particularly firms with expertise in supplying equipment, components and materials for nuclear power plants.

Investing overseas entails navigating the regulatory and economic environment of the host nation. Advance planning to avoid prolonged construction or investment timelines is another key component in ensuring investments are “commercially feasible” for Korea.

Seoul must also clearly and effectively communicate that its U.S. investment and the estimated 800 trillion won investment in the domestic semiconductor cluster are separate projects, with neither offsetting the other. Korea’s strength in semiconductors and its rising productivity will enhance the quality and competitiveness of its investments in the U.S., rather than diminish them.

The United States should recognize that Korea’s ambitious national investment in advanced technologies, particularly semiconductors, is likely to generate significant benefits for both countries. Washington should also take into account Korea’s circumstances and strengthen cooperation with its ally on the basis of trust and mutual respect. Such an approach would help ensure that bilateral investments complement one another and ultimately benefit both economies.