DPK submits bill to establish management body for $350 bil. investment in US

Democratic Party of Korea lawmakers submit the bill on Special Act for Korea-U.S. Strategic Investment Management to the Legislative Bills Office at the National Assembly in Seoul, Wednesday. Joint Press Corps

Korea’s ruling party submitted a bill on Wednesday to establish a state-run investment corporation and fund to manage a planned $350 billion investment in the United States, intending to cement a major economic agreement reached at the summit between Seoul and Washington last month.

Through the bill, the Democratic Party of Korea (DPK) and the government seek to retroactively apply the planned reduction in U.S. tariffs on Korean automobiles and auto parts, from 25 percent to 15 percent, to Nov. 1.

The legislation specifically calls for the creation of a Korea-U.S. strategic investment fund. This framework is designed to oversee commercially viable investments and bolster bilateral economic ties.

To manage and operate the fund, the bill seeks to establish a body, tentatively named the Korea-U.S. Strategic Investment Corp., for an initial term of up to 20 years. The corporation will launch with 3 trillion won ($2 billion) in capital from the government and other contributors. Under its oversight, the fund will be run to execute key investments efficiently.

To leverage existing expertise, the corporation will be permitted to delegate parts of its operations to major financial policy institutions, including the Korea Development Bank, Export-Import Bank of Korea, Korea Trade Insurance Corp. and Korea Investment Corp. For transparency, it must report on the fund’s management and operations to the National Assembly at least once a year, and its activities will be subject to oversight by the Assembly’s Steering Committee.

Funding will be sourced from returns on foreign exchange reserves managed by the government and the Bank of Korea, as well as government-guaranteed bond issuances overseas. These funds will support up to $20 billion annually, as stipulated in the memorandum of understanding between the two countries, for guarantees, loans and financial assistance.

For structured management, the fund will be divided into two separate accounts: $200 billion for investments in various sectors and $150 billion for shipbuilding cooperation.

Minister of Trade, Industry and Resources Kim Jung-kwan speaks during a press briefing on a fact sheet and memorandum of understanding related to the Korea-U.S. tariff negotiations at Government Complex Seoul, Nov. 14. Yonhap

Investment decisions will follow a multilayered governance structure involving several committees. The U.S. Investment Committee will first propose potential projects. The project management committee, chaired by Korea’s minister of trade, industry and resources, will first evaluate their commercial viability and strategic and legal alignment. Recommendations will then be sent to the investment corporation’s operating committee, to be chaired by the minister of economy and finance.

The operating committee will then further examine investment proposals by considering the expected evaluation results and the fund’s financial status. Based on its deliberation, Korea’s position on specific investments will be communicated and negotiated through the Korea-U.S. Consultation Committee, chaired by the minister of trade, industry and resources.

Once negotiations are concluded, a commercially viable project is recommended to the U.S. president by the U.S. Investment Committee and an investment destination is selected, Korea’s operating committee will make the final decision on the allocation of investment funds.

Export-bound vehicles are lined up at Pyeongtaek Port in Gyeonggi Province, Oct. 30. Yonhap

After the bill’s introduction, the trade ministry sent a letter under the minister’s name to the U.S. Secretary of Commerce, notifying U.S. authorities that the legislation had been formally submitted to the National Assembly. The ministry requested prompt publication in the U.S. Federal Register, particularly to allow retroactive application of tariff reductions on automobiles and auto parts from Nov. 1.

Under the bilateral agreement signed in mid-November, tariff reductions on Korean automobiles and auto parts exported to the U.S. will be applied retroactively to the first day of the month in which the relevant legislation is submitted to the Assembly. Since the bill was introduced on Wednesday, Korean exporters will now qualify for the retroactive tariff reduction.

The bill stipulates that the special act will take effect three months after its promulgation. It will soon undergo review by the relevant standing committees, including the National Assembly’s Strategy and Finance Committee.

Democratic Party of Korea floor leader Rep. Kim Byung-kee speaks during the party's Supreme Council meeting held at the National Assembly in Seoul, Wednesday. Yonhap

At the party’s Supreme Council meeting, DPK floor leader Rep. Kim Byung-kee emphasized the principles of caution and thoroughness when reviewing the bill.

"We will make detailed improvements to ensure the bill genuinely benefits the national economy," Kim said.

After submitting the special act, the ruling party's senior floor policy chief Rep. Huh Young also told reporters that the National Assembly will conduct a meticulous and comprehensive review of the special law, and if any aspects are found to potentially harm the national interest, "both ruling and opposition parties will work together to refine it into a more complete bill on investment in the U.S."

When asked whether the bill would be pushed through via the fast-track process if the main opposition People Power Party (PPP) opposed it, Huh responded: “We are not considering using the fast-track. ... Given that this involves strategic investment under the Korea-U.S. alliance, we expect and request the PPP’s active cooperation in passing the bill.”

People Power Party floor leader Rep. Song Eon-seog, center, speaks during a press conference held at the National Assembly in Seoul, Wednesday. Yonhap

Even though the special law must go through the Strategy and Finance Committee’s review after being introduced, the PPP maintains that it requires ratification by the National Assembly. Currently, the Strategy and Finance Committee is chaired by Rep. Lim Lee-ja of the PPP.

The PPP continues to argue that the Korea-U.S. tariff negotiations could have a significant impact on the Korean economy, and therefore require parliamentary ratification.

"It is principle that once parliamentary ratification is secured, any necessary measures — whether through a special domestic law or amendments to other laws — should proceed accordingly. We have repeatedly stressed that insisting solely on the special law without obtaining ratification is problematic," the main opposition conservative party's floor leader Rep. Song Eon-seog told reporters during a press conference Wednesday.

However, the DPK maintains that parliamentary approval of the special act would be sufficient. They argue that the U.S. Congress itself does not treat the Korea-U.S. tariff negotiations as subject to ratification.