Office of the President: "Korea-US Investment to Be Split 50-50 Until Principal Is Recovered" [Gyeongju APEC]

Kim Yongbeom, Senior Presidential Secretary for Policy, Briefs on October 29
Investment Commitment Valid Until January 2029
Fundraising to Take Place Over the Long Term
Funds to Be Raised via a "Capital Call" Method

Yonhap News Agency

The Office of the President announced on October 29 that South Korea and the United States have concluded their trade and tariff negotiations.

Kim Yongbeom, Chief Presidential Secretary for Policy, stated at a briefing at the International Media Center in Gyeongju, North Gyeongsang Province, that "the two countries reached a final agreement on the details of the tariff negotiations on October 29."

The size of the investment fund for the United States will remain at 350 billion dollars, but the annual payment cap will be limited to 20 billion dollars. In addition, a separate provision has been established to adjust the timing and amount of payments if concerns arise about instability in the foreign exchange market. The investment commitment is valid until January 2029.

However, the actual fundraising will take place over the long term. The funds will be raised not through market purchases but through a type of "capital call" method. A capital call refers to a process in which, instead of paying the entire targeted investment amount at once, a portion of the capital is raised and invested, and additional capital is provided as needed when further investment demands arise.

Regarding these measures, Kim explained, "We expect the impact on the foreign exchange market to be further mitigated."

The funds will be raised by utilizing returns from foreign currency assets. Kim stated, "The returns from our foreign currency assets are considerable," adding, "Interest, dividends, and other earnings are expected to be used extensively."

He further emphasized, "With an annual cap of 20 billion dollars, I believe a significant portion can be covered by our existing foreign currency assets. There will be no new shocks to the domestic foreign exchange market."

The investment funds will be split 50-50 between South Korea and the United States until the principal is recovered. However, if it appears that South Korea will not be able to recover the full principal and interest within 20 years, the profit-sharing ratio can be adjusted as stipulated.

Investments will only be made in projects with commercial viability and guaranteed principal and interest, and this principle will be specified in the memorandum of understanding (MOU). Commercial viability is defined as a project where the investment committee, acting in good faith, determines that sufficient cash flow exists to recover the invested amount.

In the event of losses in a particular project, an "umbrella" structure has been established to allow losses to be offset by gains from other projects. Additionally, Kim stated that a safeguard has been secured to allow further negotiations with the United States if the U.S. side unilaterally demands investments contrary to prior agreements.

Meanwhile, Kim stressed, "We thoroughly defended against additional market opening in the agricultural sector," adding, "We have strictly protected against further opening, including rice and beef. The two countries also agreed to strengthen cooperation and communication regarding quarantine procedures."