Expectations, Disappointment, and a Dramatic Breakthrough in a Tense '3 Hours'... Kim Yongbeom: "Annual $20 Billion Milestone-Based Investment" [Interview]

Kim Yongbeom, Chief of Policy Office, Presidential Office, Interview
Dramatic Shift in Tariff Negotiations on the Morning of the Korea-U.S. Summit; U.S. Side Reached Out First
"50:50 Profit Sharing Before Principal Recovery; Disappointment Over Steel Tariffs"
"Desperate Push for Housing Supply... Inter-ministerial Meeting to Launch This Month"
Sharp GDP Recovery Since the Launch of the Lee Jaemyung Administration... "Next Year Will Be Even Better"

Time passed anxiously. Even just a day before the Korea-U.S. summit, the two sides had not managed to narrow their differences over the details of the 350 billion dollar (about 500 trillion won) 'U.S. Investment Package.' The Korean negotiation team persistently argued that the condition of 'maximum annual investment of 20 billion dollars in installments' was the minimum threshold necessary to prevent turmoil in Korea's foreign exchange market, but the U.S. side showed little response. The pressure mounted to the point where some team members talked in their sleep, something they usually never did. Hopes that the tariff negotiations could be finalized at the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju gradually gave way to disappointment.

Kim Yongbeom, Chief of Policy Office at the Presidential Office, is answering questions on the 3rd at the Presidential Office in Yongsan, Seoul.

On the 3rd, at the Presidential Office in Yongsan, Seoul, Kim Yongbeom, Chief of Policy Office at the Presidential Office, told The Asia Business Daily that the previously stagnant atmosphere of the negotiations began to change around 10 a.m. on the 29th of last month, just hours before the Korea-U.S. summit. While President Donald Trump was traveling from Japan to Korea after the U.S.-Japan summit, Howard Lutnick, U.S. Secretary of Commerce, who accompanied Trump, reached out first and said the U.S. would accept some of Korea's proposed conditions, which rapidly accelerated the negotiations.

A top-down decision between the two leaders played a decisive role in reaching an agreement. The negotiation team, including Kim, provided frequent updates to President Lee Jaemyung, who was attending the 'APEC CEO Summit' and other morning events that day, and ultimately succeeded in reaching a final conclusion. Kim explained, "Since it was only the second meeting between the two leaders, there was concern that there might be no results, so the frustrating situation continued even the day before the summit." He reported to President Lee at the APEC CEO Summit venue after receiving the revised proposal from the U.S., which led to rapid progress in the negotiations. He added that the point at which the negotiations were finalized was when President Trump, during his special address at the CEO Summit starting at 1:07 p.m., remarked, "My aides say that Minister of Trade, Industry and Energy Kim Jungkwan is very tough."

As a result of the urgent remote negotiations, Korea was allowed to invest up to 200 billion dollars in cash (equity) in the U.S., with an annual cap of 20 billion dollars. The remaining 150 billion dollars will be invested by Korean companies in the 'MASGA (Make American Shipbuilding Great Again)' project using a combination of cash (equity) and guarantees. The U.S., which had initially demanded an upfront payment of 350 billion dollars in cash, accepted the persistent persuasion of the Korean negotiation team. However, the profit-sharing ratio before the recovery of the principal investment was set at 50:50, as requested by the U.S.

Kim expressed some regret about the 50:50 profit-sharing ratio before the recovery of the principal investment, but emphasized that securing 'annual investment of 20 billion dollars in installments' would ensure "there will be no shock to the foreign exchange market." He added, "The annual 20 billion dollars is a manageable amount when combined with foreign currency operating profits," and stressed that "even the 20 billion dollars will be disbursed in a milestone-based manner according to the progress of the project."

The 'Joint Fact Sheet,' a 2-3 page document outlining the agreement, and the 30-article 'Memorandum of Understanding (MOU)' are expected to be released as early as this week. The Joint Fact Sheet will contain the main points discussed at the Korea-U.S. summit, while the MOU will detail the 350 billion dollar 'U.S. Investment Package.' Kim explained, "Some content from the MOU may be included in the Joint Fact Sheet, but the two documents are different in nature," adding, "The MOU must be signed before its contents are reflected in the Joint Fact Sheet, so they are expected to proceed almost simultaneously."

He said that details regarding the semiconductor tariffs, which became a point of controversy after the summit, would be included in the Joint Fact Sheet. The controversy began when Secretary Lutnick posted on his social media after the summit, stating, "Semiconductor tariffs are not part of this agreement." Kim said, "While the MOU will not include content on semiconductor tariffs, the Joint Fact Sheet will contain wording to the effect that Korea will not be disadvantaged compared to Taiwan." However, he noted that product-specific tariffs on steel could not be addressed, as the U.S. has never made exceptions for any country, calling this "a very disappointing aspect."

The reduced U.S. tariff, from 25% to 15%, is expected to take effect as of November 1. The tariff reduction will be retroactive to the first day of the month in which the implementing legislation is submitted to the National Assembly. Kim said, "I understand that it will be pursued as a legislative initiative by lawmakers," and added, "If the bill passes the National Assembly's review process, the tariff reduction will be retroactive to November 1."

"Inter-ministerial Meeting for Expanding Housing Supply to Launch This Month"... Seoul City’s Role Is Also Crucial

Kim said that in order to accelerate housing supply measures for price stabilization, the 'Inter-ministerial Meeting for Expanding Housing Supply' would be launched within this month, and that relevant departments within the Ministry of Land, Infrastructure and Transport and Korea Land & Housing Corporation (LH) would be quickly expanded. Reflecting on his experience, Kim said that implementing real estate policy was more difficult than the principle-based Korea-U.S. tariff negotiations, noting, "Given the current market situation, there is a high possibility that real estate prices will continue to rise, so we plan to make every effort to increase housing supply."

He added, "We are establishing a ministerial body for housing supply, and all relevant ministers will participate," and continued, "We will expand related departments within the Ministry of Land and LH, assign project managers for areas such as Umyeonsan and Seoripul, and ensure responsibility for housing supply."

Kim Yongbeom, Chief of Policy Office at the Presidential Office, is answering questions on the 3rd at the Presidential Office in Yongsan, Seoul.

He also called for active cooperation from the Seoul Metropolitan Government on housing supply. Kim pointed out that for housing prices to stabilize, a stable supply of housing in Seoul is essential, but the Seoul Metropolitan Government, which holds the approval authority for redevelopment and reconstruction, has not been proactive. He said, "There are limits to what the Ministry of Land can do alone, so the role of the Seoul Metropolitan Government is extremely important," and added, "Seventy to eighty percent of housing supply in Seoul is the responsibility of the Seoul Metropolitan Government."

He suggested that if bottlenecks occur in Seoul's own housing approval work, delegating authority to each district office could be a solution. Kim said, "In Gyeonggi Province, each city and province plays a role, but in Seoul, the role of the district offices is very limited," and added, "There is a need to revisit governance structures, including the relationship between the central government and the Seoul Metropolitan Government, and between the Seoul Metropolitan Government and district offices." He also emphasized, "Yeongdeungpo-gu, Guro-gu, and Geumcheon-gu have many heavy industrial areas, and these should also be developed," stressing that "the central government and the Seoul Metropolitan Government must work together to increase supply."

Sharp GDP Recovery Since the Launch of the Lee Jaemyung Administration... "Next Year Will Be Even Better"

Kim said that the economic recovery has accelerated under the Lee Jaemyung administration and predicted that next year will be even stronger than this year. The real gross domestic product (GDP) growth rate for the third quarter was 1.2%, 0.2 percentage points higher than the forecast (1.0%). This was due to improvements in exports and investment following the distribution of consumer coupons for livelihood support. Regarding monetary indicators, he noted that broad money (M2) increased by 8% year-on-year as of August, interpreting this as a sign of rising economic activity.

Kim stated, "The macroeconomy is normalizing much faster than expected," and added, "The rise in stock prices reflects a recovery in fundamentals rather than a bubble." He explained that after negative growth in the first quarter and zero growth in the second quarter, both real and financial indicators have improved simultaneously since June.

He also took an optimistic view of next year's growth. He said, "Since President Lee took office, the stock market has risen by 60%. It has far surpassed levels previously thought unattainable, and prospects remain strong." He especially predicted that Korea would emerge as a key country in areas such as artificial intelligence (AI)-related semiconductors and energy, with continued improvements in exports, investment, and consumption.

Meanwhile, Kim stressed that it is desirable to revitalize productive finance so that funds flow into the stock market rather than real estate, and that banks should seek alternatives such as corporate loans instead of focusing solely on home loans. He also stated that the relaxation of the separation between banking and commerce would be discussed by creating special laws for specific industries in advanced industrial sectors.