SEOUL: South Korea’s cabinet approved on Tuesday a presidential decree as part of the process to allow US$350 billion of strategic investments in the US to proceed under a trade deal struck between the countries last year.
The decree specified some terms and conditions in the investment plan, including the definition of “commercial reasonableness,” which will serve as the basis for US$200 billion in direct investments in strategic US industries.
South Korea also agreed to invest US$150 billion in shipbuilding-related cooperation in return for more favourable tariff terms.
Seoul defines a commercially reasonable project as one that can generate enough revenue to fully cover the principal and interest costs of the investment during the projected period of a project.
The lifespan of projects will be decided through negotiations with Washington, the statement said.
Seoul will also create a state-backed investment corporation, which will run for 20 years.
South Korea has pledged the investment plan under a trade deal with Washington in return for a cut in US tariffs on South Korean goods, including automobiles.
In January, US President Donald Trump threatened to raise tariffs on South Korean goods to 25%, saying Seoul’s legislature had yet to enact the trade framework that had capped US levies at 15%.
The National Assembly passed a special bill on the investment with bipartisan support in a plenary session in March.
