By Cynthia Kim and Yena Park
SEOUL (Reuters) -South Korea’s pledge to invest $350 billion in strategic U.S. industries as part of a trade deal with Washington is likely to be led by state policy institutions that will provide funding on a case-by-case basis, the country’s vice finance minister said.
Under a trade deal struck in July to cap U.S. tariffs at 15%, the countries agreed to a financial package to support industries such as shipbuilding, key minerals, batteries, pharmaceuticals, chips and AI, although officials in Seoul have said details on implementing the plan still need to be hashed out.
“We basically look at the $350 billion as a limit so it won’t be raised all at once, but rather we will be able to provide support tailored to situations that may arise,” Lee Hyoung-il said on Wednesday in an interview with Reuters.
“We plan to prepare it (the package) through policy financial institutions basically,” Lee said, declining to confirm whether policy lender Korea Development Bank would be orchestrating the operation.
“Nothing has been decided on the issue,” an official at the KDB said.
State-run lenders such as the KDB provide policy financing and manage funds for public infrastructure and financial market stability.
Lee’s comments build on assurances from other top Seoul officials that the investment pledge is designed to support commercially viable U.S.-based projects on a capital-call basis as demand arises.
The two sides have appeared at times to interpret the fund differently. A South Korean presidential adviser last month denied U.S. claims that Washington would take 90% of the profit from the $350 billion investments.
Turning to Wednesday’s global bond rout, Lee downplayed concerns that South Korea’s bond and foreign exchange markets could face instability due to jitters around debt sales and fiscal discipline.
South Korea plans to issue a record amount of bonds next year to fund spending in sectors including AI, semiconductors, research and defence.
Lee said authorities would continue to monitor foreign exchange markets and “act to stabilise markets if needed”, while conducting talks with the U.S. Department of the Treasury on the dollar-won market.
He added the government will review whether the dollar-won trading hours can be further extended, as part of Seoul’s push to be included in MSCI’s developed market benchmarks.
On the broader economy, Lee expects a recovery to accelerate next year when Asia’s fourth-largest economy is forecast to grow 1.8%, around its potential growth rate, from a projected expansion of 0.9% this year.
Asked about the risk of Korean industry being hollowed out due to U.S. investment commitments, Lee said the government will channel its support into AI to shore up South Korea’s role as a key tech exporter and underpin growth.
“We need to get on the AI transformation wave to survive,” said Lee, citing major interest among companies on physical AI, which integrates AI into areas like robots, cars, shipbuilding and electronics.
The country’s 728 trillion won ($522 billion) 2026 spending budget follows up on some of the promises President Lee Jae Myung gave on the campaign trail to shore up an economy hit by U.S. tariffs and demographic challenges.
(Reporting by Cynthia KimEditing by Ed Davies and Shri Navaratnam)
Comments