South Korea finalizes details for $200 billion U.S. investment plan, defining 'commercial rationality'

South Korea has finalized the enforcement decree for a special law designed to manage its pledge of up to $200 billion in investments in the United States over the next decade. The decree, approved during a cabinet meeting on May 9, details the operational and management procedures for strategic investments between the two countries, following the special law's passage through the National Assembly on March 12. The new regulations are scheduled to take effect on May 18.

A central element of the decree is the concrete definition of "commercial rationality," which serves as the primary standard for evaluating potential U.S. investment projects. The government has defined commercial rationality as a scenario where the "total expected revenue distributed to Korea during the expected lifespan of an individual project can fully cover the principal and interest of the investment." The applicable interest rate will be based on the yield of 20-year U.S. Treasury bonds plus a premium.

Further criteria for assessing commercial rationality, beyond this core definition, will be determined through deliberations by the Korea-U.S. Strategic Investment Operations Committee, chaired by the Deputy Prime Minister for Economic Affairs. The Minister of Trade, Industry and Energy, in consultation with the U.S., will finalize these details. The selection of investment projects will be initiated when the Korea-U.S. Strategic Investment Project Management Committee, led by the Minister of Trade, Industry and Energy, requests a review of the project's feasibility from the operations committee.

Projects submitted for review must include an assessment of their commercial rationality, legal and strategic considerations, recommendations from participating domestic companies, support from the U.S. government, and a review of expected revenues. Projects that do not meet the commercial rationality criteria will undergo additional review based on their impact on national security and supply chain stability. The government plans to launch the Korea-U.S. Strategic Investment Corporation immediately upon the law's enactment, with an operational period of 20 years and an initial capital of 2 trillion won to be provided by the government.