South Korea PM says U.S. investments will be suspended until visa issues are resolved

South Korea’s prime minister, Kim Min-seok, said Thursday that its financial commitments to the U.S. will remain in limbo until it resolves visa issues. He also urged the Trump administration to act quickly to reassure Koreans concerned about getting detained for working there.

Kim believes that meaningful progress remains virtually impossible without resolving the visa issue. He spoke in an exclusive interview with Bloomberg News in Seoul, and also talked about defense spending and North Korea.

U.S. detains South Korean workers in Georgia

The country’s official argued that although the projects have not been completely put on hold or formally halted, it will be very difficult for many South Korean workers to enter or re-enter the U.S. until the problem is resolved. Kim also believes the visa issue obscures the recent $350 billion investment fund agreed by both parties in a  July trade deal.

The prime minister was referring to the incident where hundreds of South Koreans were taken into custody in a raid on a Hyundai Motor Co. and LG Energy Solution Ltd. battery plant under construction in Georgia earlier this month. The U.S. released the detainees, who returned home about a week after the incident.

The incident cast a shadow over the ties between South Korea and the U.S., where images of shackled workers circulated widely and fueled public anger. South Korea is now allegedly reconsidering the hefty investment plans for the U.S. by its conglomerates.

“In the absence of firm assurances regarding their safety, both they and their families are understandably reluctant to enter the U.S. again while this matter remains unresolved.”

–Kim Min-Seok, Prime Minister of South Korea.

According to the Korean senior government official, the visa issue has also cast a shadow on the intense negotiations between South Korea and the U.S. to finalize a trade deal. The agreement involves a 15% tariff set on South Korean goods, including automobiles. 

The two sides remain at a crossroads on finalizing the agreement, since they are divided over how to structure and execute the $350 billion investment package, which is a central pillar of the agreement. Kim revealed that the investment pledge with the U.S. accounts for more than 70% of South Korea’s foreign reserves. He believes the shock to the Korean economy would be severe without a currency swap agreement with Washington.

Cryptopolitan previously reported that President Lee Jae Myung acknowledged that a swap agreement between both countries is crucial to avoid an economic crisis. He compared a potential economic crisis similar to what South Korea experienced in 1997 during the Asian Financial Crisis if the country tries to meet all U.S. demands.

Kim didn’t elaborate further on the ongoing negotiations but maintained that a deal that fiscally jeopardizes South Korea may require parliamentary approval. The Korean official also hopes that talks between both parties over the deal wouldn’t extend into next year.

Kim believes that it’s difficult for South Korea to accept the deal, not just the negotiating team, but also among the public. He was referring to U.S. demands similar to those included in Japan’s $550 billion investment pledge. According to the Korean official, the Japanese deal allows Washington to hike levies on Tokyo if it decides not to fund projects Donald Trump puts forward or settle the deal within 45 days.

South Korea raises its defense budget

Kim revealed that the country plans to raise its defense spending to 3.5% of its GDP over the next decade. He said the plan is part of a broader push to strengthen its independent national defense. 

The government official said South Korea mentioned the 3.5% threshold because it judged that it was capable of sustaining that level. He added that South Korea also plans to spend 2.32% of its GDP on defense this year. Kim’s office also maintained that a decision on the defense budget hasn’t been officially made since it’s still under discussion. 

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