South Korea Says US Projects Will Remain in Limbo Until Visa Fix

Kim Min-seok at his office in Seoul.

(Bloomberg) -- South Korea’s investment projects in the US will remain in limbo until visa issues are resolved, the nation’s prime minister said, urging Washington to act quickly to reassure Koreans concerned about getting detained for working there.

“Without resolving the visa issue, meaningful progress remains virtually impossible,” South Korea’s Prime Minister Kim Min-seok told Bloomberg News in Seoul on Wednesday in an exclusive interview that also touched on defense spending and North Korea.

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“Although the projects have not been entirely halted or formally placed on hold, it will be very difficult for a large number of workers to enter or re-enter the US until this problem is resolved,” Kim said, referring to the visa issue, which also casts a cloud over an additional $350 billion investment fund agreed in a July trade deal.Kim Min-seok at his office in Seoul.Photographer: Woohae Cho/Bloomberg

The two countries are working to revise the visa system after 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 detainees were released and returned home about a week after the raid but the incident has rattled South Korea where images of shackled workers have circulated widely and fueled public anger, casting a cloud over hefty investment plans by Korean conglomerates.

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

The visa issue hit the allies just as South Korea and the US are engaged in intense negotiations to finalize a trade deal that sets a 15% tariff on South Korean goods including automobiles. Finalizing the agreement has proven difficult as the two sides remain divided over how to structure and execute the $350 billion investment package, a central pillar of the agreement.

The investment pledge with Washington amounts to more than 70% of South Korea’s foreign reserves, and the shock to the Korean economy would be severe without a currency swap agreement with the US, Kim said.WATCH: South Korean Prime Minister Kim Min-seok sits down with Bloomberg’s Shery Ahn in Seoul for an exclusive interview on the state of Korea-US relations. (Korean with English translation.)Source: Bloomberg

President Lee Jae Myung recently said in a Reuters interview that a swap agreement is needed to avoid an economic crisis similar to what South Korea experienced in 1997 during the Asian Financial Crisis if the nation tries to meet all the US demands.

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Kim declined to go into details of ongoing negotiations but said a deal that puts a significant fiscal burden on South Korea may require parliamentary approval. He said he hoped talks over the deal wouldn’t extend into next year.

“There’s the feeling that it’s difficult for us to accept that, not just the negotiating team but also among the public,” Kim said, referring to US demands similar to those set out in Japan’s $550 billion investment pledge.

The Japanese deal gives Donald Trump the option to raise tariffs on Tokyo if it chooses not to fund projects he puts forward, or doesn’t provide funding within 45 days.

On security, South Korea is looking to raise its defense spending to 3.5% level of its GDP over the next 10 years as part of a broader push to strengthen its independent national defense, Kim said.

“Recently, we mentioned 3.5%, and we did so because we judged that this is a level we are capable of sustaining,” he said. South Korea plans to spend 2.32% of its GDP on defense this year.

Kim’s office later said that raising the country’s defense budget is still under discussion and that a decision hasn’t been made.

A failure to reach an early deal may inject awkwardness into another expected meeting between Lee and President Trump next month when the US leader visits South Korea to join a gathering of APEC leaders in Gyeongju.

As South Korea prepares to host the regional event, North Korean leader Kim Jong Un has floated a potential meeting with Trump saying he has “good memories” of the US leader and could talk with him again if Washington drops its denuclearization demands.

“We are not aware of any concrete dialog taking place between the US and North Korea,” the prime minister said. Asked about a potential meeting between Trump and North Korea’s Kim, the premier said: “Since unexpected events can always occur, I believe we can leave open the possibility.”

--With assistance from Jaehyun Eom, Kazunori Takada, Katria Alampay and Andy Hung.

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