Experts warn of long-term recovery risks in Korea's US investment push

Experts said the government's decision to pursue construction of a gas-fired combined-cycle power plant in Encinal, Texas, as the first project under its strategic US investment initiative opens meaningful opportunities for Korean companies to enter the American market. However, they cautioned that follow-on projects — including nuclear power plants and the Alaska LNG development — carry lingering uncertainty over investment recovery and commercial viability, making future negotiations critical.

Jang Sang-sik, head of the Korea International Trade Association's Institute for International Trade, said the framework struck a reasonable balance. "The government set a cap on the annual payment amount in advance, and left items requiring profitability assessments or bilateral consultations — such as Alaska and nuclear power — for further detailed negotiations," he said. "It is positive in that it appropriately balanced US pressure with Korea's commercial rationality."

Compared with Japan, which selected its projects earlier, Korea examined the profitability and recoverability of investments more carefully before committing.

The government confirmed to the National Assembly on Tuesday that the Encinal gas-fired combined-cycle power plant in Texas would be the first designated US investment project. The total project cost is $22.3 billion, and the government reported that a feasibility review found it could recover principal and interest by generating between $43.29 billion and $45.4 billion in revenue over 20 years. Construction of eight large nuclear reactors in the United States is under review as the second project, and the Alaska LNG development as the third.

According to the National Assembly, South Korea and the United States agreed to split revenues 50-50 until Korea fully recovers its principal and interest across the combined projects, after which the split would shift to 10 percent for Korea and 90 percent for the United States.

Experts said that despite these safeguards, risks inherent in long-term investment remain. Heo Yun, a professor at Sogang University's Graduate School of International Studies, said the prospect of securing tangible economic returns was "extremely uncertain at this point." He noted that the investment and its recovery would span multiple future US administrations, leaving room for shifts in economic and policy conditions as well as unforeseen variables. "The longer the investment horizon — 10 or 20 years — the greater the exposure to uncertainty," he said.

On the 50-50 revenue split before principal recovery, Heo said the arrangement only matters if profits are substantial, but added: "I think the mechanisms the government has put in place are reasonably adequate. It would be difficult to secure additional guarantees beyond what has already been arranged."

Assessments varied by project depending on the expected recovery timeline and how firmly each deal has been finalized. Ku Ki-bo, a professor of global trade at Soongsil University, said the gas-fired plant appeared manageable. "Given US electricity demand, it does not seem like a major stretch," he said. On nuclear power, however, he cautioned that construction timelines are so long that recovery could drag on for years. "Depending on how the detailed negotiations conclude, principal recovery could come much sooner or much later," he said.

The Alaska LNG project drew even more skeptical assessments, with experts saying its prospects were more fluid than those of the nuclear project. "In Alaska's case, the uncertainty is too great — sufficient information needs to be gathered and reviewed before any decision is made," Ku said. "Korea must not be dragged into a decision by US pressure."

Experts also flagged the challenge of managing risk across the entire investment portfolio, not just individual projects. Kim Tae-hwang, a professor of international trade at Myongji University, said the government should consider diversifying risk and examine whether the United States might demand additional projects, whether construction costs for already-designated projects could rise, and whether adequate safeguards exist against such scenarios.

Several experts also expressed regret that Korea had been slower than Japan in identifying projects and conducting negotiations. Japan selected six US investment projects — including gas power and small modular reactors — across two rounds in February and March.

"Being cautious is fine, but the delay has been too long," Kim said. "Compared with Japan, Korea has fallen behind in project identification and negotiations, which is ultimately disappointing." He suggested Korea may have lost some negotiating leverage with Washington as a result.

Beyond the return on investment itself, experts said it was equally important to assess how much Korean companies stand to gain through direct participation in the projects.

Jang said the value of Korean firms gaining experience, generating business and building a foothold in the US market through participation should not be overlooked. "We need to look at how much companies participate and what tangible and intangible benefits they actually obtain," he said. He also noted that tariff issues arise when companies invest, and said workforce conditions on the ground — not just equipment and production facilities — must be addressed during actual project execution.

Some experts argued that the government should weigh the broader national interest across trade and security issues with the United States, rather than evaluating each project solely on its own commercial merits. Heo noted that the US investment drive is part of a package deal linked to other issues in last year's Korea-US negotiations, and said it was worth asking seriously "whether completing each item one by one truly serves our overall national interest."

A pan-government response is needed to address this, Heo said. Rather than the Ministry of Trade, Industry and Energy or the Ministry of Finance and Economy treating US investment as their exclusive domain, he said, the government should keep channels open with the Ministry of National Defense and the Ministry of Foreign Affairs — working through trade issues to secure what Korea genuinely needs to lock in during the Donald Trump administration's second term.