The Financial Services Commission along with related government ministries, industry officials, and financial companies held a public conference on September 10 to seek ways to propel economic growth through the establishment and operation of National Growth Fund in the size of KRW150 trillion-plus for the next five years.
At the conference, the FSC introduced plans to establish National Growth Fund and its operating strategies.
Key Details of National Growth Fund
(Background) The high-tech strategic industries, such as artificial intelligence (AI), biotech, and robotics, are critical industries that could serve as a game changer for the prosperity of future generations. In attempt to position themselves as the leader in global competition over high-tech industries, each country has rolled out plans to introduce significant investments and high level tariffs to gain competitive edge. From the construction of Gyeongbu Expressway, the shifting paradigm of economic development toward the heavy and chemical industries and export sectors, and the establishment of high-speed telecommunications network, the Korean economy had shown strategic determinations at major turning points in the past. However, amid low birth and aging population and deepening competition over key industries, the factors that have traditionally been driving economic growth are rapidly deteriorating recently with this year’s growth expectation forecast to be near zero percent. Against this backdrop, it is imperative to propel future growth prospects of the Korean economy by strategically selecting key megaprojects to support their growth in response to global competition over high-tech industries.
(Purpose) National Growth Fund created in the amount of KRW150 trillion will function as a key foundation to propel Korea’s economic growth through industrial restructuring. Over the next five years, KRW150 trillion worth of investments will be made in high-tech strategic industries and related ecosystems (value chains) to boost their competitiveness, facilitate the scale-up of venture and tech companies, contribute to the growth of regional economies, and create jobs. Through these efforts, it is expected that up to KRW125 trillion in added values will also be created in the economy.
(Overview) Over the next five years, National Growth Fund will be set up to provide funding support for high-tech strategic industries (AI, semiconductor, biotech, vaccine, robotics, hydrogen, secondary battery, display, future car, defense, etc.) and associated businesses (related technology and infrastructure, sales partner, etc.). The fund will also make active investments in the game and content industry once a revision of relevant legislation is completed through coordination of related ministries. The supply of funding support worth KRW150 trillion over the next five years will help to reinvigorate the overall capacity of high-tech strategic industries and their ecosystems. The fund also aims to make available active support for startups and venture businesses, which require investment from patient capital.
(Composition) National Growth Fund worth KRW150 trillion will be created with the KRW75 trillion high-tech strategic industry fund and another KRW75 trillion funds originating from the private sector, individuals, and financial companies. The Korea Development Bank (KDB) will contribute a sufficient level of funds to be able to cover the interest on fund bonds in its management of the high-tech strategic industry fund. The fiscal input of KRW1 trillion (for FY 2026) will take a subordinated investment position to absorb losses first and promote active investments form the private sector. Considering the risk sharing between the fiscal investment and high-tech strategic industry fund, financial companies and pension funds will actively participate on a voluntary basis in the establishment of National Growth Fund. In this regard, the authorities will also make efforts to more flexibly apply relevant regulations in financial sectors.
(Investment Methods) National Growth Fund will provide support through diverse methods—(a) direct equity investment, (b) indirect equity investment, (c) infrastructure investment, and (d) low-interest lending support. First, in establishing a new corporate entity or a production facility, the fund will participate as an equity investor or provide funding support to facilitate merger or acquisition (M&A) activities of tech companies. Second, the high-tech strategic industry fund and private sector investment funds will jointly contribute to create a large-scale fund to propel economic growth. An early-stage tech investment fund will be set up to support tech businesses, and certain types of funds will be open to the participation by individual investors to make sure that profits from growth are shared with the public. Third, the fund will provide active support for the development of infrastructures, such as AI data centers and high-tech industrial complexes. Fourth, the fund will be used to supply low-interest loans (at 2 percent level) for large-scale facility investment and research and development (R&D) projects.
(Investment Targets) National Growth Fund will supply funds in the form of investment more so than in the form of credit offering and provide adequate supply of funds for regional projects as well. In particular, the fund will aim to provide targeted support for megaprojects selected by the government (including the ‘30 priority projects’ specified in the new administration’s economic growth strategy). To facilitate a more close-knit network between industrial and financial policies within the government, a vice ministerial level consultation body will be established among related ministries to seek more comprehensive support measures in regulatory, tax, fiscal, financial, and personnel issues.
(Productive Finance) National Growth Fund is a key policy initiative for seeking a transformation of the financial industry toward more productive finance. Going forward, the financial industry will seek answers to address some of the issues in their traditional operating methods based on collaterals, guarantees, and loan-to-deposit spreads. Through the promotion of productive finance, the government seeks to fundamentally transform and reshape the functioning of the financial industry. By introducing innovative changes to the banking sector’s intermediary function, facilitating the growth of large-scale investment banks, and promoting venture capital and the KOSDAQ market, the government plans to seek growth in both the real economy and financial sectors through which businesses, individuals, and local economies are able to share and reap benefits in the process, thereby establishing a virtuous cycle in the economy and financial system.
(Further Plan) The high-tech strategic industry fund, which makes up a key pillar of National Growth Fund, will be launched in early December this year, three months after being promulgated on September 9. In the meantime, the FSC and the KDB will continue to closely work with related ministries in concerted efforts to seek and support megaprojects to strategically foster high-tech industries and strengthen their global competitiveness.
* Please refer to the attached PDF for details.