The government has identified technological innovation led by artificial intelligence (AI) as a breakthrough to reverse the potential growth rate, which has plummeted to the 1% range. As part of the 'New Government Economic Growth Strategy' announced on the 22nd, the government has selected 30 AI transformation and super-innovation economy leading projects for concentrated investment. This so-called 'technology-led growth' aims to raise the potential growth rate to 3% within the current government's term.

● Largest-ever R&D budget allocated for AI transformation

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated at a joint briefing, “Our economy's potential growth rate is rapidly declining, and the actual economy is falling short of even this potential growth rate,” emphasizing the need to transform the national system, designed for a catch-up economy, into a super-innovation leading economy.

The 15 tasks announced for AI transformation include enterprise-centered AI leading projects in robotics, automobiles, ships, home appliances, drones, factories, and semiconductors. The government plans to support these initiatives with a package of research and development (R&D), demonstration, deregulation, market access, and finance if companies take the lead. The public sector will also adopt AI in areas such as welfare, employment, tax management, and new drug review. The government aims to increase its purchase of innovative products from KRW 1 trillion last year to KRW 3 trillion by 2030 to create initial demand.

Separately, 15 super-innovation economy projects have been selected, including SiC power semiconductors and superconductors in advanced materials and components, green hydrogen in climate and energy response, and smart agriculture and fisheries. The 'K-Boom Up' tasks aim to increase global exports of bio-pharmaceuticals, webtoons, games, and food.

To cultivate AI talent, the government will promote 'AI Koreanization' education for the entire population and prepare various incentives to secure domestic and international talent. Customized online education will be provided to elementary, middle, high school, and university students, as well as youth, soldiers, and small business owners. A new military service exemption will prioritize assigning AI field master's and doctoral graduates as specialized research personnel. A 'Postdoctoral Researcher Return Track' will be created to support returning overseas Koreans with research funding.

In line with the AI transformation policy, the government plans to allocate a record-high KRW 35.3 trillion for next year's R&D budget, an increase of approximately 19.3% from this year. The R&D budget approved at the National Science and Technology Advisory Council meeting includes investments in quantum computers, synthetic biology, and defense, centered on AI. In particular, KRW 2.3 trillion, double this year's amount, will be invested in the AI sector. A total of KRW 1.3 trillion will be allocated to projects aimed at preventing the outflow of talent to the United States and China.

● “Limitations of a growth strategy focused on listed investments”

To rebound the declining potential growth rate, the government plans to form task forces where companies take the lead and the government provides support, focusing on the selected tasks. To this end, a 'National Growth Fund' of KRW 100 trillion will be established by adding more than KRW 50 trillion in private funds to the KRW 50 trillion advanced strategic industry fund, composed of government fund bonds and contributions from the Korea Development Bank.

Experts agree with the government's direction to enhance productivity through technological innovation but point out the limitations of a focus on concentrated investment in a list of core tasks. Yang Joon-seok, a professor of economics at Catholic University, stated, “It is more important to create an environment conducive to the growth of the entire industry than to increase investment in a few industries,” emphasizing that improving laws and regulations hindering corporate activities should be a higher priority.

Criticism has also been raised about the simultaneous implementation of policies that increase corporate burdens, such as the 'Yellow Envelope Act' (amendments to Articles 2 and 3 of the Labor Union and Labor Relations Adjustment Act). Seok Byung-hoon, a professor of economics at Ewha Womans University, commented, “The Yellow Envelope Act, the Commercial Act amendment, and the expansion of the role of institutional investors for corporate governance improvement (stewardship code) being pursued by the government and the ruling party could actually lead companies to reduce investment.”

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