South Korea Launches Future Fund for AI-Driven Growth

South Korea announced plans to launch a new 'Future Fund', utilizing what it calls 'windfall revenue' from increased tax collections driven by the artificial intelligence (AI) chip boom, according to multiple reports. The fund aims to promote long-term economic growth through strategic investments in key areas such as youth support, AI development, and regional economies.

The Ministry of Planning and Budget unveiled the plan in partnership with relevant government agencies, stating that the AI industry has sparked a major transition across various sectors beyond just technological advancements. 'Amid the global chip boom, domestic tax revenue is expected to rise sharply,' the budget ministry said as reported by UPI. The fund will serve as a strategic investment platform aimed at boosting the country's potential economic growth.

The Future Fund will support young people in various life stages, covering employment, housing, marriage, and childbirth. It will also back the government's three megaprojects initiative centered on fostering the AI industry and related areas such as physical AI and seven future-oriented sectors: small modular reactors (SMRs), nuclear fusion, renewable energy, quantum technology, aerospace, advanced biology, and supply chains for advanced materials and components.

According to Reuters, the fund will be financed mainly by tax revenue exceeding a benchmark based on the average growth in domestic tax receipts over the past decade. The government did not provide an official estimate of the fund's size, but pundits estimate it could range from 60 trillion won ($43.4 billion) to 70 trillion won, potentially rising to as much as 100 trillion won depending on the industrial cycle.

The announcement comes amid a broader overhaul of South Korea's education budget allocation mechanism to better reflect the country's dwindling student population while bolstering higher education. The proposal will be reviewed by the Cabinet and submitted to the National Assembly for approval, as reported by UPI. Meanwhile, Samsung Electronics is set to announce a new shareholder return policy worth more than 100 trillion won ($71.75 billion), according to media reports cited by Reuters, further highlighting the economic impact of the AI-driven chip supercycle.

The Future Response Fund will be used both to support long-term growth projects and help stabilize public finances against swings in tax revenue, as reported by Reuters. A presidential official emphasized that relying on supplementary budgets when revenue surges or cutting spending when it falls short is not responsible fiscal management. The fund aims to channel AI-driven chip tax windfalls into investments aimed at lifting South Korea's long-term growth potential amid concerns over population decline, a shrinking workforce, and weakening economic growth prospects.

The official rejected criticism that the fund could become an off-budget 'slush fund,' stating that spending would remain subject to budget procedures and parliamentary oversight. Under the proposed structure, the government could have flexibility to adjust around 20% to 30% of allocations within limits set by law. This flexibility is intended to help officials respond more quickly to changing needs without resorting to supplementary budgets.

The fund will have four components covering youth investment, growth engines including planned semiconductor clusters and future technology projects, regional development, and education and talent development. The government expects memory-chip giants Samsung Electronics and SK Hynix to underpin solid tax revenue over the next two years but acknowledged there is 'no guarantee' on revenue beyond that period.

According to Reuters, shares of Samsung Electronics fell more than 5% in early trade on Monday after announcing that its shareholder returns this year could reach up to 110 trillion won ($79.38 billion). The shares were down 5.2% by 0013 GMT, while peer chipmaker SK Hynix was up 2.4%. The benchmark KOSPI fell 0.7%.