[Op-Ed] The National Growth Fund: “Growth” Without Autonomy Is a Fiction

Plans to create a 150 trillion won “National Growth Fund” and invest in 10 strategic industries and 90 core technologies / Risks weakening the market’s natural price discovery function and distorting the private sector’s autonomous credit evaluation system / 2025 Financial Stability Report—The share of marginal firms unable to cover interest expenses with operating profit reached 17.1% / The government’s role—respect private-sector expertise and break down barriers between investment industries to reinvigorate the ecosystem

Recently, the central theme of policy finance has been “financial productivity.” So-called “productive finance” refers to policies aimed at channeling funds tied up in unproductive sectors such as real estate into innovative firms and advanced industries that can drive national growth. Among these, the “National Growth Fund” most symbolically represents the direction of productive finance.

The government plans to establish the “National Growth Fund” on a total scale of 150 trillion won and make tailored investments in 10 strategic industries, including semiconductors and AI, as well as 90 core technology areas. In addition, through the “5 Poles and 3 Special Zones” framework, a region-specific funding model, it is strengthening the policy finance foundation for balanced regional development.

However, artificial government-led capital allocation carries a high risk of infringing on market autonomy. It can weaken the market’s natural price discovery function and distort the private sector’s autonomous credit evaluation system.

The government’s tighter regulation of household lending, combined with its push to expand corporate finance centered on the National Growth Fund, undermines financial companies’ autonomy in portfolio management. As artificial capital allocation geared toward policy targets takes precedence over autonomous decision-making, the “true value” of firms or assets may fail to be properly assessed by the market.

The National Growth Fund also discourages private investment autonomy by allowing policy financial institutions to intervene deeply in the selection of investment targets and fund managers. Rigid screening guidelines and support limited to specific sectors obstruct the market’s ability to respond flexibly to rapidly changing industrial trends. If vast amounts of capital become trapped in a bureaucratic order and lose efficiency, the result will not merely be weaker financial competitiveness, but a national economic loss.

In particular, if policy justification is overemphasized and clouds market judgment, a side effect may emerge in which firms that have lost competitiveness are not forced out of the market and instead continue to survive. If funds are injected into marginal firms that should rightly be subject to restructuring, the natural generational turnover of the industrial ecosystem will be delayed and the efficiency of capital allocation will deteriorate severely.

According to the Bank of Korea’s 2025 Financial Stability Report, the share of marginal firms unable even to cover interest expenses with operating profit reached a record high of 17.1%. Under these circumstances, the National Growth Fund must not be used as a policy tool that perpetuates the vicious cycle of keeping marginal firms alive.

Even if promising firms are carefully selected, excessive policy funding concentrated in certain sectors may create a “bubble” in which corporate values are inflated beyond their fundamentals. This later raises the bar for attracting follow-on investment, and when the bubble bursts, the resulting shock can become a poison that threatens the very survival of those firms.

Ultimately, before using productive finance to allocate capital, the government should focus on creating a market environment in which business entry and exit form a virtuous cycle. Efforts must come first to prevent “moral hazard,” in which firms seek to rely on policy rather than capability, without undermining market prices or corporate value.

The government’s role should be limited to respecting private-sector expertise and breaking down barriers between investment industries so as to breathe vitality into the ecosystem as a whole. Only when policy funds become not a “wall” that blocks private competition, but a “lever” that supports the global growth of Korean firms, can the future of the national economy also be secured.

Myungsoo Kim, Intern Researcher

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Original title: [칼럼] 국민성장펀드, 자율 없는 '성장'은 허구다

Author: Myeong-su Kim

Date: 2026-06-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=1&idx=29209