The 162 Trillion Won Future Response Fund Must Be Completely Overhauled, Including Conversion into a Sovereign Wealth Fund

The government’s proposed Future Response Fund is designed to save tax revenue increased by the semiconductor boom and other factors in preparation for an economic downturn, while investing in youth, growth engines, regional development, education, and talent. Of the KRW 162.3 trillion in additional tax revenue projected for 2027, KRW 45.4 trillion will be invested in four key areas, KRW 104.4 trillion will be managed as reserve funds, and KRW 12.5 trillion will be used to reduce new government bond issuance.

The problem lies less in the scale of KRW 162 trillion than in the fact that functions with fundamentally different characteristics have been placed together in one large fund. Fiscal stabilization, welfare-type spending, local and education finance, and industrial investment all differ in purpose and operating principles. Rather than creating a new fiscal channel, the priority should be to rearrange existing institutions and investment instruments according to their respective functions.

First, the general account should be clearly defined not as a channel for allocating funding to designated projects, but as a rules-based fiscal stabilization mechanism. The method for estimating additional tax revenue, the conditions for accumulation and withdrawal, the target balance, and replenishment obligations need to be specified in detail. In a situation where government debt is rising, the priority between repaying government bonds and accumulating fund reserves must also be made clear.

The area that industry should pay particular attention to is the growth engine account. AI, semiconductors, and advanced technologies require large upfront investments and involve high risk, but if successful, they are sectors where returns can be recovered through rising corporate value and investment profits. If even these areas are supported mainly through subsidies and contributions, public finances will bear the risk while finding it difficult to adequately recapture the returns on investment.

Accordingly, among the growth engine account’s programs, investment projects with recoverable returns should be separated into a distinct strategic sovereign wealth fund. A circular structure of investment → recovery → reinvestment should be built around equity participation, fund investment, and loans, while expanding co-investment with private capital. In other words, public finances should be managed not as one-off support payments but as long-term capital for future industries.

Ireland’s ISIF, Singapore’s Temasek, and Norway’s GPFG differ in purpose and operating methods, but they all point to the same lessons: professional management, market discipline, and transparency. A Korean-style strategic sovereign wealth fund should likewise avoid a system in which the government directly selects individual companies and technologies. It should establish a professional management system along with clear risk limits and performance criteria so that both independence and accountability in investment decisions can be secured.

For the regional account, integrating existing region-targeted fiscal programs would be preferable to creating a new one. The Local Extinction Response Fund, the Special Account for Balanced National Development, and various government subsidy programs already support similar projects related to regional industry, settlement, and population decline. Adding yet another account could increase duplication in calls for applications, evaluation, settlement, and performance management. It would be better to absorb the functions of the Local Extinction Response Fund into a “Local Extinction Response Account” within the Special Account for Balanced National Development, while clearly dividing roles so that general resources are handled through the Local Shared Tax and earmarked resources through the Special Account for Balanced National Development.

The education and talent account would also be more clearly handled by assigning functions within the existing education finance system rather than creating another new account. Given that the Local Education Subsidy, the Special Account for Higher and Lifelong Education Support, and fiscal channels related to early childhood already exist, creating a separate account could lead to multiple accounts supporting the same education and talent programs while blurring lines of responsibility. Elementary and secondary education, higher and lifelong education, early childhood, and the cultivation of nationally strategic talent should be assigned according to the roles of existing accounts so that National Assembly budget review and performance evaluation can operate directly.

The youth account as well should first reduce overlap with existing programs for jobs, housing, asset formation, and childbirth support. In particular, if programs characterized by recurring expenditures such as cash payments and vouchers are expanded on the basis of temporary additional tax revenue, they are likely to become a permanent burden on the general account in the future. Rather than broadening the scope of a separate account, it is necessary to focus on temporary investments that strengthen the foundations for self-reliance—such as labor market entry, job skills, entrepreneurship, and housing mobility—while making sunset provisions and performance criteria clear.

The name “future response” does not automatically guarantee long-term fiscal responsibility. To prevent resources secured during boom periods from being scattered across short-term program expansion, the government must first establish rules and investment principles that can be maintained across economic fluctuations, along with standards for improving existing institutions. What is needed now is not a larger fund, but a fiscal management framework that operates consistently over time.

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Original title: 162조 미래대응기금, 국부펀드 전환 등 전면 재설계해야

Author: Gwang yong Go

Date: 2026-09-28

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=29561