S. Korea to launch 'future fund' with 'windfall revenue' amid chip boom

Seoul, August 21 (Yonhap) -- The South Korean government announced plans to launch a Future Fund to harness windfall revenue from the AI boom and drive long-term economic growth, the budget ministry announced on Friday. The AI industry's transformative impact extends beyond technology, influencing the economy and social systems, according to the ministry.

The surge in global chip production is projected to significantly increase domestic tax revenue, with windfall revenue defined as tax income surpassing long-term trends due to structural changes or major fluctuations. The government intends to utilize the windfall revenue for the Future Fund, while surplus revenue will support supplementary budgets, debt repayment, and the fund.

The Future Fund will focus on sectors crucial for boosting the nation's potential growth, including youth development, regional economies, and education. It will provide support for young individuals across various life stages, such as employment, housing, marriage, and childbirth. Additionally, the fund will aid South Korea's three megaprojects, primarily centered on advancing the AI industry and seven future-oriented sectors, such as small modular reactors, nuclear fusion, renewable energy, quantum technology, aerospace, advanced biology, and supply chains for advanced materials and components.

The fund also aims to enhance fiscal stability and contribute to more efficient budget management. To address the shrinking student population, the budget ministry proposes a revised education budget allocation mechanism. This change will adjust the current system, which automatically distributes 20.79 percent of internal tax revenue to local education offices, based on factors like the previous year's grant amount, three-year average nominal economic growth rate, and demographic changes.

The proposal will be reviewed by the Cabinet on September 1 and submitted to the National Assembly on September 3.