[Second Half Economic Policy] "Divided Sharing" R&D Budget of 31 Trillion Won... Reconsideration from the Starting Point

2023 Second Half Economic Policy Direction
Comprehensive R&D Strategy to be Established in September
Financial Support of '10 Trillion+α' for Strategic Technologies Including Semiconductors

The government has decided to fundamentally review the R&D budget of approximately 31 trillion won to reform the widespread practice of budget sharing. It will also significantly expand world-class joint research to strengthen global cooperation, and reform R&D support methods by expanding defense R&D institutions to include non-defense companies to enhance the utilization of private R&D capabilities. Additionally, financial support of 10 trillion won plus alpha will be provided for national strategic technologies such as semiconductors.

On the 4th, the government announced these details as part of the '2023 Second Half Economic Policy Direction' in a joint statement with related ministries.

First, to strengthen the discovery of future growth engines, the government will reform R&D support methods and enhance talent development. This year’s government R&D budget totals 31.0764 trillion won, an increase of 1.2764 trillion won compared to the previous year. For the first time ever, the government is pursuing securing new technologies with an R&D budget exceeding 31 trillion won.

"It’s okay if success chances are low"... Bold R&D Promotion

The government will focus R&D budget investments on future and foundational technology fields such as space and aviation, quantum, bio, artificial intelligence (AI), and robotics, and pursue bold investments that do not dwell on short-term results. To this end, starting from October this year, a pilot project called the 'Challenge R&D Project' will be launched. This project allows top-level researchers, designated as responsible program managers (PMs), to directly select challenging national problems without concern for the likelihood of success and oversee the entire R&D process to solve these challenges.

Large-scale R&D procedures and systems will also be improved. For multi-ministry R&D projects, investment scales will be adjusted under the planning of the lead ministry, and the review period for national research facilities and equipment costing over 100 million won will be shortened.

To strengthen global cooperation in the R&D field, world-class joint research such as 'domestic-US Boston state research institution' convergence research will be significantly expanded, and a comprehensive strategy including country-specific R&D cooperation plans will be established by September this year.

Defense R&D institutions will expand from focusing on defense companies to include non-defense companies to enhance the utilization of private R&D capabilities. Support for private technology commercialization will be expanded, including consulting support and strengthening trade secret protection. Additionally, the non-taxable limit for job invention compensation, currently 5 million won, will be raised, and the scope of non-taxable items will be adjusted.

10 Trillion Won + α Financial Support for 'Semiconductor and Display' Strategic Technologies

To accelerate the fostering of advanced industries, the government will actively promote the establishment of global clusters and provide financial support exceeding 10 trillion won. The government is pushing forward the creation of 15 national industrial complexes covering a total area of 40.76 million square meters (approximately 12 million pyeong) to foster future advanced industries such as semiconductors, future vehicles, space, and nuclear power. To ensure timely completion of the 15 national advanced industrial belts, feasibility studies will be applied for this year starting with regions where project feasibility is secured, and these will be processed swiftly. Additionally, new advanced strategic industrial complexes will be designated within this month, and rapid establishment will be supported through measures such as the 'Permit Timeout System,' which deems permits approved if not processed within a maximum of 60 days without special reasons.

Tax and financial support will also be strengthened. Previously, the government expanded the investment tax credit rates for national strategic technologies such as semiconductors from 8% to 15% for large and medium-sized enterprises and from 16% to 25% for small and medium-sized enterprises. Along with this, the strategy is to support advanced industry investments through financial support of 10 trillion won plus alpha. In particular, a plan is underway for the Korea Investment Corporation (KIC) to co-invest in mergers and acquisitions of overseas advanced industry companies. The entrusted fund (5 billion dollars) will be utilized to prioritize joint investment for domestic companies’ overseas expansion, including overseas company acquisitions and mergers.

Alongside this, the government will swiftly promote 15 projects in three major areas of the new growth 4.0 planned for the second half of the year, including the 'Korean Urban Air Mobility Demonstration Project (K-UAM),' and add and supplement detailed implementation tasks for four projects such as smart agriculture and fisheries and new energy technologies.