Next Year's Policy Finance 247.5 Trillion Won, 136 Trillion Won Allocated to Key Areas Including Bio and AI

San-eun, Kieun, Shinbo, Gibo, and other policy finance providers
Increase investment scale by 20 trillion won in 5 key sectors
Integrate 'National Representative 1000' + 'Excellent Company Preferential Support Process'... Introduce 'Innovation Premier 1000'
Create 3 trillion won-scale innovation growth fund... Government budget input of 300 billion won

The government will allocate 136 trillion won, more than half of the 247.5 trillion won in policy finance for next year, to five key focus areas including the development of advanced strategic industries such as bio and artificial intelligence (AI), and support for future promising industries such as solar cells and the water industry. Additionally, the government will introduce the 'Innovation Premier 1000,' which provides preferential financial benefits and non-financial support to core companies designated by each ministry, thereby strengthening policy finance support.

On the 25th, the Financial Services Commission held a Policy Finance Support Council chaired by Vice Chairman Kim So-young, with government ministries and policy finance institutions, and announced this policy finance support plan. Attendees included directors and bureau chiefs from the Ministry of Science and ICT, Ministry of Agriculture, Food and Rural Affairs, Ministry of Trade, Industry and Energy, Ministry of Environment, Ministry of SMEs and Startups, and the Korean Intellectual Property Office, as well as deputy heads from Korea Development Bank, Industrial Bank of Korea, Korea Credit Guarantee Fund, and Korea Technology Finance Corporation.

In her opening remarks, Vice Chairman Kim emphasized, "As the world accelerates policy competition to protect and nurture domestic industries, the role of policy finance, which can demonstrate high efficiency relative to fiscal input, is becoming increasingly important," adding, "It is necessary to sufficiently supply policy finance focused on key areas to support smooth investment and management activities of companies.”

Next year's policy finance will be supplied more solidly and intensively to the five major strategic areas selected by the ministries. The four institutions?Korea Development Bank, Industrial Bank of Korea, Korea Credit Guarantee Fund, and Korea Technology Finance Corporation?will provide 247.5 trillion won in policy finance, an increase of 7 trillion won compared to this year. In particular, 136 trillion won will be concentrated in the five jointly selected key strategic areas, an increase of 20 trillion won from the 116 trillion won planned for this year.

Specifically, 37.2 trillion won will be supplied to foster advanced strategic industries such as semiconductors, displays, secondary batteries, future vehicles, nuclear power, bio, and AI (newly established). Additionally, 21.5 trillion won will be invested in future promising industries support sectors including nano, hydrogen, content, ICT, marine and fisheries, transportation, aerospace, carbon materials, quantum, defense, agricultural food, telecommunications, deep science, solar cells (newly established), and the water industry (newly established).

Furthermore, 31 trillion won will be allocated to existing industry business restructuring and industrial structure advancement sectors such as industrial crisis response, automobile parts, shipbuilding, steel, refining, textiles, port equipment, optics, plastics, cement, petrochemicals (newly established), and solar power (newly established). 16.7 trillion won will be supplied to foster unicorn ventures, SMEs, and mid-sized companies with high growth potential, including support for global company leap and mid-sized companies (newly established). Lastly, 29.7 trillion won will be provided to alleviate corporate management difficulties caused by worsening external conditions, including machinery, electrical industries, and corporate management challenges.

Moreover, 4.25 trillion won in low-interest loans for semiconductor facility investment, offered at ultra-low rates comparable to 2% government bonds, will be fully activated, and investment funds to strengthen the competitiveness of materials, parts, and equipment such as the semiconductor ecosystem fund will be expanded. Policy finance institutions will significantly increase the direct investment target amount for the five key areas to over 1 trillion won, shifting financial supply from loan-centered to equity investment-centered. Vice Chairman Kim stated, “In addition to 1 trillion won in direct investment, the Innovation Growth Fund of 3 trillion won and the AI-specialized fund of 500 billion won will also contribute to investment-centered policy finance supply.”

The government will also strengthen policy finance support for core companies in each industry selected by ministries and expand the scope of non-financial support such as investment attraction assistance and consulting by introducing the 'Innovation Premier 1000.' This decision addresses criticisms that similar support systems for excellent companies in each industry were redundantly operated and that the benefits were insufficient, resulting in low perceived effectiveness.

Starting next year, tailored financial and non-financial support will be provided to excellent SMEs and mid-sized companies selected by each ministry. Policy finance institutions will offer the highest level of preferential benefits available along with non-financial support programs they can provide. The existing 'National Representative 1000' and 'Excellent Company Preferential Support' processes will be integrated and operated under the 'Innovation Premier 1000.'

Additionally, the Financial Services Commission will establish an Innovation Growth Fund worth 3 trillion won next year, investing 300 billion won of government budget into the fund. While maintaining the basic business direction of the Innovation Growth Fund, some systems will be revised in response to changes in the industrial environment.

First, the Financial Services Commission will create a dedicated M&A league to actively induce business restructuring of SMEs and mid-sized companies. The M&A fund, prepared with 300 billion won, will invest more than 50% of the fund in business restructuring of companies engaged in items that meet the Innovation Growth Joint Standards.

Despite the time-consuming nature of policy funds from formation to investment, a rapid investment incentive system will be established for fund managers to encourage swift investments. To ensure consistent and systematic management of policy funds, the management system will be enhanced by integrating the parent fund operation committees, which were previously operated separately by policy investment projects.

Meanwhile, the 6th revision of the Innovation Growth Joint Standards was also discussed at the council meeting. Revised for the first time in two years after consultations with private advisory groups, the updated standards reflect recent trends by adding an AI theme, including items such as smart fisheries and nuclear fusion energy, while deleting some items with reduced innovativeness. The 6th revision will be implemented early next year, and manuals on the joint standards will be sequentially distributed to financial institutions.