[Lee Administration's First Budget] Record-High 10.1 Trillion Won for AI, 35.3 Trillion Won for R&D... Focused Investment in "Ultra-Innovative Economy"

Record-High R&D Budget of 35.3 Trillion Won
Focus on Six Advanced Industries
Expanded Defense and SOC Budgets
Cuts in Diplomacy

The government has allocated a budget of 10.1 trillion won for the AI sector next year, aiming to become one of the world's top three AI powerhouses. In the research and development (R&D) field, it will invest a record-high 35.3 trillion won to drive technological development and secure future growth engines. Over the next five years, the government will create a new National Growth Fund worth more than 100 trillion won to foster promising companies in advanced strategic industries.

On August 29, the government reviewed and approved the "2026 Budget Plan" containing these measures during a Cabinet meeting. It will inject 2.6 trillion won into the so-called Artificial Intelligence Transformation (AX) project, which introduces AI across all sectors of industry, daily life, and public services. This is more than five times the related budget for this year (500 billion won). Over the next five years, 6 trillion won will be invested in core industries leading the "AI Grand Transformation," such as robotics, automobiles, shipbuilding, home appliances and semiconductors, and factories.

The government will provide 551 billion won to support global AX technology development projects, including AI models for humanoid robots. It has allocated 600 billion won for establishing an AX demonstration valley for the commercialization of fully autonomous vehicles, 613.5 billion won for developing fully autonomous ship technology, and 997.3 billion won for developing "on-device AI semiconductors."

To implement the "AX-Sprint 300" project, which applies AI to 300 products closely related to daily life, the government will invest 900 billion won. This includes products such as skin analysis mirrors and newborn cry analyzers. Specifically, a total of 10 ministries, including the Ministry of Trade, Industry and Energy, will participate, providing grants and subsidies of 1 to 4 billion won per product, and supporting loans totaling 200 billion won.

A budget of 200 billion won has been allocated to expand AI adoption in the public sector. For major projects, 100 billion won has been newly allocated to the public AX program. Forty projects selected through open calls will each receive 3 billion won over two years, and five new projects will each receive 10 billion won. For AI-based customized welfare services, 35.5 billion won has been allocated, and 23.9 billion won has been set aside for AI-based patrols and disaster response to ensure public safety.

The budget for building the AI ecosystem will be significantly increased from 2.7 trillion won this year to 7.5 trillion won next year. To nurture AI experts, 61 billion won will be invested to increase the number of AI and AX graduate schools from the current 19 to 24. The government plans to purchase an additional 15,000 high-performance graphics processing units (GPUs) with an investment of 2.0841 trillion won, aiming to reach its target of 35,000 GPUs ahead of schedule. About 90 billion won will be newly allocated for integrated AX vouchers, and 60 billion won will be invested in establishing cutting-edge AI research infrastructure, such as private sector-led Artificial General Intelligence (AGI) readiness projects and vertical AI research support centers.

Record-High R&D Budget of 35.3 Trillion Won... Focus on Six Advanced Industries

Next year's R&D budget will be 35.3 trillion won, the largest ever. The year-on-year growth rate is 19.3%, the highest among major sectors. The government’s strategy is to achieve tangible results through focused investments in the six pillars of advanced industries: AI, bio, content, defense, energy, and manufacturing. For the five leading physical AI projects and K-on-device semiconductor development, 2.2 trillion won has been allocated. To build integrated bio big data and develop AI-based antibodies, 1.6 trillion won will be invested, and 200 billion won will be provided for developing AI-powered content production technology and planning creative intellectual property (IP).

In the defense industry, 3.7 trillion won has been allocated to localize core weapon systems such as the KF-21 Boramae fighter jet and the long-range surface-to-air missile (L-SAM-II). For the development of key technologies such as silicon carbide (SiC) semiconductors, solar glass, and liquefied natural gas (LNG) cargo holds, 2.6 trillion won has been set aside, and 500 billion won will be used to secure advanced manufacturing technologies such as specialty steel and robot test fields. Climate-adaptive R&D for smart farms and fisheries, expansion of private sector-led technology commercialization programs (TIPS), and business guarantees for promising companies will further strengthen private-sector-linked investment. Three major projects will also be implemented to nurture 33,000 advanced talents.

A 100 trillion won National Growth Fund will be established to focus investments in future strategic industries such as AI, semiconductors, and bio. The government will invest by contributing to a record-high 2 trillion won parent fund, and 600 billion won will be allocated to foster unicorns in advanced industries.

Expanded Budgets for Defense and SOC... Reduction in Diplomatic Spending

By sector, next year’s defense budget will be 66.3 trillion won, an increase of 5 trillion won (8.2%) from this year. Investment in personnel, meals, and training for service members will be expanded across the board, and the transition to cutting-edge weapon systems and the development of K-defense will be promoted. The budget for social overhead capital (SOC) will be increased to 27.5 trillion won, and will be used to strengthen transportation and logistics networks and expand the foundation for balanced regional development, focusing on the "5 hubs and 3 special zones" strategy. The budget for the design of the National Assembly Sejong Building, a key step toward completing the administrative capital, will also be increased from 35 billion won this year to 95.6 billion won next year.

In contrast, the budget for diplomacy and unification will be reduced to 7 trillion won, a decrease of 700 billion won from this year. While the budget for the Inter-Korean Cooperation Fund will increase to 1 trillion won from 800 billion won this year, overall spending in the diplomatic sector will be reduced. In particular, the official development assistance (ODA) budget, which was rapidly expanded under the previous administration, has been normalized. Accordingly, the temporarily expanded humanitarian aid budget will be reduced from 700 billion won to 300 billion won, and discretionary contributions to international organizations will also be cut from 400 billion won this year to 300 billion won next year. However, the government plans to expand practical ODA linked to national interests and support for developing countries.