- South Korea's future fund to finance growth projects, not welfare spending, official says
- Fund to support chip clusters, future technology, and youth
- Official rejects "slush fund" criticism, says parliament retains oversight
SEOUL, Aug 26 (Reuters) - A new South Korean fund fuelled by record tax windfalls from a semiconductor boom would finance projects over a three- to four-year period, rather than recurring spending like welfare programmes, a presidential official said on Wednesday.
The Future Response Fund will be used both to support long-term growth projects and help stabilise public finances against swings in tax revenue, the official said. He argued that relying on supplementary budgets when revenue surges or cutting spending when it falls short was not responsible fiscal management.
President Lee Jae Myung's government has pitched the fund as a way to channel AI-driven chip tax windfalls into investments aimed at lifting South Korea's long-term growth potential, amid concerns over population decline, a shrinking workforce and weakening economic growth prospects.
"This is a once-in-a-thousand-years opportunity," the official told reporters at a briefing.
"If we fail to seize it, it is hard to see where we will find another chance to reverse the decline in our potential growth rate."
Some investments are likely to extend beyond President Lee's single five-year term, which ends in 2030.
The official rejected criticism that the fund could become an off-budget "slush fund", saying spending would remain subject to budget procedures and parliamentary oversight.
Under the proposed structure, the government could have flexibility to adjust around 20% to 30% of allocations within limits set by law, the official said.
Such flexibility could help officials respond more quickly to changing needs, such as swings in the cost of graphics processing units (GPUs), without resorting to supplementary budgets, he said.
The budget ministry has said the fund will have four components covering youth investment, growth engines including planned semiconductor clusters and future technology projects, regional development, and education and talent development.
The government has not yet disclosed the fund's size, but local media estimates have put it at more than 100 trillion won ($72 billion).
The official said the government expects memory-chip giants Samsung Electronics and SK Hynix to underpin solid tax revenue over the next two years, but that there was "no guarantee" on revenue beyond that period.
The fund would also help smooth fiscal management and reduce the need for sharp adjustments to government spending or bond issuance when tax revenue fluctuates, he added.
Reporting by Kyu-seok Shim and Joyce Lee
Source: Reuters