President Lee Jae Myung used his first anniversary press conference Monday to lay out four national goals for his second year in office, vowing to make this year "the bold beginning of an irreplaceable Korea that no other country in the world can substitute." Topping the agenda was the ambition to build an "ultra-gap industrial powerhouse" — a Korea so far ahead in key industries that rivals cannot close the distance. Lee pledged to soon unveil a large-scale investment project that would deliver what he called "a great transformation of growth strategy," a phrase that signals the direction of the second-half economic policy blueprint due at the end of this month.
Any such transformation will require enormous public funding. Korea's fiscal position has run an average deficit of roughly 100 trillion won (about $64.7 billion) a year for years, yet this year's outlook has shifted. A global AI boom has sent chipmaker profits surging, and analysts project that if Korea's nominal GDP growth rate reaches double digits this year, excess corporate tax revenue could generate up to 70 trillion won in windfall receipts. The prospect sparked controversy when Kim Yong-beom, the Cheong Wa Dae policy chief, floated the idea of distributing the surplus as a national dividend to citizens. Lee settled the debate Monday, saying the government intends "to make bold investments in areas the private sector cannot handle — such as discovering new growth engines like semiconductors — and to focus on long-term investment in restoring potential growth so we can give hope to the younger generation."
How a country spends a windfall born of a temporary boom can determine its long-term competitiveness and the fate of future generations. Norway channeled vast revenues from North Sea oil development into its sovereign wealth fund, the GPFG, steadily building it over 30 years to an average annual return of 6.6 percent and a total asset base of roughly 3,000 trillion won. The approach shielded Norway's industrial competitiveness from the distortions of resource wealth while allowing future generations to share in the benefits of energy revenues. Mongolia offers a cautionary contrast. After discovering one of the world's largest copper and gold deposits — the Oyu Tolgoi mine — in the early 2000s, it distributed the windfall as cash dividends to all citizens. When mineral prices later fell, the country faced a serious fiscal crisis and came close to sovereign default.
It is encouraging that the Lee administration has decided against scattering the boom's gains as cash handouts and instead plans to build them into assets for future growth engines. Deputy Prime Minister Koo Yun-cheol said last month that the government intends to channel surplus tax revenue into a sovereign wealth fund and create "a virtuous cycle in which that money earns more money." Whether the vehicle is a sovereign wealth fund or a dedicated investment fund, the surplus must be designed with precision so that it genuinely serves as seed capital for Korea's ambition to lead the world in the industries that matter most.
mhj@heraldcorp.com
