Government Pulls in ₩50 Trillion in Private Funds; KDB’s ₩50 Trillion Bonds Are Ultimately Public Debt

Designed to look private-sector-led on the surface,

but in reality a structure in which the government tightly holds decision-making authority

while stepping back from investment responsibility

▲ Ministry of Economy and Finance press release. ⓒ Ministry of Economy and Finance

《What We Need More Than a 100 Trillion Won Fund Is Private-Sector Autonomy and Competition》

■ Mobilizing private capital for government policy goals

Under the name

“National Growth Fund” (tentative),

the government announced that it will create

a 100 trillion won public-private joint fund.

The plan is to combine 50 trillion won in private capital with 50 trillion won backed by government guarantees and invest it in the AI transformation and super-innovation economy projects.

The goal is to focus on strategic industries such as

▲ AI and robotics ▲ semiconductors and energy ▲ K-bio and K-beauty

and raise the potential growth rate to 3% within the current administration’s term.

However, this approach reveals a number of problems.

The structure of the National Growth Fund

is one that mobilizes private capital for government policy goals.

The government says it will gather 50 trillion won in private funds from pension funds, financial companies, and publicly subscribed funds, but this is

less a matter of voluntary investment than of drawing in capital to fit government policy objectives.

The

50 trillion won the government says it will bear is also structured to depend on government-guaranteed bonds issued by the Korea Development Bank,

which in the end amounts to

little more than drawing on the national treasury through debt.

■ Disregarding the market and funneling private capital based on government judgment

There is also controversy over shirking responsibility in the way the fund will be operated.

The broad direction of strategic industries will be decided by the Deputy Prime Minister for the Economy and ministers, while the operation of the individual funds is designed to be handled by a private-sector-led committee.

It may appear private-sector-led on the surface, but

in reality it is a structure in which the government keeps decision-making power while stepping back from responsibility for the investment results.

If policy performance falls short of expectations, all that may remain is a blame game.

Nor is it justifiable to draw in private capital for policy projects chosen by the government.

The government says it will allocate the fund across 30 tasks, including the AI transformation and super-innovation economy, but this is

nothing more than a structure that ignores the market’s autonomous judgment and funnels capital into government-designated areas.

■ KDB’s issuance of 50 trillion won in bonds will raise firms’ financing costs

Industrial competitiveness is formed

not by government planning, but through a process in which the private sector takes risks and makes choices.

What is needed is not a plan in which the government designates investment targets, but a free institutional environment in which private capital can seek out opportunities and invest on its own.

If the Korea Development Bank issues bonds on a massive scale, interest rates may rise and companies’ financing costs may increase, raising concerns that private investment will be crowded out.

The government says the impact will be limited because it uses a capital call method, but that does not change the essence of the matter.

The moment the government steers private capital into government-designated projects, the market’s autonomous allocation function collapses; companies will find it harder than they do now to secure funding, while money flows into government projects instead.

This

will ultimately constrain the private sector’s investment function and weaken its capacity for innovation.

■ This is not something that can be solved simply by pouring in money

The problem with the Korean economy is not simply a shortage of money.

It is because

※ the innovation ecosystem is not functioning properly, and

※ companies lack the conditions to exercise autonomy and creativity,

that the potential growth rate is falling.

Simply creating a massive government fund will not automatically improve R&D capacity or global competitiveness.

What is needed is not quantitative financial mobilization, but qualitative innovation.

① An institutional environment in which companies can invest and compete freely

② a financial market

in which private capital can autonomously choose growth industries,

and

③

regulatory reform

are the real keys to restoring the potential growth rate.

A method that places a gigantic fund at the forefront and forces through a government-led investment plan cannot become a sustainable growth strategy.

Rather than fixating on a 100 trillion won fund,

the government should create an environment in which the private sector can decide for itself where to invest, compete, and grow.

If the government sets the direction of investment and designs a framework in which private capital flows within those boundaries, companies lose the opportunity to challenge freely and be judged by their performance.

Only when market autonomy is guaranteed can new industries emerge and economic dynamism come back to life.

I hope our economic policy shifts from government-led to private-sector-led.

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Original title: 민간자금 50조 정부가 땡기고, 산은 50조 체권도 결국 국민 빚

Author: Sung-no Choi

Date: 2025-09-03

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28042