South Korea to establish 100 trillion won Future Response Fund

The South Korean government is expected to announce plans as early as this week to establish a ‘Future Response Fund’ and reform the local education financial grant system. Driven by an unprecedented semiconductor boom, the fund is projected to reach nearly 100 trillion won. The fund aims to accumulate tax revenues that exceed the long-term average annual growth rate of domestic taxes, targeting investments in youth, future growth engines, regional development, and talent cultivation.

A key component of the announcement involves reforming the local education financial grant system. The government is considering abolishing the current system that automatically allocates 20.79% of domestic taxes to education grants. Instead, a new formula incorporating economic growth rates and changes in the school-age population may be implemented.

Significant tension remains between the Ministry of Economy and Finance and the Ministry of Education. The Ministry of Education is demanding legal guarantees to maintain current funding levels for primary and secondary education, fearing a reduction in resources. Meanwhile, the Ministry of Economy and Finance proposes focusing the new fund on higher education, lifelong learning, and early childhood education. Disagreements persist regarding the specific use of the funds and the legal protections for existing educational budgets.