South Korean government's AI initiative hits snag

South Korea's AI budget may shrink as priorities are given to other public policies such as safety, demographics and regional growth.

South Korean President Lee Jae-myung has announced a plan to spend 210 trillion won ($151.11 billion) on a five-year agenda, including a technology-industry initiative package aimed at placing South Korea among the world's top three powers in Artificial Intelligence (AI).

However, the feasibility of raising capital to realize this ambition is controversial.

According to the State Affairs Planning Commission, the program includes the “AI energy highway” project with the goal of securing more than 50,000 graphics processing units (GPUs), building advanced data and energy infrastructure, developing next-generation AI technology, and training human resources.

The government plans to allocate 25 trillion won for AI projects out of its total budget of 210 trillion won.

The government has said it will raise 116 trillion won from spending cuts and 94 trillion won from revenue increases, but experts say that will be difficult to achieve without tax adjustments, especially in the context of a national budget deficit.

South Korea's public debt will increase by 120 trillion won, surpassing the 1.3 trillion won mark in 2024, while the budget deficit will be at 4.2 percent of GDP, the highest among the Organization for Economic Cooperation and Development (OECD) for six consecutive years.

Some fear that AI funding could shrink as priorities shift to other public policies such as safety, demographics and regional growth.

There is also speculation that the government may rely on Korea Electric Power Corporation (KEPCO) to make up for the shortfall through the first electricity price hike in two years.

KEPCO reported an operating profit of 5.89 trillion won in the first half of 2025, but still incurred a cumulative deficit of nearly 29 trillion won since 2021.

If electricity prices are not increased, KEPCO will have to issue more bonds, which are already close to the ceiling according to regulations.

However, when consumer inflation has maintained a 2% increase for two consecutive months, increasing electricity prices is considered a politically and socially sensitive choice./.

(Vietnam+)

Source: https://www.vietnamplus.vn/sang-kien-ai-cua-chinh-phu-han-quoc-gap-tro-ngai-post1056228.vnp