Achieving Korea’s Economic
Vision Begins with Securing
Competitiveness in Future Industries

How Will Korea’s Economy Survive?

Korea is now facing a complex and severe economic crisis. Once hailed as the “Miracle on the Han River,” the country had risen to become the world’s 12th-largest economy and 8th in exports. But today, the outlook is more uncertain. Persistent low growth, demographic decline, and weakening industrial competitiveness are undermining the foundations of the Korean economy. Added to this is mounting external pressure—from U.S.-led protectionist policies to intensifying global trade tensions—which is threatening the survival of Korean enterprises.
To reinvigorate the economy, Korea must pursue structural transformation through bold innovation and change. Unlocking new growth potential will require forward-looking policy frameworks and disruptive strategies. However, in an era of rapidly evolving global industries, Korea is already falling behind in the global race for future sectors. In response, FKI has identified ten future industries where regulatory reform, support for private-sector innovation, and strategic investment are urgently needed.

Building a Comprehensive Ecosystem

The global race for AI supremacy is intensifying, with major nations launching massive initiatives such as the U.S. Stargate Project (around KRW 700 trillion) and the EU’s Gigafactory development plan (around KRW 300 trillion). With the emergence of global industrial landscape shifts driven by large-scale AI, it is necessary to take urgent action to establish comprehensive AI ecosystems centered around the private sector. However, policy support for building essential datasets remains insufficient due to regulatory constraints on data. Securing large-scale power supply for data centers—essential to AI infrastructure—also poses a structural challenge.
To encourage private investment, policymakers should give serious consideration to including AI data centers under the “National Strategic Technology Commercialization Facilities” category in the Act on Restriction on Special Cases Concerning Taxation, thereby strengthening tax incentives. To align with current needs, regulatory reforms for data—which is core to AI competitiveness—are necessary to promote public and private data integration and utilization. Innovative solutions should also be explored, such as linking AI clusters with designated distributed energy zones and accelerating small modular reactor (SMR) development as alternative energy sources. Also, a national data agency should be established to ensure that the AI infrastructure is kept robust. It would also oversee personal and institutional data in addition to building and managing high-quality datasets accessible to businesses, universities, and research institutions.

Rockets for the Future, Becoming a Space Powerhouse

In May 2024, the Korean government launched the Korea Aerospace Administration and announced its ambition to join the ranks of the world’s top five space powers. However, there remain numerous constraints. According to the Korea Association for Space Technology Promotion’s 2023 Space Industry Survey, Korea’s space budget amounts to only 0.86% of the U.S. space budget. Korea’s budget also lags behind that of China and Japan. It is also estimated that core launch vehicle technologies such as large engines and space observation sensors are only half as advanced as those of the U.S. Without narrowing this gap, Korea will struggle to establish competitiveness in the global space race.
We must focus and prioritize. Policy efforts should be aimed at areas where the private sector already has strengths—such as ground equipment and satellite communication services, which make up 70% of the space industry. The starting point should be securing a minimum annual budget of KRW 1.5 trillion for space development by 2027 under government leadership. A bold shift from state-led research to private-led technology development is also warranted. In addition, technologies developed by national research institutes should be proactively transferred to the private sector, and the legal and institutional framework should be reformed to allow businesses to take the lead in the space industry. Satellite imagery and public-sector space data not related to national security should be released for private use and technologies related to satellites, launch vehicles, and advanced air mobility (AAM) should be designated as national strategic technologies, so they may be eligible for expanded tax incentives and R&D support.
The goal of becoming a global top-five aerospace power is certainly appealing. To bolster feasibility, the goal must be supported by clear prioritization and firm commitment. A private-sector-led industrial transition backed by realistic policy support will be the true “rocket” that propels Korea onto a higher trajectory.

Securing Global Competitiveness Through Practical Support

Driven by advances in AI, the robotics industry is rapidly emerging as a high-value-added sector of the future. However, Korea continues to lag behind advanced countries in overall competitiveness. Among the six leading nations1 in robotics, Korea ranks fifth in manufacturing robot competitiveness, and its localization rate for core components is just 44%. In particular, Korean robot manufacturers are reliant on imports for 80.2% of robotic drive components such as gear reducers. Compounding the issue, China—backed by aggressive government support—has been rapidly expanding its presence in the Korean robotics market.
To overcome this crisis, the public sector must take the lead in creating initial demand by adopting domestically developed robots for use in rehabilitation, delivery, and waste collection. Defensive measures to counterbalance aggressive low-cost competition from Chinese and Japanese companies should also be given consideration, including monitoring dumping practices and implementing countervailing tariffs, import duties, and security screening.
For domestic companies, the highest priority is securing globally competitive technologies. Korea must establish testbeds to validate and commercialize key technologies and components for advanced robots. Also, consideration should be given to extending tax benefits for companies that acquire foreign robotics firms. Such comprehensive policy support is necessary for Korea to bolster its technological self-sufficiency and its national competitiveness in robotics.

Building an Industry Ecosystem for National Security and Supply Chain Resilience

The biopharmaceutical industry plays a crucial role in public health security and holds enormous value-creation potential through the development of new drugs. Korea possesses strengths in precision manufacturing technologies and medical devices, yet Korean-made equipment accounts for only 60% of those used in domestic healthcare institutions. Korea’s competitiveness in new drug development is also considered to be weak. Heavy reliance on foreign sources for experimental, clinical, and production inputs, along with limited investment, has led to supply chain vulnerabilities.
New drug development demands significant time and capital investment. It also has a relatively low success rate. As a latecomer, Korea cannot rely solely on the capacity of individual companies. Investment must be actively encouraged in areas that are driving paradigm shifts in the biopharmaceutical industry, such as synthetic biology, a promising field that has emerged since the rise of gene editing. Also, tax incentives and financial support for securing domestic production facilities for cell and gene therapy is necessary for both supply chain and national security reasons. Mid-sized companies should also be targeted for process improvement and product development support. This will help secure localization of key biopharma material, components, and equipment. Moreover, a two-track strategy should be pursued—attracting global leaders to Korea while also expanding domestic capabilities. This is necessary to diversify and stabilize Korea’s biopharmaceutical supply network.

Timely R&D Investment to Lead Global Markets

The defense industry is a core sector directly tied to national security, and it remains a strategic growth driver capable of creating jobs and boosting exports even in adverse global conditions. Korean defense firms have demonstrated their technological strength on the global stage, yet restrictive regulations and insufficient investment have limited their full potential. To accelerate development and production, legal and institutional frameworks must become more flexible.
Core technologies such as propulsion systems and military satellites are held by only a few countries. With rising geopolitical tensions, their importance is growing, and global competition to secure technological dominance is intensifying. For Korea’s defense industry to achieve overwhelming technological superiority and lead global markets, bolder government support is needed. At the same time, since defense development is funded through taxpayer money, profit margins tend to be lower than in other manufacturing sectors, and regulatory constraints often restrict R&D flexibility. It is therefore essential to increase and stabilize the national defense R&D budget, not only to strengthen industrial competitiveness but also to encourage new civilian companies to enter the sector.

Enhancing Competitiveness Through Demonstration Infrastructure

Shipbuilding has long been a pillar of Korea’s export-driven economy, generating significant employment and industrial output. However, recent years have seen Korea’s global market share decline amid rising competition from China. Now, new opportunities are emerging as the United States launches its shipbuilding reconstruction strategy2 and global demand for electric and eco-friendly ships surges.
To regain technological leadership in shipbuilding, Korea must respond on multiple fronts. A key first step is deepening Korea–U.S. cooperation in high-potential areas such as LNG carriers, commercial vessels, naval MRO (maintenance, repair, and overhaul), and next-generation ships—backed by clearly negotiated, business-focused agreements.
Crucially, building demonstration infrastructure is essential to securing competitiveness in eco-friendly ship construction. A large-scale integrated testing center—encompassing power generation, distribution, and propulsion systems—must be established quickly to support development and commercialization of electric ships. Korea should also support the construction of autonomous shipyards through financial aid, revise its eco-friendly ship law to encourage domestic shipowners to adopt green vessels, and activate a full industrial ecosystem around sustainable maritime technologies.

Strategic Policy Needed to Align with Global Trends

As global efforts to reduce plastic pollution intensify, concerns have been raised that Korea’s regulatory framework overlooks composting technologies for biodegradable plastics. Global production capacity for biodegradable plastics is expected to reach 4.6 million tons by 2028, marking a 32.2% increase over six years. Yet Korea still lacks meaningful incentives to support this growth.
While the production technology for biodegradable plastics is classified as a “new growth and original technology” under the current Act on Restriction on Special Cases Concerning Taxation, composting—the final step in the product’s lifecycle—is excluded from this designation. As a result, tax benefits are not applicable to biodegradable technologies. Large corporations can receive up to a 30% R&D tax credit for designated technologies, but only about 2% for general technologies. Domestic companies face difficulties not only in composting R&D and facility investment, but also in building composting infrastructure.
There is a growing need to include composting technologies within the scope of new growth and original technologies to enable tax benefits for R&D and infrastructure investment. Institutional improvements are also necessary, such as establishing a national composting system and refining environmental labeling standards. To build a truly sustainable eco-friendly industry, strategic policy backing is essential.

K-Culture Fostering Strategies

From music and broadcasting to film, gaming, food, beauty, and fashion, K-Culture is captivating audiences around the world. As a comprehensive cultural and creative industry, K-Culture has the potential to generate economic impact on par with that of high-tech industries like semiconductors. In 2023, Korea’s gaming exports alone totaled $8.39 billion, underscoring its value as a future growth engine.
Despite global competitiveness, K-Culture receives relatively limited support compared to other national strategic industries. The cultural budget accounts for only about 1% of Korea’s total fiscal expenditure, and there is a lack of systematic governance driving K-Culture’s industrialization. Instead, the government’s general approach to K-Culture stops short at imposing regulatory measures.
To elevate Korean culture as a strategic industry, its legal and institutional infrastructure need to be reinforced at a fast pace. For instance, a K-Culture Special Act could introduce a comprehensive framework for tax and financial support. Tax credit increases for video content production and the formalization of a holdback3 system could stabilize the film ecosystem. Regulatory issues, such as blockchain restrictions, should also be promptly addressed to help bolster the gaming industry.

Offshore Wind Investment to Bolster Energy Security

Transitioning to renewable energy is no longer optional—it is essential to respond to climate change and strengthen energy security. Among renewables, offshore wind is gaining the most attention for its high potential.
Surrounded on three sides by ocean, Korea is geographically well-positioned for offshore wind development. However, the country faces challenges in managing high upfront investment costs and stimulating active technological development. In particular, Korea has yet to secure core offshore wind technologies. For example, subsea cable technology—critical for offshore wind—is eligible for limited tax credits due to the narrow classification in the current tax code. To foster renewable energy industries, it is necessary to broaden the definition of core technologies eligible for tax incentives. Expanding support for technologies like subsea cables could drive more investment in offshore wind and help build a stronger overall renewable energy sector.

Regulatory Reform and Institutional Infrastructure Needed

With an aging population and rising incidence of chronic diseases, the burden of healthcare costs continues to grow—highlighting the need for efficient medical systems. Digital healthcare, which uses ICT to improve accessibility and deliver personalized care, is emerging as a transformative solution. Korean companies are actively developing digital healthcare technologies, but industrial growth has been hindered by regulatory barriers—especially with regard to medical data usage. Notably, Korea remains the only OECD country that has not fully legalized telemedicine. There is a pressing need to clarify data ownership and liability, while laying a stronger institutional foundation for remote medical services. Also, consideration should be given to establish legal and regulatory frameworks that enable safe use of healthcare data and the expansion of access, in stages, to public medical datasets. In addition, education programs must be developed to train digital healthcare professionals, and investment in R&D should be scaled up to foster convergence talent in biotechnology and IT.