South Korea’s Lee marks first year with vow to find new growth engines

SEOUL – South Korean President Lee Jae Myung vowed to ramp up investment for a range of future growth engines and to leverage excess tax revenue generated by the surging semiconductor industry for the wider good. 

Speaking at a press conference marking the first anniversary of his presidency on June 8, Lee pledged to move beyond semiconductors for driving the nation’s economy by fostering world-leading competitiveness across a range of industries.

He said his government would soon unveil a large-scale investment plan that would represent a “fundamental transformation” of the nation’s growth strategy.

“Above all, the fruits of growth must not remain confined to a select few corporations, regions or sectors,” he said in prepared remarks.

The comments point to Lee’s efforts to broaden South Korea’s industrial base when booming semiconductor exports have become a key driver of economic growth.

His appointment of a former tech executive to become prime minister underscores that drive.

At the same time, surging chip sales have also become a source of resentment among those not benefiting from soaring profits and bonuses.

The concentration of investment bets on the nation’s chip giants also creates a key vulnerability in a stock market that Lee has tried to propel upward.

The president also touched on geopolitical concerns, calling for continued efforts toward denuclearisation of the peninsula.

As Lee spoke, North Korean leader Kim Jong Un was preparing to welcome Xi Jinping for his first visit to Pyongyang in seven years.

On the gains and opportunities generated by the AI and tech sector, Lee said they should translate into tangible improvements in people’s daily lives by extending to small- and medium-sized enterprises and startups, and spreading across regions and sectors.

Lee also said the government will determine how to most effectively utilise surplus tax revenues generated by the semiconductor industry and ensure that the National Growth Fund fulfils its purpose of delivering “growth for all”.

The government-backed fund is South Korea’s flagship investment initiative to channel 150 trillion won (S$123.4 billion) into advanced industries, such as chips and artificial intelligence, over five years.

“We think the excess tax should be primarily used to invest in future generations and strengthen Korea’s long-term growth potential,” Lee said.

On foreign policy, Lee said his administration would seek concrete results from diplomatic and security initiatives including the introduction of nuclear-powered submarines and an early transition of the wartime operational control from the US.

South Korea unveiled a road map in May to develop nuclear-powered submarines and deploy the first vessel by the late 2030s, after Lee secured President Donald Trump’s backing during a summit in 2025.

Progress since then appears to have been slow, with the sensitive issue of supplying nuclear fuel for the submarines among the complications.

Lee has enjoyed strong public support since taking office following the impeachment of former president Yoon Suk Yeol, whose declaration of martial law in late 2024 triggered a political crisis that ultimately led to his removal from office. 

The President’s Democratic Party recently secured a sweeping victory in local elections, winning 12 of 16 major mayoral and gubernatorial races.

The result expanded the party’s influence beyond its parliamentary majority and is expected to give Lee fewer obstacles in pursuing his policy agenda.

But Lee was careful to avoid a self-congratulatory tone, suggesting that the election results didn’t represent a sweeping success.

One notable setback came in the Seoul mayoral race, where voters appeared to express concerns over worsening housing affordability and rising property prices, an issue that remains one of the administration’s biggest domestic challenges.

The president pledged to crack down on stock price manipulation and property-related crimes as part of a broader effort to strengthen market order and eliminate unfair privileges.

Asked about South Korean equities after the benchmark Kospi index tumbled below 8,000 on June 8, Lee said he still viewed the market as undervalued.

Improvements in corporate governance, stronger investor protections and the country’s chip boom could support further gains over time, he added.

Lee said the recent rally in local equities had contributed to volatility in foreign-exchange markets as foreign investors rebalanced their portfolios.

The current weakness in the won is likely temporary, he added.

The comments came as the finance ministry and central bank issued a joint warning against excessive swings in the currency.

Pyongyang challenges

The visit of Xi to Pyongyang underscores the diplomatic challenges also facing Lee as he seeks to improve ties with the Kim regime.

Despite a series of conciliatory steps by Seoul, North Korea has largely ignored Lee’s outreach while continuing to expand its nuclear capabilities and deepen cooperation with China and Russia.

Referring to Xi’s earlier remarks that “an ice block three feet thick does not melt in a single day,” Lee said strained inter-Korean relations also won’t be resolved overnight.

The long-term goal of denuclearisation shouldn’t be abandoned, but Lee said policymakers must also confront the reality that Pyongyang continues to expand its nuclear arsenal despite international sanctions.

Even halting development was worth pursuing, he said.

“Sanctions haven’t been very effective,” Lee said. “Goods continue to flow in from Russia, and enforcement by China appears limited as well. We need to be realistic.” BLOOMBERG