Korea Allocates $3.5 Billion Fund to Strengthen Supply Chain Management

The South Korean government has announced the establishment of a substantial 5 trillion won ($3.59 billion) fund aimed at fortifying supply chains for critical raw materials and products that are heavily reliant on imports. This initiative is part of a broader strategy to enhance the security and stability of Korea’s supply chains amid increasing global risks.

During the inaugural meeting of a newly formed special committee, Deputy Prime Minister and Minister of Economy and Finance, Choi Sang-mok, outlined the government’s comprehensive plan. The committee, which includes 19 government officials and six private sector experts, is tasked with developing a three-year strategy to secure essential supply chains starting next year.

The fund will not only support companies in securing raw materials but also finance research and development (R&D) projects focused on key technologies vital for maintaining a stable supply chain. These projects will be eligible for tax credits, further incentivizing innovation and resilience in critical sectors.

Choi emphasized the importance of practical measures to protect industries such as high technology, food, logistics, and other sectors vulnerable to supply chain disruptions. The fund, set to be implemented in the latter half of this year, will offer loans at below-market rates to businesses demonstrating significant progress in reducing dependency on foreign sources for critical materials.

Eligible companies include those diversifying their import channels or developing alternative technologies to strengthen domestic manufacturing capabilities. The government plans to receive applications and finalize the list of eligible firms by August, providing financial support for a period of three to five years.

Additionally, the government will expand the list of “economic security-related items” from 200 to 300, covering industries closely tied to everyday life, such as manufacturing, defense, logistics, and cybersecurity. While the specific items were not disclosed for security reasons, industry insiders suggest that urea water, lithium, and graphite—materials currently sourced primarily from China—may be included.

Manufacturers that relocate production of “economic security-related items” back to Korea or engage in overseas energy and natural resources development will also qualify for tax credits, further bolstering the country’s supply chain resilience.

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