Government Provides Financial Support for Projects Led by Private Sector and Local Governments

When projects are discovered through local governments and the private sector, the central government will activate a system that creates a mother fund to provide initial investment. Additionally, incentives to reduce risks and improve profitability of regional projects, as well as regulatory improvements, will be pursued.

On the 12th, the Ministry of Economy and Finance held an emergency economic ministers' meeting combined with an export investment countermeasures meeting and announced the finalized operational plan for the "Regional Revitalization Investment Fund." The Regional Revitalization Investment Fund is a system where local governments and the private sector lead the planning of regional development projects, and the government supports initial investment and regulatory relaxation to increase incentives for private capital investment.

Project items are directly discovered and designed by local governments and the private sector who are well acquainted with the region and market. Local governments and the private sector can create various profit projects within the scope that does not significantly undermine the fund’s purpose and public interest. This is based on the judgment that although regional investment (based on final integrated fiscal expenditure) sharply increased from 239 trillion won in 2018 to 330 trillion won in 2022 over the past five years, its effectiveness in actually revitalizing regions was limited.

Deputy Prime Minister for Economy Choo Kyung-ho is giving a briefing on the "2023 Second Half Economic Policy Direction" on the 4th at the Government Seoul Office in Jongno-gu, Seoul. Attending the event were Jang Young-jin, First Vice Minister of the Ministry of Trade, Industry and Energy; Won Hee-ryong, Minister of Land, Infrastructure and Transport; Lee Jeong-sik, Minister of Labor; and Lee Young, Minister of SMEs and Startups. Photo by Yoon Dong-joo doso7@

First, the central government will create a mother fund through government finances, the Local Extinction Response Fund, and policy financial institutions (Korea Development Bank) contributions. In addition to mother fund contributions, sub-funds will be formed for each project including private sector contributions. Local governments, private companies, and financial institutions will jointly establish special purpose companies (SPCs) to lead the entire project, and a method of raising project funds using project financing (PF) loans will also be introduced.

The government also announced its intention to fully adopt a "bottom-up" approach where local governments and the private sector, who are well aware of local conditions, take the lead in judging public interest and profitability to discover projects. However, projects located in the metropolitan area, gambling with addictive characteristics, entertainment bars, hazardous material storage and handling facilities, as well as simple commercial real estate development projects aimed solely at sales profit, will not be allowed.

To reduce project risks, incentives such as special guarantees will be provided, and various regulations that delay projects will be improved. Local governments can induce private investment by partially filling demand through leasing or using some facilities for a certain period after construction.

The government plans to prepare for project discovery, attracting private investment, regulatory improvements, and fund formation with the goal of launching the fund within the first quarter of next year.

This content was produced with the assistance of AI translation services.