[2027 Budget Proposal] New Funding Channels Created for Semiconductors and Resource Security... 1.4 Trillion Won Allocated for Petroleum Price Ceiling System

Ministry of Trade Sets Record 13.3 Trillion Won Budget for 2027

Petroleum Reserves to Increase by 2 Million Barrels

Manufacturing AI Transition Budget to Soar 128% to 3.7 Trillion Won

The government will establish a 2.6 trillion won Semiconductor Special Account and a 1.4 trillion won Resource Security Fund next year. This is to create separate fiscal bases that will enable stable budget allocation for the semiconductor industry and the resource security sector. In response to geopolitical instability in the Middle East and the weaponization of resources, South Korea will dramatically expand its petroleum reserves, and will also allocate a budget of more than 1.4 trillion won to compensate refiners for losses resulting from the newly introduced petroleum price ceiling system.

According to the Ministry of Trade, Industry and Energy on September 1, the government approved the ministry’s 2027 budget proposal at a Cabinet meeting that day. The ministry’s budget was set at 13.2573 trillion won, a 3.8231 trillion won (40.5%) increase from this year's main budget of 9.4342 trillion won. This is not only the largest budget in the ministry’s history, but also represents the highest growth rate ever. If the 911.8 billion won for ministry-administered projects within the Future Response Fund is included, the effective size of the budget grows to 14.1691 trillion won— a 50.2% increase from this year.

A notable aspect of next year’s budget is the establishment of separate financial frameworks for semiconductors and resource security. The government will set up a Semiconductor Special Account, worth 2.6 trillion won, to provide integrated support for the nurturing of K-Semiconductor. Of this, 2.1 trillion won will be under the ministry’s administration. The new 1.4 trillion won Resource Security Fund will be established to ensure a long-term response to supply chain crises involving key resources such as petroleum and critical minerals.

The Semiconductor Special Account will support the development of core technologies in high-growth areas, such as next-generation system semiconductors and defense semiconductors, as well as the establishment of new semiconductor production bases. In particular, as part of special incentives accompanying the administrative integration of Gwangju and Jeonnam provinces, a new 1.5 trillion won budget will be allocated for the development of the Southwest Semiconductor Cluster. The budget for advanced semiconductor technology R&D will also be increased from 47.2 billion won this year to 54.1 billion won next year.

Investments in infrastructure for the early operation of semiconductor production facilities in Yongin and Pyeongtaek will also continue. 25 billion won has been allocated for the establishment of infrastructure in semiconductor-specialized complexes, and 56.2 billion won to support the power supply for the Yongin and Pyeongtaek semiconductor clusters. The government’s plan is to ensure stable support for existing individual projects through the Semiconductor Special Account, and to create an integrated funding system for the semiconductor industry.

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Oh Seungcheol, policy chief of the Ministry of Trade, Industry and Energy, stated, "Through the administrative integration, 20 trillion won in incentives have been prepared for four years, out of which 6 trillion won will be used for support projects." He further explained, "Each year, 1.5 trillion won will be provided over four years, and this initiative will be promoted through the Semiconductor Special Account." He added, "The specific composition of the projects will be autonomously determined and managed by the integrated local government," emphasizing that, "the programs must be organized and executed in accordance with the original goals and purposes of the semiconductor cluster."

In the field of resource security, the government will focus funding on petroleum stockpiling, diversifying crude oil import sources, and stabilizing domestic petroleum prices in response to instability in the Middle East. The budget for industrial and resource security enhancement will increase by 1.6861 trillion won (84.5%), from 1.9964 trillion won this year to 3.6825 trillion won next year.

First, funding for the National Oil Stockpiling Project will be expanded almost sixfold, from 55.3 billion won this year to 328.7 billion won next year. This will be used to expand petroleum storage facilities and increase oil reserves by 2 million barrels. Additionally, 42.5 billion won will be newly allocated to upgrade refining facilities so they can process non-Middle Eastern crude and reduce dependence on Middle Eastern oil, with another 3.5 billion won earmarked for the development of related refining process technologies.

Notably, to compensate refiners for losses resulting from the implementation of the petroleum price ceiling system, the government will establish a new “Petroleum Price Stabilization Support” project and allocate 1.4497 trillion won. With the government setting the price ceiling, it will compensate refiners for resulting losses; this year’s budget reflects loss compensation for petroleum refiners in the fourth quarter of 2026.

Korea National Oil Corporation Petroleum Storage Facility

Oh explained, "The funding allocated this time assumes the application of the price ceiling system during the fourth quarter of this year and should be understood as settlement funds for Q4. If the price ceiling is not implemented in Q4, the funds will remain unused." He continued, "If it is actually implemented, spending will be settled based on international oil prices, crude oil import costs, and various other expenses for the applicable period, but will remain within the 1.4497 trillion won limit."

Investment in critical mineral supply chains will also be expanded. Investment in Korea Mine Rehabilitation and Mineral Resources Corporation, to support the stockpiling of critical minerals such as rare earth elements and the establishment of the Saemangeum storage base, will nearly double from 76.9 billion won this year to 146.1 billion won next year. The government will also support the development of a domestic resource recycling ecosystem, including securing raw materials needed for rare earth element recycling.

The government will also establish the Resource Security Fund to secure financial resources necessary for building stable supply chains of vital industrial resources, such as petroleum and critical minerals. The aim is to support resource security investments through a dedicated fund, rather than relying solely on annual budgets.

The Resource Security Fund is an expansion and reorganization of the existing Energy and Resource Business Special Account (E-Tuk Special Account), to increase budget resources for resource security. The E-Tuk Special Account has so far been the main financial source for petroleum stockpiling, resource development, and mineral reserves. With mounting supply chain risks due to instability in the Middle East and export controls on critical minerals, the government has established the separate fund to enable more stable fiscal support for resource security. While the ministry’s portion of the E-Tuk Special Account was 813.9 billion won this year, the ministry’s share of the Resource Security Fund will expand to 1.3252 trillion won next year.

Oh said, "The E-Tuk Special Account amounted to 813.9 billion won at the ministry this year, and for next year, the ministry’s portion of the Resource Security Fund will increase by about 400 billion won to 1.3252 trillion won. The expanded budget will be used to strengthen petroleum stockpiling projects, upgrade refining facilities for crude oil import diversification, and bolster mineral stockpiling and recycling."

In addition, the ministry has dramatically increased its budget for supporting the manufacturing sector’s transition to artificial intelligence (AI), local investment, advanced industries, and exports. The budget for Manufacturing AI (M.AX) and Mega Project support will rise 128.5%, from 1.6309 trillion won to 3.7261 trillion won, and will fund the construction of full-stack AI factories, development of tacit-knowledge-based AI solutions for manufacturing, and the creation of manufacturing data libraries.

For regional growth led by “Five Poles, Three Special Zones,” the government will allocate 2.0731 trillion won—an increase of 62% compared to this year. Of this, 700 billion won will launch new special subsidies to attract large-scale regional investments, and 140 billion won will be newly set aside for region-specific “growth engine” project R&D. The government will invest 1.2421 trillion won in cultivating advanced industries such as automobiles and shipbuilding, and 898.1 billion won in responding to changing trade environments such as U.S. tariff policies. The export voucher budget will be expanded to 221.3 billion won, with an additional 6.8 billion won newly allocated for operating a project management team dedicated to U.S. strategic investment and international trade issue response.

The budget proposal will be submitted to the National Assembly on September 3 and, after review by standing committees and the Special Committee on Budget and Accounts, will be finalized at a plenary session.

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