“Ease Regulations and Expand Tax Incentives” ... Business Community Submits 119 Policy Proposals for Next Year, Including Physical AI Legislation

FKI Submits “2027 Business Community Policy Recommendations”
Calls for Expanded Aerospace Budget and Support for Petrochemical Facility Dismantling Costs
Also Calls to Expand Eligibility for the Domestic Production Tax Credit

The Federation of Korean Industries (FKI) has formally submitted 119 proposals for institutional improvements to the government and the National Assembly, including enacting an integrated support law to foster the physical artificial intelligence (AI) industry.

The Federation of Korean Industries said on Oct. 22 that it had submitted its “2027 Business Community Policy Recommendations” on Oct. 19 and 20. The recommendations cover 10 key areas, including the AI transformation, the development of advanced and energy industries, corporate制度 reform, labor market reform, and stabilizing people’s livelihoods. They are intended to boost business activity in line with the direction of the government’s policymaking for next year.

An LG Electronics service robot greets visitors at KES2026 (Korea Electronics Show), held at COEX in Gangnam-gu, Seoul, on Oct. 13, 2026. Photo by Kang Jinhyeong

The Federation of Korean Industries identified drafting legislation to support physical AI, which could drive the advancement of manufacturing, as its top priority. Related laws and regulations are currently divided among fields such as robotics, autonomous driving and unmanned aircraft, making comprehensive support difficult. By contrast, China and Japan are moving quickly to open public data and establish test beds by enacting local government ordinances and formulating national strategies. The Federation therefore called for a legal basis that would include designating pilot operation zones, establishing an advanced performance certification system, and creating special provisions for using video data to train AI.

Expanding the government budget for the aerospace sector was also among the key proposals. As of 2024, South Korea’s space budget stood at just $600 million. That was 0.8% of the U.S. budget of $77.3 billion, and also lagged behind China’s $17.3 billion and Japan’s $4.9 billion. The Federation particularly recommended focusing support on satellite communications services and ground equipment, which account for 70% of the space market. It also called for expanding the transfer of source technologies from government-funded research institutes to the private sector and designating satellite and launch vehicle technologies as national strategic technologies.

Support measures for the petrochemical industry, which is facing a global supply glut, were also addressed. The current special law provides a basis for simplifying permitting procedures and supporting business restructuring. However, it lacks a legal basis for subsidizing the costs of dismantling facilities that are closing and restoring the environment. Petrochemical facilities incur enormous dismantling costs because of the need to handle chemicals. The Federation proposed using national funds to cover part of the costs of dismantling facilities shut down during business restructuring and giving preferential treatment to companies developing new industries on unused sites.

In the area of corporate制度, the Federation proposed requiring regulatory impact reviews of bills sponsored by members of the National Assembly before they are introduced. On labor market issues, it called for amendments to the revised Trade Union Act. Its position is that matters intrinsic to management, such as investment, new factory construction and staff assignments, as well as transfers between workplaces, should be excluded from collective bargaining and labor disputes. It added that, rather than making an extension of the retirement age to 65 a blanket requirement, companies should be allowed to choose arrangements suited to their circumstances, such as rehiring employees after retirement. The Federation also stressed that electric vehicles, biopharmaceuticals, small modular reactors (SMRs), liquefied hydrogen and sustainable aviation fuel (SAF) should be added to the list of key carbon-neutral products eligible for the domestic production tax credit the government is pursuing. To stabilize people’s livelihoods, it called for revising the matching contributions for the Youth Future Savings Account into a three-tier progressive structure based on income brackets.

Lee Sang-ho, head of the Federation of Korean Industries’ Economic Division, said, “For private investment and innovation to recover, we need to quickly remove obstacles facing businesses on the ground. We hope the business community’s views will be actively reflected in the government’s and the National Assembly’s policymaking so that the momentum of economic growth this year can be sustained next year.”

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