Korea’s Mother Fund Crossroads: Lawmakers Weigh Fiscal Tightening Against Innovation Growth – KoreaTechDesk

Report on the South Korean ‘Mother Fund’ Debate and its Implications for Sustainable Development Goals

1.0 Executive Summary

A significant policy debate has emerged in South Korea concerning the future of the ‘Mother Fund,’ the nation’s primary fund of funds for venture capital. This debate, centered on proposed budget reductions versus strategic expansion, carries profound implications for the country’s progress toward several key Sustainable Development Goals (SDGs), particularly SDG 9 (Industry, Innovation, and Infrastructure), SDG 8 (Decent Work and Economic Growth), and SDG 17 (Partnerships for the Goals). The outcome will directly influence South Korea’s capacity to foster a resilient innovation ecosystem, drive sustainable economic growth, and maintain effective public-private partnerships.

2.0 The Policy Conflict and its Link to SDG 9: Industry, Innovation, and Infrastructure

The current legislative conflict highlights a divergence in strategy for supporting the national innovation infrastructure, a core tenet of SDG 9. One faction of lawmakers proposes reducing the Mother Fund’s 2026 budget, citing fiscal efficiency. Conversely, the Ministry of SMEs and Startups (MSS) and venture capital associations advocate for expansion, aligning with the national goal of becoming a global leader in technology and innovation.

• Argument for Expansion: The MSS proposed a 1.1 trillion won (approx. USD 820 million) budget, with a significant portion allocated to AI and deep-tech sectors. This aligns directly with SDG Target 9.5, which calls for enhancing scientific research and upgrading the technological capabilities of industrial sectors.
• Argument for Reduction: Proponents of budget cuts argue that funds are not fully invested within a single fiscal year. This view, however, is contested by industry bodies like the Korea Venture Business Association (KOVA) and the Korea Venture Capital Association (KVCA), who state it disregards the multi-year investment cycles essential for sustainable innovation.
• Risk to Innovation Momentum: A budget reduction could undermine the fragile recovery of the venture investment market, jeopardizing the “golden window” for growth in strategic industries and weakening the national innovation system central to SDG 9.

3.0 Impact on SDG 8: Decent Work and Economic Growth

The Mother Fund is a critical instrument for achieving SDG 8 by stimulating the venture ecosystem, which in turn creates high-value jobs and fosters sustainable economic growth. The uncertainty surrounding its future funding threatens this progress.

1. Job Creation Engine: The fund’s role in de-risking early-stage investment is irreplaceable. It enables startups to scale, directly contributing to the creation of decent work.
2. Economic Recovery: Following a two-year contraction, the venture market showed signs of recovery in Q3 2025. Budget cuts could reverse this trend, stifling economic growth and productivity.
3. Chain Reaction of Reduction: Industry stakeholders warn that a reduction in public funding would trigger a negative cascade, including:
   • Reduced matching commitments from the private sector.
   • Delayed formation of new venture funds.
   • Diminished capital available for early-stage companies, limiting their growth and job creation potential.

4.0 The Role of Public-Private Partnerships (SDG 17)

The Mother Fund exemplifies a successful public-private partnership model, a key mechanism promoted by SDG 17 for achieving sustainable development. The debate places this effective partnership at risk.

• Leverage Effect: The fund acts as an anchor investor, leveraging significant private capital. Each public won invested attracts three to four won in private investment from pension funds, financial institutions, and corporations. This magnifies the capital available for sustainable development initiatives.
• Investor Confidence: Inconsistent policy signals, such as simultaneously debating the fund’s long-term extension while proposing immediate budget cuts, erode private sector confidence. This uncertainty undermines the trust and predictability necessary for robust and long-term partnerships.
• Global Competitiveness: A stable, state-guided fund-of-funds is crucial for attracting foreign venture capital and maintaining Korea’s position in the global innovation landscape. Weakening this partnership model could reduce the inflow of international financial resources needed to achieve the SDGs.

5.0 Conclusion: The Need for Coherent Policy for Sustainable Development

The debate over the Mother Fund is more than a budgetary dispute; it is a critical juncture in defining South Korea’s long-term strategy for innovation and sustainable growth. To effectively advance SDGs 8, 9, and 17, a coherent policy framework is required. This framework must balance fiscal accountability with the strategic necessity of long-term, stable support for the nation’s innovation ecosystem. Failure to align policy could result in lost momentum, diminished investor confidence, and a significant setback in the country’s pursuit of becoming a sustainable, technology-driven global economic powerhouse.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article discusses issues related to venture capital, startup funding, innovation, and economic policy in Korea, which directly connect to the following Sustainable Development Goals (SDGs):

• SDG 8: Decent Work and Economic Growth

  The article’s central theme is the funding of startups and venture capital, which are critical drivers of economic growth and job creation. The “Mother Fund” is described as Korea’s “primary growth engine” for new industries. The debate over its budget directly impacts the country’s ability to foster a dynamic economy, support entrepreneurship, and maintain momentum in its “fragile recovery of the venture investment market,” all of which are central to SDG 8.

• SDG 9: Industry, Innovation and Infrastructure

  This SDG is strongly represented, as the article focuses on building a robust financial infrastructure to support innovation. The discussion revolves around funding for “deep tech and AI-driven industries” and strengthening Korea’s “global technology competitiveness.” The Mother Fund itself is a key piece of the “innovation ecosystem,” designed to provide the “capital flow necessary for startups to scale technologies,” which aligns perfectly with the goal of fostering innovation and upgrading industrial capabilities.

• SDG 17: Partnerships for the Goals

  The article highlights the Mother Fund’s role as a public-private partnership. It explains how the fund “actively bridges government priorities and private-sector investment.” The mechanism where public investment serves as an “anchor for pension funds, financial institutions, and corporates” and attracts “three to four won in matching private investment” is a clear example of the multi-stakeholder partnerships that SDG 17 aims to promote for achieving sustainable development.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s focus, several specific SDG targets can be identified:

• Targets under SDG 8 (Decent Work and Economic Growth)

  • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article’s emphasis on expanding the Mother Fund to support “AI and deep-tech sectors” is a direct strategy to achieve this target by focusing on high-value, technology-driven industries to boost national productivity and competitiveness.
  • Target 8.3: Promote development-oriented policies that support productive activities, entrepreneurship, creativity and innovation, and encourage the growth of small- and medium-sized enterprises (SMEs) through access to financial services. The Mother Fund is a policy instrument designed to provide financial access to startups (SMEs), thereby promoting entrepreneurship and innovation as described in the article. The debate over its budget is a debate about the continuity of this support.

• Targets under SDG 9 (Industry, Innovation and Infrastructure)

  • Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit. The entire purpose of the Mother Fund is to ensure capital is available for “early-stage startups,” directly addressing this target by improving their access to venture capital.
  • Target 9.5: Enhance scientific research and upgrade the technological capabilities of industrial sectors. The proposal to allocate a record-high portion of the fund to “AI and deep-tech” is a clear effort to upgrade Korea’s technological capabilities and enhance its position in the “global technology-hegemony competition.”
  • Target 9.b: Support domestic technology development, research and innovation by ensuring a conducive policy environment. The article warns that “inconsistent policy signaling” and “budget uncertainty” could undermine the innovation ecosystem. The call for a “coherent framework” that ensures funding predictability relates directly to creating a policy environment conducive to domestic innovation.

• Targets under SDG 17 (Partnerships for the Goals)

  • Target 17.17: Encourage and promote effective public-private partnerships. The article explicitly details how the Mother Fund functions as a public-private partnership, where government funding is used to de-risk investments and attract private capital. The statement that “Each won contributed to the Mother Fund typically attracts three to four won in matching private investment” exemplifies the successful implementation of this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions or implies several quantitative and qualitative indicators that can be used to measure progress:

• Indicators for SDG 8 and 9

  • Total public investment in innovation and SMEs: The proposed budget for the Mother Fund of “1.1 trillion won (approximately USD 820 million)” is a direct, quantifiable indicator of government financial commitment to supporting startups and high-tech industries (Targets 8.3, 9.3, 9.5).
  • Venture investment volume: The article mentions that “Korea’s venture investment volume began to rebound in the third quarter of 2025.” This is a key performance indicator for the health of the startup ecosystem and the availability of capital for SMEs (Targets 8.3, 9.3).
  • Allocation of funds to strategic sectors: The detail that “half [of the budget is] designated for AI and deep-tech sectors” serves as an indicator for measuring the strategic focus on technological upgrading and innovation (Targets 8.2, 9.5).

• Indicators for SDG 17

  • Leverage ratio of private to public investment: The article provides a specific metric: “Each won contributed to the Mother Fund typically attracts three to four won in matching private investment.” This ratio is a direct indicator of the effectiveness of the public-private partnership in mobilizing private sector finance (Target 17.17).
  • Investor confidence and foreign capital attraction: While qualitative, the article notes that policy predictability is a “critical factor for attracting foreign venture capital.” Measuring foreign VC investment flows into Korea would serve as an indicator of the success of the policy environment in fostering international partnerships (Targets 9.b, 17.17).

4. Table of SDGs, Targets, and Indicators

Source: koreatechdesk.com