[Editorial] AI push: reform or relapse

The Lee Jae Myung government’s new economic blueprint, unveiled Friday, has the sweep of a manifesto: a wholesale “AI transformation” meant to lift the nation out of stagnation and restore growth to 3 percent.

The symbolism was not lost on investors. In a year when Korea officially conceded that gross domestic product growth would sink below 1 percent, Lee promised that algorithms, robots and data models would put the country back among the global top five powers.

The plan is ambitious, almost defiantly so. Over the next five years, the government will spend 100 trillion won ($72.2 billion) to accelerate AI adoption across manufacturing, logistics, health care and public services.

A sovereign Korean-language AI model is to be built with Naver, SK Telecom and other domestic champions. Humanoid robots are slated for warehouses before moving into construction sites. Autonomous vehicles will be commercialized by 2027; unmanned ships by 2030. Even the tax service will be “intelligent,” with AI consultation and auditing tools introduced within two years.

The message is clear: if South Korea cannot outmuscle larger economies, it will outthink them by deploying AI.

Yet such declarations also reveal the depth of the country’s predicament. Export-led growth has lost its traction in a world reshaped by US President Donald Trump’s tariffs, the rise of Chinese technology champions and the erosion of free trade.

Demography has turned from a tailwind to a headwind: the working-age population is shrinking faster than in most OECD peers. Earlier this year, the government poured 45 trillion won into two extra budgets, only to revise growth down to 0.9 percent on Friday — the first time Seoul has projected a sub-1 percent expansion. Against this backdrop, AI has been recast not as an option but as the last viable lever.

Next year’s research and development budget will rise nearly 20 percent to a record 35.3 trillion won, with AI funding more than doubling to 2.3 trillion. Spending on science and engineering talent will also increase, reversing earlier cuts made under the previous administration.

But the real test lies elsewhere: in the institutions and labor markets that must absorb the shock of such a transformation.

The government speaks of “super-innovation,” yet the reconfiguration it maps out is feared to be profoundly disruptive to jobs. Expanding AI factories, humanoid robotics and self-driving fleets could displace workers on a massive scale. Education reform, vocational training and transition programs are essential to cushion the blow. On this front, the blueprint is worryingly thin.

Worse, politics has cut against economics. On Sunday, the ruling Democratic Party of Korea pushed through the "Yellow Envelope Act," widening the scope of labor disputes and limiting corporate claims against strikes. Business leaders fear that the new rules, passed with minimal debate, could accelerate capital flight just as tariffs bite.

The contradiction is glaring. The Lee administration urges private firms to lead the AI revolution, then saddles them with fresh constraints. As one senior aide blithely remarked, if companies leave, the government “can fix the law later.” By then, of course, the damage may be irreversible.

History suggests Lee is right in one respect: Nations that elevate science and technology prosper; those that neglect them decline. But science alone will not save South Korea from a trap of its own making. To make the AI gamble pay, the government must confront its structural liabilities: rigid labor laws, regulatory thickets and a hostile climate for investment. Competitors are already racing ahead in AI. Catching up will require not just capital and talent but also a business-friendly environment.

If South Korea truly wishes to lead in AI, it must align its labor, regulatory and corporate policies with that ambition. Otherwise, the country risks a future in which even the smartest machines cannot outwit economic gravity.