Korea mulls relaxing capital separation to boost AI

President Lee Jae-myung raised the possibility of easing Korea’s rules separating industrial and financial capital earlier this month, but reactions from the business community have been lukewarm, even among companies that would benefit most.

Industry skepticism reflects resignation. Efforts to relax the rules have surfaced under multiple administrations but always stalled, blocked by concerns over “chaebol favoritism” and financial stability. Some companies have even asked reporters not to mention them, fearing critics could label any action as government-business collusion.

The situation now differs from the past. With the president personally raising the issue, there appears to be a consensus that urgent action is needed. The debate is linked to developing new industries that could sustain Korea’s economy for decades.

Korea’s model would look to Japan’s SoftBank. While primarily a telecom company in Japan, SoftBank operates as a global investment powerhouse. Founder Masayoshi Son created funds to back early-stage innovation companies, including Nvidia, ARM, and Alibaba. Early-stage investments require foresight and the ability to anticipate industrial trends. Japanese investors pooled domestic capital and deployed it worldwide based on their judgment.

Korea, by contrast, faces the opposite challenge. Domestic companies observe AI-driven industrial shifts but hesitate to invest. Global AI investment now reaches tens of trillions of won, far beyond the capacity of any single company. Meanwhile, Korean financial institutions have abundant liquidity but limited outlets. Leading AI firms like OpenAI cannot be accessed with money alone; investors must join the right ecosystem. Shinhan Financial Group Chairman Jin Ok-dong recently noted that if corporate venture capital manages funds, banks could participate, highlighting the limits of domestic financial investment in cutting-edge industries.

Relaxing the separation rules does not mean handing banks to chaebols. To gain public support, the government must clearly present the discussion as a way to integrate Korea into the global investment ecosystem rather than create “chaebol banks.” This framing is crucial to overcoming opposition from political and civic groups.

The separation regulations, introduced in 1982, are over 40 years old and no longer reflect global industrial shifts or capital flows. Today’s advanced sectors, including AI, semiconductors, and digital platforms, grow at the intersection of capital and industry. It is time to carefully review which aspects of the rules need reform to open doors for Korea’s future industries.