South Korean President Lee Jae Myung has placed artificial intelligence at the center of his administration’s economic vision, pledging to transform industries, public services, and national defense through aggressive AI investment and sweeping policy reforms. Delivering his first budget address to parliament since taking office in June, Lee declared that the 2026 budget would mark “the first national budget for the AI era,” signaling a decisive policy shift following months of political turbulence under his predecessor, Yoon Suk Yeol, whose failed attempt to impose martial law plunged the country into crisis.
“In the AI era, being late by a single day means falling behind by an entire generation,” Lee told lawmakers on Tuesday. “Since we got off to a late start, we must now move faster and work harder to catch up with the frontrunners — only then will we have a chance.” His remarks underscored the urgency of South Korea’s race to remain competitive in a rapidly evolving global technological landscape dominated by the United States and China.
Under the proposed 2026 budget, AI-related spending will more than triple to 10.1 trillion won ($7 billion) as part of a broader 728 trillion won national plan. The sweeping proposal aims to reignite growth, tackle demographic decline, and prepare South Korea for what Lee described as an unprecedented wave of global trade and technological disruption.
Lee outlined a comprehensive strategy that positions AI as the foundation for future competitiveness across robotics, automobiles, semiconductors, and logistics. He pledged to develop “physical AI” by merging Korea’s world-class manufacturing base with real-time data capabilities and to drive AI adoption in biotech, public health, education, and taxation. The government will also accelerate the purchase of high-performance computer chips and expand advanced AI education programs to cultivate a new generation of skilled workers.
Defense spending will rise by 8.2% to 66.3 trillion won, equivalent to 2.4% of GDP, with a strong emphasis on upgrading conventional weapons and integrating AI technologies across the military. Lee called for a self-reliant defense posture, asserting that South Korea’s annual defense expenditure already amounts to 1.4 times North Korea’s entire GDP. “Self-reliance in defense is not just about security — it is a matter of national pride,” he said.
Despite the ambitious vision, Lee faces a divided political landscape. Opposition lawmakers from the People Power Party boycotted his address, leaving the parliamentary chamber half-empty. The boycott was a protest against a recent arrest warrant for opposition lawmaker Choo Kyung-ho, a former finance minister under Yoon.
Even as political tensions simmer, Lee appealed for bipartisan cooperation, calling 2026 “a historic inflection point” for South Korea’s future. His message was clear: in the era of artificial intelligence, hesitation could mean obsolescence — and for South Korea, the time to act is now.
