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Economy
20 February 2025

South Korea Enhances Economic Strategies Amid Global Uncertainties

Government increases ODA budget and resumes short selling to align with international standards.

SEOUL, Feb. 20 (Yonhap) -- South Korea has set aside 6.5 trillion won (US$4.5 billion) for official development assistance (ODA) this year, highlighting the nation’s commitment to supporting developing countries amid rising global uncertainties. Acting President Choi Sang-mok announced this increase during a meeting of the government committee on ODA, emphasizing alignment with foreign policies as global crises deepen, including conflicts, natural disasters, and climate change.

Choi pointed out, “The government plans to focus on pursuing mutually beneficial projects, supporting the international community's sustainable development goals, and enhancing the quality of aid.” He detailed how the ODA budget would rise by 3.8 percent from last year, reaching its initial target five years early, reflecting South Korea's dedication to increasing its annual ODA contributions, which aims to double funding from approximately 3.2 trillion won by 2030. This year, the government plans to streamline its efforts by decreasing the number of projects from 1,976 to 1,928, thereby increasing the average amount of aid provided.

During this meeting, Choi also conveyed the findings of the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD), which praised South Korea's commitment to its international responsibilities. The acting president noted the significance of the year, calling it pivotal as the government prepares to draft its new five-year ODA plan.

Meanwhile, the financial authorities are also making significant adjustments, particularly with the resumption of short selling, set to take effect on March 31, 2025. This marks a fundamental shift from the comprehensive ban on short selling imposed during the COVID-19 pandemic to stabilize the market. Governor of the Financial Supervisory Service, Lee Bok-hyun, stated, “It is necessary to resume short selling for various stocks,” during the Open Discussion on Stock Market Infrastructure Improvement at the Korea Exchange.

Lee’s acknowledgment of the need to restore short selling reflects shifts toward enhancing investor trust and integrating South Korea’s practices with global financial market standards. With the full resumption allowing for all stocks, the plan aims to eliminate past limitations and supports the commission’s perspective, asserting, “in principle, it is right to resume short selling for all stocks.”

Despite this forward movement, the discussions also revealed concerns surrounding the potential risks of naked short selling. Jung Eui-jung from the Korea Investors Association criticized the current Naked Short Selling Detecting System (NSDS), highlighting its vulnerabilities as “a too loose net” against illegal activities. Similarly, Jang Chul-geun of KB Securities expressed apprehension about detecting balance management issues among foreign investors who do not reside within the country.

To address these concerns, Seo Jae-wan, deputy governor of the Financial Supervisory Service, ensured a proactive stance, stating, “We are well aware of the concerns held by individual investors.” He asserted efforts would be made to prevent illegal short selling from undermining trust and transparency within the capital markets.

With the eyes of financial communities and market participants on the March 31 resumption, the financial supervisory authorities are aiming to facilitate confidence through increased technological transparency. Lee stated, “99% of problematic naked short selling transactions can be detected through the securities firm's loan management system” and emphasized the importance of ensuring all stakeholders are informed and prepared.

These policy adjustments—an increase to the ODA and reintroduction of short selling—mark significant steps for South Korea as it aligns its economic policies with international standards and seeks to bolster both its global influence and market integrity.