Local election sweep set to accelerate SME ministry programs on local currency, smart factories

The sweeping realignment of regional political power in the June 3 local elections is fueling expectations that Ministry of SMEs and Startups programs tied to local governments could gain significant momentum. Key programs likely to be affected include local currency, smart factories and regional specialized industry development — all of which require local governments to match funding, secure sites and provide administrative coordination, making the arrival of new regional heads a potential catalyst for faster progress.

The Democratic Party of Korea won 12 of the 16 regional governorship races Thursday, a dramatic reversal from the 2022 local elections, when the People Power Party held 12 of 17 regional posts. Analysts say the shift means more regions will now be aligned with the central government's policy direction, raising the likelihood of smoother cooperation on key programs.

Local currency is the first program expected to benefit. It is one of the clearest expressions of the Lee Jae-myung administration's and the Democratic Party's economic identity at the local level. President Lee has championed the concept since his time as Seongnam mayor, when he distributed youth dividends in local currency, and has continued to push for its expansion through his tenure in Gyeonggi Province and on the national political stage. Officially called the "local love gift certificate," the program is issued by local governments and redeemable at registered merchants within each jurisdiction. Local budget matching, issuance volume, discount rates, merchant registration and crackdowns on fraudulent distribution are all tied to local government administration.

The Ministry of Interior and Safety allocated 1.15 trillion won (about $752 million) this year to support local currency issuance — up from the 1 trillion won included in this year's supplementary budget. Even as the central government increases its contribution, the real impact on residents depends on how much each local government adds from its own budget, when it issues the currency and how tightly it links the program to commercial districts dense with small businesses.

The smart factory program is another Ministry of SMEs and Startups initiative likely to feel the effects of the leadership change. The ministry has been driving digital transformation and productivity improvements at small and medium-sized manufacturers through smart factory deployment. It recently launched a program to cultivate specialized smart manufacturing talent, selecting around 480 outstanding smart manufacturing companies and training more than 600 specialists. The broader trend is a shift from simple equipment support toward a model integrating human resources, data and AI.

Regional specialized smart factory projects, in particular, hinge on local government cooperation. These projects combine the ministry's smart factory construction support with local governments' regional industry development funding to address area-specific challenges. In 2025, three local governments — North Gyeongsang Province, South Jeolla Province and North Jeolla Province — participated, with the ministry providing 2 billion won per region for a total of 6 billion won. Local governments matched that with 10.4 billion won in local funds, bringing total investment to 16.4 billion won.

The role of regional heads in the smart factory program is substantial. Decisions about which industries to designate as regional specialties, which companies in industrial complexes to prioritize for support, and how to coordinate technoparks, industrial complex authorities, chambers of commerce and local universities all fall within a regional governor's authority. Even under the same national program, beneficiaries and outcomes can vary widely depending on each region's industrial strategy — whether centered on food, agri-biotech, machinery, shipbuilding components or semiconductor materials and parts.

The "Legend 50+" regional specialized industry development program is also within the orbit of the political shift. Under this program, local governments nominate high-growth companies linked to their key industries, and the Ministry of SMEs and Startups provides coordinated support across five policy areas — smart factory construction, exports, commercialization, workforce development and consulting. In 2026, a total of 49.5 billion won will be directed toward 1,840 companies nominated and selected across all 17 cities and provinces nationwide.

Another variable is the possibility that Minister of SMEs and Startups Han Sung-sook could be tapped as the next prime minister. Han, a first-generation IT specialist and former chief executive of Naver, has made small business recovery and digital and AI transformation for small and medium-sized enterprises her top priorities since taking office. If the prime minister speculation proves true, she would move from directly overseeing programs such as small business digitalization and smart manufacturing at the ministry level to coordinating them from the prime minister's office. A ministry official said, however, that the prime minister talk was "something we have absolutely no knowledge of."