9 out of 10 Companies Have "No Plans to Relocate to Provinces"

If Relocating, Preference for Daejeon, Sejong, and Chungcheong Regions

[Asia Economy Reporter Jin-ho Kim] It has been found that 9 out of 10 domestic companies are not considering relocating to provincial areas. Although creating jobs through corporate relocation to provinces is urgent for regional balanced development under the new Yoon Seok-yeol administration, companies are reluctant to move due to difficulties in transportation and logistics as well as employee resignations.

On the 19th, the Federation of Korean Industries commissioned market research firm Mono Research to survey the top 1,000 companies by sales on their opinions regarding 'corporate relocation to provinces and new or expanded provincial business sites.' Among the 152 responding companies, 9 out of 10 said they have no plans to relocate.

Additionally, only 35.5% responded that the business environment in provincial areas is better than overseas. More than half, 57.9%, said there is no significant difference compared to overseas.

The facilities that have relocated or are considering relocation to provinces were production plants (43.8%), headquarters (31.3%), sales offices (18.8%), and research centers (6.1%) in that order. Reasons for relocation included ease of business expansion (29.2%) and favorable location due to transportation and logistics environment (27.1%).

The biggest obstacle to relocation to provinces was transportation and logistics difficulties (23.7%). Securing manpower, including employee resignations, was also cited as a barrier (21.1%).

In particular, manufacturing pointed to difficulties in securing business site land (13.5%) and regulations (13.0%) as obstacles. The service industry identified a lack of living infrastructure such as accommodations, hospitals, and schools (12.8%) as a problem.

Companies cited support for transportation and logistics infrastructure (22.8%) and manpower acquisition support (18.6%) as necessary incentives for relocation. Tax benefits and facility investment support (14.5%), regulatory and institutional improvements (12.9%), and provision of business site land (12.1%) were also highly rated. The service industry found living infrastructure support such as accommodations, hospitals, and schools (11.6%) more necessary as an incentive compared to manufacturing (7.9%). Regulatory and institutional improvements (5.1%) were lower than manufacturing (14.6%).

Advantages of provinces compared to overseas included transportation and logistics infrastructure (29.7%), tax benefits and investment support (21.0%), living infrastructure such as accommodations, hospitals, and schools (11.1%), and ease of cooperation with related companies (11.1%). Disadvantages compared to overseas were high labor costs (38.4%) and difficulties in transportation and logistics such as time and cost (23.1%).

More than half of the companies that responded with preferred relocation regions chose Daejeon, Sejong, and Chungcheong (55.3%). Busan, Ulsan, and Gyeongnam (16.4%) and Daegu and Gyeongbuk (11.2%) followed. The reason for choosing these regions was that transportation and logistics infrastructure (60.5%) was better than in other regions.

Yoo Hwan-ik, head of the Industrial Division at the Federation of Korean Industries, explained, “Transportation and logistics infrastructure and manpower issues have emerged as the biggest obstacles to relocation to provinces. Since corporate relocation to provinces can greatly contribute to revitalizing the regional economy, we expect the government and local governments to continuously work to remove obstacles such as transportation and logistics difficulties and manpower acquisition challenges that hinder relocation.”