9 out of 10 Companies Have No Plans for Reshoring

Reshoring Plans of Overseas Expansion Companies

[Asia Economy Reporter Choi Dae-yeol] Nine out of ten companies operating overseas have no so-called 'reshoring' plans to bring production facilities back to Korea.

The Korea Employers Federation announced on the 27th that a survey of 306 overseas companies found that 93.5% of respondents had no reshoring plans. By company size, the proportion of companies without reshoring plans was 97.8% for companies with 300 or more employees, which is 10.3 percentage points higher than the 87.5% for companies with fewer than 300 employees.

The biggest reason for reluctance to reshore was labor regulations, cited by 29.4% of respondents. Taxation such as corporate tax (24.5%), environmental regulations (16.7%), and metropolitan area/location regulations (13.1%) followed.

The preferred reshoring regions for overseas companies (multiple responses allowed) were the metropolitan area at 47.9%, the highest. The economic free zones accounted for only 13.7%. Regarding awareness of domestic reshoring promotion policies, 82.4% of respondents answered that they 'do not know well.' Among companies aware of reshoring promotion policies, 72.3% evaluated the policy effects as minimal.

To promote reshoring, the most requested government policy (multiple responses allowed) was expanded tax support at 31.0%. This was followed by increased government subsidies for employment, investment, and relocation (27.8%), financial support (21.6%), expanded support targets for returning companies (9.8%), and provision of location exemptions (7.8%).

Kim Jae-hyun, head of the Regulatory Reform Team at the Korea Employers Federation, said, "Although reshoring is accelerating globally due to increased supply chain risks after COVID-19, our survey shows that Korean companies have almost no reshoring plans. We need to reform the current high-wage system into a job- and performance-based wage system and consider incentives such as easing metropolitan area regulations."