Chungnam's Strategy to Attract Domestic Returning Companies Proves Successful

[Asia Economy (Hongseong) Reporter Jeong Il-woong] Chungnam Province's strategy to attract companies returning to Korea is yielding visible results. This is thanks to the alignment of companies seeking to return from overseas to Korea amid the pandemic and the province's strategic pro-business policies. Attracting companies returning to Korea is also significant because it leads to a virtuous economic cycle through large-scale investments.

According to the province on the 12th, from 2017 to 2022, Chungnam ranked first place jointly with Gyeonggi-do and Jeonbuk-do, each hosting 18 companies that returned to Korea, based on the regional status of returning companies (Ministry of Trade, Industry and Energy’s 'Status of Overseas Companies Returning to Korea').

During this period, a total of 126 companies nationwide were listed as returning companies. Following Chungnam, Gyeonggi, and Jeonbuk, Gyeongbuk had 17 companies, Gyeongnam 16, Busan 10, Incheon 7, Daegu 5, Chungbuk 5, Sejong 3, Gwangju 3, Ulsan 3, Gangwon 2, and Jeonnam 1 company each relocated their production facilities from overseas back to Korea.

Notably, the number of companies returning to Korea increased significantly during the global spread of COVID-19. The annual status shows that the number of companies was only 4 in 2017, slightly increasing to 8 in 2018 and 14 in 2019, then rising sharply to 23 in 2020 during the pandemic and 26 in 2021. However, last year, the number of returning companies slightly declined to 24 compared to the previous year.

The increase in returning companies during the pandemic is attributed to unstable international supply chains caused by the spread of infectious diseases, strengthened protectionist policies by major countries, and expanded wage increases mainly in developing countries. Companies that had moved production facilities overseas to unfamiliar foreign lands found themselves returning to Korea due to external environmental factors.

In Chungnam’s case, the province responded quickly to this shift in posture, enabling it to attract relatively more returning companies than other local governments.

In fact, in June 2020, the province established and implemented the 'Plan to Attract Companies Returning to Korea.' The plan focused on targeting local companies operating factories overseas in fields such as electrical equipment, telecommunications equipment, and automobile parts, encouraging their return to Korea by providing large-scale subsidies.

In particular, providing hundreds of billions of won in support depending on the scale of investment played a crucial role in companies returning to Korea.

For example, when an overseas company returns to Chungnam and invests 150 billion won to purchase land (based on 23 billion won), build a new factory, and create 500 new jobs, the province simultaneously provides equipment subsidies of 21 billion won (14% of investment, national funds), site subsidies of 9.2 billion won (40% of land purchase price, local funds), employment subsidies of 7.5 billion won (local funds), headquarters relocation incentives of 7.5 billion won (local funds), and large-scale special support of 10 billion won (city/county funds). According to the province, the maximum support a company can receive in this case reaches 55.2 billion won.

The exceptional support provided to returning companies has led not only to attracting companies but also to inducing large-scale investments within the region. For example, after announcing the plan, the province successfully attracted KG Dongbu Steel in November 2020 and Nexcon Technology in February 2021. Both companies decided to relocate their production bases from China to Chungnam, with KG Dongbu Steel planning an investment of 155 billion won and Nexcon Technology 40 billion won.

The province also emphasizes the virtuous cycle effect where corporate investments contribute to revitalizing the local economy. The one-time effects of KG Dongbu Steel’s factory construction are expected to generate 188.9 billion won in production inducement, 688.6 billion won in added value inducement, and 875 jobs, while Nexcon Technology’s factory construction is expected to generate 54 billion won in production inducement, 20.4 billion won in added value inducement, and 245 jobs, according to the province.

A provincial official said, “Chungnam’s pro-business policies to attract companies returning to Korea are recently yielding visible results,” adding, “This year, the province plans to continue domestic and international attraction activities and develop and implement various corporate support policies to attract excellent companies returning to Korea to the region.”