Korean Companies Prefer to Keep Manufacturing Abroad | Be Korea-savvy

Korean Companies Prefer to Keep Manufacturing Abroad


Reshoring is when a company moves manufacturing ventures back to its home country after operating overseas, often in search of cheaper labor. (image: KobizMedia/ Korea Bizwire)

Reshoring is when a company moves manufacturing ventures back to its home country after operating overseas, often in search of cheaper labor. (image: KobizMedia/ Korea Bizwire)

SEOUL, Sept. 26 (Korea Bizwire) – In contrast to the recent global tendency for enterprises to bring manufacturing back to their native soil, Korean companies seem to be bucking the trend, government data showed Monday.

Reshoring is when a company moves manufacturing ventures back to its home country after operating overseas, often in search of cheaper labor. Many governments actively pursued policies (often tax benefits) encouraging companies to return following the 2008 crisis to boost economic output and job creation. GE, Ford, Sony, and Adidas are among the popular cases. 

According to a report from Minjoo Party lawmaker Kim Kyoung-soo, 37 Korean companies relocated back home in 2013 from 14 in 2012; but the number dropped to 16 in 2014 and nine in 2015. As of September 2016, the number stands at five. 

Among the reshoring cases since 2014, LG Electronics was the only major company (annual sales of 5 trillion won, $4.5 billion, and higher) to make a move, announcing in March that it would partially relocate its manufacturing facilities for washing machines from Mexico. 

Kim criticized the government for a lack of initiative in coaxing firms to repatriate their manufacturing. 

Although 35 of the companies (since 2014) received total subsidies of 20.2 billion won for facilities and equipment, reductions on tariffs amounted to a mere 100 million won, with no reductions or exemptions whatsoever for income tax. Total government grants for employment also accounted for only 970 million won for seven of the companies. 

“A number of developed countries have set forward active policies to revitalize their economy, investment, and employment, with many global enterprises deciding to return to their home countries,” said Kim.

“If an offshore company relocates back home, its partner firms often follow suit, thus promoting investment and job creation, which is why strengthening reshoring policies is essential.”

By Lina Jang (linajang@koreabizwire.com)

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