Chung Seok-woo and Kim Hyo-jin
The South Korean government has prepared bigger incentives for companies that bring their overseas work back home in an attempt to shore up the country’s struggling labor market.
The government on Thursday revealed expanded benefits for companies under its reshoring assistance initiative. The relevant law, which came into effect in 2013, had attracted just 51 companies during its five years of implementation due to the stringent rules.
Under the eased measures, companies that repatriate their work to Korea would be eligible for the aid package if they reduce their overseas production by 25 percent, halved from the previous 50 percent threshold.
The benefits, which had previously been limited to manufacturers, would now be extended to information service providers like software developers.
It has also become easier for returning companies to receive subsidies when setting up production sites and facilities at home. Small and midsized enterprises would be offered more benefits, such as two-year employment subsidies.
The incentives have been broadened for conglomerates. Similar to their smaller peers, they would receive subsidies for production sites and facilities when relocating to rural areas and get tax relief from simply downsizing their foreign outposts, rather than having to pull out of them completely. They would also enjoy lower tariffs.
It remains to be seen whether the new measures would be a big enough enticement for local companies. According to a recent study by Korea Economic Research Institute, 96 percent of the 150 manufacturers surveyed said they had no plans to bring work back home. Many cited global expansion as their main reason for not returning, along with Korea’s high wages and rigid labor market.