Value context and insight. lkm@koreatimes.co.kr
Gov't urged to ease rules to facilitate reshoring
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By Lee Kyung-min
By Lee Kyung-min
The government is being urged to ease rules on the building of manufacturing facilities in Seoul and the surrounding Gyeonggi Province. These areas are favored by businesses for their easy access to a highly skilled workforce and operational efficiency due to the close proximity of related industries' factories and research bodies.
The call to relax decades-long regulations long cited as major hurdle to corporate growth come amid the government initiative to speed up reshoring, a process of returning production and manufacturing facilities back to Korea, amid elevated concerns of global value chain disruption brought on by the COVID-19 pandemic.
The top priority is the easing of the current restriction under which firms are not allowed to build or expand manufacturing facilities that take up more than 500 square meters in Seoul, Incheon and Gyeonggi Province.
Firms can move facilities every three years but the limit on the land size cannot be raised. This “hurdle” has long frustrated businesses needing to expand manufacturing capacity or build storage facilities nearby forcing them to find much more costly alternatives in remote regions not subject to the regulation.
Businesses choose where to build factories and related facilities factoring in variables with having related industries around a major one. The government asking firms to return home without any meaningful overhaul beforehand, in that sense, blunts any incentive to have them come back.
“Businesses by nature are not inclined to any choices that hurt profit generation. They have no reason to return unless the government lifts restrictions to a degree that could induce dramatic changes,” Yonsei University economist Sung Tae-yoon said.
Other than the thorny issue of easing rules on capacity expansion in the capital Seoul and surrounding regions, the government is also being pressured to offer greater tax incentives to those that choose to return to the highly developed area.
This could be achieved by revising a rule which currently grants subsidies only to those that set up factories outside Seoul and Gyeonggi Province.
“Deregulation to help firms reshore involves a range of complicated and complex issues, a process that should be discussed with the trade and land ministries. Discussion is ongoing,” a finance ministry official said.