Analysis of Major Policies Related to Korean Reshoring Companies
Published on 21 May 2021
Published by Economic Industrial Program Evaluation Division
Korea’s reshoring policies have been full-fledgedly implemented based on the Act on Assistance to Korean Off-shore Enterprises in Repatriation (a.k.a. the U-turn Law) introduced in August, 2013, and related policies are being released on a continuous basis. However, from the implementation of this Act until 2020, the outcome has been less than impressive with only about 80 offshore companies having repatriated to Korea. Against this backdrop, this report provides a comprehensive examination of the U-turn Law since its actual enforcement in 2014 in terms of its institutional aspects such as laws, regulations and policies related to reshoring companies, as well as in terms of policy implementation and outcomes, thereby providing measures for improvement for reshoring policies to be pursued in a more efficient manner in the future.
The main implications of the analysis are as follows:
First, while only one conglomerate reshored to Korea, it was accompanied by five partner companies, and the planned investment volume of these six businesses amounted to about 1/3 of the planned investment of all reshoring companies. In this respect, large conglomerates exhibited relatively higher advantages in terms of supply chain reshoring. Also, for companies that moved offshore as affiliates or suppliers, it is difficult to consider reshoring on their own. Therefore, in order to draw tangible reshoring outcomes, improvements to policies to actively encourage large conglomerates to reshore should be reviewed.
Second, when giving comprehensive consideration to the results of examining reshoring cases in Korea and abroad as well as the status of cases related to reshoring to Korea, close linkage is required between support policies for reshoring and high-tech industrialization & high value-added commercialization. In this respect, in parallel with developing linkages between reshoring policies and government policies on industry & technology, improving SMEs’ technology competitiveness as well as local governments’ industry development, measures to strengthen the functions of collecting and delivering additional information through the KOTRA U-turn Support Center at the working level, should be reviewed.
Third, an institutional overhaul is called for, including by recognizing reshoring from a broader and more diverse perspective by taking into account similar foreign case studies, reforming the system to set the focus on actually increasing domestic investments and employment rather than downsizing offshore production, thereby reinforcing the economic spillover effects upon a company’s reshoring.
Fourth, given that a clear performance target was lacking in the main reshoring policies since the U-turn Law was first enforced in December 2013, achievement targets need to be set and managed mainly based on the policy’s ultimate objective, that is, quantitative and qualitative growth in domestic investment and jobs.
Fifth, in order to strengthen the linkage between region-specific backbone industries under the Five-Year Regional Development Plans and reshoring companies, the role of local governments should be reinforced in the process of nominating and supporting reshoring companies. While the Ministry of Trade, Industry and Energy and KOTRA are responsible for nominating reshoring candidate companies, most reshoring companies end up returning to non-metropolitan regions due to institutional conditions etc. Therefore, procedural improvements are required to enhance the level of engagement by local governments in the process of nominating reshoring companies while developing and implementing concrete measures to enhance their roles.