[Editorial] If Labor Regulations and Site Issues Remain Unresolved, Reshoring Will Decline Further

According to the Ministry of Trade, Industry and Energy, the number of reshoring companies returning to Korea after operating abroad reached only 11 between January and September this year. After peaking at 25 cases in 2021, the number has declined annually, and it is likely to fall below 20 this year. There were 14 cases this year in which companies decided to reshore but canceled their investments, marking an all-time high. As countries around the world fiercely compete to attract companies amid global supply chain restructuring, concerns are rising that Korea is being left behind.
The reshoring company policy, implemented since 2013, offers incentives such as investment subsidies and reductions in corporate and income taxes to domestic companies that meet certain requirements and return their production activities from overseas. Utilizing this policy, KHVATEC withdrew from its Tianjin plant in China in 2022 and established a new metal forming plant for automobiles in Gumi, Gyeongbuk, creating about 300 jobs.
Despite some successful cases, the recent trend of companies returning to Korea remains extremely sluggish. Even when companies decide to come back, labor regulations and site issues make it difficult to proceed with investments as planned. Many companies are reluctant to reshore due to rigid employment structures and the strict 52-hour workweek. In fact, a survey by the Korea Enterprises Federation (KEF) identified labor regulations as the biggest obstacle to reshoring. The shortage of industrial land and complicated site selection procedures, which hinder the swift establishment of factories, also add to the burden for companies.
The United States (U.S.) and Japan are actively encouraging companies to return through bold incentives. The U.S. has fostered a business-friendly environment by introducing immediate tax deductions for research and development (R&D) and large-scale tax credits for the semiconductor industry. As a result, SoftBank Group, OpenAI, and Oracle have announced plans to invest $500 billion in AI infrastructure in the U.S. Japan, in response to the COVID-19 pandemic, also revamped its reshoring policy and introduced incentives centered on tax credits.
In contrast, overseas investments by Korean companies continue to rise. Korea Zinc, the world’s largest non-ferrous metal smelting company, has decided to build a strategic mineral smelter in the U.S. worth 10 trillion won, with the U.S. government participating as a shareholder. In just the first half of this year, 2,437 Korean companies expanded abroad through direct investment, a more than 60% increase compared to the same period last year.
To encourage companies to return from abroad, especially when they have valid reasons such as securing supply chains or targeting local markets, stronger incentives are needed. However, the government’s reshoring policy has not moved beyond its existing framework. Recently, the government revised its reshoring company guidelines to ease support requirements and increase subsidy rates for companies returning from the U.S. due to tariff issues. Nevertheless, such minor adjustments are unlikely to yield significant results as long as structural problems remain unresolved.
Countries around the world are now fiercely competing to attract companies. Companies are essential for job creation and economic growth. It is urgent to resolve the 'triple challenges' that hinder domestic investment, including labor regulations, site issues, and power shortages. Korea needs groundbreaking policies that can simultaneously attract both domestic reshoring and foreign investment.