SOUTH KOREA: Firms considering reshoring jump ninefold in 2 years, according to survey.

As published on en.yna.co.kr, Monday 14 March, 2022.

SEOUL, March 14 (Yonhap) -- The number of South Korean businesses considering bringing their manufacturing back home has spiked nine times in two years, a survey showed Monday.

Of the 105 companies surveyed from Feb. 17-24, which belong to the country's 500 biggest firms by revenue, 27.8 percent said they were in the process of reviewing reshoring, according to the Mono Research poll commissioned by the Federation of Korean Industries (FKI), the country's top business lobby.

The tally jumped more than nine times from the 3 percent found in May 2020.

Also, another 29.2 percent said they were willing to consider the option of reshoring when and if the local business environment and the government's support improve.

"Six out of 10 businesses showed interest in reshoring, resulting from production disruptions caused by the supply chain snarls, rising logistics costs and the prolonged (trade) rivalry between the United States and China," the FKI said.

Recently the political climate has also shifted to support reshoring. President-elect Yoon Suk-yeol vowed to expand support for companies that move production back home.

Currently, South Korean companies should expand manufacturing capacity at home within two years of closing offshore facilities to be eligible for tax reduction. Yoon promised to extend the time frame to three years, on top of expanding the government's financial incentives and tax cuts for such businesses.

The respondents also cited deregulation as the most pressing issue for reshoring at 35.3 percent, followed by bigger tax reductions at 29.5 percent and more financial incentives at 17.6 percent, according to the survey.

As for local investment for this year, 49.5 percent said they had set up a plan, while 38.1 percent had yet to establish such a plan and 12.4 percent had no plan for domestic investment.

Of those with a plan for local investment, half the number said investment would be similar in size to last year's, 38.5 percent said they would invest more and 11.5 percent said they would reduce investment.

The respondents also said the volatile economic environment caused by the continued pandemic as well as rising costs for raw materials was cited as the biggest hurdle facing them to make a bigger investment at 37.7 percent, followed by a rise in interest rates and difficulties to secure loans at 20.5 percent and sluggish earnings results at 15.4 percent.

The FKI said a vast majority of the reasons that were blocking companies from expanding investment came from volatile external business conditions.

More than eight out of 10 respondents, however, said they were not satisfied with the country's domestic investment environment: 86.7 percent said they found the environment "below average," while the rest said they were satisfied.