A recent survey of 700 Korean manufacturing companies operating production facilities abroad highlighted the need to improve the business environment at home.
The poll conducted by the Korea Chamber of Commerce and Industry showed manufacturers having trouble with deteriorating conditions both at home and abroad but believing it was still better to operate overseas.
Nearly 38 percent of them said conditions for operating factories abroad had deteriorated while 15.4 percent saw an improvement. Asked about the domestic environment, 31.4 percent replied that it had worsened, with 13.6 percent saying it had improved.
But about 80 percent of the companies polled said that conditions for operating their plants were more favorable overseas than at home. A meager 1.5 percent had the intention to move their overseas factories to Korea in the near future.
Cited as major reasons for their reluctance to return were high wages and strained labor-management relations. Other factors included moving costs and excessive government regulations.
They wanted the government to provide more tax incentives, financial support and assistance with securing production personnel and plant sites as measures to encourage them to make the “U-turn.”
Many local manufacturers have opted to operate plants overseas in a bid to cut costs and tap new markets. Korean companies’ investment abroad increased by 16.1 percent last year, while inbound investment here rose at a slower pace of 7.3 percent.
Facilities investment by local companies decreased by 8.5 percent from a year earlier in the first half of this year, marking the steepest reduction since a 19.9 percent decline in the same period of 2009. Korean corporations piled up a whopping 312 trillion won ($277 billion) in bank deposits as of the end of June.
Efforts are needed not only to induce local manufacturers to move their overseas facilities back home but also to prevent an accelerated corporate exodus. It should be noted that many developed countries have recently been active in improving business environments to encourage their companies to return home.
Comprehensive and effective measures should be implemented to make local manufacturers say, in the period of global deceleration, that business conditions are bad at home but worse abroad.