It’s bad overseas, worse at home

Local companies that have entered overseas markets are experiencing internal and external difficulties, the Korea Chamber of Commerce and Industry (KCCI) said yesterday.

According to a KCCI survey of 700 domestic manufacturers operating factories overseas on conditions in the domestic and foreign business environments, 37.9 percent said conditions for operating factories overseas have deteriorated, while only 15.4 percent said they have?improved.

When asked about the environment for operating plants, 31.4 percent responded that it has worsened, while 13.6 percent said it has improved.

Reasons cited most frequently for deteriorating business environments for overseas factories were wage and labor disputes, stricter regulations and reduced profitability.

However, because deterioration of manufacturing conditions is seen as more prominent in Korea than overseas, most companies still would not consider relocating their operations here.

Of those surveyed, 78 percent preferred overseas markets, compared to 22 percent who responded that Korea is better.

More than 90 percent of the companies said they have no plans for moving their overseas factories; only 1.5 percent said they would be willing to consider returning to Korea.

As to the biggest challenges in returning home, the companies cited labor costs and rigid labor-management relations. Other factors included the financial cost and logistics of moving, loss of market share overseas and excessive government regulation.

As for policies that might encourage manufacturers to return, companies cited tax incentives, such as exemptions, and financial support for facility investments (45.6 percent), support for production personnel and acquisition of plant sites (31.8 percent) and administrative support and consulting on withdrawal procedures for overseas plants (19.3 percent).

Meanwhile, the surveyed companies have manufacturing operations in two countries on average, and 87.8 percent are in emerging countries, including China (62.3 percent) and Southeast Asia (18.8 percent). Only 12.2 percent operate factories in developed countries like the United States (8.2 percent) and Europe (2.8 percent).

About 60 percent said they operate plants overseas in order to reduce the cost of production as well as to enter new markets.

“Recently, developed countries are actively improving business environments in order to make companies return their overseas plants to their home countries,” said Park Jong-gap, managing director of KCCI. “Korea should also come up with more fundamental measures to create a good environment in which to do business.”

By Kim jung-yoon [kjy@joongang.co.kr]