Take care of the pets at home
The author is the head of the industrial 2 team of the JoongAng Ilbo.
Covid-19 reminded us of the importance of the manufacturing sector. It’s been proven that we can produce masks, testing kits and vaccines on time when we have minimum manufacturing facilities. Also, it’s been revealed that a supply network heavily reliant on China could be fatal. As a result, the government announced a reshoring policy to bring back Korean companies operating overseas in order to reinforce the manufacturing sector and create jobs.
The United States and Japan have promoted reshoring before and seen results. The United States started to encourage reshoring in the Obama administration with its “remaking America” slogan. As a result, more than 3,300 companies, including Apple, GM and Ford, returned to America in the nine years since 2010. After Japan’s Abe administration promoted reshoring in 2012, Toyota, Canon, Honda and Nissan moved their factories back to Japan. Both countries used policies like lower corporate tax and subsidies for relocation costs and were able to lower their dependence on China and add jobs.
Korea is also considering measures like subsidizing relocation costs, lowering corporate tax and removing regulations on a number of factories in the capital region. The government is not hiding its hopes that successful reshoring would create jobs, boost small and medium-sized businesses and balance national development. The hope can be understood as Korean companies operating overseas have created more than 1.6 million local jobs since 2005.
However, the voices of the companies operating overseas are different from the government’s expectations. They claim that there is no market or abundant workforce if they return to Korea, unlike the United States or Japan. Also, they emphasize that the products they make are not goods with high added value and dominant competitiveness in the global market. They moved to China, to Vietnam, then to Indonesia or Bangladesh for cheaper labor. So, they are worried that if they return to Korea, they will struggle to find workers.
Despite the government’s plan to encourage reshoring, manufacturers, such as television factories, continue to move abroad. Since 2013, administrations have pursued reshoring, but only about 70 companies have returned. The priority should be focusing on vitalizing the remaining businesses and preventing them from moving abroad.
Challenges like a flexible labor market, expansion of flextime and shifts,and integration of manufacturing and ICT should be addressed first. Instead of coveting wild animals, you should first focus on taking care of the pets at home.