A total of 350,000 jobs were created in the U.S. this year by the return of companies that moved overseas and foreign direct investments, and Korea was the top contributing country. According to the Wall Street Journal, 34 Korean companies either relocated manufacturing facilities to the U.S. or set up new factories.
The “reshoring” rate of American companies surged more than 30 percent over the past year as U.S. governments sought to consolidate supply chains after lockdowns triggered by the coronavirus pandemic and intensifying competition with China. Korean companies’ growing investment in the U.S. was part of efforts to ride that wave, but that also meant lost jobs for Koreans. The U.S. Congress recently passed the CHIPS Act and Inflation Reduction Act that limit tax breaks to companies that relocate factories to America, which have impacted Korean companies.
In order to create new jobs in Korea, the government here too must encourage businesses to invest at home and relocate from overseas. Since 2014, Korea has been offering corporate tax cuts and support to companies that bring their operations here, but only around 50 have taken up the offer. Many are discouraged by high wages and a shortage of workers here while the tax breaks are not nearly big enough for them.
Instead, the business-unfriendly regulations of the Moon Jae-in administration led to an exodus of manufacturing from Korea over the last five years. More than 60,000 investment pledges were made by Korean companies overseas in the last five years totaling a record W56 trillion (US$1=W1,340). According to the Federation of Korean Industries, domestic GDP could increase by W11.4 trillion and 86,000 jobs can be created if Korean manufacturers overseas relocate here.
Amid the restructuring of global supply chains, countries are competing to attract businesses. If Korea loses in this race, its economy faces a bleak future. The new government and the National Assembly must ensure that regulations are streamlined and labor reforms pursued so that Korea becomes as attractive to business as the U.S.
- Copyright © Chosunilbo & Chosun.com
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