One of the bills that lawmakers should pass promptly when the National Assembly convenes later this month is the government proposal aimed at helping Korean companies that operate abroad to repatriate their operations.
The Ministry of Knowledge Economy submitted the bill to the Assembly last November, but it has since been put on the back burner. Yet the bill deserves prompt action as it would promote job creation and stimulate economic growth.
The ministry has recently commissioned Samjong KPMG, an accounting and consulting company, to measure the economic benefits of luring back Korean companies with production bases in China.
Samjong has found that Korea enjoys cost advantages in some industrial sectors due to the recent steep wage hikes in China.
The reduction or abolition of tariffs following Korea’s conclusion of free trade agreements with the United States, EU and other major nations has also boosted Korea’s competitiveness as a production base.
The report has singled out five industrial sectors where the government should concentrate its efforts in the short and medium term: electronic parts, clothing and fur products, luggage and footwear, electrical equipment, and shipbuilding.
It estimates that if 10 percent of Korean companies engaged in these five sectors move their factories to Korea, they would create 85,000 jobs here and boost gross domestic product by 7.5 trillion won.
If the participation rate increases to 60 percent, Korea would see 510,000 new jobs added to the economy and its GDP expand by 45.2 trillion won.
The report advises Korean companies that have left for China and other countries in search of cheap labor to reassess their cost structures because production at home has become more advantageous.
In fact, some Korean companies in China are already arranging to return. Last August, 14 jewelry manufacturers in Qingdao signed a memorandum of understanding with the government of North Jeolla Province to relocate their plants.
They agreed to invest 73 billion won to build new factories at an industrial park in Iksan. They are expected to create 3,000 jobs in the area.
The provincial government is also seeking to have another 36 jewelry firms return to Korea by 2015. If all 50 firms come back, they would add 13,000 jobs to the region and increase exports by 900 billion won.
These firms are some of more than 400 Korean jewelry manufacturers that have formed a cluster in Qingdao, employing some 50,000 Chinese workers.
To speed up the return of these and other companies, lawmakers need to pass the bill without further delay.
The bill proposes to give returning companies 100 percent exemption from corporate tax for the first five years and a 50 percent cut for the next two years. It also requires the government to cover 40 percent of site acquisition costs and 15 percent of facility investments.
The incentive package would also include financial support and assistance in staff recruitment.
To lure back more companies, the government will have to tailor its support packages to their individual needs. At the same time it would do well to survey Korean manufacturers operating in countries other than China.
As the economy is caught in a low-growth trap, jobs are becoming increasingly difficult to come by. Therefore, the government should leave no stone unturned in creating jobs.
