"COVID-19 Driven Corporate Reshoring? Start by Retaining Young Talent"

Government's 'Reshoring Policy' Expert Recommendations

Efforts Needed to Improve Overall Business Environment Including Labor Market
Must Retain Young Talent Abroad and Change Priority of Professionals

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] As the global supply chain was disrupted by the novel coronavirus disease (COVID-19) crisis, reshoring?where countries like the United States bring their industries back home?has become a hot topic. Economic experts in academia agree that unless rigid labor markets and corporate regulations are resolved, short-term policies cannot bring companies back. Since companies operate based on profits and most of those that moved overseas did so primarily due to labor cost issues, it should not be taken lightly. They also emphasized the urgent need to retain young talent who are leaving abroad.

On the 15th, Professor Kim Soyoung of the Department of Economics at Seoul National University stated, "To induce reshoring, we need to think in reverse about the reasons why companies left in the first place." She added, "Korea’s production costs are originally higher than those of other Asian countries, so this issue must be addressed." She suggested considering causes such as ▲ recent corporate regulations in Korea and the overall business environment ▲ relatively high logistics costs, and inducing reshoring by providing compensations for these factors.

Professor Kim also mentioned that while the government will likely try to provide incentives to encourage reshoring, the specifics are still unclear. She said, "Currently, production costs are high, so should the government just use national taxes to give a lot of money to reshoring companies to lower production costs?" She added, "It should be evaluated case by case, and actions should be taken only if they are judged to be genuinely helpful to companies." Of course, she noted that a successful reshoring would have the advantage of creating more jobs.

Professor Sung Taeyoon of the Department of Economics at Yonsei University also stated, "Beyond just encouraging reshoring, efforts are needed to improve the overall corporate regulatory environment, including addressing labor market rigidity."

There is also talk that when companies reshore, they must be able to retain talented personnel within Korea. Professor Lee Sangwook of the Department of Business Administration at Seoul National University of Science and Technology said, "Although entrepreneurship and company creation are encouraged, the perception that entrepreneurship is something only young people who cannot find jobs do is problematic." He questioned, "Isn't the so-called 'successful' model in Korea still becoming a doctor or lawyer and buying a house in Gangnam?" He pointed out that the perception that stable income is invested only in real estate and that real estate is the only means to outpace inflation must be changed for entrepreneurship to naturally increase. He said, "An environment should be created so that people perceive starting a company and making money as a good thing."

He added, "We need to be able to create R&D personnel clusters," and pointed out, "The reality is that highly educated brains in Korea keep trying to go to the United States." He even mentioned that there are brokers who connect Korean-American talents in the U.S. with Korean pharmaceutical companies. Efforts to retain talent are essential, especially in high value-added sectors.

If it is difficult to bring back large corporations that have already left, protecting small and medium-sized enterprises (SMEs) already in Korea is also a method. Professor Lee recalled, "A few years ago, I served as a judge for attracting an industrial complex in a certain region. I saw a company trying to return from China receiving low-interest loans and land benefits, but their interest was solely focused on the real estate prices of a specific industrial complex. That made me think that reshoring in Korea is still far off."

This content was produced with the assistance of AI translation services.