Government to Increase 'U-turn Companies'... Return Recognized Without New or Expanded Factory Construction

Ordinance Amendment for the Enforcement of the 'Overseas Returnee Enterprise Act' Approved

Samsung Electronics Pyeongtaek Campus located in Pyeongtaek, Gyeonggi Province. The photo is unrelated to specific expressions in the article. [Photo by Asia Economy DB]

[Asia Economy Sejong=Reporter Lee Junhyung] The government has decided to recognize companies that introduce new equipment to existing domestic factories as u-turn companies (domestic return companies).

On the 25th, the Ministry of Trade, Industry and Energy announced that the partial amendment to the Enforcement Decree of the Act on Support for Domestic Return of Overseas Expansion Companies (Overseas Expansion Companies Return Act) was approved at the Cabinet meeting. Through this amendment, domestic companies that have expanded overseas can be recognized as u-turn companies simply by newly or additionally introducing equipment into idle spaces of existing domestic factories without constructing new or expanding existing domestic factories.

Originally, the Overseas Expansion Companies Return Act specified "new construction or expansion of domestic business sites" as a condition for u-turn companies. According to the current enforcement decree, new construction or expansion of domestic business sites is limited to three cases: ▲ establishment of a new factory ▲ expansion of an existing factory ▲ purchase or lease of an existing factory owned by others followed by installation of manufacturing facilities. However, with this amendment, the scope of new construction or expansion of domestic business sites now includes cases where new equipment is introduced into idle spaces of existing factories.

This means that simply adding equipment to existing domestic factories qualifies a company as a u-turn company eligible for government support. The government plans to provide newly recognized u-turn companies with investment subsidies, employment creation incentives, and other supports similar to those given to existing u-turn companies through this amendment.

The government's expansion of the recognition scope for u-turn companies aims to revitalize reshoring (the return of overseas relocated companies to Korea). Previously, the government strongly promoted reshoring policies by announcing the "Comprehensive Support Measures for U-turn Companies" in 2018, but the results were minimal. In fact, a recent survey conducted by KOTRA on 734 domestic companies that had expanded overseas showed that only 4.5% (33 companies) expressed willingness to return to Korea.

The government intends to increase factors encouraging overseas expansion companies to return. In particular, the Yoon Seok-yeol administration has included "activation of u-turn" as one of its 110 national tasks and incorporated related measures in the "New Government Economic Policy Direction" announced in June. The amendment to the Enforcement Decree of the Overseas Expansion Companies Return Act is a follow-up measure aligned with this government policy direction, according to the Ministry of Trade, Industry and Energy.

Additionally, this amendment is significant as it reflects industry requests. Previously, the Ministry of Trade, Industry and Energy identified difficulties faced by the industry regarding current u-turn company recognition criteria through company interviews and meetings. A ministry official stated, "The amendment concretizes policy demands identified by the industry into legal form," adding, "It is expected to contribute to domestic investment and employment creation, as well as supply chain strengthening through revitalization of domestic return."

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