The government is undertaking a full overhaul of its support system for "U-turn companies" — Korean firms that return home after operating overseas. At a meeting with reshored companies on the 27th, Industry and Trade Minister Kim Jung-kwan said, "We intend to comprehensively improve the system so that U-turn investment can inject vitality into local economies and enable core capabilities to accumulate domestically." Kim candidly acknowledged that while the corporate investment environment is changing rapidly, the government's reshoring policy has failed to keep pace.
The U-turn company policy has been in effect since 2014, but it has generated only 7 trillion won ($5.1 billion) in investment and 8,000 jobs through last year. Moreover, critics point out that the policy's effectiveness has waned as the number of U-turn companies has dropped sharply in recent years. According to the Ministry of Trade, Industry and Energy (MOTIE), the number of U-turn companies declined from 25 in 2021 to 23 in 2022, 22 in 2023, and 20 in 2024. Last year, only 14 companies were designated as U-turn firms — a 30% plunge from the previous year. As of the first quarter of this year, only two have been designated.
A major problem with the U-turn policy is that the scope of eligible companies is too narrow. For example, benefits are granted only when the products or services produced at the overseas site and the returning domestic site are identical or similar. This makes flexible responses difficult, such as converting auto parts production to energy storage system components. Investment in research and development (R&D) facilities also fails to qualify as a U-turn. Other requirements out of step with reality include the mandatory three-year maintenance of the existing overseas operation. The government must listen to businesses and swiftly expand the scope of U-turn recognition and ease subsidy eligibility requirements.
Major economies such as the United States and Japan are going all-in on reshoring with sweeping tax benefits and incentives. Korea, too, must devote its full energy to creating a more powerful U-turn policy. Above all, the government must squarely confront the fact that the fundamental reasons companies hesitate to return home lie in anti-business legislation — such as the 52-hour workweek and the so-called Yellow Envelope Law — and various regulations. Officials need to heed the complaints from industrial sites that even after returning, normal investment is difficult to pursue. In an environment walled off by regulatory barriers, companies will not come back simply because they are designated as U-turn firms and offered additional subsidies. The government must not stop at tweaking U-turn policy; it must focus on creating an environment in which companies want to return on their own. Superficial adjustments that merely skirt the core issues will not be enough to turn back the footsteps of companies leaving the country.
