Government to Lower Barriers for Reshoring Companies... All-Out Efforts to Boost Local Investment and Attract Advanced Technologies

Easing Business Similarity Requirements Between Overseas and Domestic Operations

Negotiated Subsidy System Introduced for Large-Scale Investments

Expanding Local Investment Through Mother Factory Attraction and Manufacturing AI Integration

Kim Jung-kwan, Minister of Trade, Industry and Energy, visited Kolmar Korea, a cosmetics manufacturing company selected as the first domestic-returning company this year, located in Jeonui-myeon, Sejong City, on April 27. He received a product briefing from the company officials. Ministry of Trade, Industry and Energy.

The government is set to completely revamp its ‘U-turn (domestic reshoring) policy,’ which encourages overseas production bases to return to South Korea. The plan is to shift from simply supporting factory relocations to promoting local investment and attracting high-tech strategic industries. In particular, the requirements for business similarity between overseas and domestic operations will be eased, and a new system will be introduced in which the government and companies negotiate subsidy amounts for large-scale regional and advanced investments.

On May 29, the Ministry of Trade, Industry and Energy announced these measures in its ‘Reshoring Policy Reestablishment and Promotion Plan’ at the Emergency Economic Headquarters meeting and the joint meeting of ministers for economic and industrial competitiveness enhancement.

This initiative aims to encourage the relocation of overseas production bases back to Korea amid the global trend of strengthened protectionism and supply chain restructuring, while simultaneously advancing local investment and high-tech manufacturing capabilities. The government has identified several key objectives: redesigning the criteria for reshoring eligibility, overhauling the reshoring subsidy system, strengthening evaluation and management while rationalizing implementation requirements, and providing close support for strategic attraction and investment execution.

First, the government will significantly relax the ‘business similarity’ requirement between overseas sites and returning domestic operations. Currently, the business must produce the same or similar products or services based on the Korean Standard Industrial Classification’s mid-category criteria. Going forward, the assessment will comprehensively consider not only materials, parts, or production processes, but also functions, uses, core technologies, and supply chain factors. The intention is to support companies’ entry into new industries and investments in upgrading their business structures.

The range of exemptions for the restructuring requirement of overseas sites will also be expanded. Previously, exemptions were only granted if the company possessed certificates related to specific technologies or products, such as national advanced strategic technologies. Moving forward, exemptions will also be granted if the investment qualifies as a core production facility (Mother Factory) in advanced industry or supply chain sectors. The government plans to revise the enforcement ordinance to define the concept of core production facilities and establish a review system.

The method for providing subsidies will change significantly. Until now, subsidies were paid according to a predetermined table of rates. In the future, a ‘negotiated support’ approach will be introduced, where the amount of support is determined through discussions between the government and companies, especially for advanced industry, supply chain, or large-scale investment projects. The size of the support will be differentiated based on whether the investment is outside the Seoul metropolitan area, the level of youth job creation, the application of advanced strategic technologies, and whether it qualifies as a Mother Factory.

In particular, to actively encourage local investment and the adoption of advanced strategic technologies, the government will shift from the existing fixed-amount cap system to a support structure centered on the maximum subsidy ratio. Currently, the maximum is 30 billion won per investment (or 40 billion won for advanced sectors), with a total cap of 60 billion won per company.

The government will also strengthen management systems to improve the investment execution rate. Since there have been many cases where companies designated as reshoring enterprises canceled their designation due to lack of actual investment, the government will conduct stricter evaluations of the specificity and execution capability of investment plans during the selection stage. To this end, the Ministry of Trade, Industry and Energy will establish a new ‘Reshoring Working Committee’ chaired by a high-ranking official.

Additionally, to more closely monitor whether companies receiving subsidies are fulfilling their investment commitments, the government will extend the implementation period from the current three years depending on the scale of support. Employment and land area maintenance requirements will also be rationally improved to reflect the trend toward automation in manufacturing sites. The government is also considering providing post-incentives to companies that create more jobs than initially planned.

The government plans to proactively identify potential reshoring companies in advanced industries, manufacturing AI (M.AX), and supply chain sectors. Through KOTRA’s overseas trade offices, it will continually secure interested companies, and by establishing a local government IR platform for reshoring companies, it will also support local investment attraction activities.

Minister of Trade, Industry and Energy Kim Junggwan stated, "Reshoring is becoming a strategic choice about where to place the core of technology development, production, and supply chains, rather than simply relocating factories." He added, "We will redefine the concept of reshoring and boldly reform and expand support methods to promote locally-focused reshoring."

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