South Korea eases 'U-turn' company recognition, expands regional subsidies

South Korea is easing the requirements for companies returning from overseas to be recognized as 'U-turn' enterprises, aiming to revitalize regional economies and bolster strategic industries. The government announced on May 29th a revised 'U-turn Enterprise Financial Support and Promotion Plan' designed to encourage more businesses to bring their operations back to the mainland.

A key change involves broadening the criteria for recognizing U-turn companies. Previously, companies had to produce identical or similar products or services in both their overseas and domestic facilities. The updated policy will consider a wider range of factors, including the similarity in core technologies, functions, applications, and supply chain integration, not just the production process. This adjustment is expected to facilitate investments in new business areas, such as a company operating an overseas auto parts factory potentially returning to establish a domestic plant for industrial energy storage system (ESS) components.

Financial incentives, particularly subsidies, will be recalibrated to prioritize investments in non-capital regions and advanced sectors crucial for national competitiveness and supply chain resilience. A new 'negotiation track' will be introduced, allowing the government and companies to jointly determine support levels for strategic investments or large-scale projects. The amount of support will be differentiated based on factors like investment location (non-capital regions), job creation (especially for youth), and the nature of the technology (advanced strategic technologies or 'mother factory' status).

Furthermore, the government is strengthening the selection and management processes for U-turn companies. A dedicated U-turn Investment Support Team will be established to assist companies throughout their investment journey, addressing challenges and ensuring smooth operations. The existing subsidy limits, which previously capped support for advanced sectors at 40 billion won, will be revised to allow for larger subsidies exceeding this amount for significant regional and high-tech investments, shifting the focus towards a percentage-based support ratio tied to investment value. These reforms signal a strategic push to decentralize economic activity and enhance South Korea's industrial capabilities.

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U-turns are no longer just about relocating factories; they represent a strategic choice about where to center technological development, production, and supply chains. We will swiftly implement these improvements to promote U-turns centered in regional areas and actively support the attraction of high-quality U-turn companies.