A, which manufactures automobile bodies and special-purpose vehicle parts, was said on the 18th to have postponed a plan to build a new plant in a provincial area last year. It gave up even though it could have received government subsidies by building a new plant. There are said to be quite a few such companies. B, which produces metal frameworks used in construction, also delayed its plan last year to build a plant in a provincial area. It likewise did not receive government subsidies.
As a result, one-third of the subsidy budget that the government allocated last year to spur corporate investment in provincial areas reportedly went unspent. According to data submitted by the Ministry of Trade, Industry and Resources to Huh Sung-moo of the Democratic Party of Korea, last year's budget for the Local Investment Promotion Subsidies was 221.8 billion won. Of that, 63.7 billion won (28.7%) remained. The amount left unspent despite the available budget was the largest since the Local Investment Promotion Subsidies program began in 2002. Corporations have to invest for subsidies to be provided, but corporate investment last year was lower than expected.
A government official said, "Last year, as the United States applied a reciprocal tariff and the won-dollar exchange rate rose, there was a 'butterfly effect' that dampened corporations' investment sentiment." Both export corporations and domestic-demand corporations became reluctant to invest due to uncertainty.
The Local Investment Promotion Subsidies program is designed to induce the relocation of capital-area corporations to provincial areas or new and expanded investments within provincial areas. It supports 40%–50% of facility and site expense with central and local funds. It focuses support on lower-tier balanced development areas (58 cities, counties, and districts) and industrial crisis response areas. If 63.7 billion won of the subsidies budget remained last year, it can be seen that at least 127.4 billion won of private investment did not take place in provincial areas.
This year, the government increased the Local Investment Promotion Subsidies budget to 256.4 billion won, more than last year. It also raised the per-corporation subsidy cap from 20 billion won to 30 billion won. However, there are projections that this year as well, the U.S. reciprocal tariff, the Special Act on Investment in the United States, and a high exchange rate are highly likely to act as negative factors for corporate investment.