The regulations of capital areas have been controversial continuously since the beginning of the 60s. There are a few key features in this controversy; the restriction of location in the capital area is not effective enough to reduce the overpopulatio...
The regulations of capital areas have been controversial continuously since the beginning of the 60s. There are a few key features in this controversy; the restriction of location in the capital area is not effective enough to reduce the overpopulation of the capital area, which prevents the internationalisation of the area; the overpopulation of the capital area causes the environmental pollution, transportation problems, and severe social costs; uneven development of the capital area decreases the national competitiveness in the international society; the balanced development of the whole national territory is the right answer for a better living standard for everyone.
Also there is an increase in direct overseas investments by domestic companies; it has risen from five-billion dollars in 2000 to one-hundred-seven-billion dollars in 2006. As a result, there has been a concern if the regulation of capital area stimulates overseas investments by domestic companies in the capital area to be more active.
As such, this research has studied how the control of capital location has influenced on the establishment of factories abroad, which is one of the ways of overseas investments, to find out what effects this control has brought to the increase in overseas investments.
The followings are the results of this;-
First, there are four reasons why many businesses are located in the capital area; ⅰ) close physical approach to customers; ⅱ) earning direct profits with businesses in same industries in the capital area; ⅲ) easier recruitment of high-quality labours; ⅳ) more possibility of an increase in the price of sites. However, when companies locate themselves in the capital area, they are stressed by rents, the price of the site, and various regulations of capital location, facing with errors in running their businesses.
Second, there are five reasons why companies in the capital area locate their factories abroad; ⅰ) the availability of labours on low costs; ⅱ) the better stability of the relationship between employees and employers; ⅲ) chances to increase exports and to expand ways of them through opening markets; ⅳ) the low price of sites; ⅴ) economies of concentration achieved through the cooperation with massive companies established ahead in the same overseas areas.
Third, only 12 % of interviewees have answered positively to the question which has asked whether the regulations of capital areas have influenced when the decision of the location of factories abroad was made by companies in the capital area. The reason being of this result is that the location of supplying factories is to obtain three advantages mentioned above rather than to avoid.
Thus, although companies in the capital area regard the regulations of capital areas as errors, it is inappropriate to conclude that these errors about the location controls directly lead to the location of supplying factories abroad. Rather, we could figure out that companies set factories for business strategies or for the necessity in running businesses.
Through these results of the study suggests two political implications;-
First, the Roh administration has indicated the movement to reduce the regulation policies in the capital area constantly since the middle of its regime; for example, the expansion of the total number of factories and the amendment of the Capital Area Maintenance Plan. The interviewees of this study are companies in the capital area who established their factories abroad after 2003. As such, the reduction of the regulations in the capital area has been seen as one of the main reasons why it has minimum influence on the establishment of factories overseas by companies in the capital area. Therefore, the government’s willingness to improve and to moderate its policies to control the capital area are observed as positive.
Second, the key motivations for companies in the capital area to build their factories abroad are affordable prices of sites and labours. But they chose to locate their factories overseas rather than choosing to locate in local districts where sites and labours are cheaper than the capital area. This proves the lack of attractive factors of the local districts which has been raised as a problem by the local districts side who claimed the continuation of the regulation policies in the capital area. Consequently, it is necessary for the government to maximize local districts’ attractive factors with the policies to regulate locations in the capital area.