Six Months for Authorization, 150 Million Won Just for Administration Costs

Besides land and construction costs, research has shown that an average of 150 million won in administration costs alone in order to acquire authorization is necessary to build a new small- and medium-sized factory.

In addition, it is known that it takes six months of administration process to receive an authorization, and that throughout the process, nearly 70 regulations are applied.

Because there aren’t such costs in China, some point out that excessive administration costs are accelerating the exodus of domestic factories abroad.

Yesterday, the Ministry of Finance and Economy clarified through the National Assembly inspection document submitted to Representative Jung Deuk-gu (Uri Party), a member of the assembly Finance and Economy Committee, that it takes such cost and time to build a factory using 10,000 square meters of a non-metropolitan farm land. In the metropolitan area, it is virtually impossible to build new factories due to regulations on the number that can be built in the area.

The specific costs include: 100 million won as agriculture subsidy cost (the cost a company has to burden when using farmland for other purposes in order to sustain a “ground for food supply”); 15 million won as proxy prior environmental effect test; 15 million won as other proxy start-up process cost; and 20 million won as road construction cost to build admission passages.

Such administration costs are burdens specified by the law when building a factory.

For start-up-related regulations, it is known that it takes 180 days to start a business due to the following 68 regulations: 30 regulations for location; 21 for approval of business program; 13 for building and registering factories; and four for shares in expenses.

In fact, because of a regulation specifying the duty to build an admission passage of four meters width, it took one month and additional 30 million won to acquire and build a road of 991 meters square for the B factory in South Chungcheong Province.

Lee Kyung-sang, the head of the corporate policy team of the KorCham, pointed out, “There is practically no administration costs when building a factory in China, which is taken for granted in Korea. A relaxation of the regulation is urgent.”