Kyungbang Co., a major South Korean textile company which indicated relocation of its manufacturing base amid concerns for higher labor cost under liberal President Moon Jae-in, has indefinitely put off its offshoring plan.

A high ranking Kyungbang official who asked to be unnamed told Maeil Business Newspaper in a telephone interview on Monday that the company has decided to defer its plan to transfer the production lines in Gwangju, South Jeolla Province, to Vietnam.

Kim Joon, president and chief executive officer of Kyungbang in July said the company may move a half of Gwangju factory lines to Vietnam by the end of next year.

His comment followed the announcement of a 16.4 percent hike in minimum wage hike from next year by the new government under the order from the president who had during election pledged double-digit growth in the legal wage floor annually over the next five years to push the hourly pay to 10,000 won ($8.84).

The Korean textile manufacturer previously mulled moving 25,000 spinning mills or nearly a half of its total 55,000 spinning mills in operation in the Gwangju plant to Vietnam. Kyungbang’s Vietnam factory that began operation in 2013 is currently running 25,000 spinning mills, and the Southeast Asian country is preferred by Korean companies because of cheap labor cost and electricity expenses, which are known to be one-tenth of labor cost and a half of electricity bill in Korea.

The minimum wage hike is not the key factor behind the relocation plan, stressed the Kyungbang official, adding that the final decision would be made after studying global market trends more in depth.

Kyungbang considered moving its production lines to overseas after taking accounts of various aspects including not only labor cost but also raw material procurement and transportation costs, said an unnamed labor industry source familiar with the matter. But it has become difficult for the company to push for overseas relocation as Kim’s previous statement was misinterpreted as a rebellion against the wage hike, said the source.

Kim, concerned with his statement causing a huge stir, protested during a meeting hosted by the trade ministry in August that it was unfair that only the wage hike issue had received too much attention. He clarified his statement that the plan was made after studying a greater number of factors such as regulations on hiring foreign workers and a jump in industrial electricity price.

Kyungbang, formerly named as Kyung Sung Textile, is the country’s first listed company that took off in 1919. It registered an operating profit of 43.4 billion won on sales of 377.4 billion won on a consolidated basis last year. It recorded 29.5 billion net profit during the same period.

Shares of Kyungbang closed Tuesday at 13,950 won, unchanged from the previous session.

By Park Jin-joo, Kang Young-woon, and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]