March 7, 2011

South Korea passes agricultural co-op reform bill

A South Korean parliamentary committee has passed a bill with the objective to revamp the country's agricultural cooperative to better meet the needs of farmers.

The bill, approved by the National Assembly's food, agriculture, forestry and fisheries committee, calls for breaking up the structure of the huge National Agricultural Cooperative Federation (Nonghyup), into two holding companies and a central cooperative.

If it passes the plenary session of parliament within the month as expected and is made into law, Nonghyup will be divided into an agro-economic company that will focus on becoming a wholesale handler of farm goods, and a financial firm that controls banking and insurance.

The central cooperative will deal with training and consulting work for the 2.4 million cooperative members and provide support for the two holding companies. The separation is expected to take place on March 2, 2012.

According to the bill that had been laid on the table since late 2009, a minimum 30% of Nonghyup's current capital will be allocated to the agro-economic holding company, with the government pledging more monetary support if the need arises.

Seoul plans to reflect the allocation of fresh funds to facilitate the build-up of the agro-economic sector in the 2012 budget.

"The change can make Nonghyup more responsive to finding buyers for products raised by local farmers and allow it to become a major player in the local distribution market," said Park Hyun-chool, deputy minister in charge of the farm policy coordination.

He added that this permits farmers to get more for their products while at the same time streamlining the country's distribution system cited for fuelling inflationary pressure.

The official said that the change will also make it easier to control the supply of farm products, since Nonghyup will not hoard goods and can work with the government to prevent shortages that can spark price gains.