Noghyup must change to stay competitive, expand: official

By Lee Joon-seung
SEOUL, Jan. 20 (Yonhap) -- South Korea's agricultural cooperative must accept
sweeping changes if it wants to stay afloat and expand its business sphere, a
senior government policymaker said Tuesday.
Agriculture Minister Chang Tae-pyong said in a news conference that the
2.4-million strong National Agricultural Cooperative Federation is at a crucial
juncture that can determine its fate and the future of the country's farming
sector.
"If the organization fails to make the right decision, it could find itself in
serious trouble," he warned.
The organization, created in 1961 to help local farmers, has come under mounting
criticism for incompetency and failing to meet the demands of members, with its
executives implicated in a string of corruption scandals. Three heads of the
public organization have gone to jail on corruption charges, with the last
implicated in a scandal involving the brother of then President Roh Moo-hyun.
Without going into details, which are currently being ironed out, the policymaker
said that the number of individual cooperatives that comprise Nonghyup could be
slashed from 1,187 at present to around 500. Reductions created by merging
smaller-sized cooperatives is advantageous because it can create "economy of
scale."
"For example, the Suncheon cooperative was recently created by merging 12 smaller
operations, and because it has more members and financial resources, it can offer
low interest loans compared to other financial institutions that are good for
farmers," Chang said.
He said that by streamlining support, which is currently provided by Nonghyup to
regional cooperatives regardless of their health and ability to turn a profit,
the public organization could save over 630 billion won (US$458.5 million) a
year.
"This is enough to build super-large retail outlets in Seoul that can help
farmers find markets for their products without going through middlemen," he
claimed.
In the past, individual cooperatives resisted any moves to merge with neighbors,
since they could receive help from Nonghyup headquarters even if they lost money.
The minister in charge of country's farm and food policies said that while a
definitive plan has yet to be announced about separating the financial arm from
Nonghyup's economic activities and training role, the must move ahead as soon as
possible instead of waiting until 2017, as originally announced in 2007.
He said that while a legal mechanism will be put in place to ensure that profits
generated by the financial arm can go to helping farmers sell products and
conduct training, separation can allow Nonghyup a truly competitive organization,
with Rabobank of the Netherlands as a benchmark.
The financial arm directly controls 122 trillion won in savings, with 145
trillion won spread out among individual cooperatives that engage in limited
banking operations.
Rabobank is a global banking institution that specializes in investment in the
farming sector.
"If Nonghyup can be run efficiently, it could become a financial presence in
Southeast Asia and China," the policymaker said.
Chang, meanwhile, said that a concrete blueprint on changing Nonghyup is expected
to be issued by the end of February with necessary legal changes to be pushed in
the second half so implementation can start in 2010.
yonngong@yna.co.kr
(END)