Gov't aims to transform farm co-op into holding company by 2011

By Lee Joon-seung
SEOUL, March 31 (Yonhap) -- The government said Tuesday that it will transform
the country's largest agricultural cooperative into economic and financial
holding companies by 2011 to better meet the demands of local farmers and enhance
competitiveness.
The Ministry for Food, Agriculture, Forestry and Fisheries said that it will draw
up a definitive blueprint to enhance efficiency and streamline operations at the
National Agricultural Cooperative Federation by the end of the year so it can be
approved by parliament.
The planned changes to the federation, better known as Nonghyup, are based on a
joint proposal forwarded by a reform panel of experts from the government, the
agricultural cooperative, farmers' groups and academia.
The panel said earlier in the day that Nonghyup, which currently encompasses
economic, financial and training operations, should be broken up into independent
holding companies. The Nonghyup name will also be changed to the National
Agriculture Economic Cooperative, with a separate mutual financing cooperative to
be established as well. The latter will be charged with building up the
relatively small financing operations run by local Nonghyup chapters that exist
outside mainstream banking operations.
"If the National Assembly approves the changes without delay, all pertinent laws
could be revised in about a year's time so the new structure may take effect by
early 2011 at the latest," said Kim Kyung-kyu, head of the ministry's agriculture
policy bureau. He pointed out, however, that actual implementation would depend
on the deliberation process by lawmakers.
The ministry, which has been pushing to reform the federation for several months,
claimed the transformation would address complaints raised by farmers over the
past decade and enhance the competitiveness of both the economic arm and
financial operations of the 2.4-million strong organization.
Nonghyup caught flak for focusing on its financial business sector at the expense
of economic activities designed to help farmers sell their products, operate
silos, and expand and maintain agriculture-related infrastructure.
The nationwide organization has also been involved in numerous scandals, with the
last three heads being arrested for illegal activities including bribe-taking.
Kim Wan-bae, who co-chaired deliberation at the joint panel, emphasized the
changes should help local farmers while enhancing the competitiveness of
financial business activities in the face of the global economic crisis.
Elaborating on the details of the plan, the professor of agriculture at Seoul
National University said initial assessment of the federation's assets has been
tallied at 12.2 trillion won (US$8.7 billion). Of the total, 5.3 trillion won
will be allocated to the economic holding company, with 800 billion to be
invested into the mutual financing cooperative. The remaining 6.1 trillion won is
to be invested into the independent financial holding company that will oversee
banking and other financial businesses.
"Under this system, both the economic and financial holding companies will become
two different entities that only receive audits, general oversight and get
assistance for training of personnel from the national economic cooperative," Kim
said.
He said while financial operations will not be required to turn over money to
help economic business activities, the financial holding company could still help
economic operations through dividend payments for the 6.1 trillion won that was
first invested.
The expert meanwhile, claimed that if the changes take place, sales of the new
cooperative's economic operation could reach 14.1 trillion won by 2017, with the
financial arm reporting net earnings of 3.3 trillion won in the cited year.
yonngong@yna.co.kr
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