The environment surrounding Korea’s agriculture and food sector is becoming tougher, with free trade agreements launched with advanced agricultural countries such as the United States and European Union. In addition, with a Korea-China free trade agreement being discussed, concerns have been growing regarding the local agriculture community and small food manufacturers. BusinessKorea had an exclusive interview with Mr. Yeo In-hong, Vice Minister of Ministry of Agricultural, Food and Rural Affairs (MAFRA) to hear about how the ministry has been preparing against external threats as well as addressing internal challenges in order to make them an opportunity to strengthen the competitiveness of the local agriculture and food sector. What follows are excerpts from the interview.
Among the 140 tasks recently announced by the government, the “Industrialization of Agricultural, Forest and Livestock Sector for the Future Growth” was high in priority. What is this about?
The task is composed of four detailed tasks and 13 unit tasks. The four detailed tasks include the industrialization of the agricultural sector as the “Sixth Industry,” cutting edge industrialization, promotion of sustainable livestock industry, and the realization of a forest resources-rich nation.
These tasks aim to raise value-added on the agricultural, forest and livestock industry, create employment, strengthen fundamentals such as R&D, and establish a more sustainable environment.
The improvement in the distributional structure of agro-fishery and livestock products was also selected as an in-depth evaluation task. What detailed plans does your ministry have?
On May 27, the Ministry of Agriculture, Food and Rural Affairs finalized and announced plans for improvements in the distributional structure of rural-agricultural products. These plans will result in the diversification of distribution channels and improvements in distribution efficiency through heightened competition. A system will be devised for both producers and consumers to participate in a predictable manner and strengthen consumer’s role and engagement in the adjusting of supply-demand.
Firstly, transactions in wholesale markets will be diversified from auction-based deal to fixed priced or private deal. Regulations for wholesale corporations and commission merchants will be alleviated in order to accelerate competition among distributors. Furthermore, distribution systemization focusing on producer organizations will directly connect the producer to the consumer. Customized support, such as local food campaigns and farmers markets, will be provided to facilitate direct transactions.
Please explain about specific plans for the construction of the “Food Security” system.
Changes in diet and developments in the livestock industry have led to huge increases in demand for grain. However, limitations in land conditions have made it difficult for selfsufficiency. One of the big tasks is to maximize domestic production for improvements in self-sufficiency and to stabilize the import of grains.
The farmland purchase reserve will be expanded to 69 million ha by 2017 and the relief ratio for farmland preservation charges will be reduced. Approximately 250,000 ha of idle farmland will be restored in order to preserve prime farmlands for food crops.
Beginning next year, the targets for purchase reserve will also be expanded to include not only rice but also wheat and beans.
Beginning in 2009, we are supporting the development of agricultural businesses abroad in order to secure a steady supply line of foreign grains for food security. We support private businesses’ entry into the development of overseas agriculture through loans, investment research, information, and training.
On January 2012, the “Law on Overseas Agriculture Development and Cooperation” was enacted. Based on this, the “Comprehensive Plan for Overseas Agriculture Development” was established in September, 2012. We have put a lot of effort into organizing law and policy. We plan to secure 35% of domestic grain consumption through overseas agriculture development by 2021.
As a result, we began to see tangible results by 2012. The number of companies that entered overseas markets increased from 35 in 2009 to 106 in 2012. The amount of grain secured abroad rose from 24,700 tons in 2009 to 218,200 tons in 2012, while imports increased from 424,000 tons in 2010 to 10,539,000 tons in 2012.
Furthermore, we are working on establishing an international grain outlook system in order to forecast emergency circumstances and price volatility. We will test it on rice, wheat, beans, and corn beginning July, and go into full implementation next year.
Are there any plans to protect the agricultural sector from the damage due to the Korea-US FTA?
The government is working on backup measures for minimizing damage and strengthening the competitiveness of the domestic agricultural sector.
Korea-US FTA backup measures include a total investment of 24.1 trillion won (54 trillion won including tax credits) over a period of ten years (2008-2017). These investments will support the modernization of agricultural equipment and help find new growth engines through R&D and the seed industry.
In addition, we will push for the extension of the rural development tax, which is set to end in June 2014. Continued efforts will be made to secure a steady stream of investment in order to strengthen agricultural competitiveness.
With the Korea-China FTA along the way, significant impact is expected in the Korean agricultural sector. What insights do the authorities have regarding this issue?
China is geographically close to Korea and has a similar agricultural production structure, including similar climate conditions. Therefore, the large difference in price could have a big impact on our agricultural sector should we agree on a high degree of free trade. We will go through extensive negotiations in order to minimize any effect on the agricultural sector.
In first stage negotiations, we will try to maximize the portion of supersensitive item groups on the concession exception list, as well as put a priority on assigning agricultural products to it. In second stage negotiations, specific items will be finalized and overall service and investment issues discussed. Furthermore, we will actively incubate strategic export items in order to increase the export of Korean agricultural products to China. Based on further negotiation results, we will continue to devise measures for sectors expected to receive the most damage.
What is your opinion regarding large corporations putting out capital for entry into the agricultural sector?
Family farms have been at the backbone of our agricultural developments and such an agricultural tone needs to be sustained. In order to withstand the competition from open markets, the agricultural sector needs to bring in capital and technology from the non-agricultural sector, too.
Above all, I think that the nurturing of family farms has a very important socioeconomic meaning in terms of employment preservation in rural areas, food security, and national land preservation.
At the same time, corporate participation in the agricultural sector can have a positive effect in terms of employment creation, activation of local economy, and improvements in the competitiveness of the overall agricultural sector.
As such, it is important for corporations to form a consensus with the agricultural industry through extensive communication, as well as seek ways for them to participate in a positive way.
Lastly, do you have any plans to promote the export of agro-fishery and livestock products?
The global recession and falling exchange rates have created difficult circumstances for exports. As a result, our exports of agricultural products are expected to rise by a small amount.
Total agricultural exports as of May 2013 stood at US$2.3 billion, which is a 3.3% improvement over the same period last year. The main importers were Japan (US$510 million, up 9.2%), ASEAN (US$400 million, up 20.0%), China (US$390 million, up 9.5%), and the US (US$210 million, up 13.9%). The main items for export were strawberries (US$23 million, up 32%), beverages (US$106, up 17%), king oyster mushrooms (US$6, up 15%), kimchi (US$39, up 14%), and paprika (US$39, up 8%).
We will provide aggressive policy support for the diversification of export markets and improvements in the competitiveness of export companies. Beginning this year, we will be hosting the K-Food Fair (four food shows), as well as participate in 23 annual Food Shows abroad. We are also planning various events to which foreign buyers will be invited.
In the second half of this year, we will start operating seven antenna shops so as to develop new markets and conduct research in order to gather market information in ten countries for customized export strategies. We will also expand shared distribution services for cost reduction, develop foreign exchange risk insurance products, and provide loan support for resource procurement capital.