Ongoing market liberalization around the world has served to increase Korea's agri-food exports, which rose from USD3 billion in 2000 to USD8 billion in 2012. Agri-food imports have also risen rapidly, as a result of further market opening and price stabilization measures. Korea recorded an agri-food trade deficit of USD25.4 billion in 2012, its largest ever, and the deficit is continuing to rise. This report offers an assessment of the various government programs to promote agri-food exports and presents ways to address some of the problems with them.
The programs to support outstanding agri-foods through government purchases, to promote sales of agriculture and stock farm products, and to globalize Korean cuisine are key national initiatives to support exports of agri-foods, and all three were found to be underperforming. Most of the funds to support outstanding agri-foods through government purchases were granted to large businesses with poor export performance, limiting funding opportunities for small- and medium-sized companies with stronger export records. The government should reduce funding for large exporters that have export capacity and expand funding for small- and medium-sized exporters that are internationally competitive but lack capital. In order to achieve the program objective to raise farmers’ incomes through exports of agri-foods, the government should provide incentives to prospective funding recipients by reflecting their agri-foods export records and raise the purchase ratio of domestically-grown ingredients.
Under the agriculture and stock farm product sales promotion program, the government offers farmers funds to cover part of their export logistics costs and to improve systems for the safety and quarantine management of export products. Though covering export logistics costs is considered vital towards increasing agri-food exports, the government must establish countermeasures before funding is reduced or abolished after 2012 pending DDA negotiations. In 2012, 75% of the program’s total funding of KRW41 billion was used to pay for export logistics. However, KRW6.2 billion in indirect funds to improve systems had been diverted for logistics, indicating a need for a policy shift from merit-based direct funding for logistics to indirect funding to improve export systems. The government must also consider specific ways to reform the overall program, such as tightening the eligibility requirements for export logistics funding on items whose exports are sluggish relative to the nation’s overall agri-food export performance.
The various initiatives to globalize Korean cuisine, which are undertaken by the Korean Food Foundation, Korea Agro-Fisheries & Food Trade Corporation, and Korea Institute of Planning and Evaluation for Technology in Food, Agriculture, Forestry and Fisheries, should be consolidated. Also, a long-term Korean cuisine globalization master plan must be devised and program feasibility must be reviewed in detail to ensure that the initiatives are not discontinued after one or two years.
Korea’s agri-food exports are characterized by a pricing structure that is dependent on government grants, dumping, and cutthroat competition. A reduction in government grants or weaker price competitiveness could cause export volume to decline sharply. In the mid- to long-term, the government will reduce or abolish its direct funding based on DDA and other international agreements, which means that the government’s support policy and export structure need to be improved in anticipation of the more challenging situation that will occur when those international agreements become effective.
Cho Yunhee
The programs to support outstanding agri-foods through government purchases, to promote sales of agriculture and stock farm products, and to globalize Korean cuisine are key national initiatives to support exports of agri-foods, and all three were found to be underperforming. Most of the funds to support outstanding agri-foods through government purchases were granted to large businesses with poor export performance, limiting funding opportunities for small- and medium-sized companies with stronger export records. The government should reduce funding for large exporters that have export capacity and expand funding for small- and medium-sized exporters that are internationally competitive but lack capital. In order to achieve the program objective to raise farmers’ incomes through exports of agri-foods, the government should provide incentives to prospective funding recipients by reflecting their agri-foods export records and raise the purchase ratio of domestically-grown ingredients.
Under the agriculture and stock farm product sales promotion program, the government offers farmers funds to cover part of their export logistics costs and to improve systems for the safety and quarantine management of export products. Though covering export logistics costs is considered vital towards increasing agri-food exports, the government must establish countermeasures before funding is reduced or abolished after 2012 pending DDA negotiations. In 2012, 75% of the program’s total funding of KRW41 billion was used to pay for export logistics. However, KRW6.2 billion in indirect funds to improve systems had been diverted for logistics, indicating a need for a policy shift from merit-based direct funding for logistics to indirect funding to improve export systems. The government must also consider specific ways to reform the overall program, such as tightening the eligibility requirements for export logistics funding on items whose exports are sluggish relative to the nation’s overall agri-food export performance.
The various initiatives to globalize Korean cuisine, which are undertaken by the Korean Food Foundation, Korea Agro-Fisheries & Food Trade Corporation, and Korea Institute of Planning and Evaluation for Technology in Food, Agriculture, Forestry and Fisheries, should be consolidated. Also, a long-term Korean cuisine globalization master plan must be devised and program feasibility must be reviewed in detail to ensure that the initiatives are not discontinued after one or two years.
Korea’s agri-food exports are characterized by a pricing structure that is dependent on government grants, dumping, and cutthroat competition. A reduction in government grants or weaker price competitiveness could cause export volume to decline sharply. In the mid- to long-term, the government will reduce or abolish its direct funding based on DDA and other international agreements, which means that the government’s support policy and export structure need to be improved in anticipation of the more challenging situation that will occur when those international agreements become effective.
Cho Yunhee