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HISTORY OF COOPERATIVES
KOREA
AECO 136
AB-3R
I.
Beginning from January 1, 1981, Nonghyup streamlined their three-tier organization (primary
cooperatives, city/county cooperatives, and the federation) into a two-tier system, by placing the
city/county cooperatives under the federation. Subsequently, the former city/county cooperatives
became the branch offices of NACF.
The organizational rearrangements have made it possible for the agricultural cooperatives to
reduce the operational costs and increase the efficiencies in cooperative enterprises. NACF, in particular,
was able to channel the funds and personnel to the development of the primary cooperatives. The
primary cooperatives expanded by taking over warehouses, branch offices and other services from the
county branch offices of NACF.
F. Democratization and autonomy (1988-1993)
Nonghyup was working as an actual government-running agency since its establishment. In 1988,
the Agricultural Cooperative Law was revised due to the increasing demand for the democracy and
autonomy within the agricultural cooperatives. It allows farmer members to elect presidents of their local
cooperatives that would elect the Chairman directly. Since 1989, all agricultural cooperative members had
elected their presidents.
The revised law greatly expanded the business scope of agricultural cooperatives to include the
brokerage business related to the sales of farm land, the transportation business utilizing trucks in related
corporations, the diversification of the investment of NACF's surplus funds and the abolition of the limit
on credit guarantee as well as bill discounting.
G. Expansion and growth (1995~1999)
To reform the cooperative organization and its operations, the agricultural cooperatives devoted
most of their efforts. They introduced the farm-gate pickup service of farm products and the farm
delivery service for farm inputs on a regular basis. They introduced new accounts named Farmer's Assets
Formation Savings that raise the farmer's income by attracting new deposits.
The establishment of RPC (rice processing complex) is one of the most remarkable changes in
this period which greatly change the rice industry in Korea. Instead of packaging rice in the traditional
straw bag, RPCs supplied farmers with small brand name bags and create a direct link between the farmer
and the consumer, reducing the gap between the farm gate price and the market price.
In the 1990s, market liberalization and an increase in foreign imports, emerging big discount
supermarkets, and changing consumer demands became the dominant trends in the food industry today.
Nonghyup opened the Hanaro Club, a large discount supermarket. The Club introduced a direct sale
system between producers and customers, leading to sharp reductions in retail prices while keeping fair
prices for farmers. The success of this warehouse discount supermarket, whose main sales are Korean
farm products, was remarkable.
Nonghyup also increased the amount of low interest loans to the member cooperatives from 179
billion won in 1999 to 227 billion in 2003. The capital was used by the member cooperatives to establish
or improve businesses and services that were beneficial for member farmers such as processing facilities,
marketing, etc.
II.
The cooperative legislative system in a country is molded by characteristics of the entire legal
system of that country, the attitude of its political and economic actors toward cooperatives, and other
social influences had by the power of the cooperative movement. In addition, the trajectory of
modernization in a country significantly influences the shape of the cooperative system, including its legal
component.
The Japanese Governor-General began to establish the Financial Associations, Industrial
Associations and Farmers Associations. The first Kwangju local financial association was set up in 1907.
In 1914 the local Financial Associations Regulations was abolished and local Financial Association
ordinance was enacted and was revised in 1918. Similarly the first Chosum Industrial Association
ordinance was enacted in January 1926. While enacting this law the Japanese Governor General had
observed that Korea should have the purpose of meeting the individual needs through co-operative work
and the people should have a precious heritage of tending to improve individual moralism and to promote
public morals. However, the efforts of the colonial government did not bear much fruits. Along with
government efforts civilian people's effort to organise co-operative also continued side by side. These
efforts included co-operative movement led by Christianity since 1923 and co-operative movement led
by Cheondoism (Korean Native Religion) in 1925. After liberation efforts were made to re-organise
agricultural co-operatives and in October 1948, the Ministry of Agriculture and Forestry prepared a draft
law followed by many other drafts till on February 1, 1957 it was approved by the Congress. This was
replaced on July 29, 1961 by a new Agricultural Co-operative Law which is operative presently and has
been amended several times.
Korean cooperative laws have been influenced by Japanese and have sectoral laws like Japan.
Particularly, there are eight special cooperative laws regulate cooperatives, including agricultural
cooperatives, forestry cooperatives, fisheries cooperatives, cooperatives of tobacco producers, small and
medium enterprise cooperatives, credit unions, community credit cooperatives, and consumer
cooperatives.
The agricultural co-operative law is not only the first co-operative law in the present era of cooperative legislation but also provides broad framework for most other co-operatives and National
Agricultural Co-operative Marketing Federation which commands the agricultural co-operative
movement in South Korea. This law which was first enacted in July 1961 has been amended number of
times has 8 chapters and 176 articles.
On the other hand, The Framework Act on Cooperatives entered into force in South Korea in
2012, which drastically changed the institutional map of cooperatives by introducing new system of
general and social cooperatives. People in Korea are now able to establish cooperatives easily and jointly
pursue social and economic values in diverse fields.
B. Taxation
This provision about taxation was an excerpt from the agricultural co-operative law which was enacted
in July 1961.
Chapter I - General Provisions
Under article 8 the business and the property of the co-operatives and the federation shall be exempted
from taxes and other public assessment of the State or local autonomous entities except in case of custom
duties and commodity tax.
III.
Types of Cooperatives
The following are some of the types of cooperatives present in South Korea:
1. Agricultural Cooperatives
Agricultural cooperatives, as shown on the table below relatively has increasing number of total
members over the past years. Though this is the case we could also observe that the number of
cooperatives under this type has been decreasing over time. This includes regional agricultural
cooperatives, commodity agricultural cooperatives, regional livestock cooperatives, livestock commodity
cooperatives, and ginseng commodity cooperatives.
One example of this type is the National Agricultural Cooperative Federation, in which its
members are composed of cooperatives. It was founded on 1961 and offers services such as banking,
agricultural marketing & supply, livestock marketing & supply and extension services. As of 2011, the
number of the member farmers was 2,446,836 and the number of the associate members was 15,262,611.
4. Credit Unions
Credit unions objective is to contribute to the development of the community as well as the
nation through financial business. One example is the National Credit Union Federation (NACUFOK)
of Korea. It was established on 1964 and currently has 4,991,929 members. As a trade association,
NACUFOK represents member credit unions to the government, the regulator, and the international
credit union society. It conducts publicity, supervision, management consulting and education. As a
financial intermediary NACUFOK manages an inter-lending service as a central financial facility and it
invests the surplus funds in high grade mutual funds, government and corporate bonds, and other
securities
2002
2004
2007
2009
1 701
1 647
1 543
1 501
12 975 thousand
14 359 thousand
15 763 thousand
16 448 thousand
6. Consumer Cooperatives
Consumer cooperatives started around 1920s. Its main goal was to change the consumption
habit of the Koreans which has to do with food safety and environmental protection. The movement
was both supported by housewives and different producers which explains its success up until now. As
of 2011, there are 391 consumer cooperatives and 630, 000 individual members.
Table 4. Number of Consumer Cooperatives in South Korea.
Consumer Cooperatives
Year
No. of Cooperatives
2009
223
2010
288
2011
391
Hansalim Consumer Cooperative and iCOOP Korea are 2 of the big consumer cooperatives in Korea.
Icoop was founded by the citizens way back 1998. This group of citizens are mainly housewives. Its
primary goal was to provide their members with safe and reliable products. Some of their services includes
home delivery service, online order system, natural dream stores and more. In 2011, it has 155, 705
members and 115 stores.
Indeed, South Koreas capital investments in research and development are among the highest in
the world relative to national income. This is a strength South Korea must preserve. South Koreas
comparative advantage lies in technology and design, not in resource-intensive heavy-manufacturing
industries, which will inevitably lose market share to competitors in China.
In the long run, South Korea cant rely solely on manufacturing, because investments in
technology-intensive industries are inherently labor savingin other words, they do not create jobs. If
South Korea is to achieve balanced, sustainable growth, it must also place greater emphasis on its laborintensive services sector. Services employed only 66 % of South Koreas workforce in 2008, compared
to 70 percent in Japan and 85 percent in the United States. South Koreas 30 percent self-employment
rateamong the highest of any nation in the OECD1 reflects a fragmented, overregulated services
sector dominated by inefficient mom and pop proprietors.
The surest solutions to this shortfall are liberalization and greater openness to foreign
competition in key areas such as finance, distribution, professional services, and communications. At the
same time, the nation must increase infrastructure investments in medical care, tourism, and education.
South Korea also must focus on raising the living standards of its people and narrowing the gap
between rich and poor. Growth must be distributed more equitably between urban and rural areas.
Currently, Seoul and adjacent cities generate nearly half of South Koreas GDP. The excessive
concentration of South Korean growth is manifest in the nations property market, where prices in Seoul
are climbing while prices in the rest of the nation remain sluggish. The government has used the crisis as
an opportunity to accelerate regional infrastructure spending. It should complement that effort with
investment policies designed to encourage the creation of regional economic clusters.
Its always tempting to predict the future by extrapolating trends from the recent past. In the
case of South Korea, that would be a serious mistake. The nations real GDP growth, which
averaged 6.3 percent in the 1990s, declined to 5.2 percent during 20002007 and plunged to 0.8
percent in 20082009 in the midst of the global crisis. This downward trend has led some to warn
that South Koreas potential for economic growth over the coming decade has fallen to an annual
average of as little as 3 percent.
B. Employment Generation
South Koreas youth to establish themselves in the labour market and achieve self-sufficiency. To a
large degree, South Koreas youth unemployment problem is disguised by a relatively low labour force
participation rate of only 46 per cent for young people aged 1529, with only 41.7 per cent actually
employed. More bluntly put, South Koreas overall unemployment figure of 9.9 per cent grossly
understates youth unemployment and underemployment because over 58 per cent of South Koreas
population aged 1529 are without paid employment.
On average it takes young people 11 months to get their first job. The average employment period for
first jobs is only 14.6 months. People not in paid employment focus on vocational training and
preparation for employment exams (33.2 per cent), or take up child care and housework (19.8 per cent),
or simply kill time (18.7 per cent). Actual job seeking by those not in paid employment has decreased to
13 per cent. To postpone the inevitable, many South Korean students simply stay on at school because
they cant find a job. In this context, many well-educated young South Koreans compete for a limited
number of prestigious full-time jobs, rather than apply for less-desirable employment options.
Turning now to the ratio of cooperative employment, both in cooperatives (employees and workermembers) and within the scope of cooperatives (producer-members), out of the total employed
population, we observe that this ratio is particularly high in China (21.22%), South Korea (11.21%), Italy
(10.90%), India (10.51) and Turkey (10.32%).
Table 5. Cooperative employment numbers of South Korea, by category (2012).
Country
EMPLOYEES (A)
WORKERPRODUCERMEMBERS (B)
MEMBERS (AND
THEIR
EMPLOYEES
WHEN
AVAILABLE) (C)
South Korea
123 482
1 141
264 286
Source: <http//;ica.coop/sites/default/files/media_items/cooperatives_and_employment_a_global_report_en__web_2110_1pag.pdf>.
VI.
References
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