Innovation and Social Responsibility of Korean Agricultural

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Innovation and Social Responsibility of Korean Agricultural ...

    Innovation and Social Responsibility of Korean Agricultural Cooperatives

    Presented by CHUNG Dae-Kun

    Chairman, NACF

    ICA GA, Oct. 18, Raffles Convention Center, Singapore

I. Greeting

Good afternoon.

It is my great honor to present „Innovation and Social Responsibility of Korean

    Agricultural Cooperatives‟ at the ICA General Assembly which is such an important

    gathering of cooperators from all over the world.

II. Introduce Korean agricultural cooperatives

Korean agricultural cooperatives, known as an NH, NonghHyup in Korean, consist of

    2.4 million member farmers and about 1220 member cooperatives and one apex federation, the NACF.

    Korean agricultural cooperatives are multi-purpose type organizations, which conduct a marketing business, a banking business and extension services.

    We operate 4,600 marketing facilities to market farm products that our member farmers produce. The annual turnover reaches 37 trillion Korean won, and enjoys the largest market share domestically.

    We also operate more than 5,000 bank branches nationwide and have total assets of 370 trillion won (about USD 370 billion), which makes Korean agricultural cooperatives the biggest domestic financial institution. We have currently 32 million customers, which means 67% of the total population of Korea are our customers. Everyday 30 million banking transactions are performed at the bank counters of Korean agricultural cooperatives.


    In order to supplement our core business, we have 2 affiliated organizations and 21 subsidiaries, such as fertilizer company, farm product marketing company, securities company and asset management company.

Korean agricultural cooperatives growth over the last 46 years has been recognized as

    an object of case study by other foreign cooperatives. The ICA global 300 project

    thselected NACF as the 5 largest cooperative of the world.

II. Innovations in Korean agri-coops history

    Korean agricultural cooperatives were established in 1961, however, I believe the fast development of Korean agri-coops was due to the fact they had made continuous business innovations. They were sincerely devoted to communities especially in rural area. Id like to illustrate some of these innovations.

    In the 1960s, we introduced mutual credit service that eliminated the practice of usury, notorious private high interest rate loans in rural areas. By introducing this credit service we could provide farmers capital for their farm enterprises.

    In the 1970s, we started coop chain store business which greatly contributed to stabilizing commodity prices in the country, because we could supply the basic goods at same price throughout the country.

    In the 1980s, we implemented innovations for improved farm productivity through farm mechanization and crop and breed improvements.

    In the 1990s, Korean agricultural cooperatives established RPCs, rice process complexes across the nation and brought about innovations in rice processing and distribution. Also, we shortened the agricultural product supply chains to 2~3 steps from 5~6 by linking directly the producing and consuming areas. This innovation greatly contributed to an increase in farm house income.

    By 2000, we merged the national livestock cooperative federation and the national ginseng cooperative federation to better realize economies of scale. Recently in 2004,

    ndwe lowered interest rates on loans drastically as an effort of the 2 usury elimination;


farmers were relieved from the heavy burden of liabilities.

IV. Business innovation, New rural community, new coop movement

    Among the many cases of business innovation that Korean agricultural cooperatives have carried out, today I‟d like to introduce the “New rural community, new coop

    movement,” organization-wide movement now being promoted.

    After 1990, due to the rapid globalization, the Korean agricultural market has been liberalized and, as a consequence, a feeling of anxiety has flooded the Korean agriculture and rural communities.

    Although Korean agricultural cooperatives have played a role in relieving the anxieties of farmers through various activities, such as lowering interest rates on loans, and supplying farming inputs free. It is true that there has been some criticism for Korean cooperatives that we cannot fully meet the needs and expectations of member farmers.

    We accepted this criticism and decided to face the challenge head on through more innovations in all aspects of Korean agricultural cooperatives, including organization, businesses and management systems. In September 2004, we urged all staffs to see the crises faced by the rural community are the crises faced by Korean agricultural cooperatives, and announced the official start of the “New rural community, new coop


    The new coop movement aims to be a sustainable organization through organization-wide improvements in work processes, structure, and organizational culture.

    Member coops are to be guided to construct an independent management foundation and to be a center of finance, culture and welfare in their respective regions. The federation is to provide all possible support to the member coops, so they can become competitive enterprises. Then, we will be able to meet the expectations of farmers and citizens and become a beloved agri-coops and must-be agri-coops.”

    New coop movement is determined to implement these innovations, many of which were developed by Korean agri-coops themselves. The tasks cover almost all business sectors of Korean agricultural cooperatives, such as organizational innovation,


    strengthening extension & support functions, farm product distribution innovation.

    Last June this year, as a part of these innovations, Korean agricultural cooperatives launched Vision 2015 and new Corporate Image, NH. It is Korean agricultural cooperatives vision to become No.1 financial & marketing leader in Korea. In order to realize this vision, we have three objectives: (1) Becoming the best marketing group, (2) Making member coops regional centers for rural communities, and (3) Becoming Korea‟s leading financial institution. These objectives can be accomplished through innovations in organization, business and organizational culture.

V. Korean agricultural cooperatives Social Responsibility, I Love Farm campaign.

    On April 18 this year, Korean Federation of Banks announced the best Corporate Social Responsibility after careful survey of 18 domestic banks in Korea. The NACF was on the top of list in CSR and the spending amount in 2006 was four times that of Kookmin Bank, Korea‟s largest private commercial bank.

    Korean agri-coops pursue co-existence with environments, consumers and communities, while strive to improve not only members quality of life but also the balanced

    development of national economy.

    In 2004, the NACF established the NH culture & welfare foundation. Its main objective is to improve farmers‟ quality of lives through preservation and development of rural communities. It contributes itself to solve the social gap by supporting balanced development of urban and rural areas. Major activities include hosting cultural events, welfare business for farmers, scholarship to farmers‟ children, supporting agricultural research.

Among Korean agricultural cooperatives many CSR activities, I‟d like to introduce one

    campaign that was originally started by NACF and has since developed into a national campaign in which 2.6 million citizens across the country participate.

    For the last several decades, industries in Korea have been drastically reorganized. In this process, rural communities have suffered from decreasing farmhouse income, diminution of population, aging, deepened social and income gap between urban and


    rural area. Moreover, negotiations at the WTO and for new FTAs opened the Korean agricultural market to foreign exports which are more competitive in prices. In this situation we needed the sustainable rural-urban exchange system to better compete.

With these reasons, Korean agri-coops started the „I love farm campaign‟ which aims to

    improve the quality of the lives of urban and rural residents and to revitalize rural communities.

    Through this campaign, farmers produce high quality farm products and supply them to consumers in urban areas. Cities and corporations can recognize again the value of agriculture and rural communities, and share the amenity of rural environment, and uplift their corporate image which devotes to the CSR. This campaign also makes it possible to be vital and sustainable agriculture and rural communities, and rural communities will become production and recreation residences which lead the balanced development of the whole nation.

I love farm campaign has been evaluated as very effective. For example, the “one

    company one village sisterhood initiative,” one of the activities of this campaign, has

    reached 14,500 couples, as of the end of last year. Its success has directly contributed to not only vitalization of rural areas, but also the increase of farm house incomes.

    Also, the public benefits to rural communities, such as ecology perseveration, calamity prevention, traditional culture succession, providing recreation facilities have all became highlighted by citizens and corporations.

The corporations‟ interest in rural communities has been shown to be significantly

    increased. Agriculture and rural communities became the new spot lighted areas for CSR activities. That is, participating in the “I love farm Campaign, corporations can

    elevate their image as eco-friendly. That is because the campaign provides private companies with new opportunities for CSR which they were not afforded previously.

VI. Conclusion

Ladies and gentlemen,


It was quite enjoyable to have this opportunity to present the Innovation and Social

    Responsibility of Korean Agricultural Cooperatives to such an assembly of

    distinguished cooperators from all over the world.

    I‟d like to thank you for the chance to present to you the ways in which Korean agricultural cooperatives have pursued innovation in their respective businesses and have taken those achievements and made them into initiatives and campaigns that contributed to the even greater improvements for the member farmers and the communities they live in.

Thank you very much.


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