This study provides an overview and evaluation of the agricultural investment projects in Korea by analyzing the costs and benefits of these projects.
Agriculture has been growing steadily and consistently since 1960 at an average annual rate of 3.5 percent, but in order to ensure the continued growth and stability of the industry, the Korean government needs to carry out more thorough analyses of the costs and benefits of agricultural investment projects and make more effective investment decisions in the future. As the Korean economy continues to grow and Korean businesses find an increasing number of markets for their goods, policymakers tend to evaluate their investment projects solely on the basis of whether the outcomes have been “good” or “bad.” However, it is time that they adopted more specific criteria for analyzing and evaluating the data on given projects.
As the costs and benefits of agricultural investment projects are based upon the amenability of the projects and their outcomes to quantification and monetization, and as these projects also carry implications for public goods, policymakers need to consider not only the quantifiable, but also the unquantifiable effects of these projects. In estimating the costs and benefits of such a project from the perspective of quantification, policymakers need to estimate and analyze to what extent the given project will increase agricultural output as well as how many new jobs it will create and how much cost and benefit are to be expected as indirect byproducts.
However, the cost-benefit analysis should also be accompanied by analyses of multiple other factors and scenarios, including: the deficiency and mutability of the current price, the nominal value of which will change over time due to the inflation-caused changes in real monetary value; the adjustments to agricultural produce prices, which will become necessary to protect the agricultural industry amid the trend of protectionism that began to arise in the 1970s; the amount of agricultural wage to be decided; and the use of the floating (effective) exchange rate under the free market system.
For instance, the Daean District Agricultural Investment Project has led to the creation of a major public water reservoir, spanning 430 hectares, in 1976. The creation of the reservoir, which began operation in 1977, required KRW 179.664 million, KRW 44.993 million of which came in the form of development assistance from the International Bank for Reconstruction and Development. Another agricultural investment project in the Jeongan District, on the mountains of Chungcheongnam-do, involved creating a 256.7-hectare water reservoir in 1975, with the help of the United States Agency for International Development (AID). Analyses of these projects show that they have successfully increased output, increased the efficiency of the use of arable land and the acreage-under-cultivation system, decreased the demand for human labor, and increased the net profit per unit. In other words, agricultural investment projects have substantially helped to stabilize agriculture in Korea.
농업투자사업의 편익, 비용분석(Cost-benefit analysis of agricultural investment projects)
|Journal Title; Vol./Issue||한국개발연구:vol. 1(no. 2)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Agriculture|
|Holding||KDI; KDI School|