This study reviews the current status of the Agricultural Credit Program, and estimates its profit, cost of investment, and return on investment rate, while also forecasting the cost of investing in new or expanded facilities in the future.
Thanks to the success of the four Five-Year Economic Development Plans, the Korean economy has effectively made the transition from a traditional and agrarian mode of production into a highly advanced and industrialized economy, with dramatic transformations in the industrial and employment structures. As the Korean economy entered the high growth phase in the late 1970s, Korean agriculture also began to experience profound transformations: a growing income gap between cities and rural areas, the rising level of income nationwide, and the increasing consumption of protein-rich foods as well as fruits and vegetables.
This study analyzes the circumstances and current issues of Korea’s transitional agriculture, examining the credit structure of rural households and the current status of the Agricultural Credit Program. This study also analyzes the effect of investment on such facility horticulture projects as the farming of cucumbers and green chili peppers, as well as the effect of sprinkler investment on the cultivation of fruits and vegetables. Many argue today that the level of income that rural households can expect to earn from farming has reached its upper limit, and that rural households should be encouraged to generate additional income from non-agricultural sources. However, they overlook the potential of Korea’s agriculture and its ability to improve income for farmers. The expansion of facility horticulture, the increase in the output of fruits and vegetables through farmland irrigation, the improvement of the distribution structure, and the increase in the number of general and low-temperature storage facilities, in response to Korea’s changing dietary structure, will foster the development of the substructure of the rural economy, and help farmers make the transition into modern agriculture.
Since 1973, in an effort to secure a greater pool of fund for its Agricultural Credit Program, the Korean government has taken out two major loans from the International Bank for Reconstruction and Development, amounting to USD 305 million in total. As a result, the Agricultural Credit Program has yielded significant and tangible achievements at both institutional and individual household levels. The program, however, still struggles with securing the financial resources it needs. The Third Seeun Agricultural Credit Loan Project (1982-1984), for instance, involved a total investment of KRW 77 billion (of which KRW 54 billion was in loans), and USD 50 million of which was procured from foreign sources. This amounts to only approximately 23 percent of the estimated amount of investment that the project will require until 1986 (KRW 337.6 billion, KRW 236.3 billion in loans).
The Agricultural Credit Program should be based on an established procedure providing for the evaluation, analysis, selection, financing, and direction for projects that farmers request. Policymakers need to reinforce the institutional control over the program and its criteria for evaluating investment proposals so as to ensure a rational allocation of resources and ultimately to help rural households increase income.
농업신용사업의 경제성분석(Economic analysis of the agricultural credit program)
|Series Title; No||연구보고서 / 제81-08권|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Agriculture|
|Holding||KDI; KDI School|