[Swung by the Dinosaur Union in NongHyup Part 2] Insurance Sales Over Agricultural Products Business... "Is a Cooperative a Corporation?"

Since the Establishment of the Holding Company in 2012, NongHyup Group Focused on Expansion
Amendment to NongHyup Act Passed in Plenary Session, Insurance Operations Allowed Until 2027
Government Evaluation of 'Economic Business' Score Dropped from 88 to 72 in 6 Years

[Sejong=Asia Economy Reporter Moon Chaeseok] The National Agricultural Cooperative Federation (NACF) launched a holding company system in 2012 based on the principle of separating credit and economic operations. However, the performance of the economic holding company, which is responsible for the sales of agricultural products, farming equipment, and other materials, remains insufficient. Instead, a recent amendment to the NACF Act, which extends the bancassurance operations of regional cooperatives, has shown a focus on financial business rather than protecting the rights and interests of members. Some regional cooperatives have criticized this by saying, "This is not a cooperative but an agricultural cooperative corporation."

According to the 'NACF Economic Business Performance Evaluation' data received by the National Assembly Budget Office from the Ministry of Agriculture, Food and Rural Affairs on the 26th, the evaluation score for NACF's economic business was 72.24 out of 100 in 2019. This is 16.10 points lower than the 88.34 points scored in 2013, the year following the decision to transition to the holding company system. A Ministry of Agriculture official explained, "The NACF's plans are evaluated annually, and the growth rate of the business has decreased each year, but this does not mean there has been a decline."

The economic holding company has also been passive in selling agricultural and livestock products from production area cooperatives. According to the Budget Office and the Presidential Committee on Agriculture, Fisheries and Rural Areas (Agricultural Special Committee), the NACF announced in 2012, under the 'NACF Economic Business Revitalization Promotion Plan,' that it would invest 4.9592 trillion KRW and directly sell 51.1% of the agricultural and livestock products shipped by production area cooperatives by last year. However, the actual sales ratio was only 30.5%, which is 59.7% of the target. After the restructuring of the holding company business structure, the growth rate of economic business volume until 2019 was 1.9%, only one-fifth of the 8.5% growth rate during the eight years before restructuring (2004?2011). The Agricultural Special Committee pointed out, "It has been seven years since the holding company was established, but the economic holding company's performance is only about 60% of the original target," and added, "Since the launch of the holding company, there has been a disconnect between the members/cooperatives and the economic business."

On the other hand, the company is active in selling financial products such as insurance. The National Assembly recently passed an amendment to the NACF Act in the plenary session to extend the bancassurance regulation exemption for NACF insurance affiliates by five years. This allows insurance sales through regional cooperatives until 2027. While the intention is to utilize cooperatives as financial channels considering the poor financial infrastructure in regional areas, there are criticisms that the focus is only on product sales. NH Nonghyup Property & Casualty Insurance posted a net profit of 49.157 billion KRW in the first to third quarters of last year.

Cooperative officials say it is difficult to criticize NACF for engaging in financial business, but they point out that it is true that the economic business, which is linked to the profits of most regional cooperative members, is underperforming. Lim Ki-eung, Policy Director of the Regional Cooperative Labor Union, said, "The reality is that the major shareholders of the economic and financial holding companies are not farmer members but the NACF," and questioned, "Are farmer members subcontracted workers of a corporation?"

The agricultural sector argues that effective projects should be implemented to increase the utilization rate of members in economic business. When establishing economic business revitalization plans, they suggest collecting opinions from cooperatives and members, disclosing evaluation results, or including the enhancement of benefits for cooperatives and members in the management evaluation of economic holding companies (subsidiaries). The Agricultural Special Committee pointed out, "There is a need to seek alternatives through comprehensive inspection and evaluation of the holding company and subsidiaries." The Ministry of Agriculture said, "We are internally promoting the 'NACF Economic Business Revitalization Promotion Plan' centered on NACF in this regard."

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