Pet Industry to Grow to 15 Trillion Won... Exemption of VAT on Pet Medical Fees

'Measures to Foster the Companion Animal-Related Industry'
Establishment of Pet Food Specialized Labeling and Nutrition System
Introduction of Nationally Certified Training Instructors and Expansion of Animal Health Technicians

The government has decided to focus on fostering the pet-related industry as a national strategic industry. The pet food classification system will be reorganized to focus on functions such as staple food and snacks, and to improve the quality of pet services, a nationally certified training instructor system will be established and the number of animal health technicians will be expanded. Additionally, a 'One-Welfare Valley' will be created to demonstrate the preference and marketability of products for trained pets, encouraging the development of high value-added and new products. From October, value-added tax (VAT) exemption will also be applied to veterinary treatment and medication costs for therapeutic purposes to reduce the burden of medical expenses.

On the 9th, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) announced the 'Pet-Related Industry Promotion Measures' containing these details at an emergency economic ministers' meeting held jointly with related ministries.

Global Pet Market at $372 Billion; Korea Still in Early Stage

According to MAFRA, the global pet-related industry size was $372.9 billion in 2022. It is expected to grow at an average annual rate of 7.6% to reach $776.2 billion by 2032. Global companies are strengthening their market dominance through specialization and scaling via mergers, acquisitions, and investments. Particularly, pet food trade volume increased from $20.2 billion in 2016 to $34.3 billion in 2020, growing at an average annual rate of 14.2%. China exports the most pet products such as toys and cat litter to the United States.

Domestically, the number of households raising pets (dogs and cats) increased significantly from 3.64 million in 2012 to 6.02 million in 2022, and the number of pets rose from 5.56 million to 7.99 million during the same period. However, the domestic market size is only 8 trillion KRW (as of 2022), accounting for just 1.6% of the global market. The market is growing mainly based on domestic consumption, with pet food imports dependency at 53% (as of 2021), which is high.

Jung Hwang-geun, Minister of Agriculture, Food and Rural Affairs, said, "The pet-related industry is a developed country-type industry, and Korea is still in the early development stage. Through fostering the pet-related industry, we will revitalize the domestic market and expand global market entry to industrialize exports."

Pet Food System Reorganized to Meet Global Standards

The government will promote the pet-related industry to create new production and consumption and expand exports by implementing three main strategies: ▲ fostering four major core industries ▲ building growth infrastructure ▲ industrializing exports.

The government recognizes that the pet food industry has been managed together with livestock feed under the current system, which has hindered growth and lacked support such as raw material registration and procurement. Therefore, a separate pet food classification system distinct from livestock feed will be established. Within this year, improvement plans will be prepared based on research and analysis of advanced countries' pet food classification systems, and next year, amendments to the Feed Control Act will be pursued. The current feed classification system of single feed, compound feed, and supplementary feed will be improved to staple food, snacks, and special-purpose food.

A balanced nutrition guideline reflecting pet dietary habits will also be developed. Since pets cannot consume a variety of foods like humans and are fed solely based on the owner's choice, the concept of 'complete food' meeting nutritional standards is important. A 'Pet Nutrition Guideline Council' will be launched in October, and a 'Nutrition Guideline' will be prepared and applied next year.

Along with this, after investigating raw materials with high demand for developing functional pet foods and other products, materials will be designated as usable after safety evaluation, and support will be provided for expanding the supply chain of animal protein raw materials and raw material procurement.

Reducing Burden of Pet Medical Expenses... VAT Exemption on 100 Treatment Items for Therapeutic Purposes

Demand for veterinary medical services continues to increase, but the burden of medical expenses and low pet insurance subscription rates are pointed out as problems. Accordingly, from October, value-added tax (10%) will be exempted on essential and universal animal medical services. Currently, VAT exemption is limited to preventive purposes such as vaccinations, heartworm medication, neutering surgery, and pathological tests, but going forward, frequently used treatment items such as consultations, medication, atopic dermatitis, and conjunctivitis will also be exempted from VAT. According to MAFRA, the veterinary medical industry expects the VAT exemption level to expand significantly from the current 40% to about 90% due to this expansion.

Kim Se-jin, head of the Pet Industry Animal Medical Team at MAFRA, said, "If the VAT exemption scope is expanded, the burden of medical expenses for pet-owning households is expected to be significantly alleviated. We will closely cooperate with the veterinary medical community to ensure smooth implementation and monitor the system so that the effect of reducing medical expenses can be felt."

Activation of pet insurance is also planned. To this end, sales channels will be diversified through partnerships with insurance companies, veterinary hospitals, and pet shops, and subscriber convenience and accessibility will be enhanced through simplified claims. Last year, 71,896 pet insurance contracts were signed, which accounts for only 0.89% of the total number of pets (dogs and cats).

Additionally, existing uniform coverage products (compensation limits, frequency) will be improved considering pet developmental stages and characteristics, and new products with reasonable premiums will be developed. MAFRA plans to jointly announce a 'Pet Insurance Activation Plan' with the Financial Services Commission next month.

The standardization of treatment items will be advanced from the original schedule of 2024 to the end of this year. This involves standardizing disease names and treatment procedures for the varied treatment acts performed by different veterinary hospitals, which is expected to provide a basis for comparing medical expenses, reduce cost disparities, and induce rational treatment acts, according to MAFRA.

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Fostering Nationally Certified 'Dog Presidents'... Promoting Pet-Friendly Tourism

The government plans to expand pet service personnel and create an environment for service diffusion. To meet the increasing demand for pet training and behavior guidance, from 2024, 1,500 professionals will be trained annually and a national qualification system will be introduced. MAFRA plans to finalize the basic plan for the behavior instructor qualification system between October and November this year and prepare for the exam to be held around April next year. Additionally, the number of animal health technicians (national qualification) providing nursing and treatment assistance services will be increased, and related institutional improvements such as designation of training institutions and expansion of animal health technician roles will be prepared.

The government will support local governments promoting pet-friendly tourism and expand travel content for accompanying pets. Furthermore, through amendments to the Animal Protection Act, restrictions on the location of funeral halls among animal cremation, enshrinement, and funeral facilities will be eased, and an integrated information system for funeral services will be established.

Promoting High Value-Added and New Product Development through Demonstration Reflecting Pet Preferences

Overseas, differentiated competitiveness is secured by demonstrating preferences for pets. The government sees high demand for such infrastructure among Korean companies and plans to establish a 'One-Welfare Valley' equipped with demonstration and startup functions. This service will provide demonstration of product palatability and other factors while raising well-trained pets to promote high value-added and new product development.

The government will also induce private investment through demonstration infrastructure linking protection and welfare facilities (animal protection centers, temperament evaluation facilities, etc.), industrial facilities (production plants, logistics facilities, etc.), and research and education facilities.

Additionally, to foster pet industry ventures, a special fund of 10 billion KRW will be newly established next year for the pet-related industry, and low-interest loans will be expanded for companies with excellent technologies such as pet tech. Research and development will be promoted on 16 projects related to functional pet food, customized pharmaceuticals and medical devices, and healthcare services. In the mid to long term, areas requiring investment with significant social ripple effects will be identified and supported.

Pet Industry as an Export Engine... Fostering 20 Companies with Exports Over $10 Million by 2032

The government expects new markets such as Vietnam and China to grow and sees the need for systematic support to target export strategic markets. Accordingly, market research and information will be provided for strategic export countries, and a separate K-Pet Food Pavilion will be established at the '2023 Korea Food Expo' held in November to support market development such as buyer matching.

An export support system will also be established. In the second half of this year, a 'Export Support Council' involving related ministries will be formed and operated to link support projects by ministry, provide information, discover cooperative projects, and periodically check export status. Support will also be provided for information sharing among companies and the formation of a joint export response network.

This content was produced with the assistance of AI translation services.