NACF to Spin Off Three Units

NH Financial Holding and NH Economic Holding to take over financial and non-financial sectors following the break-up

The National Agriculture Cooperatives Federation (NACF) will spin off its finance and business departments by 2011 in line with the plan drawn up by the Ministry of Agriculture, Fisheries and Foods, the NACF said recently.
The ministry will secure the legal basis to split up the NACF in line with its plan designed to improve the support to the farm, fisheries and foods sectors in the country and spin off the financial and business divisions of the entity. It will also change the name of the NACF to the Agricultural Cooperatives Federation and keep its independence in the areas of education, guidance and other matters in support of farming businesses.
The farmers’ cooperatives will spin off its finance division including banking, insurance and securities and integrate them under NH Financial Holding Co. It will also spin off its non-financial sectors including processing, distribution and sales under the name NH Economic Holding Co.
The ministry will submit the plan for National Assembly approval before the year is out and get the approval during the first half of next year. One of the provisions of the new NACF Law revision would be the right for the farmers’ cooperatives to collect 1 percent of income from the affiliates for the use of its name. The funds thus collected will be used for various activities that the cooperative will engage in as well as its operational expenses, member education and other support programs, such as those for improvement of farm produce distribution at farms and the farm machinery bank.
As it owns 100 percent of the affiliates and the holding company, it stands to receive dividend payments annually from those entities. Officials at the ministry said the businesses that make profits will go to the economic holding company to produce income for itself and those non-profitable businesses will be retained by the farmers cooperatives so that it will continue to perform for the public interest.
The NACF will retain only one director out of four who were in charge of finance, agricultural economy and animal husbandry economy and create two new directorial positions including one for animal husbandry economy and the other for agricultural economy. A director in charge of the support for members will replace the representative director who has been in charge of management.
The financial sector will operate exactly like a commercial bank with such affiliates as securities, insurance and asset management under NH Financial Holding Co. The sector had to cover for the operational losses incurred by the non-financial sector of the NACF, which ran to 100 billion won annually in the past.
The non-financial sector has been suffering from chronic deficits in its operation ever since its establishment and the annual deficit ran to 100 billion won on average since 2000. This year, they expect the deficit would balloon to 130 billion won. It also has a large amount of debts, with its total borrowing amounting to 852.2 billion won alone last year. The sector’s main job has been the sale of farm produce and the supplying of farm equipment to farmers. The famers’ organization sold its farm produce through a number of nationwide agents such as the Hanoro Club, joint sales shops, an Internet shopping mall (NH Shopping) and Shintoburi, a sales window of farm produce operated by the NACF across the country.
In addition, it has been operating a chain of restaurants with 1,016 outlets known for using only domestic farm produce and products including domestic beef. It also directly operates a meat processing plant, chicken meat factory and a store.
The farmers’ cooperatives also supplied fertilizer, farm machinery, animal feed, animal farm equipment and pesticide, among others, to farmers belonging to the cooperatives.
The mutual financing sector will stay with NH Financial Holding due to doubts about its ability to stand alone, the officials said, adding it will continue to be attached to the holding company until it has grown strong enough to stand alone.
The officials said the government has every intention to support the mutual savings and loan company catering to farmers and has been looking for ways to provide the help it needs.
They also believe the spin off of the financial sector will be completed by 2011 due to the NACF’s vast scale so that the farmers’ cooperatives can upgrade their professionalism and become more transparent, which will help increase their profits while readjusting their function as farmers’ cooperatives. nw

President Shin Sang-hoon of Shinhan Financial Group.

This chart shows Shinhan Financial Group’s vastly improved performance in the third quarter.