Nonghyup Gets Gov't Help

Farm organization to get 4 tln won in government support to speed up its restructuring

The National Agricultural Cooperatives Federation (Nonghyup) is undergoing a restructuring of its operation to enable it to sell more farm produce and at the same boost the professionalism among its officers and employees.
Nonghyup concluded that it needs 27.42 trillion won to complete the restructuring. Of that amount, 15.12 trillion won can be met with its own funds and 12.26 trillion won must be secured from outside funding sources. Nonghyup asked the government for 6 trillion won in support.
But the government has decided to provide only 4 trillion won and will include it in the budget for next year as agreed by the officials of the Ministry of Food, Agriculture, Forestry and Fisheries (MOFAFF), the Ministry of Strategy and Finance (MOSF), the Financial Services Commission (FSC) and other related government agencies following lengthy meetings.
The government also will provide 3 trillion won in secondary support funds and an additional 1 trillion won in the form of investment in Nonghyup commercial certificates.
The government concluded that the funding needs for the financial business sector would be 4.95 trillion won and the new investment amount would need to be 3.59 trillion won with an average borrowing ratio of 42 percent of the total funding needs.
A large bulk of the funds, 15.34 trillion won, will be allocated to the credit sector, including 11.76 trillion won to the banking sector and 3.14 trillion won to the insurance affiliate. 440 billion won will be provided to other financial affiliates, while 1.19 trillion won will be given to the education sector of Nonghyup.
The government approved Nonghyup's plan to allocate 358.99 billion won to restructure its farm produce sales facilities, including 33 projects in the 15 areas of the sector such as the wholesale center for fresh fruit and the livestock logistics center, among others. On the other hand, the government eliminated 473 billion won worth of new projects unrelated to the sale of farms and stock breeding and are considered to have no potential for profitability.
The government also upheld Nonghyup's plan to build 20 livestock products plazas at a cost of 53.5 billion won and set up the overseas grain supply company at a cost of 233.6 billion won.
The government also concurred with Nonghyup's plan to strengthen its banking operation to keep its capital ratio (Tier 1) at the 11 percent level, assuming that it would have no problem competing with commercial banks.
In the insurance sector, the government readjusted the reimbursement capability ratio to 230 percent from 250 percent for life insurers and from 350 percent to 300 percent for non-life insurers.
The government's secondary support to Nonghyup includes the issuance of 3 trillion won worth of bonds with government support in interest payments above 5 percent per annum. The issuance of 150 billion won in bonds has been included in the government budget for 2012 at an annual yield of 5 percent. Nonghyup agreed with the government plan, as it was the same as what it proposed for a non-dividend investment by the government with no voting rights on Nonghyup's board. One trillion won in Nonghyup's commercial notes would be further taken up at meetings of various related government agencies including the MOSF, MOFAFF and the FSC.
The government's second support measures for Nonghyup will take place in a period to be determined later following the restructuring of the organization in consultation with related government agencies.
Nonghyup will continue to hold consultations with related government agencies to push the revision of the laws on special tax exemption and implementation decrees in the Insurance Law.
Nonghyup sees no problems in the passage of those laws through the National Assembly, along with the implementation decrees on the Nonghyup Law expected to be approved by parliament by the end of this year. nw

The government approved Nonghyup's plan to allocate 358.99 billion won to restructure its farm produce sales facilities, including 33 projects in the 15 areas of the sector such as the wholesale center for fresh fruit and the livestock logistics center, among others

Chairman Choi Won-byung of Nonghyup.

Photo on courtesy of Nonghyup