The government has decided to provide 4 trillion won ($3.5 million), or 15.7 percent, of the total needed to restructure state-run National Agricultural Cooperative Federation, the Finance Ministry said Wednesday.
The amount is 2 trillion won short of the 6 trillion won requested by Nonghyup, the country’s largest agricultural cooperative.
The funding decision settles tension between the two since Nonghyup began drawing up a drastic reorganization plan to split its financial units made up of banking and insurance operations. Nonghyup had wanted to secure more funding from the government but the issue remained complicated as the cooperative’s capital status was unclear which forced the amount of necessary public funds to be adjusted.
The restructuring is designed to allow the cooperative to focus more on securing transparent and stable supply chain for farmers without having to worry about running its financial affiliates.
The Finance Ministry, tasked to allocate funding for Nonghyup as part of its budget plan for next year, said the 4 trillion won of capital should help stabilize prices of agricultural goods in the long run.
“The government decided to capitalize part of Nonghyup’s restructuring. We expect the coming changes to help stabilize prices and improve business conditions for the farmers,” Finance Minister Bahk Jae-wan said addressing a weekly meeting of policymakers Wednesday. The budget plan is to be presented at the National Assembly in October after a series of meetings by policymakers for final approval.
The total amount of capital needed for the overhaul is about 25.42 trillion won. Nonghyup has secured about 15.2 trillion won for the plan after deferred income tax. Since it is expecting 4 trillion won from the government, the cooperative is tasked to raise about 6.26 trillion won by issuing corporate bonds.
“The 4 trillion won should be an appropriate size of funding for the reorganization to be successfully carried out,” Park Hyun-chul, a senior official at the Ministry of Food, Agriculture, Forestry and Fisheries said. The ministry is in charge of setting the policy for Nonghyup’s restructuring.
