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New Challenges Facing Asian Agriculture Under Globalisation

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New Challenges Facing Asian Agriculture Under Globalisation New Challenges Facing --------1-------- Asian Agriculture under Globalisation Volume II Edited by Jamalludin Sulaiman Fatimah Mohamed Arshad Mad Nasir Shamsudin 34 Farm Household Debt Problems in Jeonnom Province, Korea: ACose Study J.K. Park, P.S. Park and K.H. Song Introduction Farm loans have increased quite rapidly in the recent decades and the farm household debt 1 matter has become a serious socio-economic issue in Korea. In an effort to get around this critical issue, the government would prepare and implement impromptu new debt measures. Yet, the farm-debt ratio over farm income has been increasing very rapidly since the beginning of the WTO in 1995 and the IMF financial crisis of 1997, leading to 88 per cent as that of 2000, mainly due to low agricultural income. During the period of 1994 (the year right before the beginning of the WTO)-2000, farm household income had increased by 13.6 per cent but debt had increased by as much as 156.3 per cent (MAF, 2001 ). That is, farm household debt has been increasing very rapidly since 1995. Yet, the ratio of non-farm income accounted for around 32 per cent of farm income in recent years, which made it more difficult for farmers to repay their loans. This problem is getting even more complicated because of joint surety among the farmers, which would lead to total bankruptcy of farms including financially sound farms. Recently, more than 7 5 per cent of farm loans were utilised for the purpose of agricultural production. In order to cope with labour shortage problems due to the rural-urban migration of labour force, farmers began to purchase more agricultural machinery, which eventually led to the galloping farm household debts. Together with this trend, the careless financial loan management on the part of financial institutions has made the matter worse, because many farmers could not repay their loans because of their unsound financial conditions from the beginning, thereby creating both agricultural and social crises. Between the years 1970-2000, debt per farm household increased by 1,263 times at the national level, from 16,000(US$50) to 20.2 million (US$17,873),2 whereas farm income increased by 90.1 times from 256,000 to 23.1 million. This means farm household debt had 1 Farm household debt here includes various liabilities or the unpaid balance such as outstanding loans, purchasing goods and services in credits, and other obligation to mutual loan ctub, etc. 2 316.7 = US$1.00 in 1970, and 1,130.6 = US$1.00 in 2000. Therefore, farm household debt has increased as many as 357 times in terms of US$ during the period. Farm Household Debt Problems in Jeonnom Province, Korea: ACose Study 485 increased at a much faster rate than farm income. During the same period, the ratio of farm household debt over farm income also jumped from 6 per cent to 88 per cent, which created a serious problem in farm economy. During the period of 1995-2000 especially, farm household debts increased by 120.5 per cent whereas farm income by only 7.2 per cent, raising the farm debt ration from 42 per cent to 88 per cent. At the same time, most of these farm loans were obtained from the National Agricultural Cooperative Federation (NACF) in such a way that the ratio of farm loans from the NACF over the total farm loans increased from 31 per cent to 85 per cent in this period. Also, the ratio of non-farm income over total farm income has not been experiencing any significant changes beyond 32-34 per cent in recent years. These are the general phenomena of farm household debts at the national level {Table 34. l ). Table 34.1: Farm Household Debt Situation of Korea ( 1970-2000) Year Farm household debt Farm Non-Ag. Agricultural Debt Used Total Income Income Co-operatives in Farming (A) (B) (C) (D) (E) AIC B/C CID EID 1970 5 8 16 256 62 0.31 0.50 0.06 0.24 1975 10 19 33 873 158 0.30 0.58 0.04 0.18 1980 165 206 339 2,693 938 0.49 0.61 0.13 0.35 1985 1,337 1,306 2,024 5,736 1,060 0.66 0.65 0.35 0.18 1990 3,857 3,146 4,734 11,026 2,841 0.81 0.66 O.B 0.26 1995 7,364 7,331 9,163 21,803 6,931 0.80 0.80 0.42 0.32 1996 8,500 9,136 11,734 28,298 7,487 0.72 0.78 0.41 0.26 1997 9,561 9,781 13,012 23,488 8,677 0.73 0.75 0.55 0.37 1998 13,263 12,958 17,011 20,494 6,975 0.80 0.76 0.83 0.34 1999 14,445 14,054 18,535 22,323 7,034 0.78 0.76 0.83 0.32 2000 17,161 15,159 20,207 23,072 7,433 0.85 0.75 0.88 0.32 00170 3,431 1,895 1,263 90.1 119.9 Source: MAF, 200 I. The Jeonnam Province is known to be the key agricultural region of the Korean peninsula. Unfortunately, previous studies regarding farm household debts in the Jeonnam Province were unavailable, and the farm debt situation of the Jeonnam Province was unknown in details. Objectives The objectives of this study are to analyse the current situation of farm household debts in the Jeonnam Province, and to suggest relevant policy measures to mitigate the farm debt problems both regionally and nationally. 486 Park, J. K., P. S. Pork and K.H. Song In order to analyse this debt issue in the farm sector more realistically, the Jeonnam farm villages were visited in an effort to find out and accomplish the following objectives; first, to understand the financial situation of farms by surveying the farm household debt in the Jeonnam Province, second, to find out where the farmers are using their farm loans, and their repayment plans and ability to repay their farm loans, and finally, to suggest the best alternative policy options in coping with the farm household debt issues for future success of farming. With the above-mentioned objectives in mind, we decided to carry out this research by dividing the Jeonnam Province into four regions, namely, Mountainous Region, Semi-Plain Region, Plain Region, and Suburban Region. Each Region consisted of two counties, meaning a total of eight counties/cities. Then, we selected two villages from each County/City, and visited a total of 16 villages.3 The survey results from 997 farms were collected, but only 980 questionnaires were used in this analysis, disregarding the meaningless questionnaires. Findings General Information of Respondents farming Experience: A total of 794 farms, 82.3 per cent of the total respondents, had farming experience of 20 years or more. Only 3 .3 per cent of the respondents turned out to have experience of less than five years. Therefore, most of the farmers seemed to have been farming for life or had enough experience in farming at least. LT 3 Yrs. (IO Farms) 3-5 Yrs. (22 Farms) 5-IO Yrs. (40 Farms) 4.1% 10-20 Yrs. (99 Fanns) 10.3% 82 3 MT20Yrs. (794 Farms) !--------------------~ - ¾ Figure 34.1: Fanning Experience 3 Plain Region: - Naju City: Dasi Myon - Daegog and Haengsan; Sanpo Myon - Deungjong Jongja. - Haenam County: Hwangsan Myon - Woohwang; Hwasan Myon - Gwandong. Semi-Plain Region: - Gangjin County: Doam Myon - Yongsan; Sungjun Myon - Youngheung. - Bosung County: Hoechon Myon - Junil; Bokrae Myon - Youjung. Mountainous Region: - Goksung County: Jookgok Myon - Bongjung; Osan Myon - Younhwa. - Gurye County: Yongbang Myon - Yonggang; Ganjun Myon - Yangchon. Suburhan Region: - Sunchon City: Haeryong Myon - Sinsung; Byolryang Myon - Gooryong - Muan County: Illo Myon - Hwasan & Yonghodong; Hyongyong Myon - Songjung. Form Household Debt Problems in Jeonnam Province, Korea: ACase Study 487 Age Distribution About 64.2 per cent of the farmers surveyed, 629 farmers, were older than 60, followed by those in their 50s (19.1 %), 40s (11.0%), 30s (5.0%), etc. This age distribution was different from the general distribution of farm population across the nation, since it was 51 per cent at the national level, which means there exist relatively much older farmers in the Jeonnam Province than in the rest ofROK.4 That is, both ratios of old farmers and farm population in Jeonnam were much higher than the ones of national figures, respectively as of 2000. Naturally, the issue of farm household debt has been very important and sensitive in this Province. 20s(7)30s( 48) 40s(109) 1% 5% 11% 50s(190) 19% Figure 34.2: Age Distribution Distribution by Education Respondents with educational experience of primary school or less accounted for 65 per cent, followed by middle school 20.4 per cent, high school 11.9 per cent, and university education or higher 2.1 per cent. These results showed that most of the farmers had relatively low educational experience, which is not unusual in traditional agriculture. The problem is that low educational background could be a serious hindrance for agricultural development or improvement in any country. Thus, considering the small-scale farming in the Jeonnam Province and the rest of Korea alike,5 it would be quite reasonable to expect that agricultural innovation, improvement in productivity, and co-operations in agricultural production and marketing in general, and so on, would be quite difficult to accomplish among the farmers. 4 Besides, the ratio of farm population at the national level was 8.6% whereas it was 31.5% in Jeonna as of 2000(National Statistical Office, 2002).
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