KRC leads in farming knowledge sharing

Lee Sang-mu(Second from Left), CEO of Korea Rural Community Corp. visits Jeongeup, discussing main ideas of the business of agriculture and banking. (Photo : NEWSis)

State-run firm eyes public-private partnership with developing countries

The state-run Korea Rural Community Corp. (KRC) has been sharing its farming and agricultural infrastructure knowledge and experience with the developing world.

The company has helped over 30 countries modernize their agricultural sector and participated in a number of rural development projects for developing countries, sponsored by the World Bank and other international organizations. KRC has also extended assistance to private entities seeking to produce grains and other agricultural products in farmlands abroad.

CEO Lee Sang-mu is stepping up these efforts. KRC has an annual budget of 3.5 trillion won ($3.3 billion) and employs 5,100 people.

The CEO has visited several developing nations, including the Philippines, Vietnam and Mongolia, to meet with senior government officials and industry leaders there. Prior to Lee’s appointment, the state-run firm had operated only one overseas office in Indonesia, but has established presence in Thailand, Vietnam and the Philippines since last September.

In an interview with The Korea Times’ Business Focus, Lee said he will continue to boost KRC’s overseas business by using his extensive personal networks abroad and nurturing global-minded project managers.

“Many developing countries want to learn from Korea about how to develop agricultural infrastructure and improve living conditions in rural communities,” the CEO said. “I believe that KRC should assume an active role in the modernization of the agricultural sector in the developing world. I will do everything within my power to share our knowhow on farming techniques and agricultural infrastructure with developing nations.”

Lee began his public career at the agriculture ministry in 1971 after graduating from Seoul National University. In 1990, Lee earned a Ph.D. in agricultural economics at Michigan State University in the United States.

He spent many years abroad, teaching at universities in China and Japan. Lee also served as a representative of the Food and Agriculture Organization in the Philippines from 1999 through 2004.

Lee said KRC is a world leader in the development of agricultural reservoirs and dams, and irrigation and drainage systems.

“We have carried out a total of 120 projects in 32 countries since 1967. Currently, we are involved in 23 works in 17 nations,” Lee said. “Over the years, we have built solid human networks encompassing government officials and business leaders in many developing countries. In addition to it, my extensive overseas experience and personal connections will help KRC expand its business abroad.”

The firm plans to nurture up to 500 project managers capable of implementing agricultural projects abroad, according to Lee. “We will train KRC employees and recruit experts from the private sector. I think securing talented manpower is a must if KRC wants to do more in foreign countries.”

The CEO outlined three types of overseas projects in which KRC is involved: exporting agricultural development knowhow, participating in international development projects and supporting private companies in cultivating farmlands abroad.

Exporting knowhow in rural development

KRC has been providing mostly consulting services for infrastructure development projects in countries like Bangladesh, Tanzania, Cambodia and Kenya, Lee said, stressing that the state-run enterprise should play a more extensive role.

“We used to offer merely consulting services on how to design, plan and implement agricultural development schemes, but we will take up a more comprehensive role throughout the process as we do in the Saemangeum reclamation project,” the CEO said.

KRC had reclaimed the 400-square-kilometer-wide tidal flat, located off the shores of the southwestern North Jeolla Province, and is now turning it into farmlands and industrial sites.

Expanding presence to Central Asia

The company has been leading community improvement projects in Laos, Myanmar and other Southeast Asian nations, while constructing a seawall in Indonesia and undertaking a water resource management project in Thailand.

“Thanks to our successful Saemaeul Movement, or New Village Movement, in the 1960s and 1970s, Korea has long been a model for developing countries that seek to improve their rural villages. To more effectively assist developing nations, we have established more overseas offices in Southeast Asia.”

On March 20, KRC opened its fourth overseas office in Manila, the Philippines, to further boost cooperation with the country in agriculture. Last year, the company also established presence in Bangkok, Thailand, on Nov. 10 and in Hanoi, Vietnam, on Oct. 11.

“In addition to our first overseas office in Indonesia, we are now operating four bases in Southeast Asia. Our expanded presence will help use more effectively undertake the ongoing projects and secure new tasks,” the CEO said. “Currently, our overseas business accounts for only 5 percent of our entire portfolio, but we would like to increase the ratio to 23 percent by 2023 as our domestic business is projected to shrink.”

He said KRC will set up more offices in Asia, possibly including Myanmar and Mongolia. “We have been talking with the two countries about our role in their agricultural development schemes. When we secure large-scale projects there, we will definitely station some employees on a permanent basis.”

Lee visited Mongolia in March to meet with government officials, and plans to fly to Myanmar in late May to explore business opportunities there.

KRC has also been in talks with Ukraine about sharing farming techniques and knowhow on building various agriculture-related facilities.

“Many ethnic Koreans reside in Ukraine, who were forced to locate there in the early 1900s. Many of them engage in agriculture so we would like to make things better for them,” Lee said. “We would like to build a bridgehead for private companies seeking to secure farmlands in the nation.”

On top of pursuing business opportunities abroad, KRC has been inviting government officials from developing countries and providing them training on farming, water resource management, and construction of reservoirs and other agricultural infrastructures. The company has trained a total of 2,677 government officials and agricultural technicians from 95 countries since 1976.

“When they return home with a favorable view of Korea, they will help us make inroads into their home countries. This will also make things easier for domestic agricultural firms to do business abroad,” Lee said.

Furthering reach to South America, Africa

The CEO then admitted that its overseas business focuses more on Southeast Asia, and it is more difficult for KRC to do business in South America, Africa and other regions.

“Korea has many things in common with other Asian nations so it is much easier for us to set up presence in Asia. We would like to secure some large-scale rural projects in Africa as people there also cultivate and consume rice,” Lee said. “But South American countries have different farming cultures. People there engage mostly in dry-field farming, in contrast to rice farming, which requires large volumes of water. So it is not easy to share our knowledge with them.”

But many Koreans have successfully cultivated large farmlands in the region, according to the CEO. “Rather than advance into South America, we will lend more support to companies and individuals that run farms there.”

Cultivating farms overseas

KRC has extended financial and other support to private firms developing farmlands abroad. From 2009 through 2013, it offered a combined 101 billion won to 32 companies setting up presence in 12 countries, including Russia and Mongolia.

According to Lee, some companies are close to signing a deal to secure sizeable farmlands in Myanmar.

“Some say we should secure farmlands in foreign countries to bring produce into Korea and boost its food self-reliance, but this is not how it works,” the CEO said. “If host countries know we are taking all the products to Korea, they wouldn’t allow us to use any land. Agricultural companies should cultivate products and sell them in local markets. If they are allowed to export them, then Korea should be one of many destinations, not the sole destination. Localization is the key to the overseas farming business.”

Participating in international projects

Lee said KRC will more actively take part in international projects for the developing world, funded by the World Bank, the Asian Development Bank and other global organizations.

“Currently, we are involved in Korea’s official development assistance projects funded by the Korea International Cooperation Agency. We also receive money from the Economic Development Cooperation Fund administered by the state-run Export-Import Bank of Korea,” he said. “But we would like to expand the scope of our overseas business. KRC plans to secure funds from the World Bank and other international organizations, and work with our counterparts in advanced countries.”

When asked whether KRC makes money from its overseas ventures, Lee stressed that it is a state-run company.

“We implement public projects at home and abroad with taxpayers’ money so our goal is not to generate profits but to provide affordable public goods and services,” he said. “What we do outside Korea is also public sector-oriented. We are different from private entities seeking to generate profits. KRC wants to expand its overseas presence to make up for the shrinking domestic business and retain employees.”

Water is too cheap in Korea

When asked whether Korea suffers from a water shortage as indicated in a recent report by the Organization for Economic Cooperation and Development, Lee said the nation has ample supply of water.

“Korea shouldn’t be categorized as one of the countries grappling with water shortage. The situation is not that bad. Agriculture uses about half of the country’s water resources because rice farming requires significant amounts of water,” the CEO said. “But agricultural water use will decline in line with the declining size of rice paddies.”

However, although Korea does not suffer from water deficiency, Koreans use water recklessly, he claimed. “Koreans use too much water because it is cheap. The government has refrained from raising the price of tap water in fear of inflation. This has been fueling the public’s reckless use of water.”

The CEO said water and most public goods here are priced below production costs, forcing providers of public goods to sustain huge losses.

“Reckless management of public companies is often blamed for their financial losses, but I think the real culprit behind public firms’ poor performance is that they are forced to offer services below costs,” Lee said. “The government should increase the price of public goods and services to make people conserve more water and other resources.” By Lee Hyo-sik, The Korea Times