SEOUL, Korea, Mar 9, 2014 (Korea Bizwire) – The government-appointed National Commission for Corporate Partnership designated in November 2011 a total of 82 business areas for small business protection, meaning that entrance of large corporations into these sectors would be subject to regulation.
When the commission decided on these matters, it included tofu making as one of the protected industries. But the commission didn’t realize an important fact that small- and medium-sized tofu makers rely mostly on imported soybeans for their tofu ingredient unlike larger ones that use domestically produced soybeans.
After large tofu suppliers stopped making tofu in compliance with the newly introduced regulation, it was domestic soybean farmers who were negatively affected. Ahead of the November 2014 review of the three-year small business protection rule, the National Commission for Corporate Partnership is facing an uphill battle with the domestic farm lobby backed by the Ministry of Agriculture, Food, and Rural Affairs.
The commission’s decision was intended to protect small-scale tofu suppliers, which was no doubt commendable. But it led to an unintended consequence of harming domestic farmers. As large food companies such as Pulmuone, Daesang Corp., and CJ reduced their purchase volume of soybeans, the total amount of domestically harvested soybeans sold in 2013 declined 38.9 percent from the previous year.
According to the Agriculture Ministry, the volume of soybean purchase by large food companies rose 2.2 percent to 14,200 tons in 2011 from 13,900 tons. But the amount shrank 7.0 percent to 13,200 tons in 2012 and 28.0 percent to 9,500 tons last year after the commission introduced the regulation in late 2011.
Accordingly the average price of soybeans (based on a 35-kg high-quality white bean pack) has plunged 41.2 percent to 146,230 won during the first quarter of this year from 248,891 won during the same period three years ago.
As most soybean farmers have few outlets to sell their produce except to tofu makers, they have a hard time finding willing buyers. Of all the soybean output, as much as 85 percent are sold to food processors. Tofu is by far the largest consumer of the beans accounting for 51 percent in total, followed by bean paste and soy sauce (16%), bean sprout (11%), and soy milk (10%).
The Ministry of Agriculture, Food and Rural Affairs is adamant that the regulation be abolished. A ministry official said, “Soybeans are the third most important crop for our farmers. The Corporate Partnership Commission must allow big food companies to sell tofu products in order to encourage farmers to keep growing soybeans.”
To this, a commission official responded that its decision was simply intended to limit expansion of large company business in some protected areas, which will pose little threat to farm goods suppliers.
The Ministry of Strategy & Finance is in the position of deciding this matter after waiting for a research project to come out by June this year. As the National Commission for Corporate Partnership commissioned research projects to the Korea Small Business Institute and Market Economic Research Institute, however, the Agriculture Ministry quickly added a researcher from the Korea Rural Economic Institute to the team as a way to reflect the farmers’ interest better.
For the next six months until the Corporate Partnership Commission makes decisions on the protected industrial sectors by September, ministerial competition is expected to get fiercer.