rural convergence industry policy in korea · 2021. 7. 8. · rural areas as a space for the...

Rural Convergence Industry Policy in Korea

HYOJUNG LEE, Ph.D.

Associate Research Fellow

Korea Rural Economic Institute

30 June 2021

Webinar on Stocktaking and Lessons Learned from the Implementation

of One Village-One Product in Asia and the Pacific

1. Rural conditions and Rural Convergence Industry

2. Fostering Rural Convergence Industry at the regional level

3. Regional Network Analysis of Rural Convergence Industry

4. Implications and Policy Challenges

Contents

1. Rural Conditions and Significance of Rural Convergence Industry Development

3

Rural Urban

Rising age of marriage and childbirth, low fertility

Declining of national population

Population outflow + low fertility Continuous low fertility

(Migration leading from on young people)

• ‘Population cliff’ shock with the lowest fertility rate* in the OECD

* 1.17 in 2016 (France 2.0, US 1.9, Japan 1.4)

• Areas where the extinction risk index is less than 0.5

* the elderly population over 65 compared to the female population aged 20-39

• Declining population in rural areas and outflow of young people are concerned about

the chain collapse of urban and rural areas

Rural areas as a space for the emergence of new lifestyles and challenges

Emphasis on work-life balance

• Emerging of new lifestyle

• Half of living in rural areas and are engaged in subsistence agriculture,

• The others are combining the work that one wants to do (writing, community service,

artistic creation, special product processing, local resource conservation, etc.)


Continuous promotion of policies for fostering specialized rural industries

Source: Kwang-Sun Kim, 2014. A plan to improve rural industry policies through the establishment of a regional innovation system, Korea Rural Economic Research Institute

• Full-scale rural industrialization policy promotion since the mid-2000s

• It seeks to promote secondary or tertiary industrial activities by utilizing resources with

pluralistic values in agriculture and rural areas.


Project for fostering Regional Specialized Product

Supporting local agricultural clusters

Supporting for inter-district cluster activation



6th industrialization

Support for complex industrialization of rural resources

Rural vitality promotion project Local industry promotion project

New vitality support project (Phase 1) New vitality support project (Phase 2)

Significance of Rural Convergence Industry Policy

Contents ~1980’s 1990’s 2000’s 2010~

Processing (Secondary)

Contents Attract local agriculture

and manufacturing unrelated to resources

Fostering the agricultural-based

processing industry

Strengthening industrial competitiveness based on regional innovation

capabilities

Strengthening the competitiveness of

agriculture and rural resource-based

manufacturing(Expanding the share and influence of

agriculture and rural areas within the industry)

Projects Side business complex,

Saemaul Factory

Fostering the agricultural and marine

products processing industry

Regional agricultural cluster, local industry

development, etc. Complex Resources Project

Experiential tourism service

Contents

Encourage accommodation

facilities as a source of income other than simple agriculture (differentiation X)

Rural tourism development from the perspective of urban-

rural exchange

Expansion of rural tourism based on the

pluralistic values of rural areas

Spread of agricultural and rural values nationwide

through commercialization of rural multicultural values

Projects Tourism Farm, Rural Recreation Complex, Rural

B&B Rural Experience Village


Significance of Rural Convergence Industry Policy

Contents ~1980’s 1990’s 2000’s 2010~

Rural industrial

base

Contents

Laying the foundation for industrial

accumulation in rural areas

Creation of an agglomeration site for fostering agricultural-

related processing industries

Fostering rural industrial clusters with self-

reliance

Nurturing industrial bases in various spatial units (village →

region)

Projects

Side business complex, Saemaul factory,

agricultural industrial complex

Specialized complex

Regional Agricultural Cluster

Specialized Agricultural Complex

6th industrialization district, etc.

socioeconomic conditions

Full-scale industrialization

Increase in unemployment in rural

areas

Expansion of crop import opening

Reduction of the rural labor force and

restructuring of the Korean economy

Rural labor force decline and population aging

national economy restructuring

Intensifying population aging Changes in population change such as returning to farming

Local revitalization

Expected to stimulate employment of idle workers through the manufacturing sector

Expectation of economic ripple effects through the creation of

agricultural and industrial complexes

Enhancing economic vitality based on

regional development paths (specialized

industries, etc.)

Based on endogenous development, create a

virtuous cycle that leads to income enhancement, job creation, and population

inflow.


Growth of specialized rural industries and creation of local jobs

• Emergence of rural industrial ecosystem and job creation using local assets

County Specialty product

Industry Classification Designation

Employment (persons)

2000 2015 2000-2015

Rate of change(%)

Nam-hae Terraced

paddy field Tourism and lodging facility operation

business 396 1,606 305.6%

Keum-san Ginseng Ginseng Food Manufacturing 417 1,175 181.8%

Go-chang Raspberry

Fruit and vegetable processing and storage processing

52 204 292.3%

Manufacturing liquid food for health supplements paste manufacturing

74 138 86.5%

Soon-chang Fermented

paste paste manufacturing 234 480 105.1%

Dam-yang Bamboo Tourist accommodation management

business 84 194 131.0%

Moo-an Onion Manufacturing liquid food for health

supplements 46 313 580.4%

Young-gwang Dried yellow

corvina Aquatic/animal drying and salting products

manufacturing 60 1,437 2295.0%

Moon-gyeong Chinese

schisandra Fruit and vegetable processing and storage

processing 25 427 1608.0%

Creation of jobs in specialized industries in major rural cities and counties


2. Fostering rural convergence industry at the regional level

Contents Fostering individual

business entities

Fostering rural

convergence industry at

the regional level

policy status Individual item and product

development

Upgraded to “Regional Strategic

Industrialization”

Target Individual business entity Industry related to the 6th

industry

policy goals

Increase in income of individual

business entities (farms,

corporations)

Revitalization of the rural

economy and shared growth

Supporting

system

Support by sector(industrial

policy)

Integrated support(industrial

policy + regional policy)

Value chain for individual business

Clustering

• Business entities engaged in production, processing, distribution, tourism, and export, focusing on

specialized items, support the creation of new added value based on collective activities through

network configuration and value chain efficiency.

• Creating synergies through networking between production-processing-distribution-tourism

management Encourage participation of more farms and businesses through regional-level access

Regional Rural Convergence Industry Promotion Policy

Support for individual business entities

Support for selection of certified companies

Professional counseling and coaching

Antenna shop operation

Basic fact-finding

Facility directory construction

Sales Platform for Distributor

Regional-level support

6th Industrialization District

Rural Convergence Industry Network Construction

Establishment of regional promotion system

Regional tourism system

6th industrialization Value Chain

Expansion Agglomeration,

scale


Year County Target products

2014

Young-dong Grape and wine

Soon-chang Fermented pastes

Ha-dong Green tea

2015

Heong-sung Beef

Seo-cheon Hansan Sogokju (Korean whisky)

Young-gwang Barley

Moon-gyoung Schisandra

Eui-sung Garlic

Seo-gwi-po Citrus

2016

Gang-reung and Pyeong-chang High-land cabbage

Gong-ju Chestnut

Jang-su Red-food

Ham-yang Wild-ginseng

2017

Go-chang Raspberry

Go-heung Citrus

An-dong Chinese yam

2018

Young-wol Fermented pastes

Eom-sung Perilla seeds

Im-sil Cheese

Gok-sung Melon


• Promoting increase in income of farmers and vitalization of local economy through

advancement of regional development system for rural convergence industry and

expansion of social agriculture

• Regional network/rural convergence industrial district (cumulative):

(’17) 25 locations/16 → (’18) 38/20 → (’22) 92/36

Contents Shortcomings of the previous

projects Improvements

Rural Convergence Industry

Low participation of young farmers

Establishment of youth startup support system for each stage of growth of convergence industry management body

Rural tourism

Lack of differentiated entertainment due to government-led development and dissemination of tourism contents

Development and operation of local-specific rural tourism contents led by rural sites


Emphasis on building a network to compensate for the lack of competency of the management body

• Lock-in to existing trading relationships

• high barriers to entry

Active participation of

local farmers

• Segmented transaction relationship by item

• Difficulty in regular cooperation with supporting organizations

Activation of networks

between heterogeneous

entities

Establishment of regional

customized support system

• Limitations of individual management capabilities

• Undeveloped regional innovation network Activation of various value chains

Local – based

support


• Poor support system at the local government (city, county) level • Roles and Functional Limitations of Local Supporting Agencies • Lack of planning function and competency, such as establishing

mid- to long-term strategies


Regional research on case studies of rural convergence industrial districts Situation Contents

Government and other administrative organizations

Ministry of Agriculture, Food and Rural Affairs, Jeollabuk-do(District), Soon-chang Paste Office

Stakeholder Daesang, Sajo(Private company), Traditional sauce manufacturer, Korea Soybean Cooperative Association, Korea Traditional Food Association

Key subject (Main actors) Soybean, pepper production farm, Sauce(Paste) manufacturer, Sauce business office

Direct supplier Soybean farmers, Pepper farmers, Pottery manufacturer, Salt producer

Central industry Red pepper paste, soybean paste, soy sauce, pickles

Distribution channel Direct transaction, online sales, home shopping, soy sauce festival

Innovator Chonbuk National University, Wonkwang University, Woosuk University, Rural

Development Administration, Korea Food Research Institute, Fermented Microorganism Industry Promotion Agency

Competitor CJ (Haechandeul), Sempyo, Mongolian soy sauce, other local traditional sauce manufacturers, imported sauces

Market Characteristics Soybean Concentration

Expand to related products Expansion of domestic and foreign markets

Source: KREI (2017)

Regional Rural Convergence Industry Cooperation Form

Forms of cooperation in production with local entities

None Joint

promotion of business

Joint procurement and joint use of product

raw materials

Co-production

Establishment of product standard

specifications between

companies

Etc

7.5 9.4 20.8 56.6 7.5 0.0

Purpose of cooperation with local entities

Saving time,

money and effort

Improving market

share and

pioneering new

markets

Sharing of skills,

information

and knowledge

Reduction of

development risk

Maintaining long-

term business ties Etc.

39.6 43.4 3.8 34.0 9.4 0.0

Unit: %

Unit: %

Source: KREI (2017)


Regional network analysis of cases of rural convergence industry at the regional level

• Analysis of network changes related to collective activities such as new product development

and joint marketing in addition to transaction relationships

• Changes in network density of business entities and supporting organizations

• Changes in the centrality index of major supporting organizations

Network density Average linkage per business entity

2014 2017 2014 2017

0.012 0.018 0.712 1.017


Source: KREI (2017)

Changes of Rural Convergence Industry Network in Soon-chang County

<2014> <2017>


Paste Information Village

Paste Information Village

Soonchang Agricultural Technology Center

Soonnchang Paste Village Farming Association

Soonchang Agricultural Cooperative Federation

Traditional Paste Association Soonchang County Gov.

Traditional Paste Association

Soonchang Agricultural Technology Center

Soonchang Agricultural Cooperative Federation

Soonnchang Paste Village Farming Association

Soonchang County Gov.

Source: KREI (2017)

Regional growth constraint factors

Factors hindering production activities of new rural convergence industries

Difficulty in securing a

market

Reduced profitability

Aging, manpower shortage

Lack of skills Material cost

rise

Lack of operating expenses

Poor location

Etc.

2.4 59.5 19.0 4.8 7.1 4.8 4.8 0.0

Factors hindering the development of regional rural convergence industry

Lack of expertise

Absence of key

players in related

industries

Lack of cooperati

on between companies

Winner-take-all

structure

Difficulty in

supplying raw

materials

Absence of synergies between

large corporations

Difficulty in

securing competent manpower

R&D new technology

Lack of PR

Etc.

14.6 17.1 2.4 36.6 12.2 34.1 2.4 0.0 0.0 2.4


Source: KREI (2017)


Implications of Regional Analysis of Rural Convergence Industry Cases

• Growth of cooperative networks in the region other than direct business relationships

centering on local support organizations, innovation actors, and consultative bodies

between business entities

• In particular, entry into new farms and network formation through the Agricultural

Technology Center and Research Society are actively appearing.

• In order for the industry in rural areas to grow through the 6th industrialization, how to

change the cooperative relationship that was formed in the early stage is an important

policy task

• It is necessary to support innovation activities in consideration of the needs of business

entities, and the unique role of local innovation agents, local government research

institutes, agricultural technology centers, etc.

• It is necessary to differentiate policies and support projects that take into account different

conditions for each region, such as the stage of market growth and the degree of

accumulation and growth of production activities in the 6th industry by region.

Considerations for fostering rural convergence industry at the regional level

• Even if the policy focuses on regional network expansion, it is difficult to expect the effect

of the policy if there is no incentive for farmers (business entities) participating in the value

chain of rural convergence industry to expand their business scale in cooperation with

other farms.

• The profit obtained by the individual business entity through the cooperative (network)

business must be higher than if it is not

• When expanding the regional rural convergence industry network, the interests of existing

farms and businesses should not be damaged.→ (Policy direction) In order to continuously

maintain cooperation among the actors participating in the network, ① the profit should

increase proportionally as the scale of cooperation increases. ② Government support for

fostering cooperation must have continuity, and support that can lower fixed costs


Thank you for your attention

Dr. HYOJUNG LEE

Korea Rural Economic Institute

[email protected]

rural convergence industry policy in korea · 2021. 7. 8. · rural areas as a space for the...

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