Thursday, April 03, 2008

not a terribly bad idea?

This one is going to be a first. I actually agree some aspects of one policy of the new regime, just one so far, though. This would be one of the few actual 'pragmatic' plans that it has beyond the reckless, crisis prone policies that he also seems set to unveil. This is the plan to use Nonghyup's profits to pay off the debts of some farmers. The principle here that I support would be that the National Farmers Cooperative is actually run like a cooperative and not a profit-making business. However, plans shouldn't merely be forced onto it and there should be more protections and socialization of costs at different levels of governance that compliment the kind of relief highlighted here.

Gov't pushing to ease farmers' debt burden

The government is pushing to introduce a new agriculture equipment leasing system to help ease the farmers' debt burden, a senior policymaker said on Thursday.

The plan calls for the state-supported National Agricultural Cooperative Federation (Nonghyup) to use profits generated through its banking operations to help alleviate debt incurred by farmers who have bought equipment such as combines, tractors and rice transplanters.

Minister for Food and Agriculture Chung Woon-chun said Nonghyup posts profits of 1.2-1.3 trillion (US$1.23-1.33 billion) won every year that could be diverted to help relieve some of the 1.2 trillion won in debt incurred by farmers from buying equipment.

The official said in talks with the cooperative's managers in Seoul that a leasing arrangement would be a feasible means to reduce debt, while at the same time not hurting the ability to raise crops.

"Nonghyup could buy farm equipment from farmers and then lease it back to those who need it," Chung said. The size of the purchase would be determined by the size of the debt of individual farming households.

He added that such support is in accordance with the cooperative's goal of helping farmers.

The minister said that measures are underway to ascertain exact levels of debt, with a detailed blueprint on how best to push for the new system to be announced at the end of the month.

Using farm equipment is essential for mass production, but because of steep prices, small farms are unable to generate enough money to pay back loans used to buy the equipment.

Nonghyup officials said they will try to make changes that will allow the purchase of farm equipment and the start of a leasing program, although some reservations have been raised.

Insiders said that while the agriculture ministry thinks the cooperative generates more than 1 trillion won worth of profit every year, a lot of this must be set aside to meet the capital adequacy ratio set by the Bank for International Settlements.

Of the total, about 650 billion won is reserved for capital adequacy and support projects. It said another 140 billion won is used as dividends for regional cooperatives which are shareholders of the nationwide organization.

This, it said, leaves around 400 billion won available for the leasing equipment, with even this amount unlikely to be used entirely because of the need to maintain emergency relief reserves.

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