`Korea can offset agricultural damage by fostering food companies`

A Korean think tank has suggested that for Korea to overcome damage to its agricultural market due to free trade agreements, extensive cultivation of small- to medium-size food processing companies is needed.

Korea especially needs to systematically assist research and development by small and medium-size food companies, and elevate their international competiveness and capacity to create jobs.

The Korea Food Research Institute suggested this and other ideas Tuesday in its report on promotion of small and medium-size food companies, titled "A Shortcut to Overcoming the High Waves of Agricultural Market Opening due to Signing of Free Trade Agreements.”

The report said the global trend of food consumption is fast shifting from the practice of consumers focusing only on nutrition and taste to one in which consumers pursue health and beauty through foods. Accordingly, the business scope of food manufacturers is expanding to high added-value fields, including food supplements, foods for disease prevention, and anti-aging foods.

In the wake of the expansion of food manufacturers’ business scope, the global food market has posted annual average growth of 4.5 percent over the past several years. The global food market is estimated at about 4 trillion U.S. dollars, or 1.7 times the auto industry, 5.8 times the steelmaking industry, and eight times the semiconductor sector. Taking these into consideration, advanced countries have designated food processing as a future growth industry and are promoting it accordingly.

The report said, however, that the productivity of Korean food manufacturing is far behind that of advanced countries. The number of staff in the sector accounted for 6.8 percent of the manufacturing sector, but food manufacturing only took up 1.3 percent of Korea`s gross domestic product. Korean food companies are also small in size with staff of 20 or less accounting for 88 percent, while small-size companies are concentrated in primary food processing, including agricultural produce drying.

Kim Seong-soo, chief of the division of convergence technology at the Korea Food Research Institute, said, “If Korea can nurture food and agricultural manufacturing properly, it can kill two birds with one stone by securing the competitiveness of the agricultural market and creating jobs.”

The key to promotion of Korea`s food manufacturing is expansion of research and development. In 2009, Korea’s R&D investment in domestic food hit 342.7 billion won (304 million dollars), or 0.9 percent of the nation’s R&D investment. Also, R&D investment relative to sales in food manufacturing amounted to 0.89 percent, far lower than the average of 2.78 percent for the overall manufacturing sector.

The institute suggested that to expand R&D by small and medium-sized food companies in Korea, the government should take a proactive step to secure a system that includes acquisition and nurturing of professional human resources, operation of a constant training and education system, and assistance in the analysis of export foods meeting the demand of food importing countries.

ryu@donga.com