Bloomberg News

S. Koreans in Farm U-Turn as Chaebol Era’s Rapid Growth Ends

March 27, 2013

South Koreans in Farm U-Turn as Chaebol Era’s Rapid Growth Ends

Lee Geun Hong’s annual income of 200 million won makes him a wealthy outlier in a profession where 44 percent of the population is over 60 and where the average household income is 30 million won, compared with 51 million won for urban workers, according to farm ministry data. Photographer: Woohae Cho/Bloomberg

Lee Geun Hong is a rare example of wealth in South Korea’s countryside, known for its shrinking population and decades-long farming slump. Driving a Mercedes rather than a Hyundai, the former Samsung Heavy Industries Co. executive says that may soon change.

“The future for farmers is very bright,” the 60-year-old Lee said while pruning trees in a greenhouse at his farm in Sangju, overlooking the Nakdong River about 160 kilometers (100 miles) southeast of Seoul. “But those who stick to conventional ways will remain poor.”

Lee moved to Sangju from Seoul in 2007 after 18 years at the world’s second-biggest shipbuilder and a stint running his own cafeteria. He earns about $180,000 a year, more than six times the average rural income, selling blueberries online to cut out the middleman, and grows organically to appeal to Korean consumers he calls “the pickiest in the world.”

The number of people leaving cities for rural areas is at a record high in South Korea, as government subsidies to boost agricultural production coincide with slowing economic growth. The most successful bring investment and skills that are boosting margins -- the number of farmers and agricultural associations earning at least 100 million won ($90,000) rose for a fourth year to 17,291 in 2012, the farm ministry said.

“The trend may help the national economy by re-channeling surplus labor to rejuvenate farming areas,” said Jun Kwang Hee, a professor of sociology at Chungnam National University. “We now live in an era where the economy is growing without creating many jobs. Your career at companies ends at 50, but you are very young at 50 and even at 60 in the countryside.”

Record Migration

The number of households that left cities for rural areas rose to a record 27,008, or 47,322 people, in 2012, according to data released today from the farm ministry and Statistics Korea. The number of families moving to set up farms rose 11 percent to 11,220, with 38 percent in their 50s and people younger than 50 making up 36 percent, the data show.

The government expects the trend to continue as South Korea’s estimated 7.1 million baby boomers -- in a population of 50 million -- reach retirement age, and last year increased loans and training to help people re-settle.

Lee spent his life’s savings of 1.3 billion won to set up his farm, including 600 million won for 8.2 acres (3.3 hectares) of farmland. This year he’ll join an auction market to expand his sales channels. He’s also studying how to extend the blueberry harvest period to March-October from June-July to double his income.

Wealthy Outlier

Even as the number of wealthy farmers increases, his 200 million won annual income makes him an outlier in a profession where 44 percent of the population is over 60 and where the average household income is 30 million won, compared with 51 million won for urban workers, according to farm ministry data.

“Farming strategically makes a difference,” said Lee, sipping tea made from fermented blueberries grown on his farm.

South Korea’s rural areas hollowed out as family-run industrial groups known as chaebols, including Samsung Group and Hyundai Motor Co., fueled years of double-digit growth since the 1970s to create Asia’s fourth-largest economy.

Migration in search of factory jobs contributed to a fall in food production to 45 percent of consumption in 2011, from 86 percent in 1970, farm ministry data show.

The period of rapid industrialization led South Korea to the third-highest rate of urbanization in the Asia-Pacific region at 83 percent, behind Australia and New Zealand, according to Bloomberg Industries.

Fading Attraction

The allure of city life may be fading as growth slows, according to Kim Jeong Seop, a research fellow at Seoul-based Korea Rural Economic Institute. South Korea’s economy expanded 2 percent last year, the slowest since 2009 at the height of the global financial crisis, with household debt soaring to a record 959.4 trillion won last quarter.

Surveys also show the country lags smaller economies in quality of life. South Korea ranked 24th of 36 nations in the Organization for Economic Cooperation and Development’s Better Life Index, which gives equal weight to 11 categories including income, jobs, housing and health. While the nation ranked among the highest in education levels and safety, it scored lower grades in jobs, income and the environment, the index shows.

The average person earns $16,570 a year, less than the OECD mean of $22,387, the index shows. Sixty three percent of people aged 15 to 64 have a paid job, below the OECD average of 66 percent, while Koreans work 2,193 hours a year, more than the OECD average of 1,749 hours.

‘Cultural Change’

“Many people move to farm villages because it’s hard to make a living in cities,” the institute’s Kim said. “At the same time, many others move to rural areas because they are tired of hectic, capitalism-driven metropolitan life. It’s a cultural change that’s taking place in Korea.”

For full-time farmer Lee, the move to Sangju has given him the freedom to wake up whenever he wants and the time to spend full days grocery shopping with his wife in his dark blue Mercedes S500 sedan.

“It was tough in the beginning,” said Lee, whose son and daughter, both in their 20s, visit the farm on weekends from Seoul. “I’m happy because I still can work. Companies won’t take care of you forever. I’m happier now than ever.”

Still, new investment from farmers like Lee won’t immediately reverse the long-term slump in Korean farming. Lee chose blueberries over South Korea’s staple rice due to better economics of the niche crop. He would have needed four times his farmland of 8.2 acres to earn half his current salary from rice farming, he estimates.

Cheaper Imports

Cheaper food imports coupled with increases in production costs have left many crops unprofitable in South Korea, with rice among the hardest hit due to falling demand, according to Kim Jeong Ho, an agricultural economist at Korea Rural Economic Institute. Annual per-capita rice consumption has halved to 70 kilograms (154 pounds) since 1970, farm ministry data show.

“Rice is the most-neglected crop in the agricultural industry even though it’s the most important to us,” said Park Jong Kwan, a 40-year-old farmer who started organic farming in Sangju after graduating from college in the late 1990s.

Park earns 40 million won a year from a grape and persimmon orchard. He farms rice only for his family to eat, an increasing trend among farmers that he knows is undermining the country’s ability to feed itself.

“We need to change our mindset to improve important crops like rice,” he said. “Without mobile phones or cars, life gets more inconvenient, but without food, you can’t live.”

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

To contact the editor responsible for this story: Stuart Biggs at sbiggs3@bloomberg.net


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