Research Reports
Development Schemes of Local Public Corporations in Agricultural Sectors
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AuthorPark, Seokdoo
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Publication Date2009.10.01
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Original
Local public corporation refers to firms owned partially or fully by a local government, which also runs it directly or indirectly. Local public corporations meet the service demands of residents and farmers in remote areas. They directly contribute to revitalizing the local economy, expanding the financial capacity of local governments, and indirectly expanding public services and creating regional employments.
The Act of Local Public Corporation was created in 1969 and put into practice in 1970. Since then, the number of local public corporations has been increasing constantly from 46 in 1975 to 59 in 1980, 113 in 1986, 202 in 1991, 250 in 1998, 378 in 2008 and so on.
Though having positive influences, both local and national public corporations have been negatively recognized by the public and blamed for their insolvency, recklessness, corruption and inefficiency. Actually, many local public corporations were either disposed, liquidated or merged with after experiencing deficit accumulation with insolvent operations, which was believed to be caused mainly by management problems and lack of relevant systems. Other factors of financial difficulty include insufficient business volume relative to firm size and the tie-up of sales, though there is lots of room for growth considering the market share with a firm boundary.
The acts and regulations for local public corporations do not include supporting devices helping them in case of management crisis. The responsibility for their duration and development is placed mainly on shoulders of managers with a limited support from local government from time to time. In case of Japan, local governments are subsidizing local public corporations from the launching and afterwards. Subsidy covers business expenditure and operation cost, and it includes the guarantee of an obligation or a loss and rescue fund for financial emergency.
The purposes of the study are ① to gather up the operative reality and systemic problem of current local public corporations, ② to closely inspect and solve their problems to develop local public corporations in agricultural sectors, and ③ to present promising perspectives to improve systems, normalize operations, and establish and activate current ones.
Directly-run projects or firms by the act of local public corporations are excluded from the scope of this study. The study only includes either indirectly-run local public corporations and industrial complexes or the third sector in which the majority of ownership is given to the private sector. For precise inspection of local public corporations in agricultural sectors, we interviewed 7 corporations among 12 relevant firms. In addition, using both field study and literature review, we studied local public corporations in Japan.
The structure of the report is as follows: Chapter 1 is for the introduction and Chapter 2 is for the overall theory about local public corporations. Chapter 3 reviews the overall policy and system of local public corporations including directly-run project, operative reality and problems. Chapter 4 covers achievements and problems in their operation through a field study of local public firms in agricultural sectors. Chapter 5 introduces foreign examples including a Japanese case. Chapter 6 integrates all the studied contents and presents the ways of developing local public corporations in agricultural sectors.
Compared with urban areas, rural areas have struggled with shortage of investment money, specialized labor, and resources, as well as the aging population and, above all, industry structure lagging far behind. Local public corporations are one of the solutions for it. They can find and develop a local resource, industrialize it and even create a new local image for citizens, which attracts more visitors for farm tour and consumption of local products. In the end, they can play an important role in revitalizing the local economy.
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