Government Purchase Price of Rice to Be Cut Beginning in 2003

Minister of Agriculture and Forestry Kim Dong-Tae said yesterday, "It is difficult to increase the government purchase price of rice in 2003 and 2004. In order to strengthen the negotiation power in the 2004 WTO rice renegotiation, competitiveness of the price of Korean rice should be increased."

In a meeting with reporters, Kim said, "Because no other plan, which can preserve the farmers` income, is projected in the next year`s budget, except the direct payment system of rice field farming, the government had to freeze the purchase price to reduce the impact on the agricultural economy. There will be difficulties to increase the purchase price in 2003 and 2004."

"When the WTO`s Doha Round is over at the end of 2004, the pressure to open the rice market will increase. Although the government cannot decide whether it will collect tariff or defer it, it is clear that the price differences between domestic rice and foreign rice should be reduced. Even if the government decides to collect tariff in the current situation, the price of domestic rice is 7.5 percent more expensive than the rice imported from China according to some test calculation." said Minister Kim.

Kim`s statement is worth paying attention since it implies the possibility that the purchase price of rice, which has never dropped before, may drop by 3 to 4 percent for two years beginning in 2003.

Minister Kim also said, "The government plans to increase the unit price of the direct payment system of rice field farming from 200,000-250,000 won to 400,000-500,000 won per hectare to preserve the farmers` income. The government is also considering introducing the stabilization system of rice-production management and the compensation system for dry field farming, which are enforced in Japan, and the import insurance system, which is enforced in the U.S."

In relation to the possibility that the National Assembly may further increase the purchase price, Minister Kim said, "Since the government decided to freeze the purchase price considering the farmers` position, I think that the price should not be increased any more. I will persuade lawmakers of the ruling and opposition parties to prevent the price increase in the National Assembly`s motion process."

Park Joong-Hyun sanjuck@donga.com