Haengnok Oh, Misun Yoo [OECD]
Korea is one of the OECD countries that has achieved the fastest growth in income per capita over the past 25 years. Remarkable economic growth in Korea in the last four decades has been led by export-oriented industrialisation. In this process, the share of agriculture and fisheries in value-added and employment has diminished, even as overall output has continued to rise (Figure 1).
The share of agriculture and fisheries production in Korea’s Gross Domestic Product (GDP) fell from 4.96% to 1.83% during the period of 1996-2020. The share of agriculture and fisheries in total employment has also declined, falling from 8.0% to 5.1% between 2005 and 2019 (Figure 2).
Both sectors have been under pressure to respond to changing domestic demands and to improve their productivity in a very limited time. At the same time, the policy environment has changed to increase the exposure of producers to international competition.
Against this background, this chapter considers the role that the agriculture and fisheries sectors in Korea have played in contributing to food security, the generation of viable livelihoods and the sustainable use of natural resources.
From the 1950s to the 1970s, agricultural policy concentrated on increasing crop productivity and achieving self-sufficiency in staple crops. Through the late 1980s and the 1990s, government objectives centred on restructuring the agricultural sector and improving its competitiveness, concurrent with the opening of agro-food markets. The sector faced challenges to keep up with the comparatively competitive manufacturing sector and to adapt to international competition following conclusion of the Uruguay Round Agreement on Agriculture in 1994. In addition, rapid growth and industrialisation led to income disparities between farm and urban households (OECD, 2021).
Since the early 2000s, the emphasis of agricultural policy has shifted to a broader set of objectives, which include revitalising the rural economy, expanding export markets, and enhancing the environmental performance of the sector. Moreover, multilateral and bilateral trade agreements have required progressive structural adjustment in the sector. During the late 1990s and 2000s, non-tariff trade measures on agricultural products were gradually converted to a system of tariffs and Tariff Rate Quotas (TRQ). As agreed in the Uruguay Round Agreement on Agriculture, rice remained an exception to this until January 2015, when a tariff scheme also replaced non-tariff measures on rice. The most recent five-year policy plan (2018-22) emphasises the re-orientation of agricultural policies to ensure income stability and quality of life for farmers, as well as balanced development between agricultural production and environmental conservation, with the aim of addressing a variety of societal demands related to agriculture and rural areas (OECD, 2021).
The fisheries industry faced a turning point in the 1990s. In 1994, the United Nations Convention on the Law of the Sea (UNCLOS) came into force, which Korea and its neighbouring countries, Japan and China, ratified in 1996. Based on the UNCLOS, Korea concluded fisheries agreements with its neighbours (with Japan in 1998, and with China in 2000), which led to significant reduction in its fishing area. In 1999, Korea developed its first National Fisheries Development Plan to restructure the sector from wild catch-oriented policy to management of marine living resources. To achieve this goal, Korea introduced a Total Allowable Catch (TAC) in 1999 which was applied to 4 species, and expanded the budget for decommissioning of vessels (OECD, 2008).
From 2001, Korea became a net importer of seafood and, with the conclusion of Free Trade Agreements (FTA) with a number of economies, the fisheries sector was facing strong competition. In order to recover its marine resources and to increase the competitiveness of its fisheries industry, Korea focused on developing further the TAC mechanism, eliminating illegal bottom-trawling, and shifting from government regulation to community-based fisheries management (OECD, 2008).
Despite these efforts, Korea was unable to suppress overfishing sufficiently and marine living resources did not recover as expected. In response, Korea adopted the Marine Resources Management Law in 2010 and developed its first Marine Resources Management Masterplan. Under this plan, the government set a clear goal of 5 years for the achievement of sustainable levels of marine living resources and fishing, based on scientific research, and established a detailed action plan to achieve the goal.
Korea’s marine landings continued to shrink and by 2016 were lower than 1 million tonnes. This ongoing decline was driven by various factors, including climate change and damage to marine habitats, but overfishing remained a significant driver. In addition, the population engaged in fishing continued to fall, from 251,000 in 2000 to 122,000 in 2017. In response, in 2019, the government announced the Fishery Innovation Plan for 2030, setting out a comprehensive approach to deal with the depletion of resources and revitalise regional fishing communities.
Korea’s level of support to agricultural producers has been gradually reduced over the last two and a half decades due to continued efforts towards market-oriented reforms. Korea has increased investment in the agricultural knowledge and innovation system and introduced direct payments decoupled from commodity production. The level of producer support as a percentage of gross farm revenue in Korea declined from 62% in 1995-97 to 46.7% in 2018-20. Despite these changes, Korea still provides one of the highest levels of support and protection to its farmers among OECD countries, according to the 2021 OECD Agricultural Monitoring and Evaluation Report. This support can constrain farmers’ responses to market signals, and hinder structural adjustment of the sector toward production of higher value-added products (OECD, 2021).
The OECD Review of Fisheries 2020 showed that Korea provided KRW 75.41 billion (USD 68.5 million) in support directly benefiting individual fishers in 2018, down by 85% since 2008. Korea spent KRW 11,558 (USD 10.5) per fisher—well below the average of the OECD—on lowering the cost of inputs, which are likely to encourage unsustainable fishing (OECD, 2020). In 2018, Korea spent KRW 348.98 billion (USD 123.4 million) financing services to the fisheries sector, with the public cost of services to the fisheries sector amounting to 3.3% of the value of production, well below the OECD average of 8.5%.
While Korea maintains stable access to food, the means through which this is assured varies across food types. In 2015, the self-sufficiency ratio of rice was 101%, whereas that of upland crops such as barley, soybeans and wheat was 10.6%. A new direct payment programme, integrating payments for rice, upland crops and less favoured areas, has been implemented since 2020. The new scheme aims to further decouple payments from production. As a means of alleviating the current high dependence on direct payments for rice, the government continues to offer incentives for crop diversification in the form of support for drainage, seeds and agricultural machinery (OECD, 2020).
Korea is amongst the most land-scarce countries in the OECD. Arable land per capita is 0.03 ha and the land‑intensive crop sector thereby has a comparative disadvantage. Moreover, the fragmented land structure makes consolidation of cropland particularly challenging. This fragmentation is accelerating in Korea, due to subdivision of farmland ownership through inheritance and land conversion to non-agricultural use. This fragmentation discourages farm consolidation and encourages land abandonment, as landowners have an incentive to maintain land for future conversion to non-agricultural use (OECD, 2018).
More than 65% of Korean farms are less than one hectare in size, and the share of land cultivated by farms with more than ten hectares of land has remained low, at 14% in 2015. The strong protection of farmland ownership is based on the principle that cultivators should own farmland. This restricts farmland leasing in all but exceptional circumstances, discouraging land owners from leasing their farmlands on the basis of formal contracts. Meanwhile, informal land lease contracts are often unstable and short-term, which discourages stable farm management and long-term investment.
Farmers usually receive their irrigation water for free or at low prices either from the Korea Rural Community Corporation (KRC) or from the local government. This system does not recover operation and maintenance charges, and encourages farmers to continue using water despite increased water stress. The system also reduces the incentive to adopt water-saving technologies to avoid unsustainable use of water in the face of climate change, or to diversify production away from paddy rice. Moreover, providing water, especially irrigation water, may become more costly in the future, given increased competition for access to water resources, degraded water quality and limited capacity to build dams. Reform to water policies could affect the capacity of the sector to reduce its impact on water resources, and increase its overall water use efficiency and its resilience to water risks. In this context, an increase in water charges to at least reflect full supply cost – ideally to cover the opportunity cost of water withdrawals – would help agriculture to adapt to future constraints and encourage more sustainable practices.
Korea is suffering from the depletion of domestic fisheries resources and experiencing declining marine landings. According to the OECD, in 1996, the domestic marine landing of Korea was 1.6 million tonnes, which fell to 0.89 million tonnes in 2016, while recovering more recently to slightly over 1 million tonnes. The depletion of fisheries resources is a concern not only for Korea, but also globally. The recent OECD Review of Fisheries shows that 23% of 1,119 stocks which was gathered from the OECD are in unfavourable conditions (OECD, 2020), while the FAO has estimated that the share of fish stocks at biologically sustainable levels decreased from 90% in 1974 to 65.8% in 2017 (FAO, 2020).
In contrast, the consumption of seafood has continued to increase and Korea has become one of the world’s largest seafood consumers. On average, Korea consumed 56.70kg of seafood per capita in 2018, well above the global average (20.30kg per capita) or the average for developed countries (24.40kg per capita) (FAO, 2020). The consumption of seafood also exceeded Korea’s aggregate meat consumption. Thus, ensuring sufficient supplies of seafood – from aquaculture as well as capture fisheries – has become an increasingly important issue for Korea.
With the stated aim of securing sufficient and stable supplies of seafood, Korea has set a target to increase the rate of self-sufficiency from 72% in 2019 to 79% by 2025 by focusing on managing its marine living resources at a sustainable level, and boosting aquaculture production.
To manage the level of marine living resources, Korea adopted a policy of decommissioning parts of the fishing fleet and extending TACs to further species. These measures have the potential to reduce capacity, improve profitability and relieve pressure on stocks (OECD, 2007), although their success depends on design and implementation. Korea started its decommissioning scheme in 1994 and its fleet decreased from more than 95,000 vessels in 2000 to less than 66,000 vessels in 2018. In line with the OECD principles and guidelines for decommissioning schemes, the government involved stakeholders in the design and shifted from fixed pricing to auction systems where possible. While the decommissioning itself made remarkable progress (Figure 3), the actual effect on the recovery of resources is still unclear.
From 2000, the Korean government changed the focus of its policy from capture fisheries to aquaculture and set a production target for aquaculture to move from 0.8 million tonnes in 1999 to 1.3 million tonnes by 2004, projected to reach the same level as coastal fishing. To this end, the government invested in the development of aquaculture technology and distributed it to fish farmers. Due to these efforts, the production of aquaculture surpassed marine landing in 2005 and has continued to grow more rapidly (Figure 4). However, the pollution from aquaculture facilities and the need to shift to higher value species remain key challenges.
A widening income gap between urban and rural areas arising from rapid industrialisation and slow structural change in agriculture has been a significant agricultural policy issue in Korea (Figure 5). In line with structural change in the agricultural sector, diversification of income sources and development of off-farm employment are considered as pathways to increasing rural income. Despite the government’s efforts to develop rural infrastructure and provide incentives to attract non-farm business activity to rural areas, young and skilled workers tend to leave rural areas and the ageing of the rural population has been more rapid than in urban areas. Korea can exploit the opportunities that rural areas provide for more space-intensive activities, more flexibility in land use, less congestion, lower housing costs and less environmental pressure. Taking a more bottom-up approach and promoting integrated investments and public services could contribute to increasing rural competitiveness and productivity (OECD, 2018).
In addition, a well-functioning labour market gives the agro-food sector the flexibility to adjust quickly to change in labour and skill needs. Given the current demographic trend, Korea will increasingly face greater labour shortage problems, particularly in the agricultural sector. The capacity of agriculture to attract skilled labourers from both domestic and foreign labour markets is crucial for sustainable productivity growth in the sector. Promoting the corporate organisation of agricultural operations would facilitate the entry of younger generations based on a formal employment contracts. The labour market also needs to be able to meet the need for temporary agricultural labour.
Farm structure in Korea tends to be polarised, with more productive large-scale commercial producers and less productive small-scale producers. Efforts to facilitate structural change in agriculture should continue to improve productivity and sustainability performance at the farm level. Sector-specific agricultural policies have a limited capacity to solve the low-income problem of small-scale producers. Policies covering economy-wide rural development and social security should play a more proactive role in addressing low income issues among rural households, including both farm and non-farm households.
Korea has achieved a higher productivity growth in primary agriculture than the OECD average for the last five decades, mainly driven by a declining labour input through rural to urban migration and farm mechanisation. The resource reallocation to more productive farms and to growing sectors such as livestock and horticulture also contributed to this overall productivity growth. Farm structure in Korea is expected to become further polarised between large-scale commercial producers and small-scale producers. Policies should facilitate the structural change and focus more on improving the productivity of large size commercial farms through providing more tailored support, such as technical advisory and risk management.
Given the limited demand growth in Korea’s domestic food markets, opportunities for the future growth of agriculture increasingly depend on access to export markets for high value-added agro-food products. Korea has the potential to develop its food and agricultural sector, including by producing high-value products for both the mature domestic market and growing markets in Asia. To ensure the long-term competitiveness of Korea’s agro-food sector, it is critical to increase its capacity to respond to market demand. Promoting the food manufacturing industry would exploit Korea’s comparative advantage in the export of more capital and knowledge-intensive food products. The food manufacturing industry also has the potential to create employment in rural areas. However, further restructuring is necessary to improve the food manufacturing industry’s competitiveness; for example by establishing a more competitive domestic agricultural sector and a more open agricultural trade regime.
Investment in agricultural innovation is fundamental to ensuring the long-term competitiveness and sustainability of agriculture, and Korea is one of the most intensive investors in public agricultural R&D among OECD countries. To help unleash the sector’s potential to be more knowledge-intensive, Korea’s agricultural innovation system has become more integrated and collaborative, benefiting from a strong advantage in information and communication technology (ICT) and responding effectively to the needs of commercial farmers and agro-food firms. Policies should also promote knowledge flows, thereby facilitating the adoption of innovations in technology, production, management and marketing practices. Furthermore, to meet the needs of commercial producers to improve productivity, the agricultural extension system should evolve to leave more room for private technical service providers in transferring technologies, capital and information.
While economic diversification is one of the key strategies to increase the economic viability of rural areas, the food manufacturing industry has arguably strong potential to create rural employment, add more value to primary agricultural production and open more possibilities to explore export markets and meet domestic demand for value-added products. Government policy needs to focus on enhancing vertical linkages between producers and related industries by removing the restrictions to invest in agricultural sector. Policy should also promote the diversification of farm production activities into processing and marketing of farm products.
For fisheries, the number of families engaged in capture fishing decreased from 171,000 in 2010 to 117,000 in 2018, while employment in aquaculture began to recover after 2010. In addition, ageing is a particular concern for fishing villages, where the share of people aged more than 65 years rose from 23.1% in 2010 to 36.3% in 2018. To cope with this problem, the Korean government takes a 3-prong approach: raising the income of fishing families, improving living conditions in fishing villages, and promoting and supporting newcomers from urban area to settle in those villages.
Income: While the average income of fishing families remains below that of urban families, it grew by 6.0% annually between 2014 and 2018 and reached 80% of urban family income in 2018, above the level of farming families. Due to the shrinking share of capture fishing, the population in fishing communities is increasingly engaged in aquaculture and increasingly derives income from other occupations, such as sales of sea products and marine tourism. The government supports seafood processing enterprises located in fishing villages, and boosts eco-friendly marine tourism.
Living conditions: the Korean government tries to improve the living condition in fishing villages through co-operation across relevant ministries and local governments. The main policy objective is to increase the attractiveness of living in fishing villages, by expanding basic infrastructures and by deregulation of village development.
Newcomers: in order to accelerate the inflow of newcomers from urban areas, the government develops and provides a suitable occupational education and subsidises the cost of housing or settling down.
Despite the declining share of primary agriculture in the economy, managing the environmental impacts of agriculture on natural resources remains important as the sector occupies around 20% of the country’s total land area and accounts for almost half of total water withdrawal. Nitrogen and phosphorus surpluses remain high compared to other OECD countries. Korea has reduced the use of chemical fertilisers and pesticides, but the rapid expansion of intensive livestock production has made manure emissions the main agricultural source of water and soil pollution. Contamination and pollution of soil and water resources is giving rise to uncertainty about future productivity growth, as is climate change (which is expected to raise temperatures and change precipitation patterns). Promoting sustainable use of land and water and increasing preparedness for climate change is an important policy agenda to assure long-term growth in agriculture.
The government released the Climate Change Response Plan 2020-40 in 2019 and the 2050 Carbon Neutral Strategy in 2020. The Climate Change Response Plan, in line with the Paris Agreement on Climate Change, includes a reduction target to decrease GHG emissions by 37% from the business-as-usual (BAU) level by 2030, 24% lower than the 2017 level, as well as action plans across all economic sectors, including agriculture. The Carbon Neutral Strategy includes a national vision and strategic initiatives for achieving the GHG emission reduction target. In addition, direct payment schemes have been further reformed in the direction of targeting explicit societal objectives, such as the provision of environmental services including water management, flood buffering and biodiversity.
On fisheries side, the United Nations Sustainable Development Goal (SDG) 14 seeks to “conserve and sustainably use the oceans, seas and marine resources for sustainable development” and by 2020, “effectively regulate harvesting, and end overfishing, illegal, unreported and unregulated (IUU) fishing.”
In 2005, Korea successfully eliminated illegal small “bottom-trawling” which posed severe problems for sustainability by catching both juvenile and adult fish at the same time. This experience shows that strong political will by the government, coordinated operations across the ministries and the participation of stakeholders are required to deal with IUU (OECD, 2008). The OECD Review of Fisheries 2020 shows that, based on the OECD IUU indicators, Korea performs more strongly in port state measures compared to other indicators, but has the greatest scope for progress in the area of international co-operation.
The fishery sector is competing for space and resources with other industries of the blue ocean economy. The effect on the fisheries and aquaculture industry from increasing competition for space in the coastal zone has been discussed as one of the important subjects of the Committee for Fisheries (COFI) since 1995 (OECD, 1995). However, recent competition that the fisheries industry is facing from other industries for marine space and resources is unprecedented in intensity and scale. As the ocean becomes the stage for a new ocean-related activities, pressures on the ocean and ecosystems from overfishing, pollution and climate change are increasing significantly (OECD, 2020).
Korea’s fisheries sector is also facings large construction projects on coastal areas and expansion of marine protected areas (MPA) for marine tourism, as well as a large-scale ocean wind power plant project, all of which are encroaching on fishing grounds. The dredging of sea-sand for construction material, which can damage the habitat for fish, is another critical problem.
The OECD Committee for Agriculture (COAG) and COFI seek to promote well-managed agriculture and fisheries that can contribute to sustainable growth of the sectors and livelihoods of farmers and fishers. Since the joining the OECD in 1996, Korea has sought to develop its agricultural and fisheries policies in line with OECD recommendations, while the focus of policies has changed to meet evolving national circumstances.
The OECD has been monitoring and providing policy recommendations to Korea as part of its annual Agricultural Policy Monitoring and Evaluation report. This has contributed to Korean reforms to move away from intervention coupled to commodity production and towards policies that facilitate structural change and more market-oriented agricultural production. Furthermore, Innovation, Agricultural Productivity and Sustainability in Korea, published in 2018 as part of the OECD Food and Agriculture Review series, was implemented through a co-operative activity with the Korea Rural Economic Institute (KREI). This review examined the conditions to enable farms and businesses in Korea to undertake innovation in the food and agriculture sector to become more productive and environmentally sustainable.
Korean representatives also vigorously engaged in the work of the COFI as a member and vice-chair of the bureau. Korea’s fisheries policies have been heavily influenced by the experiences shared by OECD members. Korea has been participating in the COFI as a member country since 1997. Since it presented its first case study on “The Economic Impact of Responsible Fisheries on Production and Management” in 1998, Korea has actively engaged in the work of the OECD and shared its policy experience with other member countries (OECD, 1999). As with other members, Korea’s case studies have helped inform the development of OECD guidelines on fisheries policy.
To further co-operation and communication, Korea has seconded officials to the OECD Secretariat (Trade and Agriculture Directorate) since 1997. Secondees have contributed to the work of the Secretariat by providing expertise and facilitating communication and liaison between Korea and the OECD.
Workshops have been one of the most important avenues through which member countries can share their policy experiences and hear diverse opinions, including by experts from NGOs, research institutes and other international organisations. Korea hosted a workshop on the Economics of Adapting Fisheries to Climate change, in Busan in 2010, as well as a workshop on aquaculture in Yeosu in 2012. High-level officials from non-member countries, such as China, Thailand and Indonesia, were invited to the Yeosu workshop, which provided a good opportunity for the COFI to enhance its outreach to those important countries in the field of fisheries.
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Source: Bank of Korea http://ecos.bok.or.kr/flex/EasySearch.jsp?langGubun=K&topCode=111Y002.
Starting with Chile in 2004, Korea had concluded FTAs with 17 countries and economies by June 2021.
Korea has recorded the lowest fertility rate (0.92) in 2019 among the OECD countries.
The ten-year average temperature in Korea changed from 12.31˚C during 1981-90, to 13.1˚C during 2011-2020.
To date, there have been eight secondments to Agriculture and eight to Fisheries.