Cooperatives in the Republic of Korea: 3rd survey highlights cooperatives’ growing contribution to social and economic realms

Earlier this year, the Ministry of Strategy and Finance of the Republic of Korea (MOSF) announced the results of its third cooperatives survey. Conducted biennially since 2013, the latest edition of the survey points out the growing contributions of cooperatives to society and economy.

Actualité | 29 mai 2018
According to the survey (available here in Korean), the number of cooperatives identified as of the end of 2016 was 10,615; of these the majority (9,954) were general cooperatives whose establishment needs to be reported to local governments. Only 604 were social cooperatives. The establishment of these need to be approved by Ministries in charge of the sector. An even smaller number (57) were associations. The establishment of these needs to be approved by MOSF. With respect to sectors, close to one-fourth (23.6%) were in wholesale and retail, followed by education (13.7%), agriculture and forestry (10.3%), manufacturing (8.7%), and arts and sports (8.6%).

The number of cooperatives (10,615), has increased by 4,380 compared to the 2nd survey at the end of 2014. Out of 10,615 cooperatives, 9,547 cooperatives (89.9%) were registered as corporations. Among them, 5,100 cooperatives (48% of the total) were identified as active by the administrative registers; measured by their tax registration and records of corporate tax payments at the National Tax Service, and employment insurance registration at the Korea Worker’s Compensation and Welfare Service. The reason for cooperatives not to register as corporations (1,068) is due to being in the early stage of their business. For the remaining 52% (4,447) identified as inactive, 1,453 were closed and 2,994 were temporarily suspended. Main reasons for the closure or suspension of these cooperative enterprises were non-profitability, insufficient operating capital, and disaccord among members.

There was growth also in the number of members, workers, and employees among cooperatives between the 2nd and the 3rd cooperative survey.
  • Among the 5,100 active cooperatives identified in the 3rd survey results, the total number of members was 313,000, and the average number of members per cooperative was 62, which was 15 more than the 2nd survey (47 members).
  • The total number of workers was 69,000, and the average number of workers per cooperative was 14, which was 5 more than the previous edition (8 workers).
  • According to the latest survey, the total number of employees was 22,000, and the average number per cooperative was 4, an increase of 1 compared to the 2nd survey (3 employees). The proportion of the vulnerable among the number of total employees increased from 20.2% to 34.7% between the 2nd and the 3rd survey.
  • The ratio of the employees with a regular job was also increased from 73.2% to 81.0%.
However, the relatively low salaries among employees of cooperatives has remained unchanged. The average monthly salary was KRW 1,470,000 (USD 1,354) for regular employees and KRW 920,000 (USD 848) for irregular employees. These numbers are below the average monthly salaries among regular employees in the country which is estimated at KRW 1,860,000 (USD 1,714). According to MOSF, the reasons for the below average salaries in cooperatives, were shorter working time and higher ratio of older and the vulnerable people in cooperatives.
On the financial indicators as well, there were some improvements compared to the 2nd cooperatives survey:
  • The total income of active cooperatives was KRW 1.5 trillion with KRW 290 million (USD 267,183) per a cooperative, an increase from KRW 230 million (USD 211,903)
  • The total turnover reached KRW 1.4 trillion with KRW 270 million (USD 248,756) per a cooperative, an increase from KRW 210 million (USD 193,477)
  • The average assets per a cooperative were KRW 140 million (USD 128,984) which has increased from KRW 56 million (USD 51,870)
However, the net profits of cooperatives decreased from KRW 19 million (USD 17,827) to KRW 3.7 million (USD 3,436). According to MOSF, this was partly because of the increase in the number of co-operatives that put more emphasis on services to its members and community, prominently like social cooperatives. An increase in financial costs due to scaling up of the businesses was also presented as another possible reason.

In terms of financing, cooperatives tend to depend on internal financing such as borrowing from their stakeholders including members (67.0%) and receiving equity investments (42.3%). The ratio of external financing stands at 21.1% while this may allow for them to remain independent, it may also pose challenges to growth.

More than half the active cooperatives (52.4%) were contributing to their communities in various forms such as cash and in-kind donation, provision of space and labour which is in alignment with cooperative principle seven on ‘concern for community’.

According to MOSF, the results of the survey confirms that cooperatives are making a growing contribution to society in the form of job creation, provision of employment to vulnerable people, and concern for community. At the same time, the results of the survey also point out the difficulties cooperatives face including the low levels of public awareness on cooperatives and sustaining cooperative businesses with regard to management and governance know-how. MOSF particularly pointed out lack of access to external financing and market channel as the main difficulties.

Korean government recently announced two inter-governmental plans for boosting Social and Solidarity Economy (SSE) in Korea. One was released in October 2017 aiming to cover the range of SSE institutions recognized by the government including cooperatives, social enterprises, community enterprises, and self-help groups. The other was released in February 2018 targeting social finance with an emphasis on the critical importance of access to finance for SSE enterprises and organizations.

Against this backdrop, MOSF officials point out that the results of the survey help inform the development of a tailor-made policy for each stage of cooperative growth from starting up to scaling up the business so that cooperatives can play its central role as main components of SSE in Korea.