This report aims to analyze the background and process of constructing public wholesale markets and policy projects related thereto, outcomes and issues involved, so that the results can be used effectively for policy processes of developing countries, and can suggest implications to policy makers of those countries. Public wholesale markets significantly transformed the premodern distribution system of Korea before the 1980s.
This report is composed of the Background and necessity of public wholesale market construction (Chapter 1), the Outcome and assessment of the public wholesale market (Chapter 2), Promotion of the public wholesale market construction, operation of the market and its management system (Chapter 3), Issues and improvements of the public wholesale market operation system (Chapter 4), and Features of public wholesale market policy and applications for developing countries (Chapter 5). Until the 1980’s, distribution of agricultural products in Korea were unfair and closed transactions by commissioned sellers in markets, which contributed to unfair pricing, and asymmetrical market information resulted in very low negotiation capabilities in the markets for the farmers. To improve this situation, the Korean government enacted the “Act of stabilized distribution and prices of agricultural and fishery products (ASDP) in December, 1976, to make a basis for constructing public wholesale markets.
The Garakdong Wholesale Market, the first public wholesale market in Korea, opened in 1985, to complete the nationwide public wholesale market (33) construction project, which included the Busan International Fish Market in 2008. The outcome of the public wholesale market construction policy is summarized as follows: 1. Suddenly increased volume of transactions and attraction of transactions in similar wholesale markets; 2. Fair and transparent transactions and stable transaction basis; 3. Improved product quality and logistics efficiency; 4. Improved quality of agricultural products and negotiation capabilities; 5. Enhanced distribution system for agricultural products and leading role in the system; and 6. Reduced the risk of farmers and enhanced reliability of consumers. The public wholesale market construction policy looks very feasible in terms of compatibility, and the goal of the policy was fully achieved in terms of efficiency. The current transaction system for the public wholesale market is classified under the auction system and the commissioned retailer system, which are very important for distributing agricultural products in Korea through various functions and operational rules. The public wholesale market has various operators and participants, and appointed managers manage facilities, keep transactions organized, guide and supervise people involved in distribution.
The volume of transactions in the public wholesale markets continues to increase, and as of 2011, accounted for approximately 45%, the largest portion, in the total distribution volume of fruits and vegetables in Korea. In regards to the proportions for the transaction systems in the public wholesale markets, the wholesale markets by auctions (95.0%) are even higher than the wholesale markets by the commissioned retailer system (5.0%). However, a lot of issues have been revealed due to poor operation and management of the public wholesale markets and the changing spirit of people involved in distribution since the 1990s.
The government prepared step-by-step measures to innovate distribution in public wholesale markets, introduced a new transaction system (commissioned retailer system) and started the facility modernization project.
Korea’s public wholesale market construction policy suggests many implications to developing countries. Therefore, the first thing needed to establish a public wholesale market construction policy is to examine the necessity of public wholesale markets and its feasibility. Also, another requirement to examine is to build an efficient organization to overhaul and establish related regulations, and to establish a complete master plan to present a feasible construction scheme. In addition, systems need to be built for efficient operation and management.