{"id":2204850,"date":"2024-04-25T17:51:14","date_gmt":"2024-04-25T08:51:14","guid":{"rendered":"https:\/\/koreapro.org\/?p=2204850"},"modified":"2024-04-26T15:26:39","modified_gmt":"2024-04-26T06:26:39","slug":"south-korean-smart-farm-companies-face-uphill-battle-in-middle-east-market","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/04\/south-korean-smart-farm-companies-face-uphill-battle-in-middle-east-market\/","title":{"rendered":"South Korean smart farm companies face uphill battle in Middle East market"},"content":{"rendered":"

South Korea\u2019s smart farm sector presents a promising opportunity for the country to bolster its agricultural productivity and food security, but Korean companies seeking to enter the Middle Eastern market with their smart farm technologies face significant risks, including economic instability and the need for long-term investments.<\/span><\/p>\n

The Yoon Suk-yeol administration has made securing food at <\/span>lower costs and in larger quantities<\/span><\/a> a key policy goal, as South Korea\u2019s agri-food sector has suffered from the realities of <\/span>climate change<\/span><\/a> and international conflicts.<\/span><\/p>\n

To achieve its goal, the Yoon administration is doubling down on the previous Moon Jae-in administration\u2019s <\/span>commitment<\/span><\/a> to foster <\/span>smart farms<\/span><\/a> that allow producers to manage production activities remotely and automatically, reducing working hours and operating costs.<\/span><\/p>\n

However, despite the government\u2019s promotion efforts and sustained sectoral growth, the domestic adoption of smart farms still faces obstacles.<\/span><\/p>\n

AGING FARMERS<\/b><\/p>\n

South Korea\u2019s rural areas face significant challenges in adopting smart farm technologies due to an aging agricultural workforce and depopulation. In 1971, only <\/span>7.6%<\/span><\/a> of the farming population was over 60, but by 2022, <\/span>nearly half<\/span><\/a> of all farmers were 65 or older.<\/span><\/p>\n

Research<\/span><\/a> indicates that older farmers are less likely to adopt new agricultural technologies. They often struggle with technologies that are not intuitive, interoperable, or easy to understand without proper training. Moreover, convincing them of the value of high-cost investments proves difficult.<\/span><\/p>\n

The Yoon administration has taken steps to encourage young people to pursue farming careers and has provided training in smart farm technologies. However, these efforts have had limited success, with <\/span>60%<\/span><\/a> of trainees abandoning their plans to start agricultural businesses due to high investment costs and challenges in securing arable land.<\/span><\/p>\n

To address these issues, the government announced <\/span>plans<\/span><\/a> to relax land use regulations in February, allowing vertical farms to be set up in industrial complexes. It has also supported the establishment of <\/span>Smart Farm Innovation Valleys<\/span><\/a>. However, the three-year rental plots in these valleys can only support <\/span>25%<\/span><\/a> of the trainees.<\/span><\/p>\n

\"\"

Agriculture officials from Oman visit a smart farm operated by Nongshim in Anyang, Gyeonggi Province, Nov. 24, 2022 | Image: Nongshim<\/a><\/em><\/p><\/div>\n

EXPORT OPPORTUNITIES<\/b><\/p>\n

Despite the domestic challenges, <\/span>the South Korean government remains committed<\/span><\/a> to positioning the country as a leader in exporting smart farm goods and services.<\/span><\/p>\n

By diversifying Korea\u2019s export portfolio, the smart farm sector could play a crucial role in strengthening trade relations and fostering economic cooperation in emerging markets, particularly in the Middle East.<\/span><\/p>\n

The Yoon administration sees significant potential for South Korean companies in the Gulf region, which is almost entirely dependent on food imports and <\/span>vulnerable to supply chain disruptions<\/span><\/a>. The region faces issues similar to those in Korea, including shrinking arable land, water scarcity and labor shortages in the agricultural sector.<\/span><\/p>\n

To combat these problems, Gulf nations have also invested in smart farms, and the region\u2019s smart farm market is <\/span>expected to reach<\/span><\/a> $6.23 billion by 2030, with an average annual growth rate of 21.7%.<\/span><\/p>\n

To support Korean companies in exporting smart farm products and winning project bids, the agriculture ministry and the Korea Trade and Investment Promotion Agency (KOTRA) <\/span>designated Riyadh<\/span><\/a> as the first overseas trade office dedicated to this purpose in Sept. 2023. The ministry and KOTRA later opened trade offices in Kuwait, Almaty, Baku and Melbourne in February.<\/span><\/p>\n

Further, South Korea has identified <\/span>Qatar<\/span><\/a> and the <\/span>United Arab Emirates<\/span><\/a> (UAE) as key targets for its smart agriculture exports. The ROK and the UAE concluded a <\/span>Comprehensive Economic Partnership Agreement<\/span><\/a> (CEPA) \u2014 the first free trade agreement between South Korea and an Arab country \u2014 in Oct. 2023.<\/span><\/p>\n

The CEPA will eliminate <\/span>90%<\/span><\/a> of tariffs between the two nations and includes an annex calling for the expedited development of a <\/span>special strategic partnership<\/span><\/a> focused on smart farms.<\/span><\/p>\n

Similarly, Yoon\u2019s state visit in Oct. 2023 accelerated cooperation with Qatar, resulting in a revised <\/span>Smart Farm Cooperation memorandum of understanding<\/span><\/a>.<\/span><\/p>\n

\"\"

Van der Hoeven\u2019s ModulAIR greenhouse | Image: Van der Hoeven<\/a><\/em><\/p><\/div>\n

GLOBAL COMPETITION<\/b><\/p>\n

South Korea faces significant competition in the Middle Eastern smart farm market from other countries that have already established successful regional partnerships, such as the U.S. and the Netherlands.<\/span><\/p>\n

In Feb. 2023, U.S.-based AeroFarms entered into a <\/span>joint venture agreement<\/span><\/a> with Saudi Arabia\u2019s Public Investment Fund to establish a company that will build and operate vertical farms throughout the Kingdom and the wider Middle East and North Africa regions.<\/span><\/p>\n

Similarly, in Aug. 2023, Dutch horticultural project provider <\/span>Van der Hoeven<\/span><\/a> secured a $120 million contract to establish and maintain <\/span>two pilot greenhouses<\/span><\/a> in Neom, a futuristic urban mega-project in the Saudi Arabian desert championed by Crown Prince Mohammed bin Salman.<\/span><\/p>\n

The Netherlands, known for its \u201c<\/span>Dutch Diamond<\/span><\/a>\u201d approach, which emphasizes close collaboration between the government, knowledge centers and the business sector, views this cooperative model as a blueprint for disseminating its innovations and achieving sustainable impact through cross-border public-private partnerships.<\/span><\/p>\n

As South Korea seeks to establish itself as a leader in the smart farm sector, it will likely seek to develop strategies to differentiate itself from these competitors and demonstrate to potential partners in the Middle East how its technologies and expertise can be localized to support sustainable economic growth in the agriculture sector and meet production demand.\u00a0<\/span><\/p>\n

\"\"

A consortium of Korean smart farm companies, supported by the Ministry of Agriculture and KOTRA, form a joint venture in Riyadh for year-round strawberry cultivation, March 12, 2023 | Image: KOTRA<\/a><\/em><\/p><\/div>\n

MARKET RISKS<\/b><\/p>\n

South Korean companies seeking to enter the promising Middle Eastern smart farm market must conduct thorough risk assessments. While the ROK is targeting wealthy countries, they are heavily dependent on oil production, which makes them vulnerable to oil price volatility.<\/span><\/p>\n

Although major disruptions have not yet occurred, the near future remains <\/span>uncertain<\/span><\/a> due to the <\/span>escalating<\/span><\/a> conflicts<\/span><\/a> in the region. Such instability could lead to the cancellation of new projects and affect the timelines and costs of existing ones.<\/span><\/p>\n

To mitigate these risks, Korean companies will likely leverage support from their government and establish partnerships with experienced local firms.<\/span><\/p>\n

For example, Nongshim, a major food and beverage company, formed the <\/span>K-BTS (Korean Best Team for Smart Farm) consortium<\/span><\/a> with three mid-sized businesses, including Pomit, an information and communications technology provider with an established regional presence specializing in <\/span>hybrid-Plant Lifecycle Management<\/span><\/a> technologies.<\/span><\/p>\n

In a joint venture with local strategic partner Al Marina Holding, the consortium is establishing <\/span>six smart farms<\/span><\/a> in Abu Dhabi to produce Korean strawberries year-round. A similar <\/span>$30 million deal<\/span><\/a> with Saudi Arabia was announced in March 2023.<\/span><\/p>\n

Collaborative relationships like these are essential, given the significant cultural differences and complex business environments in the region. Despite reforms, exporters and investors still frequently <\/span>encounter challenges<\/span><\/a> across all Gulf countries, including a lack of transparency in decision-making, inconsistent policy enforcement, time-consuming bureaucratic procedures and complex public contracting and procurement processes.<\/span><\/p>\n

LONG-TERM COMMITMENT<\/b><\/p>\n

In the coming years, Korean companies entering the Middle Eastern market will likely rely on government support to strengthen their position when bidding for pilot project contracts.<\/span><\/p>\n

Due to regional variations, securing pilot projects is essential to demonstrate the compatibility of Korean smart farm solutions with local conditions and to test various factors, such as location, desired crop, water availability and energy expenses. These pilot projects will help determine actual implementation costs and potential profitability.<\/span><\/p>\n

The success of these pilot projects will significantly influence South Korean companies\u2019 ability to scale their technologies in the region. As local partners and foreign governments witness evidence of Korean smart farm solutions delivering maximum value, exporting companies will be well-positioned to recoup their initial entry investments and achieve commercial profitability.<\/span><\/p>\n

However, even if they successfully expand their presence in the Middle East, it will likely take time to see returns on their investments. South Korean companies must approach this market with a long-term perspective.<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

South Korea\u2019s smart farm sector presents a promising opportunity for the country to bolster its agricultural productivity and food security, but Korean companies seeking to enter the Middle Eastern market with their smart farm technologies face significant risks, including economic instability and the need for long-term investments. The Yoon Suk-yeol administration has made securing food […]<\/p>\n","protected":false},"author":10781,"featured_media":2204853,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[21],"tags":[24,28],"yoast_head":"\nSouth Korean smart farm companies face uphill battle in Middle East market - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/04\/south-korean-smart-farm-companies-face-uphill-battle-in-middle-east-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korean smart farm companies face uphill battle in Middle East market - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"South Korea\u2019s smart farm sector presents a promising opportunity for the country to bolster its agricultural productivity and food security, but Korean companies seeking to enter the Middle Eastern market with their smart farm technologies face significant risks, including economic instability and the need for long-term investments. 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