The South Korean government has pressured flour manufacturers to lower prices, following the same move on ramyeon, or instant noodle makers.

The Ministry of Agriculture, Food and Rural Affairs on Monday pressured the country‘s seven flour millers to cut down prices, just eight days after the country’s Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho openly stressed instant noodle makers to cut prices on June 18.

The government’s move may be aimed at lowering the prices of flour, a key ingredient of many staples, and also bread and confectionery.

The series of calls, however, are nothing but extreme market intervention. Its pressure may lower prices in the short term but in the long run it can develop into a threat that drives prices back up and make the entire food industry less competitive.

The food industry seems to be yielding to the pressure.

Local flour millers said Monday that they will review the option of lowering the flour price from July. Nongshim Co., the country’s top ramyeon marker, also said that it would cut the prices of its signature Shin Ramyun by 4.5 percent and shrimp-flavored snack Saewooggang by 6.9 percent from July 1.

Companies, however, are prone to establish counter measures if the government continues to intervene in prices. They may take into consideration the government’s intervention when pricing products.

For example, even if international grain prices go up and cause only 10 percent rise in prices, food companies may raise the prices by 20 percent.

In the face of the government’s calls for price cuts, they may simply announce modest price cuts to pretend to cooperate with the government, all of which will force customers to buy things at higher prices before the government‘s intervention.

Companies may launch new items with higher prices or fewer portions in the name of high-end marketing. Some might denounce such practices as tricky, but the blame should fall on the government for trying to control the market.

Free enterprise is only possible when companies are free to set prices. We all know that the market will never innovate without free pricing.

In the absence of such discretion, investments in research and development will diminish, thus preventing new innovative startups from joining the market. That will drag down the global growth of the Korean food industry. What the government should do is prevent market players from raising prices through unfair competition such as monopoly, not outright price intervention.

By Editorial Team

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