Agricultural cooperatives in vietnam and their contributions to benefit the rural poor a case study in an giang province vietnam

List of Figures2.1 Agricultural cooperative organization before the policy reform 15 2.3 General Structure of Primary Cooperatives in Vietnam 232.4 General Organization Chart of the Prov

AGRICULTURAL COOPERATIVES IN VIETNAM AND THEIR CONTRIBUTIONS TO BENEFIT THE RURAL POOR:

A CASE STUDY IN AN GIANG PROVINCE, VIETNAM

by

Pham Trung Tuan

A research study submitted in partial fulfillment of the requirements for the

degree of Master of Science inRegional and Rural Development Planning

Examination Committee: Dr Mokbul Morshed Ahmad (Chairperson)

Prof J K Routray

Dr Soparth Pongquan

Nationality: VietnamesePrevious Degree: Bachelor of Economics

Cantho University

Scholarship Donor: IFP - Ford Foundation – AIT Fellowship

Asian Institute of TechnologySchool of Environment, Resources and Development

ThailandMay 2007

I would like to express my heartfelt thankfulness and profound gratitude to my advisor Dr.Mokbul Morshed Ahmad for his excellent guidance, encouragement, suggestions,comments and preliminary editorial works throughout this research The research wouldhave not been completed in this shape without his constructive suggestions, comments andgreat attention to various research steps with a careful review of his work

My sincere appreciations and profound gratitude are also extended to my committeemembers, Professor Dr Jayant K Routray and Dr Soparth Pongquan for their valuableadvice, constructive comments, and suggestions to improve this research

I am very much indebted to IFP-Ford Foundation and Asian Institute of Technology (AIT)for providing the opportunity to study at AIT

Special thanks go to Mr Vitoon Nil-Ubol, SERD Field Laboratory Supervisor for hisassistance in using the Statistical Package for Social Science (SPSS) for data analysis,which was very helpful in this study My appreciation also goes to the secretariat staffs ofSERD Officer 2 for their administrative support throughout the period of my study at AIT.Sincerely thank is also given to my beloved godmother, Dr Loudes G Salvador,Executive Director of Asian Scholarship Foundation for her kind support andencouragement throughout the period of his study in AIT

My sincere appreciations are given to Dr Do Van Xe – Cantho University, Mr Le MinhTung – An Giang People’s Provincial Committee, Prof Vo-Tong Xuan, Dr Nguyen TriKhiem, Mr Nguyen Thanh Long from An Giang University for their strongly speaking inrecommendation of him to IFP-Ford Foundation Scholarship Heartfelt thanks are alsoexpressed to my colleagues of An Giang University, Vietnam who strongly supported andencouraged him to study at AIT

My thanks to Finance and Planning Department of Tan Chau District, Vinh XuongCommune People’s Committee, and Committee and staffs of Tan Tien Cooperative fortheir kind support and cooperation during the field work for this research He is indebted

to the district, provincial's government offices of An Giang province and othergovernment officers for providing him useful data relevant for this research

My thanks to all of my seniors, classmates and friends at AIT and RRDP/SERD inspecific for their affection, good care and morale support to him during his hard work atAIT

Last but not the least, I wish to express my sincere thanks to his beloved parents, mybrother and sisters who have been encouraging and supporting him to complete thisprogram at AIT successfully as well

Those sources of inspiration and encouragement from all of them are essential for me forsuccessful completion at AIT from the start of my master degree program until thecompletion Those are my words of gratitude

The research studied the performance of the agricultural cooperative activities to benefitthe poor in An Giang province of Vietnam The main objectives of the research were todescribe the administrative system of agricultural cooperatives in An Giang province; toevaluate the direct benefits and perceptions of the services of the poor farmers on theiragricultural cooperatives; to analyze the constraints and opportunities of the agriculturalcooperative in terms of providing services and operation for poor farmers in An Giangprovince; and to give suggestions for the improvement of sharing benefits to poor farmersmembers of the agricultural cooperatives

The research was conducted with the use of a survey questionnaire at the household levelwith a total of 70 respondents who were the members of the agricultural cooperative in thestudy area The research was focused on a quantitative analysis with the support ofqualitative statement

Main findings of the research showed that the performance of the cooperative was quitegood in providing services to its members due to enthusiasm of the managementcommittee and staffs, interests from local government, and government support policies.The members perceived quite high degree of benefits and satisfactions from the variousactivities and services offered by the cooperative These degrees of benefits andsatisfactions of the members were examined in different aspects such as social, economicand institutional aspects in order to explore contributions of the agricultural cooperative tothe rural poor

Several problems and constraints were identified in relation to the cooperative’sperformance They were limited management capacities of the management committee,lack of operational funds and difficulties in accessibility to credit sources Certainpotentials were identified as the future prospects for further development of the Tan Tiencooperative

Certain recommendations were suggested to improve the performance of the cooperative.These consisted of enhancing efficient management of local committee and thecooperative staffs, encouragement of the exchange with other cooperatives and localinstitutions for developing leadership skills and increasing members’ participation invarious cooperative activities

2.3 Agricultural Co-operative Movement in Developing Asia 10

2.5 Characteristics of Cooperative Movement in Vietnam 212.6 Some Definitions of Agricultural Cooperative in Vietnam 33

5.2 Profile of Tan Tien Cooperative under the study 59

6 Perception of Members on Benefits From the Tan Tien

Agricultural Cooperative

62

6.1 Perception of Members on Benefits Gained The

Performance of the Cooperative

626.2 Members’ Perception on Satisfaction of the Cooperative’s

Performance

70

7 Strengths and Weaknesses of the Agricultural Cooperative 73

7.2 Weaknesses of the Tan Tien Cooperative

List of Tables

2.3 State of Agricultural Co-operatives Before Implementation of the

2.4 Preliminary Results of the Transformation of Agricultural

Co-operatives in 39 Selected Provinces (31 March 1998) 182.5 Value of Assets of a Selected Number of Agricultural Co-

operatives Undergoing the Transformation Process (31 March

4.3 Distribution of Respondents by Educational Level 524.4 Distribution of Respondents by Year for Memberships 52

4.6 Distribution of Respondents by Sources for buying Shares 53

4.8 Distribution of Respondents by Kinds of Cropping 55

5.2 Business Achievement in the Agricultural Year 2005 - 2006 616.1 Perception of Farmers on Degree of Benefits from the Services

6.4 Type and Degree of Social Benefits Gained from Agricultural

6.5 Comparison of Service Fees Charged by the Private Sectors and

the Cooperative (Based on Agricultural Year 2005) 666.6 Type and Degree of Economic Benefits Gained from Agricultural

List of Figures

2.1 Agricultural cooperative organization before the policy reform 15

2.3 General Structure of Primary Cooperatives in Vietnam 232.4 General Organization Chart of the Provincial Cooperative

Alliance in Vietnam

262.5 Organization Chart of the Vietnam Cooperative Alliance 27

5.1 Current Organizational Structure of Tan Tien Cooperative 60

List of Map

4.1 Map of An Giang Province Showing Tan Chau District 49

ADB Asian Development Bank

ADI Analyzing Development Issues

APO Asian Productivity Organization

AusAID Australian Agency for International DevelopmentBAAC Bank for Agriculture and Agricultural CooperativesBRDB Bangladesh Rural Development Board

FAO Food and Agricultural Organization

FDI Foreign Direct Investment

GATT General Agreement in Tariffs and Trade

GO Government Organizations

GSO General Statistics Office

HEPR Hunger eradication and poverty reduction

ICA International Cooperative Alliance

IMF International Monetary Fund

ILO International Labor Organization

IRDP Integrated Rural Development Program

PRSP Poverty Reduction Strategy Paper

UNDP United Nations development programme

VBA Vietnam Bank for Agriculture

VCA Vietnam Cooperative Alliance

Equivalent: 1 USD = 16,000 VND (December, 2006)

Chapter 1 Introduction

This chapter consists of these components: background of the research, statement of theproblem, rationale of the study objectives of the research, the scope and limitations of theresearch, and conceptual framework

1.1 Background of the Research

Over the past decade (1991-2000), the economy of Vietnam maintained a robust averageannual growth rate of 7.5% Estimated per capita GDP in the year 2000 was 1.8 timeshigher than that in 1990 (IMF, 2001) As a result, the Vietnamese people have experienced

a considerable improvement in their living standards Remarkable achievements have beenrecorded in agricultural production Vietnam became self-sufficient in food andtransformed into a major food exporter, contributing substantially to socio-economicstabilization, eradication of hunger and poverty reduction (HEPR) The industry andservices sectors also continue to grow at high rates, thus accelerating the economy’sstructural transformation The ratio of domestic savings to GDP in the year 2000 was 2.5times higher than that in 1990 State revenues account for about 20% of GDP (GSO, 2002).Many socio-economic renovation policies and measures have been adopted recently Thebanking and finance system is being reorganized and renovated A fair, efficient andcompetitive business environment is being created to stimulate greater investment byindividuals and enterprises, both domestic and foreign, and to expand production andbusiness activities

However, despite the significant gains of the past decade, Vietnam’s economic growth path

is not yet on a securely sustainable footing In 1997, the regional economic crisis hurt theVietnamese economy, and contributed to a slowing of output growth to only 4.8% in 1999.Although a revival of economic growth is anticipated, with GDP reversing the previousdeclining trend by growing at an estimated 6.7% in the year 2000, it may not be possible torepeat the high economic growth rates of the mid-1990s The quality of growth is low; theefficiency and competitiveness of the economy is not high, and international tradecompetitiveness for many sectors and products is weak The pace of change in productiontechniques, technologies and management styles is slow Especially, 32% of the totalpopulation of a little more than 27 million has remained poor Vietnam is still one of thepoorest countries in the world with GDP per capita of just about US$400 per year (UNDPVietnam, 2005) It is on its road of a long and difficult transition from a centrally plannedeconomy to market-oriented one Vietnam is still largely an agricultural economy, withroughly 80% of its 85 million people living in rural areas and where jobs are scarce andbasic social services missing

Poverty is mainly concentrated in rural areas, particularly in poor farming households.

Over 90% of poor households live in rural areas (GSO, 2005), mainly work in agriculture

or have unstable jobs, and have few off-farm employment opportunities They tend to have

a low level of education, limited professional and business skills, poor access to credit,physical infrastructure and social services, and they have difficulty selling their products

Therefore, poverty reduction has been a central goal of the government and a driving forcebehind the economic reform of the past decade To combat poverty, Vietnam hasimplemented a comprehensive strategy on growth and poverty reduction and a program onhunger eradication and poverty reduction (HEPR) The former is focused on povertyreduction through socioeconomic development in general while the latter is aimed athelping the poor to get jobs and improved income The specific programs includedeveloping infrastructure in poor communes; helping the poor with capital, housing, healthcare and education; developing new economic areas through settlement and emigration;improving cadre capacity; and assisting the handicapped people e.g elderly, orphans, warcasualties Government agencies and instrumentalities as well as social organizations havebeen mobilized to help implement HEPR.

The social organizations and labor representatives recognize the role of Agriculturalcooperatives in assisting the poor resolve social issues affecting them in the remote andrural areas of the country There are presently about 15,500 cooperatives and cooperativeunions and 150,000 cooperative teams These cooperatives have been playing noticeablerole in the area of socioeconomic development, especially in 10 job creation So far, theyhave produced 14 million jobs and accounted for about 20% of the country’s GDP Eachcooperative has an average income of 500,000 VND per month (VCA, 2005)

The cooperatives have also contributed significantly in the implementation of the HEPR,thereby contributing to the bridging of the gap between the rich and poor Specifically, thecooperatives provided the poor with assistance in production, market development, jobcreation, training and resource mobilization Besides, in the current context of Vietnam,rural areas are usually out of the domain of the International Labour Organization (ILO)’ssocial partners, employers’ and workers’ organizations as well as central government Inthese areas, the nearest institutes to the poor are local cooperatives

1.2 Statement of the Problem

Meanwhile, in the south of Vietnam cooperatives become more complex as they grow andrespond to competition At the same time, members become more demanding, as freer andmore efficient markets increase their opportunities These change traditional mechanisms

of solidarity, and require the adoption of new financial strategies that encourage members

to patronize the cooperatives and become involved in democratic decision-making in itsbusiness operation (Pishke, 2004)

Agriculture cooperatives for rural farmers have been paying a very pivotal role for povertyeradication in Vietnam since its establishment in 1960s Membership in the agriculturalcooperatives generated various benefits for the rural poor including the social, economicand institutional aspects The cooperatives in Vietnam created about 14 million jobs for therural people that contributed about 20% of the country’s GDP (AusAID, 2002)

However, this local institution still faces several major challenges and problems namely;unclear identification of operation scale, uncertainty of cooperatives, lack of technicalknowledge and experience and complexity (APO, 1996)

The cooperatives’ operation is still small and the connection inside many cooperatives isnot clearly identified In addition, the management skill is limited due to lack of educationand training Also, the real poor farmers do not actually obtain the interest from

participating in cooperatives Many cooperatives just accept rich and powerful households

to provide services in the local Because the poor households have low income andlandless, so they can not afford service charge It is hard for the poor to join in and enjoythose services The agricultural co-operative sector is neglected in national povertyreduction strategies (ICA, 2003) The general public still under estimates the scope andsize of the agricultural co-operative movement and thus how it affects provincial andnational economies and society in general (ICA, 2003)

On the other hand, the cooperatives seem to have wrong ideas which cause troubles for thedevelopment of cooperatives in particular of collective economy in general Many peoplehave thought that cooperatives have the similar roles as stock join companies, profit fromdoing business is an essential criteria to assess the success of the cooperatives, so theattention on profits and loss of cooperatives have been more paid than to benefits ofparticipant

Due to Harms (2006), most cooperatives have operated under marginal conditions, with ainadequate resources and lack of capital Between 1988-1994, more than 2,950 co-operatives including agriculture ( i.e 17.4 % of the total of former cooperatives) and 33,800production groups ( i.e 93 % of the total number of production group) were dissolved bytheir members Another, obvious instance was a case of cooperatives and productiongroups in the North Mountain Region which were dissolved after land had been allotted toformer members Without sufficiency of resources and capital, cooperative seem to be veryslow in its development and lack in sustainability

There is a lack of technical knowledge and experience as regards the promotion andoperation of genuine agricultural service cooperatives or alternative farmers' organizationswithin Vietnam, as farmers, soon after the liberalization at 1945, have been pushedvigorously to organize themselves into large-scale kolkhoz type agricultural collectivefarms after a very short period of interfarm cooperation within small mutual assistantteams The Vietnamese farmers never really enjoyed the experience of managingautonomous small farms being integrated into or cooperating with their own voluntarycooperative service structures of the classical Raiffeisen type society With the exception

of savings and credit cooperatives organized during the colonial time, service cooperativeswere used (misused) as transitional organizations towards collective economyorganizations (Kirsch, et al, 1997)

Contribution of the cooperatives to poverty alleviation is still unrecognized by somedevelopment institutions such as local authorities, local farmer associations, the WorldBank, or even poor people themselves are not aware of the opportunities offered byagricultural co-operatives (ILO, ICA, 2003) Sometimes it is said that co-operatives do nothelp the poorest But we must keep in mind that by definition co-operatives practice openmembership, which means that they do not exclude the poor or the poorest and that in factthe socially weak should be motivated in most cases to form their own co-operatives.There is a co-operative model for almost every problem faced by the poor and the poorestand it does not require necessarily huge financial resources But it is true that most poorpeople are not aware of the opportunities offered by co-operatives

1.3 Rationale of the Study

As mention of above, agricultural cooperatives have increasingly played a role in povertyreduction in the rural areas of Vietnam as well as in An Giang province, especially inregards to improving the livelihoods of the poor

However, the contribution of the cooperatives to poverty alleviation is still unrecognized(ILO, ICA, 2003) The presence of agricultural cooperatives remains important since some

90 percent poor Vietnamese heavily relied on cultivation The study provided an image ofthe agricultural development of Vietnam under the economic reforms The role ofcooperatives was shown through their offered marketing and agricultural input services.Also, the ultimate aim of this study is to make clear about characteristics, the role and itssignificant contribution to poverty reduction of agricultural co-operatives

The findings of this study would help to improve the agricultural cooperatives in the futureoperation by identification of the constraints and potentials as well as needs for theperformance of the agricultural cooperatives At the same time, the results on the strengthand constraints of the leadership of the cooperative would help to point out the areas ofimprovement for the management aspects of the cooperatives

The results would serve for the Ministry of Agriculture and Rural Development in Vietnam

to provide specific technical and financial support and make a plan for agriculturalcooperative Meanwhile, the An Giang Co-operative Alliance, Vietnam Co-operativeAlliance, International Co-operative Alliance, and the Co-operative Branch of ILO wouldalso benefit from such research They are most important institutions because they areworking closely to the farmers in the sectors of agricultural cooperatives The research willalso give the real situation of the cooperatives’ condition

1.4 Objectives of the Research

The overall objective of the research is to examine the contribution of agriculturalcooperative to the rural poor in An Giang Province Therein, the specific objectives of thestudy are:

 To describe the administrative system of agricultural cooperatives in An Giangprovince;

 To evaluate the direct benefits and perceptions of the services of the poor farmers

on their agricultural cooperatives;

 To identify the constraints and opportunities of the agricultural cooperative in terms

of providing services and operation for poor farmers in An Giang province; and

 To give suggestion some guidelines to strengthen the operation of the cooperativefor the benefits of the poor farmers

1.5 Scope and Limitations of the Research

The emphasis of this study would be placed mainly on characteristics and contributions ofthe agricultural co-operatives to rural poor in An Giang province, Mekong Delta, Vietnam.The scope of the research highlighted the role and potential of new agricultural co-operatives in poverty reduction by creating awareness as well as drawing attention on thesignificant contributions of agricultural co-operatives in poverty reduction Actually, inVietnam a district is consisted of approximately 7-10 agricultural cooperatives In thisstudy, a cooperative was closely observed and studied to get knowledge about the roles ofagricultural cooperatives to reduce poverty of people in the rural areas

Firstly, the study was focus on the administrative system of the Tan Tien agriculturalcooperative by describing the types of cooperatives, sizes, financial sources, managementand so on On the other hand, the conditions of cooperatives would also be examined based

on the present situation, membership and operations

Secondly, the perceptions and benefits from rural people on the studied agriculturalcooperative were evaluated in order to get know how useful the cooperatives are forfarmers in the rural areas Within the scope of this research, the benefits created by thecooperative included the social, economic and institutional aspect The satisfaction of thecooperative members was based on the services offered by the cooperative comprising offertilizer, irrigation and land preparation services

Lastly, potentials were assessed from the cooperative in order to see the strength of theservices Also, problems were critically analyzed in order to improve the situation ofagricultural cooperatives in the future

1.6 Conceptual Framework

The conceptual framework of the research is presented in the Figure 1.1

The research examined the exiting situation of agricultural cooperative’s performance inthe study area including benefits and satisfaction of the members through the services thatcooperative offered to its members (fertilizer supply, irrigation, land preparation service).Key aspects influencing cooperative members’ perception on benefits included social,economic, and institutional aspects The social aspects consisted of membership,knowledge and skills, and employment opportunities The economic aspects comprised ofincreased income, yield, and better price for purchase of inputs, while the institutionalaspects covered provision of training, and equality in democratic management

Satisfaction of the members were examined through satisfaction of each service includingsatisfaction on fertilizer service, satisfaction on irrigation service, satisfaction on landtilling service

Problems, constraints and potential of the cooperative’s performance could be thenidentified in the cooperative’s performance Finally, based on findings and conclusions,certain recommendations could be suggested to strengthen the cooperative’s performance

in the coming years

Figure 1.1: Conceptual Framework of the Research

Potentials of Agricultural Cooperative

Benefits

Satisfaction

of the Members

Types of Services

Land PreparationIrrigation

Satisfaction onIrrigation Service

Satisfaction onLand PreparationService

Recommendations to Improve Performance

Constraints of Agricultural Cooperative Tan Tien Cooperative

Chapter 2 Literature Review

This chapter describes the concept and principles of cooperatives, co-operative movement

in the world, agricultural co-operative movement in the developing Asia, as well as inVietnam The chapter also mentioned about the characteristics of cooperative movement inVietnam, some definition of agricultural cooperative in Vietnam At the same time, theeconomic, social and institutional factors, the benefits and satisfaction of members, povertyand deprivation, and the current poverty situation in Vietnam were also discussed

2.1 Concept and Principles of Cooperative

2.1.1 Concept of Co-operative

Cooperative is a self-supported economically autonomous organization of the memberswho have the same need and interests They voluntarily contribute money and labor for thefoundation of Cooperatives in accordance with legal regulations in order to improve thepower of a group and of an individual so as to help each other to carry out production andbusiness activities effectively, provide services to improve life standards making acontribution to the socio-economic development of the country (the VietnameseCooperative Law, 2003)

A cooperative is a private business organized and joined by members to fulfill their mutualeconomic needs as patrons of the business, with the key control, ownership, and incomedistribution decisions based on patronage proportions; namely, member voting, equitycapital investment by patrons, and distribution of net income to patrons are proportional touse of the cooperative (Barton, 1989) It is a business voluntarily owned and controlled byits member patrons and operated for them and by them on a not-for-profit or cost basis It

is also owned by the people who use it Cooperatives are organized and incorporated toengage in economic activities with certain ideas of democracy, social consciousness andhuman relations included A cooperative provides services and benefits for its members inproportion to the use they make of their organization, rather than earning profits for theshareholders as investors (University of Wisconsin Center for Cooperatives, 2000)

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality,equity and solidarity In the tradition of their founders, cooperative members believe in theethical values of honesty, openness, social responsibility and caring for others (ICA, 2003)

2.1.2 The Principles of Cooperatives

The principles of cooperatives are guided which put the values of cooperatives intopractice

First Principle: Voluntary and Open Membership: Cooperatives are voluntary

organizations, open to all persons able to use their services and willing to accept theresponsibilities of membership, without gender, social, racial, political or religiousdiscrimination (ICA, 2005)

Second Principle: Democratic Member Control: Cooperatives are democratic

organizations controlled by their members, who actively participate in setting their policiesand making decisions Men and women, serving as elected representatives, are accountable

to the membership In primary cooperatives, members have equal voting rights [onemember one vote], and cooperatives at other levels are also organized in a democraticmanner (ICA, 2005)

Third Principle: Member Economic Participation: Members contribute equitably to, and

democratically control, the capital of their cooperative At least part of that capital isusually the common property of the cooperative Members usually receive limitedcompensation, if any, on capital subscribed as a condition of membership Membersallocate surpluses for any or all of the following purposes: developing their cooperative,possibly by setting up reserves, part of which at least would be indivisible; benefitingmembers in proportion to their transactions with the cooperative; and supporting otheractivities approved by the membership (ICA, 2005)

Fourth Principle: Autonomy and Independence: Cooperatives are autonomous, self-help

organizations controlled by their members If they enter into agreements with otherorganizations, including governments, or raise capital from external sources, they do so onterms that ensure democratic control by their members and maintain their cooperativeautonomy (ICA, 2005)

Fifth Principle: Education, Training and Information: Cooperative provides education and

training for their members, elected representatives, managers, and employees, so that theycan contribute effectively to the development of their cooperatives They inform thegeneral public – particularly young people and opinion leaders – about the nature andbenefits of cooperation (ICA, 2005)

Sixth Principle: Cooperation among Cooperatives: Cooperatives serve their members

most effectively and strengthen the Cooperative Movement by working together throughlocal, national, regional and international structures (ICA, 2005)

Seventh Principle: Concern for the Community: Cooperatives work for the sustainable

development of their communities through policies approved by their members

2.1.4 Types of Cooperatives

Producer-owned cooperatives are owned by farmers, producers or small businesses to

process and market their goods, and to provide themselves with credit, equipment andproduction supplies (ICA, 2003)

Consumer-owned cooperatives enable consumers to secure a wide array of goods and

services, such as health care, utilities, insurance, housing, heating fuel and hardwaresupplies (ICA, 2003)

Worker-owned cooperatives include employee-owned food stores, processing companies

and restaurants, taxi cab companies, sewing companies, timber processors and light/heavyindustry (ICA,2003)

2.2 Co-operative Movement in the World

The cooperative movement is growing throughout the world The InternationalCooperative Alliance (ICA) was formed in 1895 - today it has more than 200 participatingorganizations with over 800 million members in nearly 100 countries! In 1994, the ICAand International Labor Organization (ILO) launched a global co-operative campaignagainst poverty, Co-operating Out Of Poverty, urging the worldwide cooperativemovement to work together to fight poverty by helping the poor to form cooperatives

Table 2.1: Cooperative Movement in the World

1752 The first successful cooperative organized when Benjamin Franklin formed the

Philadelphia Contributionship of the Insurance of Houses from Loss by Fire

1844 The Rochdale Equitable Pioneers Society opened a cooperative story on Toad

Lane in Rochdale, England Toad Lane is considered the birthplace of moderncooperatives because the principles and practices of the Pioneers assured thesuccess of the cooperative model

1865 Michigan passed the first law recognizing the cooperative method of buying

and selling

1895 The International Cooperative Alliance (ICA) was established

1916 The first national cooperative association formed the National Cooperative

Business Association in every member countries

1922 Congress passes the Capper-Volstead Act allowing farmers to market products

together without violating antitrust laws

1929 Farm Credit Administration forms

1934 National Credit Union Administration forms

1936 Rural Electrification Administration forms

1978 Congress passed the National Consumer Cooperative Bank Act, establishing

the National Cooperative Bank

continue to play significant economic and social roles in their communities Below aresome facts about the Movement that demonstrate their relevance and contribution toeconomic and social development (ICA, 2005).

Large segments of the population are members of co-operatives and as follow:

 In Argentina, there are over 17,941 co-operative societies with 9.1 million members(ICA, 2005)

 In Belgium, there were 29,933 co-operative societies in 2001(ICA, 2005)

 In Canada, 1 in 3 individuals is a member of a co-operative (33%) The Desjardinsco-operative movement in Québec has over 5 million members (ICA, 2005)

 In Colombia over 3.3 million people are members of co-operatives or 8.01% of thepopulation (Sector Cooperative Colombiano, 2005)

 Costa Rica counts over 10% of its population as members of co-operatives

 Finland, S-Group has a membership of 1,468,572 individuals which represents 62%

of Finnish households (Corporation Annual Report 2004)

 In Japan, 1 out of every 3 families is a member of a co-operatives

 Kenya 1 in 5 is a member of a co-operative or 5.9 million and and 20 millionKenyans directly or indirectly derive their livelihood from the Co-operativeMovement

 In India, over 239 million people are members of a co-operative (ICA, 2005)

 In Malaysia, 5.4 million people are members of co-operatives (ICA, 2005)

 In Singapore, 32% of the population (1.4 million people) is members of a operative (ICA, 2005)

co- In the United States, 4 in 10 individuals is a member of a co-operative (25%) (ICA,2005)

2.3 Agricultural Co-operative Movement in the Developing Asia

2.3.1 General Context

The cooperative movements in the Asia and the pacific region with the exception of Japanwere basically dependent on the agricultural economy The movements gradually emergedfrom their initial role as rural credit source to their present role as diversified communalservicing institution The beginning of the cooperative movement which grew fromdifferent circumstances is now at different stages of development Some have developedfaster than others while the rest lags behind for political, social, economic, or otherreasons

The agricultural cooperatives’ orientation was primarily directed towards increasingagricultural productivity and financial assistance was initially intended for production.However, this scope was gradually widened to credit for marketing, processing and otherpost-harvest activities Governments initiated the formation of agricultural cooperatives asconduits for channeling financial assistance to farmer-members Cooperative banks, banksfor cooperatives, and government-owned financing institutions were created to providerural finances to cooperatives

2.3.2 Agricultural Co-operative Movement in Bangladesh

All cooperatives in Bangladesh are subject to audit and inspection of the Registrar ofCooperatives (RCS) under the Department of Cooperatives and responsible to it for quasi-judicial matters However, for purposes of registration and supervision, cooperatives mayeither be affiliated with RCS or with the Bangladesh Rural Development Board (BRDB).Cooperatives under RCS have evolved since the beginning of the century, and vary in theirorganizational structure On the other hand, BRDB cooperatives have developed from theIntegrated Rural Development Program (IRDP) which, in turn, was the outcome of theexperimental Comilla model of rural development They are two-tiered, having primarysocieties at the village level and secondary societies at the upazilia/thana level

The functions of primary agricultural cooperatives (PACs) are mainly to generate creditand supply it to farmers In addition, PACs procure and supply inputs such as HYV seeds,fertilizers, pesticides, and minor irrigation equipment The upazilla/Thana levelcooperatives basically acts as conduits in the flow of the above resources from the central

to the village level, They also impart training to managers and other key members of PACswith the aim of disseminating knowledge among the general members through theirweekly meetings

The performance of PACs under both RCS and BRDB has been poor The main reasonsfor this are the breakdown of credit operations due to strict and unrealistic requirements forobtaining credit, large-scale default, lack of accountability of managers and managingcommittee to the general members, failure of members to comprehend the true spirit ofcooperation, and lack of efficiency in the running of the business to enhance the financialviability of the cooperatives Since their inception, BRDB cooperatives have continued toreceive much support from the government through funds from donor agencies Thisimpeded the growth of self-reliance among these cooperatives

From a few examples of successful cooperatives, the following success factors areidentified: 1) committed and dynamic leadership; 2) accountability of the management tothe general members; 3) participation of the general members in decision-making and theireasy access to accounts for their scrutiny; 4) diversification of activities; and 5)combination of business-oriented and welfare approach in the activities of the PACs

In light of the recent policy shift in favor of privatization and market deregulation, thescope of the PACs in acting as conduits for subsidized credit and inputs has becomelimited They are likely to be more effective if the thrust is on organizing networks formarketing agricultural produce and developing rural infrastructure Also, the integration ofagricultural and non-agricultural activities in the programs is a more realistic and desirableapproach which is likely to facilitate the development of primary cooperatives as effectivevehicles of self-reliant growth (APO, 1996)

2.3.3 Agricultural Co-operative Movement in Thailand

Since agriculture is the mainstay of the economy of Thailand (62 percent of the population

is engaged in farming), emphasis has been put on strengthening agricultural cooperatives

as a means to increase income and improve the standard of living of their farmer-membersand hence result in the improvement of the socio-economic condition in the rural areas

Agricultural cooperatives are organized among farmers engaged in the production ofvarious products such as rice, maize, tapioca, dairy, pigs, fruits, cut-lowers, and others.They have the following objectives: 1) provide agricultural credit; 2) supply farm inputsand consumer products; 3) market agricultural produce of the members; 4) encouragesavings and deposits; 5) provide services relating to land and water development; 6) giveguidance on agricultural technology; and 7) educate and train members on cooperativeprinciples and practices.

Agricultural cooperatives are vertically organized into a three-tier system: primarycooperatives at the district level; provincial federations at the provincial level; and anational federation They undertake business activities and services to satisfy the needs offarmer- members in their farming activities The main business activities are credit, inputsupply and marketing Credit business is the major business of the agriculturalcooperatives which receive the money from the Bank for Agriculture and AgriculturalCooperatives (BAAC) to on-lend to members Many agricultural cooperatives are trying to

be self-reliant in financial matters by building up their own capital One of the programsbeing implemented in this regard is the Savings Campaign Program which encouragesmembers to save one baht daily

The marketing business is also important to the cooperatives, especially the marketing ofthe paddy or rice With the cooperation of many concerned agencies, the ProductionCredit and Marketing Linkage Program for Rice was launched in 1981 Under thisProgram, the agricultural cooperatives at all levels worked together in a unified marketingsystem The main objectives were to: 1) integrate the marketing activities of the primaryagricultural cooperatives so as to reduce marketing costs and strengthen the bargainingpower of the agricultural cooperative movement; and 2) improve the loan repaymentperformance of cooperatives by closely linking paddy collection with loan repayment.Agricultural cooperatives have played a significant role in agricultural development both

in social and economic aspects, but there arc many constraints in promoting agriculturalcooperatives In a competitive economic situation, the national policies should support andcreate a suitable environment for the development of agricultural cooperatives (APO,1996)

2.3.4 Agricultural Co-operative Movement in the Philippines

Cooperatives had a unique beginning under the mantle of (lie U.S.A While the firstCooperative Law was enacted in February 1915, the bill was introduced in the legislature

in 1907 The first law authorized rural cooperative credit associations to generate fundsfrom members exclusively for agricultural activities In 1927, the new law empowered thegovernment to organize marketing cooperatives and even in war-time, cooperativesdistributed relief goods After the war, the Agricultural Credit and Cooperative FinancingAdministration were enacted in 1952 The Act empowered the government to organizeFarmers Cooperative Marketing Associations (FACOMAs) through which farmer-members obtained credit for production FACOMAs marketed the produce of the farmer-members (APO, 1996)

2.3.5 Agricultural Co-operative Movement in Malaysia

Malaysia, which is a late bloomer in cooperatives, formally introduced its cooperativemovement in 1922 as a means of checking the widespread indebtedness among farmers,workers, and civil servants As mandated by laws, there are two types of agriculturalcooperatives The first type; agro-based cooperatives, are registered under the CooperativeLaw as amended in 1983 for Peninsular Malaysia, with the Farmers OrganizationAuthority (FOA) The non-food agro-based cooperatives are registered with theDepartment of Cooperative Development Agro-based cooperatives, either single- purpose

or multipurpose, have a three-tier structure and their model is adopted from farmers’associations in the Rep of China (APO, 1999)

2.3.6 Agricultural Co-operative Movement in Japan

Modern cooperatives started after 1900 when the Cooperative Law was enacted,authorizing four types of cooperatives: credit, marketing, purchasing and processing AFew years later, the Central Cooperative Union was established which launched acampaign to form cooperatives nationwide In 1947, an Agricultural Cooperative Law wasenacted with a view to sustaining the owner farmers' livelihood under the Land Reform In

1948, agricultural cooperatives were organized in village, town, city, prefecture andnational levels In succession, the Government enacted in 1951 the Law for Rehabilitationand Consolidation of Agricultural, Forest owners and Fisheries Cooperatives (APO, 1999)

2.3.7 Agricultural Co-operative Movement in People’s Republic of China (PRC)

Since its founding, agricultural cooperatives have undergone a number of changes Theagrarian reform which abolished the feudal land system and introduced the system of landownership by farmers, laid the foundation for the establishment of agriculturalcooperatives in New China The government guided and supported the farmers to joinagricultural cooperatives through various policies and measures Early agriculturalcooperatives included agricultural producers' cooperatives, supplying and marketingcooperatives and credit cooperatives

In 1958, a large-scale movement of people’s communes in rural PRC was developingwhich was considered a serious mistake As a result of this transformation, the enthusiasm

of farmers in production was adversely affected this caused the reduction of yield andliving standards of farmers The agricultural cooperatives in PRC; within the framework ofthe responsibility system, was adopted dual management system, and combining theunified collective management and the individual farmers' management The householdresponsibility system is enshrined in the Constitution and Agricultural Law of PRC (APO,1999)

2.4 Agricultural Co-Operative Movement in Vietnam

2.4.1 The Performance of Agricultural Cooperatives in Vietnam Before 1981

In 1986, the Government of Viet Nam initiated a reform process to move from a centrallyplanned economy to a market-oriented one, with elements of state regulation This ongoingprocess requires institutional reform in agriculture, as individual farm households are nowconsidered the sector's basic economic units Thus, the crucial importance of farm

household participation in agricultural and rural development has been recognized Thishas led to a much stronger emphasis on mutual self-help and reliance on farm householdresources, and reduced expectation that Government will intervene to assist them.

Under the centrally planned economic system, emphasis was laid on creating very large operative units, as these were believed the motor of progress, development, and greatersocialization Thus, many co-operatives in the Northern and former Fourth Zone Provinces

co which were initially established as village coco operatives co had to merge with other smallerco-operatives to create inter-village or communal co-operatives In the South this processstarted after national liberation in 1975, with the initial creation of village and inter-villageco-operatives

Farm households were members of all these kinds of co-operatives As the means ofproduction, including land, was collectivized, membership was obligatory if one wanted toprofit from services provided by the co-operatives Children born in member farmhouseholds were automatically registered as members when they reached 16 years Whenthey married, the new family was considered as a new member farm household The co-operatives also provided a number of services for the farm households, including socialwelfare activities, schools, kindergartens and health care centers

2.4.2 Land Reform and the First Stage of Cooperativization

Over the last three decades tremendous efforts such as land reform, cooperativization andmobilization of the rural population had been made by the Government in order to bringabout the desired changes to Vietnam’s rural life and economy

In 1954 when the North of Vietnam was liberalized, about 90 percent of its total populationlived in rural areas and were engaged in agricultural production However, 80 percent ofthe agricultural land was in the hand of landlords or land owners The most importantprogramme launched by the Government that fulfilled the desire of majority of the ruralpoor was agrarian reform This democratic reform was radically put into effect and thetillers actually got land in 1956 – two years after the complete liberation of the North(VCA, 2006)

The Government held the view that peasants should be organized into new forms ofagricultural production such as co-operatives since which was regarded as a suitableinstitution for the building of socialism in the country The Government policy for the ruraland agricultural department was to take the individual farmer step by step to form lowlevel co-operatives where income was dependent on the land contributed on the basic ofpeasants’ willingness and voluntaries The agricultural co-operative movement waslaunched in 1959 and largely completed by 1960 (VCA, 2006)

2.4.3 The Second Stage of Cooperativization and the Work-Based Contract System

In 1965 agricultural co-operatives underwent a qualitative change: lower level co-operativewere raised to a higher level with the collectivization of all means of production, andincome distribution was independent of the land contributed; it was done in accordancewith contributions in the form of labor Social justice was created by the existence ofcooperatives, along with a sense of solidarity of all people (VCA, 2006)

Since 1970 the small cooperatives had been changed into the big ones on the scale of thewhole village The stylized picture of the organization of collective agricultural productioncan be described as follows: land belonged to the state and was under co-operativeutilization, while 5 percent of the land was left for individual household use Each co-operative operated about 200 hectares of land cultivated by 500 farmers All farmingactivities were carried out by 10 – 15 production teams which were primary work units asshown by Figure 2.1.

Input distribution; Output distributionSource: VCA, 2006

Figure 2.1: Agricultural Cooperative Organization Before the Policy Reform

The co-operative was managed by a board consisting of a chairman and 2 or 3 vicechairman, treasurer and other officers Decisions were made by the planning departments

at national, provincial and district levels which set area, input and output targets for eachcrop in each co-operative All input distributions were centralized The quantity of inputsbeing allocated to each province was determined by the planned output targets set by theprovincial planning department The provincial government then allocated the supplies tothe district which allocated them to the co-operatives and finally to the production teams.The share in farm products was based on the time spent working in the production teams.Quantity and quality of labor spent to fulfill a certain task were measured by labor normsand work classes, respectively The labor norm was defined as the time spent to fulfill aunit of work Work class was defined by grading different base on skillful, physical inputneeded Based on the work classification, each work class was given a number of workpoints If the worker fulfilled a labor norm he/she would e given a number of work points

in accordance with this work class At the end of a working day and after each task, theproduction team calculated and recorded the number of work points for each worker.Payment at the end of the crop season was based on the number of work points

District planning department

Cooperative member conference

Cooperative management board

Chairman

Accountingsection

Planningsection

Cropsection

culturalsection

Socio-accumulated Farmers’ income received from co-operative members was egalitarian, whilethat of cash income was based on the number of works points accumulated This wascalled the Work-Based Contract System.

With this organization, co-operative in the North developed from pure production unit tosocial and economic quasi-political entities During the war time, they were turned intostrategic units and took upon themselves many non-economic functions When the co-operative coincided with the area of a village, the distinction between economic andpolitico-administrative management virtually disappeared even though legally theyremained two separate entities

The utilization of co-operative recourses to fulfill various non-economic functions and topay the wide range of the local cadres and officials including village teachers and healthworkers posed a heavy burden on the co-operative economy Moreover, an egalitarianincome distribution system limited the farm level incentive to expand output

The co-operative campaign had been conducted since the late 1950s and during the 1960s.While the former North was nominally under a collectivized agricultural productionsystem since the late 1950s, it became effective only by the mid 1970s “During 1959 and

1960 almost 86 percent of the peasant households with 68 percent of total cultivatedacreage were collectivized But in 1960, only 11 per cent of the co-operatives were of highlevel” (Florde, 1984) Collectivization was strictly implemented since 1974 In the late1970s over 50 per cent of the Northern co-operatives were of the high level type

Table 2.2: Cooperative Size in the Northern Provinces

Number offarmers/coops

Cultivated landper coop (ha)

Number offarmers/coops

Cultivatedland per coop.(ha)The entire

Source: Statistical Yearbook of Vietnam, 1980

2.4.4 The Stage of Transformation of Agricultural Co-operatives under the Law of Cooperative

With the implementation of the Co-operative Law all co-operatives had to be transformedaccordingly In addition, newly established co-operatives could be registered under theLaw But during the first years the major question had been how to transform traditionalagricultural co-operatives, i.e from “old-style to new-style co-operatives” This includedthe basic challenge of how to change the existing co-operatives (“state-managed style“)into share-holding co-operatives with individual shares After briefly reviewing thedevelopment of the transformation process at the national level, it will be discussed inmore detail at the co-operative level, which implies the transformation procedure, the

nature of main activities of the transformed co-operatives and the main problemsencountered, so far.

At the beginning of 1997, once the Co-operative Law had become effective, the number ofagricultural co-operatives stood at 13,120 Most of them could be found in the Northernand Central provinces as it is shown in Table 2.2

Table 2.3: State of Agricultural Co-operatives Before Implementation of the Law

Once the Co-operative Law became effective various decrees had to be issued during thefirst months in order to implement it effectively at the local level The most importantdecrees are the following ones:

- Decree 02 (2 January 1997) regulates the responsibilities of institutions and apexstructure for the different co-operative branches;

- Decree 15 (21 February 1997) regulates the policy concerning the registration of operatives;

co Decree 16 (21 February 1997) regulates the transformation of former co-operatives,particularly the assessment of assets and capital and their conversion into commonand member shares

- Decree 43 (29 April 1997) gives guidelines about the model rules and regulations, i.e.bylaws and statutes, of agricultural co-operatives

Based on Decree 16 the transformation process could be implemented Originally, adeadline for the completion of the transformation process had been set at 15 March 1998,i.e actually one year after Decree 16 has become effective At that time it was hoped toproceed with the transformation process as quickly as possible Those with businessopportunities should be quickly re-registered, the others quickly dissolved But the processhad been rather slow, so far By the end of March 1998, the picture summarising thedevelopment in 39 selected provinces looked as follows, as it is shown in Table 2

Table 2.4: Preliminary Results of the Transformation of Agricultural

Cooperatives in 39 Selected Provinces (31 March 1998)

Number

Transforming Co-operatives

Total Number

of which Preparing Applying Registered

process But just 1,133 (or about 11 percent) had been registered as new-style operatives, so far Another 20 percent are in final stage of the transformation process Itseemed to be that the most efficient co-operatives had been transformed most quickly Bythe middle of 1998, based on provincial reports, 2,494 agricultural co-operatives (or about

co-18 percent) had been transformed and newly registered (NGUYEN: 33) Due to the largenumber of problems in the process, which will be discussed below, the deadline offinalising the transformation process had been extended to 31 December 1998 But, even,

by the end of September 1999 the transformation process had not been terminated At thattime just about 50 percent of all co-operatives had been transformed, so far While nofigures about agricultural co-operatives had been given, it can be assumed that thepercentage share is not higher (NHAN DAN: 24 October 1999) It seems to be morerealistic that just those co-operatives which started the transformation process already byMarch 1998 have a certain economic perspective as a co-operative enterprise

Legally, old-style agricultural co-operatives had the option to transform themselves intoanother legal business entity In that case they will fall under the Business Law (CompanyLaw) But no case has been reported that any co-operative did so One reason seems to bethe fact that co-operatives are taxed to a lesser extent than other legal forms of businessentities

One of the main issues in the transformation process had been the identification andeconomic valuation of assets of the old-style co-operatives and their transfer to thetransformed ones The average value of assets of a selected number of agricultural co-operatives undergoing the transformation process is summarised in Table 3

Table 2.5: Value of Assets of a Selected Number of Agricultural Co-operatives

Undergoing the Transformation Process (31 March 1998)

All old-style co-operatives had to make an inventory of all assets and their value had to beassessed On average, the value of all assets had been estimated to be around VND 470.6million Those assets directly related to their business activities (production or services)were transferred to the transformed co-operatives Other assets which are of common usefor the entire community such as kindergartens, health care stations, media systems etc.have been transferred to the communes On average, co-operatives had to transfer assets of

a value of VND 75.7 million or about 15 percent However, at the local level this rule washandled rather flexible as will be discussed in Chapter 3.2.2 below In addition, some co-operatives sold some of their assets to raise cash, either to repay debts or to distribute somefunds among the members On average, this amount came up to VND 7.5 million or lessthan 2 percent of the total value of assets

Although there had been a process of amalgamation of co operatives during the 1970s,just a few of them opted to separate during the 1980s When it came to transformationthere had been no report, so far, that one old-style co-operative had been split up into 2 or 3successor co-operatives as it could be observed in various Central and Eastern Europeancountries

Besides setting the legal basis for transforming old-style co-operatives, the Co-operativeLaw set the stage for establishing new agricultural co-operatives By the end of 1997, asmany as 99 agricultural co-operatives have been newly registered, 53 in the north and 46 inthe south (AAP, 18 February 1998) In addition, it is estimated that there are about 100,000agricultural groups of a pre-cooperative type, which might be able to get registered as co-operatives in the long run

2.4.5 Present Situation of Agricultural Cooperatives in Vietnam

Presently, there are over 15,000 agricultural cooperatives existing in Viet Nam Theseagricultural cooperatives fall into two major types These are commonly called OldCooperatives (those which were transformed from cooperatives/collectives operating prior

to the 1997 Law on Cooperatives) and New Cooperatives (cooperatives formed after theintroduction of the 1997 Law on Cooperatives)

New and old agricultural cooperatives are involved in a number of different types ofactivities, including land preparation, seed production and provision, irrigation serviceprovision, crop protection, marketing of agricultural products and input supply One of themost common forms of activity undertaken by cooperatives is irrigation provision in 2001,more than 80 percent of cooperatives provided some sort of irrigation services

Old Cooperatives – In many cases, the activities of Old Cooperatives remained largelyunchanged with the introduction of the Law on Cooperatives The members of thecooperative are normally all local residents Production services which are provided by theCooperatives are mostly activities based on the exploitation of infrastructure and old assetsleft by the former Cooperatives such as irrigation, electricity and pesticide provisionservices In general, Old Cooperatives have not developed input services (such as provision

of irrigation or fertilizer) and output services (such as the marketing of agriculturalproduction) for members These Cooperatives often lack capital to run, and the influence

of the Cooperative on households’ economic development is limited

New Cooperatives – In 2003, there were 5,717 newly-established Cooperatives in the total

of 15,174 Cooperatives of all kinds nation-wide New Cooperatives generally can be

classified into two main types: (1) General Service Cooperative: general services such asthe provision of electricity, fertilizer and pesticides However, this kind of Cooperativeconstitutes a small proportion among newly-established ones (2) SpecializedCooperatives: These account for a majority of New Cooperatives SpecializedCooperatives have the objective of producing particular commodity types, for example:Cow breeding Cooperative, Pig breeding Cooperative, Aquaculture Cooperative, fruit treeCooperative, fresh and safe vegetable Cooperative or agricultural and forestry productprocessing Cooperative.

New Cooperatives formed according to the Cooperative Law, generally have more flexibleand methods of organization and operation, and members join in Cooperatives because ofthe requirements for production and trade development However, after a period ofoperation, these Cooperatives sometimes face a number of difficulties, including smallscale of operations, lack of management skill and a lack of clear operational mechanisms.This can result in farmers not actually obtaining any benefit from participating in thecooperative

2.5 Characteristics of Cooperative Movement in Vietnam

2.5.1 General Structure of Agricultural Cooperatives

Agricultural Cooperatives in Vietnam are vertically organized in a three-tiered system;primary cooperative at district level and alliance at provincial and national level as thefollowing:

Source: VCA, 2006

Figure 2.2: Vertical Structure of Cooperative Federation

All of the cooperatives at district level are members of Provincial Cooperative Alliances,all of the Provincial Cooperative Alliances are members of Vietnam Cooperative Alliance.The primary cooperatives consist of individual members while members of provincial andnational alliances are cooperatives

a) Primary Level

The primary cooperative consist of individual farmer members The average membership

of agricultural cooperatives are 200 households According to VCA, at the generalmeeting, members elect the management Board who formulates the policies of thecooperative and appoints the staff to run the entire operation of cooperative (Figure 2.2)

Provincial Cooperative AlliancesVietnam Cooperative Alliance

Cooperatives

Cooperative Management Committee was voted directly by General Meeting of the

members including President, Vice –Presidents

Cooperative management Committee is on behalf of members to resolve workadayaffairs of Cooperative To help Cooperative Management Committee, apparatus ofCooperative organized of the following departments: Control section, Planning section,Accounting section, and credit section (VCA, 2006)

Audit and Control Committee was also voted by General Meeting of the members

including: Chairperson, and some members Audit and Control Committee is in chargeof:

 Supervising, controlling organizations and members of Cooperative onimplementing regulation, resolution of General Meeting, statute of Cooperativeand decisions of Management Committee;

 Considering and resolving complained application of members;

 Coordinating with the civil inspective service and other agencies for carrying outcontrolling members in case of necessary;

 Struggling to protect the rights and legal benefits of Cooperative and cooperativemembers (VCA, 2006)

The general structure of primary cooperatives in Vietnam is presented in the Figure 2.3below

General Meeting of Members

Controlsection

Planningsection

Accountingsection

Creditsection

Audit and ControlCommittee

Managers

b)Provincial Level

The provincial Level of Cooperatives are Alliance of Cooperatives which undertakes jointactivities on behalf of their primary affiliates It is established by the following ways:(1) Cooperatives, Unions of Cooperatives may voluntarily establish an Alliance ofCooperatives within their branches or an Alliance of all cooperatives which belongs tovarious industries Alliance of Cooperatives shall be set up at central and provincial level.(2) Alliance of Cooperatives shall be a non-governmental organization who is to representand protect legitimate rights and interests of cooperatives and Unions of cooperatives;conduct propaganda, campaign for development of cooperatives; give advice; renderservices and assist cooperatives members, unions of cooperatives; participate in makingpolicies, laws on cooperatives, represent cooperatives and Unions of cooperatives incoordinating and operating relations between its domestic and foreign members according

to laws Functions, duties, powers, organizational structure, name and finance of theAlliance Cooperatives shall be stipulated by the by-laws of Alliance of Cooperatives.(3) Central Alliance of cooperatives shall be recognized by a decision of the PrimeMinister; Provincial Alliance of cooperatives shall be recognized by a decision of theChairman of Provincial People's Committee (VCA, 2006)

The provincial alliances have the following functions, tasks and rights:

Functions:

 Representation and protection for legal benefits of cooperative members

 Propagating, mobilizing and developing cooperative economy and cooperatives

 Consulting and providing the services and support to the cooperative members

 Participating in setting up the law policies related to the cooperative

 Representation for cooperative members in domestic and foreign relationsaccording to the law (VCA, 2006)

Tasks and Rights: Participating in setting up strategy, scheming plan, development

program of cooperative economy and cooperatives

 Synthesizing the opinions and ambitions of members in reflecting, petitioning,putting forward and proposing to the government and civil service on thepolicies related to the cooperatives

 Protecting rights and legal benefits of cooperative members

 Propagating and mobilizing the individual, yeoman economy and household fordeveloping the cooperative economy and cooperatives

 Summing up, disseminating experiences of advanced, symbolic cooperatives andorganizing emulative movements in cooperative alliance system.

 Organizing activities of consultancy, supporting, supplying services forcooperative members on legality, investment, technological science, financialinformation, credit, market, and other fields

 Organizing the training course for learning leaderless cadres of alliance system;managerial cadres, members and laborers of cooperatives, and members ofAlliance

 Participating international organizations, non – governmental organizations(NGO) for developing cooperative relations with organizations in the countries;have right to accept and organizing implementation of supported projects,programs, the aid sources for develop cooperative economy section

 Implementing other tasks assigned by Government and Provincial People’ sCommittee (VCA, 2006)

The figure 2.3 shows the steps that the provincial cooperative alliances in Vietnam wereformulated by following:

Province’s Executive Committee voted directly by General Meeting of the member

units, is an active leading organization for all activities of Cooperative Alliance between

2 terms of General Meeting (VCA, 2006)

Standing Committee voted by Executive Committee including President, Vice –

President and the other standing members Standing Committee is on behalf of ExecutiveCommittee to resolve workaday affairs of Cooperative Alliance To help StandingCommittee, apparatus of Cooperative Alliance organized of the following departments:

Control Committee of voted by Executive Committee including: Chairperson, and some

members Control Committee is in charge of:

 Supervising, controlling organizations and members of Cooperative Alliance onimplementing regulation, resolution of General Meeting, statute of CooperativeAlliance and decisions of Executive Committee, Standing Committee;

 Considering and resolving complained application of member;

 Coordinating with the civil inspective service and other agencies for carrying outcontrolling members in case of necessary (VCA, 2006)

 Struggling to protect the rights and legal benefits of Alliance and cooperativemembers

26Source: VCA, 2006

PROVINCE’S COOPERATIVE ALLIANCE EXECUTIVE COMMITTE

STANDING COMMITTEE

Vice-President Vice-President Standing Vice-President Vice-President Vice-President

CooperativeGroups

Cooperatives Cooperative

Unions

Figure 2.4 : General Organization Chart of the Provincial Cooperative Alliance in Vietnam

c) National level

At the national level, there is the Vietnam Cooperative Alliance which is the apex organization

of agricultural cooperatives Its organization, functions and tasks are presented as the

following (Figure 2.3);

The National Representative Congress, the highest VCA decision-maker is organized everyfive years The Congress selects the Central Executive Committee who is responsible forconducting the VCA Congress The Committee is held semi-annually The Central ExecutiveCommittee of the Second Congress currently has 115 member representatives from ministries,agencies, socio-political organizations, professional associations, departments and affiliatedmembers of the Vietnam Cooperative Alliance, provincial and municipal cooperative alliancesand cooperatives of all sectors (VCA, 2006)

The Standing Committee elected by the Central Executive Committee conducts the VCACongress The current Standing Committee includes the President, Vice Presidents andCommittee members as follows:

Professional units,Affiliated Companies

Specialized Divisions,Department

Professional Affiliates

SupervisionCommitteeSpecialized Department

The Main Functions of Vietnam Cooperative Alliance

- Representing and protecting the legal rights of its members

- Promoting the development of cooperatives and the cooperative economy

- Providing consulting and support services to its members

- Participating in formulating policy and legal frameworks related to the cooperative sector

- Representing its members legally in internal and external relations (VCA, 2006)

The Main Tasks of Vietnam Cooperative Alliance

- Participating in formulating strategies, plans and programs which are aimed to support anddevelop cooperatives and the cooperative sector

- Generalizing ideas and aspirations of its members to recommend related problems and legalissues to the Government and other State-authorized organizations

- Protecting the legal membership rights and interests

- Encouraging individuals, business owners, business households, small and medium-scaleproducers to promote cooperatives and the cooperative economy

-Generalizing good experiences and advanced cooperatives models to promote the emulationmovement for the development of cooperatives and cooperative sector

- Organizing and providing consulting and support services to the members on legal issues,technology, information, finance, credit, markets and so on

- Organizing training courses for cooperative alliance officers, cooperative managers, staff,employees and other members

- Participating in international organizations, non-governmental organizations, and developingcooperative relations with international organizations

- Adopting and implementing support programs and projects for developing cooperatives andthe cooperative economy

- Conducting other activities assigned by the Government and other authorities (VCA, 2006)

2.5.2 Organization And Management of Agricultural Cooperatives

a) General Meeting of Members

(1) The General meeting of members shall be the highest body of the cooperative

(2) In case of a cooperative having large number of members, it may hold the Annual GeneralMeeting of representatives of the members, election of the representatives to participate in theGeneral meeting of representatives shall be stipulated by the Cooperative by-laws Generalmeeting of representative of cooperative's members and general meeting of all cooperative'smembers (commonly referred to as General meeting of members) shall have the same dutiesand powers

(3) Regular Annual General meeting of members shall be held once a year and convened bythe management committee within three months from the date of closure of accounting books

on fiscal year

(4) Extraordinary General meeting of members shall be convened by either managementcommittee or Audit and Control Committee in order to decide on those measures that gobeyond powers of the management committee or of the Audit and Control Committee In thecase of not less than 1/3 of all members apply to the management committee or Audit andControl Committee for convening General meeting of members then, within 15 days afterreceiving the application, the management committee must convene such a meeting; if themanagement committee fails to convene the meeting, the Audit and Control committee mustconvene an extraordinary general meeting to deal with issues stated in the application (VCA,2003)

b) Contents of Annual General Meeting of Cooperative's Members

The annual general meeting of members shall discuss and decide on the following measures:(1) Report on output of annual manufacturing, business and services activities of the

cooperative, report on operation of the management committee and Audit and Control

Committee;

(2) Report in public on finance-accounting, plan of surplus distribution as well as dealingwith losses;

(3) Policy on manufacture, business and service; plan on operation and raising funds of

cooperative for the coming years;

(4) Increase or reduction of the share capital; setting up funds of the cooperative;

(5) Election, removal of the cooperative's manager/president; election, additional election

or removal of other members of the management committee and Audit and ControlCommittee;

(6) Approval of admission of new members as well as withdrawal of members from the

cooperative, decision on expulsion of members;

(7) Merger, division and dissolution of the cooperative;

(8) Amendment of the by-laws and external rules of the cooperative;

(9) Remuneration of the cooperative's manager/president, members of the management

committee and other parts in the cooperative;

(10) Other issues as requested by the management committee, Audit and Control

Committee or by at least 1/3 of all the members (VCA, 2003)

c) Provisions Concerning number of Representatives and Voting Procedure at GeneralMeeting of Cooperative's Members

(1) General meeting shall have a quorum of at least 2/3 of all members or representatives ofthe members The General meeting shall be contemporarily postponed if the above mentionedquorum requirement is not present; the management committee or Audit and Controlcommittee must reconvene the meeting

(2) A decision on amendment of the by-Laws, merger, division, dissolution of the cooperativeshall be approved if at least 3/4 of all the members or their representatives present at themeeting support by voting Decisions on other matters shall be approved if more than 1/2 ofall the members present at the meeting agree to by voting

(3) The right to vote at the General meeting of members shall not depend on the amount ofcontribution or position of members in the cooperative Each member or representative shallhave one vote (VCA, 2003)

d) Management Committee

(1) The management committee is a body administering and conducting the affairs of thecooperative, elected by the general meeting of members and shall include the cooperative'smanager/president and other members The number of members of the section of managementshall be fixed by the Cooperative by-laws Cooperatives who have less than 15 members mayelect a manager/president who shall exercise duties and powers of the management committee.Large sized cooperatives shall elect a board of management to exercise duties and powersofihe management committee as stipulated in this law

(2) The term of the management committee shall be stated by the Cooperative's by-law's butshall not be less than two years and more than five years

(3) The management committee shall meet at least once a month The meeting shall beconvened and chaired over by the cooperative manager/president or a member of themanagement committee authorized by the cooperative's manager/president Meetings of themanagement committee shall be legitimate if at least 2/3 of the members of the managementcommittee shall operate under the principle of collectivism and majority of votes In the casewhere number of votes for and against are equal, the vote- casted by the chairman shall bedecisive (VCA, 2003)

f) Duties and Powers of the Management Committee

(1) The management committee shall have the following duties and powers:

(a) Appoint the chief accountant, decide on formation of specialized committees of thecooperative; (b) Ensure the implementation of resolutions of the General meetings ofmembers; (c) Prepare reports on manufacturing, business and service activities as well asmethod to raise funds for the cooperative and report on work of the management committee to

be submitted to the General meeting of members; (d) Prepare agenda of the General meetings

of members and convene general meetings

of members; (e) Make assessment of output of manufacturing, business and service activities

of the cooperative, approve report on financial settlement to be submitted to the Generalmeeting; (f) Consider the admission of new members and deal with matter concerningwithdrawal of members from the cooperative (except for case of expulsion of members) and

report thereof for approval by the General meeting of members; (g) Other duties and powersstated in the by-laws of Cooperative.

(2) The management committee shall be responsible for its decision to the General meeting ofmembers (VCA, 2003)

h) Duties and Powers of Cooperative Manager

(1) The cooperative's manager shall have the following duties and powers: (a) Represent thecooperative in legal matters; (b) Ensure the implementation of plans and manage allmanufacturing, business and service transactions of the cooperative (c) Convene and chairover meetings of the management committee, organize the implementation of resolutionsmade by the general meeting of members and decisions

made by the management committee;

(2) The Cooperative's manager shall be responsible to the General meeting of members andthe management committee for works assigned to him Cooperative's manager/president in hisabsence may authorize the deputy manager or a member of the management committee tomanage business of the cooperative

(3) The post of Deputy Manager shall be as stipulated in the by-laws of Cooperative (VCA,2003)

i) Audit and Control Committee

(1) Audit and Control Committee is a body to supervise and control all affairs of thecooperative in conformity with laws and by-law's of the Cooperative

(2) The Audit and Control Committee shall be elected by the General meeting of members.The number of members shall be fixed by the cooperative's by-laws The Audit and ControlCommittee shall elect a chief controller to manage the affairs of committees; a cooperativewhich has a small number of members may elect one controller

(3) Qualifications of members of Audit and Control Committee shall be the same as that of themembers of the management committee A member of the Audit and Control Committee shallnot at the same time be member of the management committee, chief accountant, cashier ofthe cooperative and shall not be their parents, spouses, children or brothers or sisters

(4) The term of the Audit and Control Committee shall be coincided with the term of themanagement committee (VCA, 2003)

g) Duties and Powers of the Audit and Control Committee

The Audit and Control Committee shall have the following duties and powers:

(1) Supervise the observance of the by-laws, internal rules of the cooperative and

resolutions of the General Meeting of members;

(2)Supervise business of the management committee, cooperative's manager/president andcooperative's members in conformity with laws, by-laws and internal rules of the

cooperative;

(3) Investigate finance, accounting, income distribution, dealing with losses, use of

cooperative's funds, assets, loans and state subsidiaries;

(4) Receive and settle complains and denunciations relating to business of the cooperative;(5) Participate in meetings of the Management Committee;

(6) Inform the management committee and report the General Meeting of members on

results of the investigation; make proposal to the Management Committee and cooperative'smanager for overcoming weakness found in manufacture, business and services activities ofthe cooperative and deal with violations of the by-laws and internal rules of the cooperative;(7) Require persons concerned in the cooperative to provide documents, books, bills andreceipt and other information necessary for inspection provided that they shall not be used forother purposes;

(8) Prepare agenda of General Meeting and convene extraordinary General Meeting of

members where one of the following reasons exists:

(a) Any violation of laws, by-laws, internal rules of cooperative or resolution of the

General Meeting of members has been found for which the management committee has failed

to apply measures to prevent such violation after the Audit and Control Committee hasrequested it to do so

(b) The Management Committee failed to convene an extraordinary General Meeting ofmembers as provided in Article26, Item 4 of this law (VCA, 2003)

2.5.3 Finance of Cooperative

a) Contributions of Cooperative's Members

(1) A cooperative's member shall make his/her contribution upon joining the cooperative inaccordance with the provisions of Article 24 of this law Cooperative members may maketheir contribution once or at several times; amount, forms and time limit of contribution shall

be provided by the by-laws of the cooperative Contribution of cooperative's members shall beadjusted by decisions of the General Meeting of members

(2) Contributions made by members shall be returned to them The return of capitalcontribution of cooperative's members shall depend on financial state of the cooperative at thetime of the return after the cooperative has balanced the accounts of its business year andsettled all economic rights and obligations of members against the cooperative The form andtime limit of the return of capital contribution to cooperative's members shall be stated in thecooperative's by-laws (VCA, 2003)

b) Working Capital of a Cooperative

.

Working capital of the cooperative shall be formed from share capital, subscription ofmembers, accumulated capital owned by the cooperative, loans and other raised capital.Operating capital of the cooperative shall be administered and used in accordance with theprovisions of this law, other provisions of the law and of the Cooperative by-laws (VCA,2003)

c) Funds of a Cooperative

(1) Profits of the cooperative, as priority, shall be used to set up a business expansion fundand reserve fund; other funds may be set up according to provisions of the by-laws or